|
|
Home | Switchboard | Unix Administration | Red Hat | TCP/IP Networks | Neoliberalism | Toxic Managers |
| (slightly skeptical) Educational society promoting "Back to basics" movement against IT overcomplexity and bastardization of classic Unix | |||||||
| Home | 2020 | 2019 | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 | 2008 |
For the list of top articles see Recommended Links section
|
|
Switchboard | ||||
| Latest | |||||
| Past week | |||||
| Past month | |||||
 |
 |
 |
October 16, 2013 | Yahoo
Republican Party. Senator John McCain's decades-old joke about the popularity of Republicans in Congress --"we're down to paid staffers and blood relatives"-- is approaching arithmetical accuracy.
All of which tell us...a lot less than it might about the electoral prospects of the GOP.
The party had already begun an agonizing reappraisal of its condition after the 2012 presidential contest, where Republicans lost the popular vote for the fifth time in the last six presidential elections. It might seem as if the recent damage to the party's brand, combined with the demographic challenges of a younger, browner and blacker electorate, all but dooms the GOP to years in the wilderness, unless the centrists wrest control from the party's more militant (or zealous, or screw-loose) wing.
But maybe not. Why not? Consider, for openers, the Power of the Purse. Once upon a time, the big business/Chamber of Commerce wing of the GOP held the key to its finances. It was a big reason why the Midwest/small town element of the party could never get its longtime hero, Ohio Senator Robert Taft, nominated for president. (When Taft lost for the third time, in 1952, he said, "every Republican nominee since 1936 has been picked by the Chase Manhattan Bank.")
In political terms, that hasn't been true since Republicans nominated Barry Goldwater in 1964. The rise of the party in the South, and its rules that give extra convention delegates to states that vote Republican, have shifted the axis of power in a way that Republicans of earlier generations would have found inconceivable.
More recently, the financial power has shifted as well. With campaign-finance laws now essentially gutted, wealthy ideologues can provide more than enough cash to fuel a cause or a candidacy (as casino mogul Sheldon Adelson did for Newt Gingrich's presidential bid last year). If the pin-striped wing of the GOP thinks it can force Republicans to the center by threatening to cut off campaign contributions, it's an empty threat. In fact, the more likely threat is that conservative outside groups like Heritage Action and Club for Growth will fund the primary challenges to any Republican incumbent who looks to move to the center.
Bottom line: Between the Internet and the deep pockets of the Koch Brothers and company, a candidate of the party's most militant wing will not lack for resources.
But, doesn't this mean that the GOP is on its way to nominate a presidential candidate so far out of the mainstream that he or she will go down to a defeat that will make losers to Goldwater and George McGovern look like FDR and Reagan?
Maybe. But consider: the latest shutdown-default farce has had another consequence even more dramatic than the unpopularity of the Republicans; it has made the public even more cynical about the whole process of government. (For the first time, polls have found voters saying they'd like to throw out all the rascals, including their own elected representative).
|
|
|
[Aug 26, 2013] We're All Still Hostages to the Big Banks - NYTimes.com
Op-Ed Contributor
Published: August 25, 2013
STANFORD, Calif. - NEARLY five years after the bankruptcy of Lehman Brothers touched off a global financial crisis, we are no safer. Huge, complex and opaque banks continue to take enormous risks that endanger the economy. From Washington to Berlin, banking lobbyists have blocked essential reforms at every turn. Their efforts at obfuscation and influence-buying are no surprise. What's shameful is how easily our leaders have caved in, and how quickly the lessons of the crisis have been forgotten.
We will never have a safe and healthy global financial system until banks are forced to rely much more on money from their owners and shareholders to finance their loans and investments. Forget all the jargon, and just focus on this simple rule.
Mindful, perhaps, of the coming five-year anniversary, regulators have recently taken some actions along these lines. In June, a committee of global banking regulators based in Basel, Switzerland, proposed changes to how banks calculate their leverage ratios, a measure of how much borrowed money they can use to conduct their business.
Last month, federal regulators proposed going somewhat beyond the internationally agreed minimum known as Basel III, which is being phased in. Last Monday, President Obama scolded regulators for dragging their feet on implementing Dodd-Frank, the gargantuan 2010 law that was supposed to prevent another crisis but in fact punted on most of the tough decisions.
Don't let the flurry of activity confuse you. The regulations being proposed offer little to celebrate.
From Wall Street to the City of London comes the same wailing: requiring banks to rely less on borrowing will hurt their ability to lend to companies and individuals. These bankers falsely imply that capital (unborrowed money) is idle cash set aside in a vault. In fact, they want to keep placing new bets at the poker table - while putting taxpayers at risk.
When we deposit money in a bank, we are making a loan. JPMorgan Chase, America's largest bank, had $2.4 trillion in assets as of June 30, and debts of $2.2 trillion: $1.2 trillion in deposits and $1 trillion in other debt (owed to money market funds, other banks, bondholders and the like). It was notable for surviving the crisis, but no bank that is so heavily indebted can be considered truly safe.
The six largest American banks - the others are Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley - collectively owe about $8.7 trillion. Only a fraction of this is used to make loans. JPMorgan Chase used some excess deposits to trade complex derivatives in London - losing more than $6 billion last year in a notoriously bad bet.
Risk, taken properly, is essential for innovation and growth. But outside of banking, healthy corporations rarely carry debts totaling more than 70 percent of their assets. Many thriving corporations borrow very little.
Banks, by contrast, routinely have liabilities in excess of 90 percent of their assets. JPMorgan Chase's $2.2 trillion in debt represented some 91 percent of its $2.4 trillion in assets. (Under accounting conventions used in Europe, the figure would be around 94 percent.)
Basel III would permit banks to borrow up to 97 percent of their assets. The proposed regulations in the United States - which Wall Street is fighting - would still allow even the largest bank holding companies to borrow up to 95 percent (though how to measure bank assets is often a matter of debate).
If equity (the bank's own money) is only 5 percent of assets, even a tiny loss of 2 percent of its assets could prompt, in essence, a run on the bank. Creditors may refuse to renew their loans, causing the bank to stop lending or to sell assets in a hurry. If too many banks are distressed at once, a systemic crisis results.
Prudent banks would not lend to borrowers like themselves unless the risks were borne by someone else. But insured depositors, and creditors who expect to be paid by authorities if not by the bank, agree to lend to banks at attractive terms, allowing them to enjoy the upside of risks while others - you, the taxpayer - share the downside.
Implicit guarantees of government support perversely encouraged banks to borrow, take risk and become "too big to fail." Recent scandals - JPMorgan's $6 billion London trading loss, an HSBC money laundering scandal that resulted in a $1.9 billion settlement, and inappropriate sales of credit-card protection insurance that resulted, on Thursday, in a $2 billion settlement by British banks - suggest that the largest banks are also too big to manage, control and regulate.
NOTHING suggests that banks couldn't do what they do if they financed, for example, 30 percent of their assets with equity (unborrowed funds) - a level considered perfectly normal, or even low, for healthy corporations. Yet this simple idea is considered radical, even heretical, in the hermetic bubble of banking.
