Sunday, November 20, 2011

Greek Coalition Partner Refuses to Back Austerity Greece’s new prime minister is to present his policy platform ahead of a midweek confidence vote in parliament. / Reuters / AP / Common Dreams

Greek Coalition Partner Refuses to Back Austerity

Greece’s new prime minister is to present his policy platform ahead of a midweek confidence vote in parliament.
Greece's new prime minister Lucas Papademos pictured at the Presidental Palace in Athens on November 11. (AFP Photo/Louisa Gouliamaki) Lucas Papademos, who is tasked with securing the country’s international loan lifeline, will meet finance minister Evangelos Venizelos today before this evening's presentation.
Mr Papademos succeeds George Papandreou, whose proposal to hold a referendum on the country's bailout terms prompted EU leaders to raise the threat of a Greek exit from the euro zone.
The new Greek leader, a former central banker who oversaw his country's entry to the euro zone in 2002, must win a confidence vote in his cabinet before meeting euro zone finance ministers in Brussels on Thursday, state television reported, where he will be expected to outline next year's draft budget before putting it to parliament.
The interim coalition government is expected to easily win Wednesday’s confidence vote as it is backed by Greece’s two biggest parties and a small right-wing nationalist party.
However, the leader of Greece's main conservative group Antonis Samaras today his New Democracy party would not vote for any new austerity measures and said the mix of policies demanded by international lenders should be changed.
"We will not vote for any new measures," Mr Samaras told a meeting of his own MPs. He added that he would not sign any letter pledging a commitment to austerity measures, as has been demanded by EU economic and monetary affairs commissioner Olli Rehn, and that a verbal pledge should be sufficient.
Newspaper polls published yesterday showed Mr Papademos has the support of three in four Greeks. But he will face his first protest in front of parliament today afternoon from left-wing demonstrators who accuse the new government of working in the interests of bankers.
Inspectors from the International Monetary Fund, European Central Bank and European Union troika are due to start arriving in Athens today.
Greece depends on loans from a €110 billion rescue package in 2010. That bailout later proved inadequate, forcing a new €130 billion deal put together last month.
Release of a crucial €8 billion loan tranche this month - without which Greece will default on its debt mountain before Christmas - depends on approval of the new bailout.
Mr Rehn has said the EU and IMF will not release the tranche without written assurances from all Greek parties that they will back the measures, but New Democracy leader Antonis Samaras, who has given only tepid backing to the unity government, has said he will sign no pledge under external pressure.

Wednesday, November 16, 2011

America’s Pacific Century?: APEC Summit in Hawaii Seeks to Implement Free Trade Agreement of the Asia Pacific Region by Tina Gerhardt /

America’s Pacific Century?: APEC Summit in Hawaii Seeks to Implement Free Trade Agreement of the Asia Pacific Region

