The Coming Crash

Trapped between the Fed and Congress

By Mike Krauss

Despite the never ending assurances of the Federal Reserve that happy days are almost here again — the same tune the Fed has sung for nearly seven long years — there is mounting evidence that the U.S. is headed for another economic crash. It will be more terrible than the last.

The Washington Post headlined, “U.S. economic growth slows to 0.2 percent, grinding nearly to a halt.”

Fox News reported the real story of unemployment: the official, good news government figure of 5.4 percent is a fiction, achieved by not counting the millions who have given up looking for work, and those who can find only part-time work.

Fox was playing catch-up. That story has been out there for years, but ignored by the corporate media and clueless politicians.

Tyler Durden reports in his blog, Zero Hedge, that year-on-year sales at the big retailers have taken a precipitous drop. Most Americans have no disposable income to dispose of, after they pay the food bill, mortgage, rent and utilities.

Wholesale trade has fallen like a stone, dropping more than $100 billion over four months. Wholesalers provide the goods that retailers sell. If retail demand is off, wholesale trade is off. The last time it dropped like that was in 2008-2009. Post crash. Then it took seven months to go from the high to the low; now, only four.

New manufacturing orders indicate the future. Not good. In only one of the last seven months has there been growth in new orders. Things were not that bad during the 18-month-long credit crunch of late 2008 through 2009.

Poverty in the U.S. is off the charts. The number of children living in poverty is nothing less than shocking.

For almost seven years, seniors have seen their savings and pensions eaten alive.

Public and private debt are at record levels.

Durden reports that the median net worth of the American people is down 40 percent from where it was before the last collapse.

Tens of millions of Americans who are far worse off today than they were seven years ago will be brought to their knees in the next crash, while the wealthy will rest easy on an even greater cushion of wealth.

The people who know are running scared.

Former Fed Chairman Ben Bernake — now cashing in as an adviser to a couple of hedge funds — has sounded the alarm which he failed so spectacularly to sound before the last crash. Apparently, Fed chairs may speak the truth only after they have done their bit for Wall Street and the 1 percent.

The root cause of this terrible distress is the failure of Congress to do what everyone in Washington promised to do, talks endlessly about doing, but never gets around to actually doing: creating good paying jobs in the obvious place — infrastructure.

The need was obvious in 2008. It was obvious in 2012. It is obvious today. Jobs at a good wage are everything and infrastructure is the obvious place to start.

This is what the suddenly alert Bernake now urges: “…a well-structured program of public infrastructure development, which would support growth in the near term by creating jobs and in the longer term by making our economy more productive.”

But it is not going to happen. The Fed, which pumped upwards of $20 trillion into Wall Street after the last crash, has steadfastly refused to make even a fraction of that available to state and municipal governments — a move that could have stopped the “Great Recession” in its tracks seven long years ago.

And the GOP Congress will do nothing that might make President Obama and the Democrats look good before the next elections — like improve the lives of more than 300 million Americans by putting the nation back to work..

The American people are trapped between a Fed that works for Wall Street and a GOP Congress that can’t decide who it works for: Wall Street, the American people or itself.

The Trans Pacific Partnership

Another dagger to the heart of democracy

By Mike Krauss

Bucks County Courier Times

Thirty years ago I had my first experience of marketing for a corporation. I learned that the most often used word in marketing and advertising is “free.”  I recall this lesson as I follow the debate on the “Trans Pacific Partnership” (TPP), which is being sold as a “free” trade agreement. “Free” sells.

What exactly is being sold in the TPP ? To answer that question, you need to read the fine print. But you can’t.  TPP has been negotiated in almost total secrecy by a team of about 600 lawyers, working for the major trans-national corporations.

The text of the treaty has been classified as “Secret” by U.S. negotiators. Even members of Congress are not permitted access. The deal will be presented to Congress on a “fast track” – no opportunity for Congress to modify the details. One vote, yes or no on the entire  treaty as presented – a done deal.

But thanks to one or two alert member of Congress and WikiLeaks, which think that information about the deal should also be free to the people of the nations who will be bound by the treaty’s terms, there is some news.

What is being sold is not the duty free importation of goods and services across national boundaries; but instead, how the movement of these goods and services, and most especially finance and capital is managed, and by who.

It should surprise no one that a treaty negotiated by lawyers working for the major trans-national corporations stipulates that international commerce should be managed (regulated) by lawyers representing the trans-national corporations.

The purpose is not “free” trade; but rather, to protect and increase the profits of trans-national corporations. How does that work? Like this.