Bankers and regulators want us to believe that the banks' high levels of borrowing are acceptable because banks are good at managing their risks and regulators know how to measure them. The failures of both were manifest in 2008, and yet regulators have ignored the lessons.
If banks could absorb much more of their losses, regulators would need to worry less about risk measurements, because banks would have better incentives to manage their risks and make appropriate investment decisions. That's why raising equity requirements substantially is the single best step for making banking safer and healthier.
The transition to a better system could be managed quickly. Companies commonly rely on their profits to grow and invest, without needing to borrow. Banks should do the same.
Banks can also sell more shares to become stronger. If a bank cannot persuade investors to buy its shares at any price because its assets are too opaque, unsteady or overvalued, it fails a basic "stress test," suggesting it may be too weak without subsidies.
Ben S. Bernanke, chairman of the Federal Reserve, has acknowledged that the "too big to fail" problem has not been solved, but the Fed counterproductively allows most large banks to make payouts to their shareholders, repeating some of the Fed's most obvious mistakes in the run-up to the crisis. Its stress tests fail to consider the collateral damage of banks' distress. They are a charade.
Dodd-Frank was supposed to spell the end to all bailouts. It gave the Federal Deposit Insurance Corporation "resolution authority" to seize and "wind down" banks, a kind of orderly liquidation - no more panics. Don't count on it. The F.D.I.C. does not have authority in the scores of nations where global banks operate, and even the mere possibility that banks would go into this untested "resolution authority" would be disruptive to the markets.
The state of financial reform is grim in most other nations. Europe is in a particularly dire situation. Many of its banks have not recovered from the crisis. But if other countries foolishly allow their banks to be reckless, it does not follow that we must do the same.
Some warn that tight regulation would push activities into the "shadow banking system" of money market funds and other short-term lending vehicles. But past failures to make sure that banks could not hide risks using various tricks in opaque markets is hardly reason to give up on essential new regulations. We must face the challenge of drawing up appropriate rules and enforcing them, or pay dearly for failing to do so. The first rule is to make banks rely much more on equity, and much less on borrowing.
Anat R. Admati, a professor of finance and economics at the Stanford Graduate School of Business, is the author, with Martin Hellwig, of "The Bankers' New Clothes: What's Wrong With Banking and What to Do About It."
[Aug 21, 2013] How financial hackers from GS, J.P. Morgan and other usual suspects cornered commodities by Christian Berthelsen
If you hack somebody else computer and get caught you go to jail. If you hack financial system you reap profits and because you own the system you have no risk to be be put to the slammer ;-)
Aug 21, 2013 | The Wall Street Journal
Aluminum deliveries into warehouses run by big banks and trading firms have plunged this summer, highlighting Wall Street's retreat from the once-lucrative commodities business amid stagnant markets, new rules and regulatory scrutiny.
The slump marks the unraveling of a practice that boosted profits for several years at warehouse operators including Goldman Sachs Group Inc. and Glencore Xstrata PLC. Bank warehousing practices now are the subject of investigations by several U.S. authorities, including a Senate panel.
Fabrizio Costantini for the Wall Street Journal A metals warehouse in Detroit owned by Metro International Trade Services, a unit of Goldman Sachs Group.The reversal underscores Wall Street's efforts to wring profits out of power plants, oil pipelines and metals warehouses. After spending billions of dollars in a decadeslong expansion into all corners of the raw-materials business, Goldman Sachs, J.P. Morgan Chase & Co. and Morgan Stanley are trying to sell commodities assets.
"The game as we know it seems to be over," said James Malick, a partner in the capital markets practice at Boston Consulting Group. "It's hard to see anything new that is bolder, bigger or better" in commodities.
In its heyday, the firms offered aluminum producers cash, rent discounts and other incentives to put metal into storage rather than selling to users such as brewers and soft-drink makers, according to analysts and traders. Meanwhile, the prolonged time in inventory generated hefty rental income for warehouse owners that more than made up for the incentives paid out.
Industrial aluminum users such as Coca-Cola Co. and aluminum sheet maker Novelis Inc. have complained to the London Metal Exchange that warehouses had artificially slowed the release of aluminum, limiting supply and driving up prices. A MillerCoors LLC executive testified in a Senate banking committee hearing last month that the practices were inflating consumer prices by billions of dollars.
Glencore, Goldman Sachs and J.P. Morgan declined to comment.
Average daily aluminum shipments to LME warehouses were down 79% in the first 19 days of August from two months earlier, according to data provided by New York-based metals consulting firm CPM Group Inc. August's daily average rate of aluminum deliveries is the lowest since November 2011, CPM Group said.
At the same time, the cash incentives dangled before producers by the banks and trading firms that own the facilities have recently dropped to $50 a metric ton from more than $200 this past spring, traders said.
As more metal comes back into the market, the premium charges for immediate delivery have fallen 7.2% from their record in July, according to Platts. On Tuesday, LME aluminum for three-month delivery closed at $1,914.50 a metric ton, down 7.6% this year.
Spurring the bank pullback: A decline in commodity profits amid more-placid markets that have limited trading opportunities and increased capital requirements that have made running these businesses more expensive. Commodity revenue at the 10 largest global investment banks in 2012 fell 57%, to $6 billion, compared with 2008, according to Coalition, a research consultant. In the first half of 2013, revenue fell 25% from the same period last year.
Raw-materials trading in 2008 generated as much as a third of revenue within large banks' market-making business, which matches buyers and sellers in the fixed income, currency and commodities markets; it now accounts for less than 7%.
"As things stand right now it's a very, very bleak picture," said Paul Johny, research director of Coalition.
Employment in commodity divisions at the 10 largest global investment banks dropped to 2,183 at the end of the first quarter from its peak of 2,775 at the end of 2010, according to Coalition.
J.P. Morgan plans to sell physical assets such as warehouses and power plants. The Wall Street bank has told potential buyers of its commodities assets that it expects to kick off sale efforts in early September, said people familiar with the sale process.
Goldman Sachs has explored a sale of its metal warehousing unit, Metro International Trade Services. Metro International has maintained a stockpile of more than 1.5 million tons of aluminum, or about 27% of the LME's global inventories of that metal, at its Detroit facilities. Metro operates 29 of 37 LME-licensed warehouses there.
UBS AG last year closed all of its commodity trading desks not tied to precious metals such as gold and silver.
At Morgan Stanley, a pioneer in the commodities business that doesn't own a warehouse unit, the pain has been acute. The Wall Street securities firm doesn't disclose specific results for the commodities unit, but people familiar with its performance said revenue has fallen to less than $1 billion last year from nearly $3 billion five years ago.
The firm sought to sell its commodities business last year, but talks broke down after the sovereign-wealth fund of Qatar said it wanted only certain parts of the business, principally oil, according to people briefed on the talks. The sides discussed different structures for a partnership to run the business together but couldn't reach an agreement, the people said.
The Commodity Futures Trading Commission last week subpoenaed a number of warehousing operators, and the Justice Department launched a probe into the matter last month, people familiar with the probes said. Separately, the Federal Reserve is examining whether banks should be allowed to own physical commodities assets such as pipelines, warehouses and power plants. Lawmakers also have questioned the role of banks in the physical raw-materials business. Goldman Sachs and Metro have been targeted in at least four federal lawsuits in recent weeks alleging abusive practices. The firm has denied wrongdoing.