HONOLULU, Hawai’i -- As international attention focuses on the economic situation of the EU - the rollercoaster political-economic ride of events unfolding in Greece and Italy and the G20 summit in Cannes - and domestic attention focuses on the Occupy Wall Street movement and the XL Keystone Pipeline protests, President Obama shifts gears this week to the Asia Pacific region.
On Tuesday, the Asia Pacific Economic Cooperation (APEC) summit kicked off in Honolulu, Hawai’i.
Running through Sunday, November 13, the summit brings together 21 Pacific Rim economies.
Established in 1989, in the face of the perceived collapse of communism, APEC seeks to promote free trade in the Asia Pacific region. In particular, the current APEC meeting seeks to pave the way for a Free Trade Agreement of the Asia Pacific (FTAAP) region.
In a talk given at the University of Hawai’i East-West Center today, Secretary of State Hillary Clinton referenced the importance of transatlantic systems for the 20th-century. She stated “The 21st-century will be America’s Pacific Century.”
The Asia Pacific region continues to increase in economic might -- witness China’s offer to bail out the EU a mere two weeks ago – President Obama is attune to these geopolitical shifts.
Together, the 21 member economies account for over half of global GDPs, purchase over half of US goods and form almost half of world trade.
Seven of the U.S.’s top 15 trade partners are located in the APEC region.
President Obama has sought agreements to benefit from the region since the very outset of his presidency.
A Harbinger of Things to Come: The Korea-US Free Trade Agreement (KORUS FTA)
On February 10, 2011, the United States and South Korea signed two agreements – amendments to the Korea U.S. Free Trade Agreement (KORUS FTA) ratified on June 30, 2007.
The agreements - the most significant the U.S. has signed in over 16 years, since the North America Free Trade Agreement (NAFTA) - reduce Korean tariffs on U.S. goods exported to Korea.
They were approved last month by Congress on October 12, 2011 and await the decision of the Korean National Assembly.
The Office of U.S. Trade Representative stated that “under the FTA, nearly 95% of bilateral trade in consumer and industrial products will become duty free within five years .. and most remaining tariffs would be eliminated within 10 years.”
Additionally, the KORUS FTA will also allow greater access to the Korean financial market.
“As the first U.S. FTA with a North Asian partner,” the Office of U.S. Trade Representative stated, “the KORUS FTA is a model for trade agreements for the rest of the region, and underscores the U.S. commitment to, and engagement in, the Asia-Pacific region.”
In other words, the KORUS FTA is a harbinger of possible things to come.
Christine Ahn, Executive Director of the Korea Policy Institute, stated that “the proposed KORUS FTA undermines South Korean democracy in significant ways: it undermines approximately 180 South Korean laws.”
“In particular,” Ahn continued, “the KORUS FTA has two really negative effects: first in the pharmaceutical industry and second in the agricultural arena. Korea has a universal health care system. While it is not like Sweden’s healthcare system, it does provide basic care for everybody. As part of it, Korea has a strong generic pharmaceutical industry. Concerns abound that the KORUS FTA would drive up costs so much, that universal healthcare would be untenable and Korean health care would essentially be privatized.”
“The FTA would also negatively impact agriculture,” Ahn stated, “As anyone who has been following the World Trade Organization knows, Korean farmers have already been intensely affected by their policies.” At the 2003 WTO meeting in Cancún, Korean farmer Lee Kyung-Hae committed suicide at the frontline barricades to underscore the desperate situation of Korean farmers.
“The KORUS FTA would deepen this impact,” Ahn stated. “According to the Korean government’s own figures, 45% of Korean farmers would be displaced from their farms because they would not be able to compete with the U.S. subsidized agricultural industry. We have already seen this type of effect of FTAs in Mexico under NAFTA.”
If the KORUS FTA is a sign of possible things to come, so, too, are the uprisings against it. Historian and political scientist George Katsiaficas states in his forthcoming book Asia’s Unknown Uprisings: “massive protests took place against the [KORUS] FTA in December 2006” and “polls showed over half of all Koreans opposed the agreement.”
Connecting the Dots: Australia-US FTA
Like the KORUS FTA, the U.S.-Australia Free Trade Agreement was passed before Obama took office but augmented during his tenure, and again, with the intention to increase free trade in the Pacific region.
Passed on January 1, 2005, the FTA was intensified in 2009, when working groups were established to facilitate agricultural trade.
President Obama is scheduled to travel from the APEC summit – first to the East Asia summit in Bali, Indonesia then - on to Australia, in order to discuss not only aspects of the trade agreement but also the establishment of military bases, in a further sign of geopolitical shifts.
Announcing the U.S.-Australia FTA, the Office of the U.S. Trade Representative laid bare the relationship between these bilateral and planned multilateral agreements, as it continued on to state: “in September 2008, the United States announced its intention to begin negotiations to join the Trans-Pacific Strategic Economic Partnership agreement” also known as the Trans-Pacific Partnership (TPP).
Trans-Pacific Partnership
President Obama, during his first visit to Asia in November, 2009, underscored his commitment to the Trans-Pacific Partnership (TPP), a multilateral free trade agreement seeking to liberalize the economies of the Asia-Pacific region or “to serve as a vehicle for Trans-Pacific economic integration.”
In a letter sent to Congress on December 14, 2009, Ron Kirk, U.S. Trade Representative, stated that President Obama joined the TPP “with the objective of shaping a high-standard, broad-based regional pact.”
While the TPP is not an official part of APEC, its meetings and negotiations have taken place parallel to the APEC summits since 2002.
Emissaries for Corporations
In the eyes of APEC critics, the summit has governments acting as emissaries for corporations, drawing up agreements that benefit big business but not small, independent businesses.
Tuesday, finance ministers met to discuss regional financial issues. And CEOs met in the APEC Business Advisory Council (ABAC). The 63 member council, which includes up to three business representatives for each of the 21 member economies, has drawn up a list of recommendations to present to heads of state, in order to improve trade in the Pacific region.
These suggestions include removing tariff barriers and reducing regulatory barriers to trade. In particular, the U.S. would like tariffs on renewable energy components, such as solar panels and wind turbines, to be reduced.
Today through Saturday, a CEO summit talks place in conjunction with APEC. It includes heads of state as well as at least 23 CEOs from companies such as Time Warner Cable, Sybase, DHL, COFCO, Bank of China, Boeing Company, Gazprom, Caterpillar, General Electric, Google, Lockheed Martin, Cathay Financial Holdings, and Johnson and Johnson.
A Free Trade Agreement of the Asia Pacific (FTAAP) Region?
APEC and the TPP seek to pave the way for a Free Trade Agreement of the Asia Pacific (FTAAP) region.
At its previous meeting, the TPP’s nine negotiating partners – four countries with which the U.S. has free trade deals, Australia, Chile, Peru and Singapore, as well as Brunei, Malaysia, New Zealand, and Vietnam - set themselves the goal of outlining an agreement by this week’s APEC meeting.
The first step could be to formalize the TPP as a regional trade agreement. Canada, Japan, the Philippines, South Korea and Taiwan have expressed interest in TPP membership.
Secretary of State Hillary Clinton will travel on from the APEC summit to the Philippines, Thailand and Indonesia – countries in the Asia Pacific region that have not yet signed on to the Trans-Pacific Partnership.
Japan’s Prime Minister Yoshihiko Noda is considering joining but its farmers are concerned that they will be devastated by the move. Like in South Korea, in Japan, memories of the financial crisis that effected much of southeast Asia beginning in 1997 linger. Noda intends to announce his decision Friday.
The talks face a further and larger hurdle: the U.S. wants nations in the region, in particular China, to lower tariffs imposed on U.S. renewable energy products.