An industry wants to set up shop in your community. But you decide, based on your local zoning, where they can and cannot operate. Or you decide that their product or service is harmful to your health and welfare, and want to limit adverse impacts; or that female workers deserve some paid time off during pregnancy.

Whatever the issue, you want a say in what happens in your community. Democracy.

The public interest clashes with the private interest and costs the corporation money. So the private interest turns to the international tribunals set up to manage these disputes that get in the way of “free” trade. These tribunals are staffed by representatives from the corporations, because they are “experts.”

Guess who they rule for?

Outrageous, you say? Undemocratic? Yes and yes. But it doesn’t matter what you say, because your Congress has voted for our nation to abide by the “free” trade pact.

It’s already happening.

In an attempt to limit smoking and the related deaths and health care costs smoking causes its people, little Uruguay decided to increase the size and visibility of the anti-smoking messages on packs of cigarettes and in other public health advertising.

Under the terms of a “free” trade deal negotiated between Uruguay and Switzerland, where Phillip Morris moved its corporate office from the U.S., the tobacco company is suing Uruguay to be paid the anticipated profits it may lose because of lower sales.

As reported in the U.K. newspaper The Independent, “The litigation is allowed to be done in tribunals known as international-state dispute settlements (ISDS), ruled upon by lawyers under the auspices of the World Trade Organization.”

In a similar case, Bolivia (also little) is being sued by the giant international corporation Bechtel because Bolivia cancelled a contract with Bechtel for a privatized water system, when rates skyrocketed far above those that Bechtel had advertised, forcing already poor people to pay even more for their water.

 

Bechtel is suing Bolivia in the International Centre for the Settlement of Investment Disputes (ICSID), another tribunal that is part of the World Bank. The ICSID holds all of its meetings in secret. Neither the media nor the people affected may even witness the proceedings.

As CorpWatch reported, “The company filed the case with ICSID under a bilateral investment treaty between the Netherlands and Bolivia. Although Bechtel is a U.S. corporation, its subsidiary [which did the Bolivian water deal] recently established a presence in the Netherlands in order to make use of the treaty.”

Corporations can shop for places to do business and move money easily around the world for the best deal. People, on the other hand, find it more difficult, often impossible and sometimes life threatening to change countries.

There is a price tag for “free” trade agreements like the TPP: democratic government and the right of people to govern themselves in their own communities is sold out.

Congress at work

The two year temper tantrum

  

In January the GOP took control of the U.S. Congress and immediately got down to business: a two year temper tantrum.

The Republicans in Congress don’t like President Obama. I mean, really don’t like the man,and they just can’t miss an opportunity to make that clear.

There are obvious differences, of course. The biggest may be generational. Even the “young turks” in the GOP leadership seem somehow so  –  yesterday.

Race is of course a part of the divide. It plagues the GOP in Congress, as it does the nation. The sins of the fathers – slavery, Jim Crow and segregation – visited on the children.

The GOP Religious Right was born when mostly southern segregationists abandoned the Democratic Party after the 1964 Civil Rights Act, to take up residence in the GOP, and that legacy has shaped GOP policy ever since.

Over the next two years progress on domestic issues will be next to impossible; except the care and feeding of Wall Street, of course. When it comes to Wall Street, there is no division in Washington.

But the rest of the domestic agenda – jobs, better paying jobs, affordable education and health care, the income divide, the wealth chasm, an end to the immigration wars – forget about it.

For example, the U.S. needs a new Attorney General. The AG is a member of the president’s cabinet. Used to be, presidents got who they wanted. No more.

The nominee for AG, who seems to me as well qualified or better than some recent selections, expressed an opinion that the president’s executive actions in the area of immigration were quite legal.

And that was that. Almost the entire GOP went on the warpath.  And now that nomination is in Washington “limbo” – held up to see what damage can be done in the interim to hamper the president and his administration.

The delay in confirmation hearings, says the GOP Senate leadership, is because they want first to “take up” a human trafficking bill, to attack human slavery and the sex trade. Who could object?  Shouldn’t take more than six hours to pass that bill and move on.

Not a prayer. The GOP tacked on to the human trafficking bill an extraneous, anti abortion provision ; and it’s back to the partisan, religious wars that so engage the many learned theologians in the Congress. And the Justice Department can wait.

This intense determination to stick it to the president has now spilled over into vital matters of our foreign policy, national security, international alliances and matters that have since the nation’s founding – and for good reason – been principally the responsibility of our presidents.

The GOP House Speaker invited the Israeli Prime Minister to Washington to directly challenge the foreign policy of the President of the United States in a manner calculated to offend the president.

Juvenile.