Most banks are retaining units that make commodities-related trades for customers such as hedge funds, airlines and manufacturers seeking to bet on price changes or hedge risks. But the volume of such trading has fallen sharply, pressuring profits, thanks to rules limiting bank trading and a decrease in large market swings.
The pullback is compounding the challenges of a low-interest-rate environment that has cut into investment returns. The commodity business has been highly profitable but accounts for a small chunk of large banks' revenue.
The London Metal Exchange is the world's largest industrial metals trading bourse and is considered the global benchmark for aluminum prices. No U.S. exchange trades aluminum futures. The LME on July 1 announced a proposal to link the amount of metal entering and leaving warehouses that have long wait times, with the aim of reducing the queues that have prompted complaints from industrial consumers. If approved, the rule would go into effect in April 2014.
Write to Christian Berthelsen at [email protected] and Tatyana Shumsky at [email protected]
[Aug 20, 2013] Introducing Government Finance Quasi-Capitalism by Doug Noland
Aug 17, 2013 | Safehaven.com
The Fed has been talking about bubbles for 20 years. I've been diligently studying bubbles and Money & Credit for longer. I'm here with a sense of humility. After all, I'm again relegated to wearing the proverbial "dunce cap," as I persevere through my third major bull market, "new era" and "new paradigm."
The great American economist Hyman Minsky is best known for "stability is destabilizing" and the "Financial Instability Hypothesis" - the evolution of finance from "hedge finance" to "speculative finance" and finally to highly unstable "Ponzi finance."
Minsky delineated the "Stages of Development of Capitalist Finance": "In both Keynes and Schumpeter the in-place financial structure is a central determinant of the behaviour of a capitalist economy. But among the players in financial markets are entrepreneurial profit-seekers who innovate. As a result these markets evolve in response to profit opportunities which emerge as the productive apparatus changes. The evolutionary properties of market economies are evident in the changing structure of financial institutions as well as in the productive structure... To understand the short-term dynamics of business cycles and the longer-term evolution of economies it is necessary to understand the financing relations that rule, and how the profit-seeking activities of businessmen, bankers and portfolio managers lead to the evolution of financial structures."
Minsky saw the evolution Capitalist finance as having developed in four stages: Commercial Capitalism, Finance Capitalism, Managerial Capitalism and Money Manager Capitalism. "These stages are related to what is financed and who does the proximate financing - the structure of relations among businesses, households, the government and finance."
Commercial Capitalism: "The essence of commercial capitalism was bankers providing merchant finance for goods trading and manufacturing. Financing of inventories but not capital investment."
Early economic thinkers focused on seasonal monetary phenomenon. Credit and economic cycles were prominent, although relatively short in duration.
Finance Capitalism: "Industrial Revolution and the huge capital requirements for durable long-term capital investment... The capital development of these economies mainly depended upon market financing. Flotations of stocks and bonds - securities markets, investment bankers and the Rothchilds, JP Morgan and the other money barons... The great crash of 1929-1933 marked the end of the era in which investment bankers dominated financial markets."
Managerial Capitalism: "During the great depression, the Second World War and the peace that followed government became and remained a much larger part of the economy... Government deficits led to profits - the government took over responsibility for the adequacy of profits and aggregate demand. The flaw in managerial capitalism is the assumption that enterprise divorced from banker and owner pressure and control would remain efficient... As the era progressed, individual wealth holdings increasingly took the form of ownership of the liabilities of managed funds..."
Money Manager Capitalism: "The emergence of return and capital-gains-oriented block of managed money resulted in financial markets once again being a major influence in determining the performance of the economy... Unlike the earlier epoch of finance capitalism, the emphasis was not upon the capital development of the economy but rather upon the quick turn of the speculator, upon trading profits... A peculiar regime emerged in which the main business in the financial markets became far removed from the financing of the capital development of the country. Furthermore, the main purpose of those who controlled corporations was no longer making profits from production and trade but rather to assure that the liabilities of the corporations were fully priced in the financial market..."
Late in life Minsky wrote "Today's financial structure is more akin to Keynes' characterization of the financial arrangements of advanced capitalism as a casino."
The above quotes were from a Minsky paper published in 1993. That year was notable for the inflation of a major bond market speculative Bubble. This Bubble began to burst on February 4, 1994 when Fed raised rates 25bps.
I still view 1994 as a seminal year in finance. The highly leveraged hedge funds were caught in a bond Bubble; there were serious derivative problems; and speculative deleveraging was having significant global effects, most notably the financial and economic collapse in Mexico.
[Aug 05, 2013] Columbia Economist Dr. Jeffrey Sachs speaks candidly on monetary reform
Level of corruption of the system is just staggering...
From the event at the Philadelphia Fed on April 17th, 2013 (04/17/2013) conference segment "Fixing the Banking System for Good" .
[Jul 14, 2013] Taibbi Goldman Raped The Taxpayer, And Raped Their Clients Zero Hedge
Nothing really new, just the most searing and comprehensive evisceration of the vampire squid's "profitability tactics" to date, packaged in a box of exquisite semantic brilliance that only Matt Taibbi can provide, and comprehensible enough for anyone to understand. Taibbi points out: "the fact that we haven't done much of anything to change the rules and behavior of Wall Street shows that we still don't get it. Instituting a bailout policy that stressed recapitalizing bad banks was like the addict coming back to the con man to get his lost money back.
Ask yourself how well that ever works out. And then get ready for the reload." It is time to break up the market monopolizing force known as Goldman Sachs.
Published in Rolling Stone magazine
[Jul 14, 2013] Bill Black The Banks Have Blood On Their Hands Zero Hedge
Submitted by Adam Taggart via Peak Prosperity blog,We invited Bill Black to return to explain whether the level of systemic risk due to fraud in our financial markets has improved or worsened since the dire situation he painted for us in early 2012. Sadly, it looks like abuse by the big players has only flourished since then.
In the US, our regulators have publicly embraced a "too big to prosecute" doctrine. We are restraining, underfunding and dismantling regulatory oversight in the interests of short-term stability for the status quo. Which as a criminologist, Black knows with certainty creates an environment where bad actors will act in their self-interest with assumed (and likely real, at this point) impunity.
If you can steal with impunity, as soon as you devastate regulation, you devastate the ability to prosecute. And as soon as that happens, in our jargon, in criminology, you make it a criminogenic environment. It just means an environment where the incentives are so perverse that they are going to produce widespread crime. In this context, it is going to be widespread accounting control fraud. And we see how few ethical restraints remain in the most elite banks.You are looking at an underlying economic dynamic where fraud is a sure thing that will make people fabulously wealthy and where you select by your hiring, by your promotion, and by your firing for the ethically worst people at these firms that are committing the frauds. And so you have one of the largest banks in the world, HSBC, being the key ally to the most violent Mexican drug cartel, where they actually did so much business together that the drug cartel designed special boxes to put the cash in that they were laundering that fit exactly into the teller windows so that there would be no delay. This is the efficiency principle of drug laundering.