Video: Italy: Too Big to Bail Out? / Inside Story / Al Jazeera English / Common Dreams

Italy: Too Big to Bail Out?

As the debt crisis in Italy is sending shock waves across Europe, we ask if radical change is the only way forward.

Over the past two years, economic crisis has hit Greece, Ireland, Portugal, and Spain.
This time the country in the firing line is Italy, the third largest economy in the eurozone. It may now need a bailout, but its debts are more than those of Greece, Ireland, Portugal and Spain combined: a total of a staggering $2.6 trillion.
If Italy needs a bailout, where is the money going to come from? Is the tipping point for the whole eurozone now close at hand? Is radical change the only way forward? And will a change of leadership make any difference?
Inside Story, with presenter James Bays, discusses with Nicola Rossi, an economist and Senator in the Italian Parliament; Georgi Gotev, a senior editor of Euractiv, an online European news service; and Adam Myers, a senior market strategist for the French Bank, Credit Agricole.
"There are significant debts, and whether we are talking about the leadership in Greece or the leadership in Italy, the underline concern is still that the voters may not accept any decisions that are put in front of them in terms of austerity in any case. And of course, investors globally are aware of that and so even if issues are resolved in terms of leadership in both countries, it still does not mean that investors will not still take a very pessimistic view of the underline problem and that of course is those countries' indebtedness."
Adam Myers, Credit Agricole

Tuesday, November 15, 2011

Roubini The Next MF Global Collapse Could Be Goldman Sachs / By Henry Blodget / ICH

Roubini The Next MF Global Collapse Could Be Goldman Sachs
By Henry Blodget 
November 08, 2011 "Business Insider" -- Nouriel Roubini was was in fine form yesterday, scaring the bejeezus out of his followers on Twitter by saying that several huge financial institutions could collapse in the blink of an eye like MF Global.
These houses of cards, Roubini tweeted, include:
The problem, as Roubini has consistently warned, is the banks' dependence on short-term financing to maintain their long-term asset leverage and run their businesses.
What killed MF Global, Lehman Brothers, Bear Stearns, AIG, and other huge financial firms, after all, was the sudden refusal of short-term lenders to continue lending money to the firms.
Every day, the big Wall Street firms borrow tens of billions of dollars in low-cost short-term loans. They then use this money to make long-term bets on assets that yield more than the money costs to borrow. And then they happily keep the difference between the two.
In good times, the banks come to take this funding for granted: They just keep rolling over their huge debts every day, repaying the old loans with the money from new ones.
When the overnight lenders suddenly get suspicious and the money disappears, however, it's as if the oxygen is suddenly sucked out of the room.
In additional tweets, Roubini argued that JP Morgan and Citigroup were actually less at risk because more of their funding comes from insured deposits. So that's some good news for you. Dan Freed of TheStreet has more on Roubini's tweeting.
If you don't understand this short-term funding dynamic, and the enormous risks it creates, read this excellent William Cohan article on how Jon Corzine just flew MF Global into a mountain.