A majority of the Republicans in the Senate then attempted to sabotage U.S. led international efforts to get some kind of deal going with Iran over its aspirations to develop nuclear energy and weapons capability.

The president agrees Iran is trouble, with a capital “T.” He wants to get the government there into some kind of discussion, dialogue, diplomacy to unwind that coiled spring. The GOP alternative leads only to more conflict and war.

Like we don’t have enough problems in that part of the world and elsewhere.

Juvenile and dangerous.

You can make an argument that American presidents over-reach the powers granted them by the Constitution. Obama is not the first, and he will not be the last. And you can argue that the Congress needs to reassert its role as the law maker of the land.

And it can, any time it wants. And if the Congress would pass the laws needed to address the destruction of the American middle class and our democracy, it would be applauded and honored across the nation.

But it now seems likely that what the American people are going to get from the GOP Congress for the next two years will amount to little more than a GOP temper tantrum - members holding their breath, stamping their feet, pulling off stunts and sending out self congratulatory newsletters until Obama leaves office.

This does not serve the American people.

Congress at work

Looking out for Wall Street

By Mike Krauss

Bucks County Courier Times

The Wall Street crash of 2008 was brought on by unprecedented self-serving and risk taking that went undetected by the regulators — the cops on the beat — to whom the American people entrust the job of insuring honest markets and honest dealing in the banking and finance industry.

Since the Reagan administration, Congress and presidents of both parties have been bowing to Wall Street and billions of dollars of lobbying and campaign contributions in a system of legalized bribes. They have steadily reduced the manpower and resources of the regulators and put Wall Street insiders in charge of their agencies; even as the global wheeling and dealing of the finance industry they are charged to police has become ever more complex and opaque.

The lessons to be learned are obvious. Wall Street cannot be trusted to regulate itself. The rewards of fraud have trumped honesty and morality. The regulators are out-gunned. The crooks run circles around the cops.

And the remedy is equally obvious. Limits must be placed on Wall Street’s risk taking and the cops on the beat — the Securities and Exchange Commission in particular — must be given the tools and authority to do their job, detect catastrophic risk, take action to avert another crash and protect the American people.

But Congress and the president have done just the opposite.

In December, a Wall Street friendly Congress and president got together to enact legislation to allow Wall Street banks to place their riskiest assets — almost $300 trillion of derivatives holdings — in the business units that enjoy FDIC protection, setting up a back door bail out via the FDIC in the next crash.

Republican Mike Fitzpatrick, who represents Bucks County, was one of seven votes that made the difference to pass the legislation in the House. Now, Fitzpatrick is leading the charge for more favors for the parasites in pin stripes.

He has introduced legislation to further roll back the already weakened safeguards put in place after 2008 to protect Main Street from Wall Street’s greed and recklessness.

Can the congressman and so many of his colleagues have forgotten the lessons of 2008? Or is it that Congress just can’t see the forest for the green of all that Wall Street campaign and lobbying cash?

But if Congress has no memory, not so Wall Street, which knows that one trader making a bad bet can take down a bank. While Congress may have forgotten the “London Whale,” the trader who took a loss that blind-sided JP Morgan two years ago, the banksters remember.

They remember way back to 1995, when one trader bet wrong and took down Barings, one of the oldest merchant banks in the world.

Wall Street is getting ready for the next crash.

First, the global banking cartel used the G20 to set up a “bail in” — a confiscation of deposits — to insure the cash on hand to survive the next bad bet. Then the barons got the Wall Street-friendly Congress and president to set up another insurance policy, the back door bail out via the FDIC.

Two bail outs are better than one.

Fitzpatrick’s constituents may not be pleased to learn that he is so eager to serve Wall Street that he cannot remember the horrendous damage done only six years ago. Kevin Yoder, the Kansas Republican and Wall Street errand boy who slipped the back door bail out into last year’s legislation, got hammered by the Kansas media and constituents posting on his Facebook page.

One called Yoder the “lowest of the low” and added, “Hope you burn in hell.” Another called Yoder “one greedy immoral coward.”

Gotta love Kansas. Direct.

Which may explain why Fitzpatrick was selected to quarterback Wall Street’s latest play — he’s not running for re-election. So whatever heat he may take for his services to Wall Street, he’s fire-proof.

Give Wall Street credit. They look out for their own.

Who in Congress is looking out for the American people? Mr. Fitzpatrick, the vice chairman of the House Financial Services Subcommittee on Oversight and Investigation, who favors protecting Wall Street from the oversight that might prevent another crash?

Mike Krauss is chair of the Pennsylvania Project and a director of the Public Banking Institute. www.publicbankingpa.org / Email: mike@mikekrausscomments.com