So these banks figuratively have the blood of over a thousand people on their hands. They are willing to fund people that murder and torture and behead folks. And they are willing to do that year after year, despite warnings from the regulators that they are doing this. And the regulators are not willing to actually take serious action until there has been "true devastation."
And as time passes, our ability to bring effective justice -- should we want to -- atrophies:
I will tell you one of the things from being a former enforcement specialist: If you do not bring cases for year after year after year, it would be like a tennis player who stopped playing tournaments for ten years and never practices, and then he or she goes onto the court. What is going to happen?
They will get crushed by the opposition. So once you have given up enforcing the laws, I can tell you this with my lawyer hat on and former enforcement hat: You fear bringing these cases because you have allowed your skills to deteriorate so badly.
Given the sorry statements from officials like Lanny Breuer, who stepped down as the DOJ Criminal Division Chief earlier this year (he headed up the investigation of the banks and mortgage companies) -- we may already be at this stage.
Black sees a natural end to this systemic rot: a day where the bad actors no longer trust one another, and the system implodes upon itself:
I can tell you as a criminologist and as a former financial regulator, this is what you need to know about fraud: Fraud involves me, the fraudster, getting you to trust me. And then I betray your trust for my financial gain. And so there is no more destructive asset against trust than elite fraud.
So yes, we have been running a system under which the fraudsters get incredibly wealthy. And now they get incredibly wealthy and they do not even get prosecuted. And if there is a civil case – actually, they get the worst of all worlds. It sounds large for propaganda purposes, but all of us in finance know it is trivial. It is often literally a week of income, where their income is massively increased by the frauds. The statistics show that there has been a general withdrawal of less sophisticated investors, in particular, from the marketplaces -- and it's because people do not trust the markets anymore.
Here is what people forget: After Lehman Brothers goes, the run that occurred was not Ma and Pa. The run that occurred that, for example, broke the buck in the money market mutual funds: that was a massive run of the most sophisticated financial players, where they were taking out hundreds of millions – or even tens of billions, in some cases – of money, in some cases, literally, in microseconds. In other words, bankers no longer trusted other bankers. And when that happens, markets do not simply become inefficient; they actually lock up. And that is what happened thousands of times after Lehman collapsed, because bankers would no longer trust other bankers' evaluation of the assets.
And we have not even discussed derivatives to this point. Which is the not-800-pound gorilla, but the $8-trillion-ton-gorilla that is out there. So we already have the insanity of derivative trades in which both of us book a gain because we have different evaluations for the asset. So we have phenomenal paper gains that cannot be true. When the markets no longer trust each other, then those kinds of transactions do not work anymore, and there is no liquidity, and you are in the equivalent of trying to sell minority shareholder interest in a privately held corporation. How is that going to work out for you? Ever tried to do that?
So all across the globe, all across history, minority shareholders get completely screwed in that circumstance, when liquidity dries up. Well, the same thing can happen to much broader markets, including in particular the derivatives markets.
And if it does, when trust is interrupted, much less eroded, in the ways I have talked about it in the derivatives market, liquidity completely dries up. Anything that functions like a market-maker collapses, and you get whole financial systems that grind to a halt. And they do not happen just a few times. It can happen in thousands of markets roughly simultaneously.
You asked me earlier about Dodd Frank, and I said it had no coherent strategic vision. And a couple of the areas in which it had no coherent strategic vision we have talked about. It did not deal with the international competition-in-laxity. It did not deal with "too big to fail." And it did not deal with derivatives. So I would say that was strike one, strike two, strike three.
Click the play button below to listen to Chris' interview with Bill Black (47m:23s):
[Jun 19, 2013] Britain says reckless bankers could face jail
This is naive. It was financial coup that put financial junta in power. And they control who will be jailed.
By Matt Scuffham
LONDON (Reuters) - Bankers who are reckless with customers' or taxpayers' money could face criminal charges and have bonuses and pensions clawed back, according to proposals backed by Britain's prime minister on Wednesday.
Many Britons blame bankers' risk-taking for the 2008 financial crisis and subsequent economic slump and were furious when the former boss of RBS (RBS.L) left the bank with a pension of almost 17 million pounds even after a state rescue.
He later agreed to a cut and was stripped of his knighthood but it was one in a series of banking scandals that increased pressure on Prime Minister David Cameron to get tougher on a sector contributing billions of pounds to the British economy.
The parliamentary commission on banking standards he set up last year after Barclays (BARC.L) was fined for manipulating interest rate benchmarks said on Wednesday the law should be changed so that bankers found guilty of "reckless misconduct in the management of a bank" could face jail.
The UK Treasury said the new rules could be in place before the end of 2015 but lawyers said it would be hard to prove when a banker had taken too much risk or simply made a mistake.
Asked in parliament whether he supported the report's recommendations on criminal penalties and pay, Cameron said: "Penalizing, including criminal penalties ... bankers who behave irresponsibly, I say yes."
Lawyers doubted that new laws would be effective.
"There is likely to be a considerable burden of proof - merely miscalculating or being negligent in an assessment of risk most likely won't be enough," said Michael Isaacs, head of banking litigation at law firm Pinsent Masons.
The commission also recommended a new pay code to better balance risk and reward, with bonuses deferred for up to ten years with the aim of preventing bankers taking risks for short term reward, one of the factors blamed for the crisis.
It also proposed that the UK financial regulator would be granted a new power enabling it to cancel all bonuses and pension rights not yet paid out to senior executives in the event of their banks needing taxpayer support.
WATERED DOWN
Banking industry sources said banks were likely to accept many of the proposals in principle, including the threat of criminal sanctions, but will lobby for some to be watered down, including the 10-year deferral on bonuses.
"The commission's conclusions contain many constructive proposals to help fix the issues which have afflicted the industry, most importantly in the emphasis on personal responsibility and accountability," said HSBC (HSBA.L) Chairman Douglas Flint.
The cross-party commission, which includes former British finance minister Nigel Lawson and Justin Welby, head of the Anglican church, recommended senior bankers are held personally responsible and regulators granted greater powers.
Commission member Pat McFadden said it would be "pressing the government very hard in the coming weeks" to make sure the proposals are implemented. The government has set itself a four week deadline to give a formal response.
"I think all of us who were engaged in this process over the last year very much hope this is not a report which is going to gather dust," he told Reuters.
The British Bankers Association, a lobby group, said it would work with government and regulators to take forward proposals from what it described as the "most significant report into banking for a generation".
UNPOPULAR
Bankers are deeply unpopular in Britain where the economy has narrowly avoided a triple-dip recession and is expected to show tepid growth at best through next year.
"I think jail sentences would be suitable," Ben Stewart, a 34-year-old cabinet maker said in Whitechapel, not far from the City of London, the traditional financial heartland.
"It's fraud a lot of what they've done. Even if it's not legally fraud, I think by most people's moral compass, they'd find it quite distasteful."
The commission recommended the industry adopt two new registers for senior bankers and other employees to make sure the most important responsibilities within banks were assigned to specific individuals.
The 'Senior Persons Regime' would enable those responsible for failures to be identified more easily and provide a stronger basis for action to be taken against them, the report said.
The Financial Conduct Authority, the financial services industry watchdog which took over regulation of banks in April, said it was "learning from the regulatory mistakes of the past".