Sunday, November 13, 2011

MF Signs Death Warrant for Short-Term Funding: William D. Cohan / Bloomberg


MF Signs Death Warrant for Short-Term Funding: William D. Cohan

November 10, 2011, 7:10 PM EST
By William D. Cohan
Nov. 8 (Bloomberg) -- People ask me all the time: How could Wall Street powerhouses such as Bear Stearns Cos., Lehman Brothers Holdings Inc. and Merrill Lynch & Co. disappear virtually overnight?
How could MF Global Holdings Ltd. be here one day and gone the next? Why was Jefferies Group Inc., the midsized investment bank, whipsawed last week by rumors about its very survival because of questions about its exposure to European debt?
What the demise of Bear, Lehman, Merrill, MF Global -- and the near collapses of Jefferies, Goldman Sachs Group Inc. and Morgan Stanley (before the latter two became bank holding companies in September 2008) -- reveal in spades is that the age-old model by which these firms finance themselves is irreparably broken and should be outlawed.
MF Global found itself in financial peril so quickly because its short-term lenders decided almost overnight that they no longer wanted to take the risk of lending money to the firm. Jefferies faced the same situation -- even if it stanched the bleeding last week -- and it isn’t out of the woods. Both provide further evidence that the short-term funding model for securities firms needs to be ended because it’s simply too risky.
Before the recent financial crisis reached its most acute stages, beginning in March 2008, the dirty secret of securities firms was that without the ongoing financial support of their short-term lenders they couldn’t stay in business. In effect, the short-term lenders to firms such as Bear Stearns and Lehman had a free option -- every night -- about whether to continue doing business with them.
Lenders’ Support
Without the ongoing support of these lenders, the securities firms couldn’t stay open. One day the funding switch is on; the next day it’s off. Period.
For instance, Bear Stearns borrowed about $70 billion a day in the short-term -- so-called repo -- secured financing market. The cost was low, and the risks seemingly negligible. Who wouldn’t keep lending to Bear Stearns, especially with a secured interest in the financial assets -- such as Treasuries or mortgage-backed debt -- on the borrower’s balance sheet?
Or so the logic went before March 2008, when we discovered that without the $70 billion from the overnight lenders -- which was suddenly withheld -- Bear Stearns couldn’t continue as a going concern, even though it had $18 billion in cash on hand.
Admittedly, before Bear Stearns collapsed over the Ides of March more than three years ago, very few financial executives had any appreciation for this subtle funding dynamic. Yet nothing is more fundamental to most banks’ operational strategies than the ability to borrow short and lend long. Such backroom plumbing was thought best left to the firm’s repo desk and its treasurer, all blessed with a little oversight from the chief financial officer and other top executives.
Although it’s true that Wall Street firms rely on short- term financing to varying degrees, by March 2008, Bear Stearns was especially dependent on the overnight repo market because its other sources of liquidity had pretty much dried up. Goldman Sachs depended far less on short-term financing than did Bear or Lehman. That’s because the bank agreed to pay higher interest rates on its borrowings to ensure the money it needed to run its business -- despite having about $160 billion in cash -- would still be there from one day to the next.
Before Bear Stearns collapsed, most senior Wall Street executives would have never imagined that overnight lenders would decide to stop financing their business. But after Bear, then Lehman and Merrill Lynch, went down and was almost followed by Morgan Stanley and Goldman Sachs -- who were saved only by their immediate access to the Fed’s discount window, which made moot the question of where they would get short-term funding -- there could be no more credible excuses for not understanding the tenuousness of the funding model.
Risky Business
Indeed, no self-respecting Wall Street banker would ever advise a client to personally take such short-term financing risks. And yet the industry itself was doing this very thing.
That’s what makes the MF Global debacle so shocking. Jon Corzine, the firm’s former chairman and chief executive officer, had previously been CEO and CFO of Goldman Sachs. He understood exactly the fragile short-term funding dynamic of a securities firm.
His principal financial sponsor, the billionaire J. Christopher Flowers -- one of MF Global’s largest shareholders who installed Corzine as CEO in 2010 -- was a former financial institutions banker at Goldman Sachs.
Flowers made his fortune by buying and turning around a distressed Japanese bank. He also had a seat at the table during the collapses of Bear Stearns, Merrill and the rescue of American International Group Inc. Flowers knew exactly how fragile short-term funding could be. And yet both he and Corzine allowed MF Global to take the risk of financing a long-term bet -- its $6.3 billion gamble on European sovereign debt -- in the short-term markets.
MF Global even admitted in its financial statements that it was at risk if the ratings companies downgraded its debt. “Pursuant to its trading agreements with certain liquidity providers, if its credit rating falls, the amount of collateral” the company “is required to post may increase,” MF Global said in its 10Q disclosure for the second quarter of 2011. It also noted that its debt was rated investment-grade.
But once those ratings changed -- as they did in the firm’s final week -- les jeux sont faits and the gig was up.
Over the weekend, the Financial Times praised Corzine, claiming that he “arguably” deserved “some respect” for “thinking big.” This is pure bunk. All the mea culpas and excuses in the world won’t change the fact that Corzine and Flowers knew exactly the risks posed by the broken funding model relied on by companies such as MF and Jefferies.
They decided to take the risk anyway. As a consequence, about 3,000 MF Global employees will soon be out of work and billions of dollars belonging to creditors and shareholders has been lost.
Don’t worry about Corzine and Flowers, though, they still have their hundreds of millions of dollars in previous winnings socked away. Actually, come to think of it, they deserve to be locked up.
(William D. Cohan, a former investment banker and the author of “Money and Power: How Goldman Sachs Came to Rule the World,” is a Bloomberg View columnist. The opinions expressed are his own.)
--Editors: Max Berley, Stacey Shick
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To contact the writer of this article: William D. Cohan at
To contact the editor responsible for this article: Max Berley at

Key Lesson from Iceland Crisis is 'Let Banks Fail' By Haukur Holm / ICH

Key Lesson from Iceland Crisis is 'Let Banks Fail'

By Haukur Holm

November 08, 2011 "
AFP" -- Three years after Iceland's banks collapsed and the country teetered on the brink, its economy is recovering, proof that governments should let failing lenders go bust and protect taxpayers, analysts say.

The North Atlantic island saw its three biggest banks go belly-up in the October 2008 as its overstretched financial sector collapsed under the weight of the global crisis sparked by the crash of US investment giant Lehman Brothers.

The banks became insolvent within a matter of weeks and Reykjavik was forced to let them fail and seek a $2.25 billion bailout from the International Monetary Fund.

After three years of harsh austerity measures, the country's economy is now showing signs of health despite the current global financial and economic crisis that has Greece verging on default and other eurozone states under pressure.

"The lesson that could be learned from Iceland's way of handling its crisis is that it is important to shield taxpayers and government finances from bearing the cost of a financial crisis to the extent possible," Islandsbanki analyst Jon Bjarki Bentsson told AFP.

"Even if our way of dealing with the crisis was not by choice but due to the inability of the government to support the banks back in 2008 due to their size relative to the economy, this has turned out relatively well for us," Bentsson said.

Iceland's banking sector had assets worth 11 times the country's total gross domestic product (GDP) at their peak.

Nobel Prize-winning US economist Paul Krugman echoed Bentsson.

"Where everyone else bailed out the bankers and made the public pay the price, Iceland let the banks go bust and actually expanded its social safety net," he wrote in a recent commentary in the New York Times.

"Where everyone else was fixated on trying to placate international investors, Iceland imposed temporary controls on the movement of capital to give itself room to maneuver," he said.