The commission also urged the government to immediately consider a range of strategies for RBS, which is 81 percent state-owned, including a possible break-up.
Some commission members, including Lawson, have advocated hiving off RBS's toxic loans into a 'bad bank' leaving the remaining 'good bank' better able to lend to British businesses and households. But Finance Minister George Osborne said such a move would be complicated, time consuming and costly.
The report said the government had interfered in the running of RBS and Lloyds Banking Group (LLOY.L), in which it holds a 39 percent stake, and said RBS was being held back by having the government as its main shareholder.
The level of the government's influence over RBS has come under scrutiny since Chief Executive Stephen Hester was ousted last week with the Treasury's approval.
Osborne is set to lay out strategies for returning RBS and Lloyds Banking Group (LLOY.L) to full private ownership in his annual speech to financiers in the City of London on Wednesday.
(Additional reporting by Steve Slater, William James, Peter Griffiths and Dasha Afanasieva; Editing by Greg Mahlich and Anna Willard)
[Jun 19, 2013] Sallie Krawcheck Big Banks Still Don't Have Enough Capital
Banks are "certainly safer than they were" in 2008 but they're far from failsafe, according to former senior banking executive Sallie Krawcheck.
"I think banks and money funds will do just fine in a bad market, in a very bad market, and a very, very bad market," says Krawcheck, who recently acquired 85 Broads, a global women's network. "But I do worry about a very, very, very, very bad market."
Specifically, the former Citigroup CFO and head of wealth management at Bank of America worries that banks "continue to be hardly really well capitalized" -- which is a polite way of saying they're still undercapitalized.
Dismissing the new Basel III capital requirements as "the most complicated construct the world has ever known" – and poorly conceived to boot – Krawcheck prefers to look at banks' "plain old-fashioned leverage ratio" as the best indicator of health.
Back in 2008, many large banks went into the downturn with leverage ratios of 2% of assets, meaning "you can take a loss of 2% and [then] you're out of equity," she says. At the time, many senior bankers thought 2% leverage ratio was sufficient protection, Krawcheck recalls. "Because if you risk adjust this and change this and you offset this…but [the unthinkable] happened."
Today, the industry average is 8%; again, an improvement but hardly foolproof.
The risk is that 8% "really is 4% to 6%" because banks will lose access to overnight funding if they suffered a 50% loss on capital reserves, Krawcheck says.
Fast forward to the present: The stress tests are "helpful and useful, but what does 'extended downturn' mean?" she wonders. "Are those stress tests fully representative of what happens?"
Based on that, Krawcheck's advice is for investors to avoid concentrating assets in individual bank stocks, and buy a basket if they want exposure to the sector.
"Accidents can and do happen," she says, citing JPMorgan's infamous London Whale losses. "JPMorgan (JPM) was easily able to weather it, but the next one may not be."
Aaron Task is the host of The Daily Ticker and Editor-in-Chief of Yahoo! Finance. You can follow him on Twitter at @aarontask or email him at [email protected]
[May 03, 2013] Trusting banks to self-regulate is like trusting to self-regulate heroin addicts
- "What Cyprus demonstrates is an old truth: You can't trust bankers to govern themselves," Munger told CNBC, "I do not think you can trust bankers to control themselves. They are like heroin addicts [as for ability to control themselves]". "A banker who is allowed to borrow money at X and loan it out at X plus Y will just go crazy and do too much of it if the civilization doesn't have rules that prevent it."
- "I think the long term investor is not too much affected by things like the flash crash. That said, I think it is very stupid to allow a system to evolve where half of the trading is a bunch of short term people trying to get information one millionth of a nanosecond ahead of somebody else," Munger said. "It's legalized front-running. I think it is basically evil and I don't think it should have ever been allowed to reach the size that it did," he said. "Why should all of us pay a little group of people to engage in legalized front-running of our orders?"
[Apr 05, 2013] The Banksters and American Foreign Policy by Justin Raimondo
July 15, 2011 | Antiwar.com
In a free economy, the banks that invested trillions in risky mortgages and other fool's gold would have taken the hit. Instead, however, what happened is that the American taxpayers took the hit, paid the bill, and cleaned up their mess – and were condemned to suffer record unemployment, massive foreclosures, and the kind of despair that kills the soul.
How did this happen? There are two versions of this little immorality tale, one coming from the "left" and the other from the "right" (the scare-quotes are there for a reason, which I'll get to in a moment or two).
The "left" version goes something like this:
The evil capitalists, in league with their bought-and-paid for cronies in government, destroyed and looted the economy until there was nothing left to steal. Then, when their grasping hands had reached the very bottom of the treasure chest, they dialed 911 and the emergency team (otherwise known as the US Congress) came to their rescue, doling out trillions to the looters and leaving the rest of America to pay the bill.
The "right" version goes something like the following:
Politically connected Wall Streeters, in league with their bought-and-paid-for cronies in government, destroyed and looted the economy until there was nothing left to steal. Then, when their grasping hands had reached the very bottom of the treasure chest, they dialed BIG-GOV-HELP and the feds showed up with the cash.
The first thing one notices about these two analyses, taken side by side, is their similarity: yes, the "left" blames the free market, and the "right" blames Big Government, but when you get past the blame game their descriptions of what actually happened look like veritable twins. And as much as I agree with the "right" about their proposed solution – a radical cut in government spending – it is the "left" that has the most accurate analysis of who's to blame.
It is, of course, the big banks – the recipients of bailout loot, the ones who profited (and continue to profit) from the economic catastrophe that has befallen us.
During the 1930s, the so-called Red Decade, no leftist agitprop was complete without a cartoon rendering of the top-hatted capitalist with his foot planted firmly on the throat of the proletariat (usually depicted as a muscular-but-passive male in chains). That imagery, while crude, is largely correct – an astonishing statement, I know, coming from an avowed reactionary," no less. Yet my leftist pals, and others with a superficial knowledge of libertarianism, will be even more surprised that the founder of the modern libertarian movement, also an avowed (and proud) "reactionary," agreed with me (or, rather, I with him):
"Businessmen or manufacturers can either be genuine free enterprisers or statists; they can either make their way on the free market or seek special government favors and privileges. They choose according to their individual preferences and values. But bankers are inherently inclined toward statism.
"Commercial bankers, engaged as they are in unsound fractional reserve credit, are, in the free market, always teetering on the edge of bankruptcy. Hence they are always reaching for government aid and bailout.
"Investment bankers do much of their business underwriting government bonds, in the United States and abroad. Therefore, they have a vested interest in promoting deficits and in forcing taxpayers to redeem government debt. Both sets of bankers, then, tend to be tied in with government policy, and try to influence and control government actions in domestic and foreign affairs."
That's Murray N. Rothbard, the great libertarian theorist and economist, in his classic monograph Wall Street, Banks, and American Foreign Policy. If you want a lesson in the real motivations behind our foreign policy of global intervention, starting at the very dawn of the American empire, you have only to read this fascinating treatise. The essence of it is this: the very rich have stayed very rich in what would otherwise be a dynamic and ever-changing economic free-for-all by securing government favors, enjoying state-granted monopolies, and using the US military as their private security guards. Conservatives who read Rothbard's short book will never look at the Panama Canal issue in the same light again. Lefties will come away from it marveling at how closely the libertarian Rothbard comes to echoing the old Marxist aphorism that the government is the "executive committee of the capitalist class."
Rothbard's account of the course of American foreign policy as the history of contention between the Morgan interests, the Rockefellers, and the various banking "families," who dealt primarily in buying and selling government bonds, is fascinating stuff, and it illuminates a theme common to both left and right commentators: that the elites are manipulating the policy levers to ensure their own economic interests unto eternity.
In normal times, political movements are centered around elaborate ideologies, complex narratives that purport to explain what is wrong and how to fix it. They have their heroes, and their villains, their creation myths and their dystopian visions of a dark future in store if we don't heed their call to revolution (or restoration, depending on whether they're hailing from the "left" or the "right").
You may have noticed, however, that these are not normal times: we're in a crisis of epic proportions, not only an economic crisis but also a cultural meltdown in which our social institutions are collapsing, and with them longstanding social norms. In such times, ideological categories tend to break down, and we've seen this especially in the foreign policy realm, where both the "extreme" right and the "extreme" left are calling for what the elites deride as "isolationism." On the domestic front, too, the "right" and "left" views of what's wrong with the country are remarkably alike, as demonstrated above. Conservatives and lefties may have different solutions, but they have, I would argue, a common enemy: the banksters.
This characterization of the banking industry as the moral equivalent of gangsters has its proponents on both sides of the political spectrum, and today that ideological convergence is all but complete, with only "centrists" and self-described pragmatists dissenting. What rightists and leftists have in common, in short, is a very powerful enemy – and that's all a mass political movement needs to get going.
In normal times, this wouldn't be enough: but, as I said above, these most assuredly aren't normal times. The crisis lends urgency to a process that has been developing – unfolding, if you will – for quite some time, and that is the evolution of a political movement that openly disdains the "left" and "right" labels, and homes in on the main danger to liberty and peace on earth: the state-privileged banking system that is now foreclosing on America.
This issue is not an abstraction: we see it being played out on the battlefield of the debt ceiling debate. Because, after all, who will lose and who will win if the debt ceiling isn't raised? The losers will be the bankers who buy and sell government bonds, i.e. those who finance the War Machine that is today devastating much of the world. My leftie friends might protest that these bonds also finance Social Security payments, and I would answer that they need to grow a spine: President Obama's threat that Social Security checks may not go out after the August deadline is, like everything out that comes out of his mouth, a lie. The government has the money to pay on those checks: this is just his way of playing havoc with the lives of American citizens, a less violent but nonetheless just as evil version of the havoc he plays with the lives of Afghans, Pakistanis, and Libyans every day.
This isn't about Social Security checks: it's about an attempt to reinflate the bubble of American empire, which has been sagging of late, and keep the government printing presses rolling. For the US government, unlike a private entity, can print its way out of debt – or, these days, by simply adding a few zeroes to the figures on a computer screen. A central bank, owned by "private" individuals, controls this process: it is called the Federal Reserve. And the Fed has been the instrument of the banksters from its very inception [.pdf], at the turn of the 19th century – not coincidentally, roughly the time America embarked on its course of overseas empire.
There is a price to be paid, however, for this orgy of money-printing: the degradation, or cheapening, of the dollar. Most of us suffer on account of this policy: the only beneficiaries are those who receive those dollars first, before it trickles down to the rest of us. The very first to receive them are, of course, the bankers, but there's another class of business types who benefit, and those are the exporters, whose products are suddenly competitive with cheaper foreign goods. This has been a major driving force behind US foreign policy, as Rothbard points out:
"The great turning point of American foreign policy came in the early 1890s, during the second Cleveland Administration. It was then that the U.S. turned sharply and permanently from a foreign policy of peace and non-intervention to an aggressive program of economic and political expansion abroad. At the heart of the new policy were America's leading bankers, eager to use the country's growing economic strength to subsidize and force-feed export markets and investment outlets that they would finance, as well as to guarantee Third World government bonds. The major focus of aggressive expansion in the 1890s was Latin America, and the principal Enemy to be dislodged was Great Britain, which had dominated foreign investments in that vast region.
"In a notable series of articles in 1894, Bankers' Magazine set the agenda for the remainder of the decade. Its conclusion: if 'we could wrest the South American markets from Germany and England and permanently hold them, this would be indeed a conquest worth perhaps a heavy sacrifice.'
"Long-time Morgan associate Richard Olney heeded the call, as Secretary of State from 1895 to 1897, setting the U.S. on the road to Empire. After leaving the State Department, he publicly summarized the policy he had pursued. The old isolationism heralded by George Washington's Farewell Address is over, he thundered. The time has now arrived, Olney declared, when 'it behooves us to accept the commanding position… among the Power of the earth.' And, 'the present crying need of our commercial interests,' he added, 'is more markets and larger markets' for American products, especially in Latin America.'"
The face of the Enemy has long since changed, and Britain is our partner in a vast mercantilist enterprise, but the mechanics and motivation behind US foreign policy remain very much the same. You'll note that the Libyan "rebels," for example, set up a Central Bank right off the bat, even before ensuring their military victory over Gadhafi – and who do you think is going to be selling (and buying) those Libyan "government" bonds? It sure as heck won't be Joe Sixpack: it's the same Wall Streeters who issued an ultimatum to the Tea Party, via Moody's, that they'll either vote to raise the debt ceiling or face the consequences.
But what are those consequences – and who will feel their impact the most?
It's the bankers who will take the biggest hit if US bonds are downgraded: the investment bankers, who invested in such a dodgy enterprise as the US government, whose "full faith and credit" isn't worth the paper it's printed on. In a free market, these losers would pay the full price of their bad business decisions – in our crony-capitalist system, however, they win.
They win because they have the US government behind them - and because their strategy of degrading the dollar will reap mega-profits from American exporters, whose overseas operations they are funding. The "China market," and the rest of the vast undeveloped stretches of the earth that have yet to develop a taste for iPads and Lady Gaga, all this and more will be open to them as long as the dollar continues to fall.
That this will cripple the buying power of the average American, and raise the specter of hyper-inflation, matters not one whit of difference to the corporate and political elites that control our destiny: for with the realization of their vision of a World Central Bank, in which a new global currency controlled by them can be printed to suit their needs, they will be set free from all earthly constraints, or so they believe.
With America as the world policeman and the world banker – in alliance with our European satellites – the Washington elite can extend their rule over the entire earth. It's true we won't have much to show for it, here in America: with the dollar destroyed, we'll lose our economic primacy, and be subsumed into what George Herbert Walker Bush called the "New World Order." Burdened with defending the corporate profits of the big banks and exporters abroad, and also with bailing them out on the home front when their self-created bubbles burst, the American people will see a dramatic drop in their standard of living – our sacrifice to the gods of "internationalism." That's what they mean when they praise the new "globalized" economy.
Yet the American people don't want to be sacrificed, either to corporate gods or some desiccated idol of internationalism, and they are getting increasingly angry – and increasing savvy when it comes to identifying the source of their troubles.