During a visit to Reykjavik last week, Krugman also said Iceland has the krona to thank for its recovery, warning against the notion that adopting the euro can protect against economic imbalances.

"Iceland's economic rebound shows the advantages of being outside the euro. This notion that by joining the euro you would be safe would come as news to the Spaniards," he said, referring to one of the key eurozone states struggling to put its public finances in order.

Iceland's example cannot be directly compared to the dramatic problems currently seen in Greece or Italy, however.

"The big difference between Greece, Italy, etc at the moment and Iceland back in 2008 is that the latter was a banking crisis caused by the collapse of an oversized banking sector while the former is the result of a sovereign debt crisis that has spilled over into the European banking sector," Bentsson said.

"In Iceland, the government was actually in a sound position debt-wise before the crisis."

Iceland's former prime minister Geir Haarde, in power during the 2008 meltdown and currently facing trial over his handling of the crisis, has insisted his government did the right thing early on by letting the banks fail and making creditors carry the losses.

"We saved the country from going bankrupt," Haarde, 68, told AFP in an interview in July.

"That is evident if you look at our situation now and you compare it to Ireland or not to mention Greece," he said, adding that the two debt-wracked EU countries "made mistakes that we did not make ... We did not guarantee the external debts of the banking system."

Like Ireland and Latvia, also rescued by international bailout packages and now in recovery, Iceland implemented strict austerity measures and is now reaping the fruits of its efforts.

So much so that its central bank on Wednesday raised its key interest rate by a quarter point to 4.75 percent, in sharp contrast to most other developed countries which have slashed their borrowing costs amid the current crises.

It said economic growth in the first half of 2011 was 2.5 percent and was forecast to be just over 3.0 percent for the year as a whole.

David Stefansson, a research analyst at Arion Bank, told AFP Iceland hiked its rates because it "is in a different place in the economic (cycle) than other countries.

"The central bank thinks that other central banks in similar circumstances can afford to keep interest rates low, and even lower them, because expected inflation abroad is in general quite (a bit) lower," he said.

Lazy Ouzo-Swilling, Olive-Pit Spitting Greeks Or, How Goldman Sacked Greece By Greg Palast for In These Times

Lazy Ouzo-Swilling, Olive-Pit Spitting Greeks
Or, How Goldman Sacked Greece

By Greg Palast for In These Times
November 08, 2011 "Information Clearing House" -- Here's what we're told:Greece's economy blew apart because a bunch of olive-spitting, ouzo-guzzling, lazy-ass Greeks refuse to put in a full day's work, retire while they're still teenagers, pocket pensions fit for a pasha; and they've gone on a social-services spending spree using borrowed money. Now that the bill has come due and the Greeks have to pay with higher taxes and cuts in their big fat welfare state, they run riot, screaming in the streets, busting windows and burning banks.
I don't buy it. I don't buy it because of the document in my hand marked, "RESTRICTED DISTRIBUTION."
I'll cut to the indictment: Greece is a crime scene. The people are victims of a fraud, a scam, a hustle and a flim-flam. And––cover the children's ears when I say this––a bank named Goldman Sachs is holding the smoking gun.
In 2002, Goldman Sachs secretly bought up €2.3 billion in Greek government debt, converted it all into yen and dollars, then immediately sold it back to Greece.
Goldman took a huge loss on the trade.
Is Goldman that stupid?
Goldman is stupid—like a fox. The deal was a con, with Goldman making up a phony-baloney exchange rate for the transaction. Why?
Goldman had cut a secret deal with the Greek government in power then. Their game: to conceal a massive budget deficit. Goldman's fake loss was the Greek government's fake gain.
Goldman would get repayment of its “loss” from the government at loan-shark rates.
The point is, through this crazy and costly legerdemain, Greece's right-wing free-market government was able to pretend its deficits never exceeded 3 percent of GDP.
Cool. Fraudulent but cool.
But flim-flam isn’t cheap these days: On top of murderous interest payments, Goldman charged the Greeks over a quarter billion dollars in fees.
When the new Socialist government of George Papandreou came into office, they opened up the books and Goldman's bats flew out. Investors' went berserk, demanding monster interest rates to lend more money to roll over this debt.
Greece's panicked bondholders rushed to buy insurance against the nation going bankrupt. The price of the bond-bust insurance, called a credit default swap (or CDS), also shot through the roof. Who made a big pile selling the CDS insurance? Goldman.
And those rotting bags of CDS's sold by Goldman and others? Didn't they know they were handing their customers gold-painted turds?
That's Goldman's specialty. In 2007, at the same time banks were selling suspect CDS's and CDOs (packaged sub-prime mortgage securities), Goldman held a “net short” position against these securities. That is, Goldman was betting their financial "products" would end up in the toilet. Goldman picked up another half a billion dollars on their "net short" scam.
But, instead of cuffing Goldman's CEO Lloyd Blankfein and parading him in a cage through the streets of Athens, we have the victims of the frauds, the Greek people, blamed. Blamed and soaked for the cost of it. The "spread" on Greek bonds (the term used for the risk premium paid on Greece's corrupted debt) has now risen to — get ready for this––$14,000 per family per year.
Greg Palast is the author of Vultures' Picnic: In Pursuit of Petroleum Pigs, Power Pirates and High-Finance Carnivores, which will be released on November 14 by Penguin USA.