This brings us to the prospects for a left-right alliance, both short term and in the long run. In the immediate future, the US budget crisis could be considerably alleviated if we would simply end the wars started by George W. Bush and vigorously pursued by his successor. Aside from that, how many troops do we still have in Europe – more than half a century after World War II? How many in Korea – long after the Korean war? Getting rid of all this would no doubt provide enough savings to ensure that those Social Security checks go out – but that's a bargain Obama will never make.
All those dollars, shipped overseas, enrich the military-industrial complex and their friends, the exporters – and drain the very life blood out of the rest of us. Opposition to this policy ought to be the basis of a left-right alliance, a movement to bring America home and put America first.
In the long term, there is the basis for a more comprehensive alliance: the de-privileging of the banking sector, which cemented its rule with the establishment of the Federal Reserve. That, however, is a topic too complex to be adequately covered in a single column, and so I'll just leave open the intriguing possibility.
"Left" and "right" mean nothing in the current context: the real division is between government-privileged plutocrats and the rest of us. What you have to ask yourself is this: which side are you on?
[Mar 02, 2013] Why You Should Care About That $83 Billion Bank Subsidy
By providing an extra measure of insurance to banks that have the potential to tank the economy, the government encourages them to become as threatening as possible.
Bloomberg
Our estimate that taxpayers provide an $83 billion annual subsidy to the largest U.S. banks has provoked a lot of debate. Amid the arguments over methodology, the most important points may be getting lost. So here they are: The subsidy is too large, it is bad for the economy, and the best way to deal with it is through measures such as increased capital requirements.
The subsidy comes in the form of lower borrowing costs, which large banks enjoy because creditors expect the government to bail them out in an emergency. We assumed, in consultation with a co-author of an International Monetary Fund working paper on the subject, that the funding advantage amounts to 0.8 percentage point over the longer term, and that applying the number to banks' total liabilities is the best way to get at its dollar value.
Reasonable people can make different assumptions and arrive at different answers. The economists Frederic Schweikhard and Zoe Tsesmelidakis estimated the subsidy was about $32 billion a year for the bond debt of U.S. banks alone, from 2007 through 2010. Andy Haldane, a senior official at the Bank of England, put the subsidy at $60 billion a year for the five largest global banks, from 2007 through 2009. A. Joseph Warburton and Deniz Anginer, respectively of Syracuse University and Virginia Tech, found that the subsidy for the largest U.S. banks went from less than $10 billion in 2004 to more than $100 billion in 2009. Ed Kane of Boston College put it at $300 billion for 2009 alone.
Exact Size
The subsidy's exact size is less important than its effects. By providing an extra measure of insurance to banks that have the potential to tank the economy, the government encourages them to become as threatening as possible. In other words, the desire to mitigate crises undermines the market discipline that would otherwise keep banks from getting so big.
The repercussions of taxpayer support for banks are far-reaching. To steal a thought from a previous editorial, if you subsidize corn farmers, you get too much corn. If you subsidize banks, you get too much credit. As of September, the total debts of households, companies and governments in the U.S. stood at 2.5 times annual economic output, up from 1.3 times in 1980. While it's hard to say what the right level should be, the recent credit-related crises in the U.S. and Europe suggest we're pushing the outer limits.
What can be done about the subsidy? Some efforts to quantify it have been aimed at designing a tax that would extract reimbursement from the banks. This would probably be too blunt an instrument. It would punish some institutions too harshly, because the size of the subsidy can differ for individual banks, depending on how much they rely on government support.
A better approach would be to make banks less likely to need taxpayer bailouts. Doing so would automatically reduce the subsidy precisely in proportion to its size for any given bank. The cost to well-run banks would be lower than the cost to banks taking big risks at taxpayers' expense.
The most effective subsidy-reducing tool is capital -- that is, the equity shareholders put into the enterprise, as opposed to the money banks borrow to augment their investments. Equity absorbs losses, making banks less likely to require taxpayer support in an emergency.
Research from the Bank of England suggests that if banks had $1 of shareholder equity for each $5 in assets, the benefits would outweigh the costs. Current global rules require just $1 in equity for each $33 in assets. In their new book, "The Bankers' New Clothes," economists Anat Admati and Martin Hellwig explain in detail how higher levels of equity would benefit the financial system and the economy.
Subsidy Curb
Another subsidy curb, already used in Ireland and Spain, is to require some creditors to take losses when banks get into trouble. Investors would then demand a higher yield to compensate for the added risk of lending to big banks, removing some of the funding advantage. Also, the pending Volcker rule in the U.S. and financial ring-fencing measures in the U.K. pare down the subsidy by preventing large universal banks from using it to finance speculative trading.
We've established that the largest global banks receive a big taxpayer subsidy. Even Federal Reserve Chairman Ben S. Bernanke agrees, judging from his statements to the Senate this week. Let's move on to the question of what to do about it.
(For more on this subject, see our original editorial and our initial and further responses to critics.)
[Feb 26, 2013] Real House Prices and Price-to-Rent Ratio Hoocoodanode
One advantage of strong law enforcement actions after the financial crash is that it allow to jail quite a bit of psychopaths who managed to get to the top of financial institutions since the last crisis.
2/26/2013
arthur_dent:
sum luk wrote:
I'm not understanding why Ben's fiat is an insufficient replacement for the "pre-recession money" that set those asset prices
my own view is that if you continually reward psychotics you will have an economic system dominated by psychotics who continually push the system toward an undamped response, creating higher highs and lower lows until the whole thing tears itself apart. The natural healing of a depression is that the psychotics are replaced by those who practiced sound money management and is a necessary part of system stability.
sum luk:
arthur_dent wrote:
The natural healing of a depression is that the psychotics are replaced by those who practiced sound money management and is a necessary part of system stability.
.... the natural healing of a depression is also desperation, starvation and death. I'm not sure I like your ideal.
ResistanceIsFeudal:
sum luk wrote:
the natural healing of a depression is also desperation, starvation and death. I'm not sure I like your ideal.
True, but those who survive the Dark Times will emerge to build a collective utopia based on Real Capitalism.
arthur_dent :
sum luk wrote:
.... the natural healing of a depression is also desperation, starvation and death. I'm not sure I like your ideal.
not true, governments practicing sound money management should have the fiscal resources to alleviate suffering, not bail everyone out, but provide basic needs until the underlying technological forces of growth reach a level consistent with long term growth. Keynes himself admitted that responsible application of his theory required that govts run a surplus during periods of growth.
energyecon
arthur_dent wrote:
not true, governments practicing sound money management should have the fiscal resources to alleviate suffering, not bail everyone out, but provide basic needs until the underlying technological forces of growth reach a level consistent with long term growth. Keynes himself admitted that responsible application of his theory required that govts run a surplus during periods of growth.
But when are the Unworthy Cleansed by the Libertarian Sword of Justice?
ResistanceIsFeudal:
energyecon wrote:
But when are the Unworthy Cleansed by the Libertarian Sword of Justice?
Again, that is after the Dark Times. Those who survive it shall be declared most worthy, as it is written in the holy books of capitalism.