Occupy France: Calling for Change at the G20 Summit by Yifat Susskind / Common Dreams

Occupy France: Calling for Change at the G20 Summit

This week marks the beginning of the G20 summit in Cannes, where representatives from the 20 richest countries will gather to discuss global economic policy. The G20 has been meeting since the late 1990s to respond to global financial crises. But the policies they espouse—from cutting back on government spending to deregulation—have only led to more poverty, inequality and instability.
Ahead of this week’s meetings, MADRE, an international women’s human rights organization, calls on the G20 states to take effective action to address financial crisis. One important step is to stabilize the market by creating a ‘Robin Hood’ tax on currency exchanges and financial transactions. MADRE stands with economic justice advocates worldwide in endorsing the call for such a tax.
In a global economy wracked by speculation and rapid-fire trading, the ‘Robin Hood’ tax would tame the profit-driven speculation that has made our world financial markets so volatile. It would curb short-sighted trading practices that move trillions of dollars each day, generating huge profits for a tiny few without reinvestment in social services, infrastructure and other necessities for the global 99 percent. By taxing these financial transactions, money could be funneled into critical social services such as health care and education.
The practices of traders and speculators in global markets have also turned basic rights like food, water, health care and education into commodities, pushing these resources out of reach for many of the world’s people. For example, this year’s famine in the Horn of Africa is in part the result of rampant speculation on grains—the world’s staple food.
Today, grassroots protests against economic injustice are growing around the world. The Occupy Wall Street movement was born in downtown New York City, but it has links that span geographies and time.
MADRE joins our allies worldwide in calling on the G20 to recognize the fundamental and unjust imbalances of the global economic system and endorse the creation of a ‘Robin Hood’ Tax.
Correction: This post was updated on 11/3 to reflect that the G20 meeting is being held in Cannes, not Paris.

Friday, November 11, 2011

Greece, Home of Democracy, Deprived of a Vote Armed by Papandreou with a referendum, the Greek people had clout. Now, they're powerless before the troika's austerity plan by Dean Baker / Common Dreams

Greece, Home of Democracy, Deprived of a Vote

Armed by Papandreou with a referendum, the Greek people had clout. Now, they're powerless before the troika's austerity plan

Greek Prime Minister George Papandreou touched off a firestorm last week when he proposed putting the austerity package designed by the "troika" (the IMF, the European Central Bank and the European Union) up for a popular vote. The idea that the Greek people might directly be able to decide their future terrified leaders across Europe and around the world. Financial markets panicked, sending stocks plummeting and bond yields soaring.Greek Prime Minister George Papandreou: while Greeks could have vetoed the bailout, they had some bargaining power. Photograph: Lionel Bonaventure/AFP/Getty Images
However, by the end of the week, things were back under control. The leaders of France and Germany apparently laid down the law to Papandreou and he backed off plans for the referendum. While the government is in the process of collapsing in Greece, the world can now rest assured that the Greek people will not have an opportunity to vote on their future.
This is unfortunate, since it means that Greece's future will likely be decided by politicians who may not have the interests of the Greek people foremost in their minds. By their own projections, the austerity package designed by the troika promises a decade of austerity, with high unemployment, falling real wages and sharp reductions in public services and pensions. And their projections have consistently proven to be overly optimistic.
If given the opportunity, would the Greek people endorse this sort of austerity package? The answer obviously depends on the alternative.
The alternative route almost certainly means a disorderly debt default and a departure from the euro. That is not a pretty picture. If Greece follows the path of Argentina, the last country to make a similar break, then the economy is likely to undergo a free fall for a period of time. The duration of this free fall will depend on how long it takes the government to get a new currency in use and construct some provisional formula for converting euro-denominated contracts into the new currency.
In Argentina, this period was three months, with another three months of stagnation before the economy began a sustained boom. The process could be more difficult in Greece, both because it is tied in more extensively to the eurozone countries, and because Argentina at least had its own currency.
However, even in the case of Greece, such a break would not be impossible. There would be a desire to hold the new currency. The government just has to impose a new property tax, which is only payable in the new currency.
People will want to hold onto ocean-front property in the Greek islands or at the foot of the Acropolis, so there will be demand for the currency. Also, the prospect of a tourist boom, once prices in Greece fall by 50% relative to Italy, Spain and other popular destinations will go a long towards supporting the Greek economy.
If the Greek people can convince themselves that this would be a plausible alternative, then they could make a few demands on the troika. First, they could say that ten years of continuous austerity is not acceptable.
Yes, the Greeks had been reckless borrowers, but the European banks had also been reckless lenders. It is true that the Greek government had lied about its budget situation. But the word among finance types is that everyone knew they were lying and went along with the joke. Goldman Sachs even designed a nifty swap that allowed it to profit from the lies.
Instead of austerity, the Greek people might insist that the ECB focus on a growth agenda. This would mean that the ECB would have to ditch its obsession with a 2% inflation target and start acting like a real central bank. The ECB could start by guaranteeing the debt of Italy and Spain, both of which risk a rising interest rate/debt default death spiral, if there is not a credible guarantee behind their debt.
It might also start pushing more expansionary policies. It's always hard to admit when you are wrong, but the ECB-IMF policy of growth through austerity is not working. Every month, we get more proof of this fact – with data showing that growth is lower than expected and unemployment is higher than expected. Is there any evidence that could get these people to change their minds before they destroy Europe's economies? Maybe, the Greek people could have forced the troika to actually look at the data.
There would have been other potential for fun in these negotiations. The Greek people, who have already been forced to accept a rise in their retirement age and lower pensions, may suggest the same for IMF economists. These hard-working types can often retire from their jobs in their early 50s. Instead of the meager Greek pensions of a few hundred euros a month that got the banker types so riled, the IMF crew can be pocketing close to $10,000 a month in their pensions. Perhaps IMF pensions would have come up for debate, if the Greek people actually had to be convinced that a bailout was in their own good.
But the chance to bring the Greek people into the discussion was quickly nixed. We are back to a conversation among the bankers and the politicians. There is not much room for democracy in this story, but we can still dream.

Thursday, November 10, 2011

Keynes Trumps Hayek in Debate Felix Salmon /

Keynes Trumps Hayek in Debate

In the Asia Society debate, Keynes was a proxy for Obama’s economic policies and Hayek played the same role for GOP presidential candidates—with most of the audience siding with the Keynesians who think the government should do something about the economy.

It’s been billed as the Fight of the Century: John Maynard Keynes vs. Friedrich Hayek. And on Tuesday night at the Asia Society it became a high-powered Thomson Reuters debate, moderated by Sir Harry Evans and featuring Nobel Laureate Edmund Phelps on the side of the Hayekians.
Nicholas Wapshott, who introduced the debate, gives a good overview of what’s at stake in an article for Reuters. It’s particularly germane right now, with Keynes acting as a proxy for Obama’s economic policies and Hayek serving the same role for essentially all of the Republican candidates.
Boiled down, it comes to this: Keynesians see a dreadful economy and say that the government should do something about it. Specifically, the government should get the economy moving again by spending money now. Hayekians, on the other hand, mistrust the idea that the government is the solution to any problem, and suspect that more government spending only acts to make matters worse. It’s a stance that makes for compelling political rhetoric: pay less in taxes, and see the economy grow! Nothing not to like there.
But could the Hayekians withstand the scrutiny of a formal debate? They had a hard time of it tonight.
For one thing, the Keynesians had the advantage of history. Keynes is a giant of 20th-century economic thought, who was intimately involved in policy decisions at the highest level and whose works are revered to this day. Hayek, by contrast, has always been a more marginal figure, whose works are borderline unreadable even in the original German, and who had an unhelpful habit of contradicting himself on a semiregular basis. Some of Hayek’s ideas—a nugget here, a concept there—have proved surprisingly resilient over time. But taken as a whole, it’s hard to point to a big-picture philosophy of practical economics in Hayek’s oeuvre as a whole. And as Sylvia Nasar pointed out, when Hayek did make specific statements and predictions about the economies he lived in, he was very quickly proved wrong.

Friedrich Hayek (left )Lord John Maynard Keynes, AP Photos (2)

What would Keynes do, right here, right now? That’s easy to answer. Hayek? No one has a clue. He would avoid meddling in the economy, trying to pick sectors and pick winners—and yet Phelps, arguing for Hayek, said he’d like to see a National Innovation Bank. Not a bad idea—but not a way of winning this particular debate, either.
The problem with the Hayekian position is that it’s relentlessly negative: spending doesn’t work, stimulus doesn’t work, all we can do is suffer a nasty bout of deflation and trust in the invisible hand to eventually get us back to work again.
For the Hayekians, the Manhattan Institute’s Diana Furchtgott-Roth was particularly revealing: she would take a question about rescuing the financial system and duck it by talking about how rescuing the auto industry was a bad idea. Or she would ridicule high-speed rail by saying that no one wants to take the train from New York to L.A.—a route that precisely no one is proposing. In other words, the Hayekians were more comfortable with straw men than with messy reality.
Furchtgott-Roth did stammeringly admit that she thinks AIG should have been allowed to go bust, which is exactly the kind of thing that gives Hayekians a bad name. No responsible president would ever have allowed AIG to collapse—it would have meant the end of the financial system as we know it, and a Great Depression to rival that of the 1930s.
And when economist Lawrence White was asked if the U.K. government was following a Hayekian course and whether he thought it would work, he simply ducked the question outright, saying he had no idea.
Meanwhile, the Keynesians were full of real-world examples, either from Keynes’s own history or from the more recent past. The financier Steve Rattner did a good job of defending the auto-industry bailout, saying it saved two million jobs and represented a classic case where the government could step in when the market fails. White responded by saying that GM wasn’t a market failure; it was “a market verdict.” Which is a great sound bite, but sound bites don’t save two million jobs.
Phelps, by far the most reality-based of the Hayekians, was happy to adopt Keynesianism in a crisis. He approved of most of the fiscal and monetary policy adopted by Presidents Bush and Obama in the face of the financial crisis, saying that they “served to remedy a deficiency of liquidity.” He just feels that such mechanisms have outlived their usefulness at this point—that they can help for a year or so after a crisis, and should then be abandoned. That’s an interesting and defensible point, but it seems to me a point for Keynes rather than for Hayek. As New Yorker writer John Cassidy noted, we’re all Keynesians in a crisis—including, it would seem, Ned Phelps.

Wednesday, November 9, 2011

Five Articles About Abramoff, Delay and Spitzer By Alex Pareene and Andrew O'Hehir / Salon

Tuesday, Nov 8, 2011 5:00 AM 23:36:26 PST

Jack Abramoff plays the earnest reformer

In his new book and in a "60 Minutes" interview, the felon and former super-lobbyist poses as a changed man

Jack Abramoff
Jack Abramoff (Credit: Reuters)
Jack Abramoff is back! He’s selling a book, naturally. (The movie was already made, limiting his cashing-in opportunities.) To celebrate, “60 Minutes” had him on to look sort of contrite while nostalgically reminiscing over his time as Washington’s top incredibly corrupt super-lobbyist.
Abramoff pleaded guilty to defrauding his lobbying clients through over-billing and double-dealing. He admitted to bribery and wire fraud. In his interview, Abramoff explained basically How He Did It, and it turns out that it’s really not that hard to “bribe” a member of Congress. Offer their staffers jobs and give the members lots of gifts and campaign donations. Then you can write whatever you want into pending legislation, more or less.
Alex Pareene
Alex Pareene writes about politics for Salon. Email him at and follow him on Twitter @pareene More Alex Pareene Tuesday, Apr 5, 2011 3:01 PM 23:36:26 PST

John Boehner’s policy director gave out Abramoff favor money

He greased the wheels for the symbol of GOP corruption, now he works for the leader of the new majority

Jack Abramoff and Sen. John Boehner
Jack Abramoff and Sen. John Boehner
John Boehner is so obviously a favor-trading tool of monied interests — this is the man, it must never be forgotten, who literally handed out tobacco company checks on the floor of the House — that sometimes it hardly seems noteworthy when he again proves that he is nothing but a puppet of well-heeled lobbyists. But we must guard against cynicism and always take opportunities to remind the nation that Speaker Boehner is a corrupt tangerine. So documentarian Alex Gibney writes today of Boehner’s recently hired policy director, Brett Loper. Before joining team Boehner, Loper was, naturally, a medical device lobbyist, whose job was to protect the profits of the medical device industry at the expense of, among other things, the federal deficit. And before that, he worked for the gloriously amoral Tom DeLay.
Alex Pareene
Alex Pareene writes about politics for Salon. Email him at and follow him on Twitter @pareene More Alex Pareene Monday, Aug 16, 2010 1:45 PM 23:36:26 PST

No federal charges for Tom DeLay

The Justice Department decides not to charge the former House majority leader for his connections to Jack Abramoff

Tom DeLay
Tom DeLay
Tom DeLay has finally been completely vindicated. After a six-year investigation, the Justice Department has declined to press charges against DeLay for his connections to disgraced lobbyist Jack Abramoff. Former top DeLay aides Michael Scanlon and Tony Rudy pleaded guilty years ago to corruption charges, but apparently DeLay himself did not violate any federal laws. Which, of course, doesn’t mean that DeLay isn’t still an amoral, unethical scumbag. The details of DeLay’s relationship with Abramoff are a matter of public record, and while blocking legislation banning sweatshops in the Northern Mariana islands from reaching the floor of the House, as a favor to Abramoff, isn’t a crime, it is still probably not something you want to brag about. DeLay still faces charges in Texas for conspiracy and being just as corrupt as everyone always knew he was.
Alex Pareene
Alex Pareene writes about politics for Salon. Email him at and follow him on Twitter @pareene More Alex Pareene Thursday, May 6, 2010 9:01 AM 23:36:26 PST

Jack Abramoff, Eliot Spitzer: A tale of two swindlers

What connects the disgraced N.Y. governor and the jailed D.C. lobbyist? Oscar-winner Alex Gibney explains

Former New York governor Spitzer speaks at the Reuters Global Financial Regulation Summit in New York
Former New York governor Eliot Spitzer speaks at the Reuters Global Financial Regulation Summit 2010 in New York April 28, 2010. REUTERS/Brendan McDermid (UNITED STATES - Tags: BUSINESS HEADSHOT) (Credit: © Brendan Mcdermid / Reuters)
What do the following have in common: Imprisoned Washington lobbyist Jack Abramoff, disgraced ex-New York Gov. Eliot Spitzer, the collapse of Enron, the Bush administration’s torture policies, the late gonzo journalist Hunter S. Thompson? Before we go chasing some thread of thematic continuity — and we could definitely do that — let’s observe the emotional connection. All of those people and things provoke or embody big, visceral reactions: shock, outrage, disgust, amazement.
Andrew O
More Andrew O'Hehir Friday, Apr 30, 2010 9:31 AM 23:36:26 PST

Exclusive Alex Gibney clip: Jack Abramoff and healthcare

See a deleted scene from Oscar-winner Alex Gibney's new movie about the guy who dosed Congress with dirty money

In an exclusive premiere for Film Salon readers, here’s a deleted scene from Oscar-winning director Alex Gibney’s upcoming documentary “Casino Jack and the United States of Money.” The film recounts the horrifying, mesmerizing saga of über-lobbyist Jack Abramoff and the congressional corruption scandal of the late ’90s and early 2000s that dramatically changed the landscape of Washington (and definitely not for the better).
Andrew O
More Andrew O'Hehir