[Feb 13, 2013] Equity capital requirements The people versus the bankers by M.C.K
Feb 13 2013 | The Economist
MOST of what we call money is actually short-term debt created by banks when they make loans. This means that banks are the stewards of our savings and manage the payments system. As a result, they have a privileged place in our society: governments never deliberately choose to liquidate the banking system. It always appears preferable, in the short term at least, to preserve the incumbent institutions and personnel through bail-outs. (Lending to "solvent but illiquid" firms at below-market rates is another kind of bail-out, even if it is not always called one by the authorities.)
Bankers thus have every incentive to become as "systemic" as possible and to take as much as risk as possible-they know that they can almost always get these bail-outs when they need them. Moreover, the liability of the big risk-takers (i.e., the mid-level traders rather than the executives) is often quite limited.* They keep all of the upside when times are good and leave the rest of society with the tab when their bets go south. The Bank of England's Andrew Haldane has argued that, if you properly count the cost of crises and hidden subsidies, banking as currently practised may not actually add any value.
Policymakers have been trying to wrestle with these problems for more than a century, most recently with the Basel accords and America's Dodd-Frank law. But, according to The Bankers' New Clothes, a powerful new book by Anat Admati and Martin Hellwig, these reform efforts failed to address the basic problem of the crisis: banks are too fragile. The authors persuasively argue that the solution is higher levels of equity capital throughout the banking industry to offset the impact of the implied government protections against failure.
Banks, just like other firms, can fund their investments by borrowing, by issuing shares, or by retaining earnings. Unlike other firms, however, banks appear to love borrowing and are allergic to equity, often funding more than 97% of their asset portfolio with debt. This makes it extremely challenging for banks to absorb even moderate losses. Short-term lenders to banks, particularly those not protected by deposit insurance, have every reason to be skittish when they know that there is so little loss-absorbing capital available to shield them. In other words, thinly-capitalised banks are very vulnerable to runs, which are behind every single bank failure. If a bank incurs losses but does not fail, it is often because it got a bail-out from the rest of us through some combination fiscal transfers, regulatory forebearance, and accomodative monetary policy. More equity would neatly solve these problems, which is why Ms Admati and Mr Hellwig recommend a minimum ratio of tangible common equity to total assets of about 25%.
Bankers, however, are steadfastly opposed. When confronted, they deliberately obfuscate the issue with meaningless phrases like "hold equity" and "set aside equity", to imply that equity is an inert asset that could have been a productive investment in the economy. Bankers also like to say that there is trade-off between safety and growth, arguing that higher capital requirements make it more costly for banks to create credit. The theory is that equity is more expensive than debt. Regrettably, non-specialists in politics, the media, and the general public often fall for these tricks. However, Ms Admati and Mr Hellwig, along with many other finance scholars ranging from Eugene Fama to Simon Johnson, argue that the bankers' narratives are based on bad economics.
To understand why bankers love the status quo you have to understand how they pay themselves. Unlike most enterprises, labour actually has more power than capital at the big banks because debt plays such a huge role on bank balance sheets. To make shareholders feel better about this quasi-Marxist relationship, bankers use "return on equity" as a way to justify their compensation. The easiest way to maximise ROE is to minimise the stock of equity outstanding and borrow as much as possible. Conveniently for the bankers, this also ensures that shareholders remain relatively powerless. (For more on the special incentives driving bank behaviour, see this earlier post.) It all helps explain why banks never seem to alter the absolute value of their outstanding equity:
After all, if banks were really concerned with minimising their funding costs, they would issue and retire shares opportunistically. Instead, all of the shrinkage and growth of bank balance sheets comes from changes in debt. Clearly, there are reasons for this behaviour besides the cost of capital.
It is worth reiterating that the cost of bank debt is suppressed by government subsidies, unlike bank equity. Thanks to deposit insurance, lenders-of-last resort, and the implicit guarantee that creditors will not face losses during any bail-out of a "systemic" institution, banks can borrow at much lower rates than other businesses, much less businesses with capital structures that are even remotely as fragile as banks. The implication is that the existing arrangement constitutes a subsidy for bankers to enrich themselves while putting the rest of society at risk. Ms Admati and Mr Hellwig compare them to chemical companies that earn fat export profits because they are not penalised for dumping toxic waste in the rivers of their home countries.
The real question for policymakers is whether higher equity capital requirements would raise the cost of bank funding above what it would be right now in a world without these gifts from the rest of society. Empirical studies of America and Britain in the 19th century, before the establishment of the safety net, suggest that the answer is "no". The cost and supply of credit was not meaningfully different despite the fact that equity capital ratios were far higher. (My colleague nicely summarised that research here.)
To be clear, higher equity capital requirements do have one cost: they would be very bad for people who work at banks. The benefits, however, would more than redound to the rest of society by making the financial system safer. Well-capitalised banks maintain their lending during downturns. Those on the verge of insolvency do not. We also see that among the big banks, those with lower leverage are perceived by the equity markets to more valuable, as a percentage of their book value, than those with higher leverage. In other words, higher equity/asset ratios may actually lower funding costs.
Existing shareholders, however, are not interested in getting diluted, although new investors would be interested in buying attractively priced shares. Bankers would not be interested in dilution because it would lower ROE and their own pay. The most straightforward way to maintain ROE while issuing more shares is to cut costs, the biggest of which is labour compensation. The better deal for shareholders is to cut pay (and/or fire workers) and use the savings to buy back bank debt, which would reduce leverage without dilution. Unsurprisingly, both options are undesirable to the bankers, hence the lobbying effort and dissimulation. They are obviously entitled to express their opinions in a free society, but that does not mean we should be taken in by their self-serving arguments.
There is another interesting, but not insurmountable, objection to higher equity capital requirements. I will discuss that in a subsequent post.
*At some firms, the structure of bonuses is beginning to change. But compensation schemes still fail to adjust for risk.
[Feb 12, 2013] Assistant Attorney General Admits On TV That In The US Justice Does Not Apply To The Banks
01/23/2013 | Zero Hedge
Those who watched Frontline's special on why nobody has been prosecuted on Wall Street titled appropriately "The Untouchables" didn't learn much new. The rehash of ideas presented is what has been well known for years - namely that when it comes to prosecuting Wall Street criminals nothing will ever happen, because as Bill Gross tweeted " Its not Republican in politics. Its not Dem in politics. Its money in politics" and all the money in politics comes from Wall Street, which happens to be the ultimate ruler of the United States of America, pushing levers here and pulling stringer there to give the impression the constitutional republic is still alive. It isn't - this country has become an unchecked despotism of those in charge of money creation and who control capital - just the thing Andrew Jackson warned against. One thing we did learn, was courtesy of Assistant Attorney General Lenny Breuer who made it very clear that when it comes to the concept of justice the banks are and always have been "more equal" than others. He does so in such shocking clarity and enthusiasm that it is a miracle that this person is still employed by the US Department of Justice.
To wit from the transcript:
MARTIN SMITH: You gave a speech before the New York Bar Association. And in that speech, you made a reference to losing sleep at night, worrying about what a lawsuit might result in at a large financial institution.
LANNY BREUER: Right.
MARTIN SMITH: Is that really the job of a prosecutor, to worry about anything other than simply pursuing justice?
LANNY BREUER: Well, I think I am pursuing justice. And I think the entire responsibility of the department is to pursue justice. But in any given case, I think I and prosecutors around the country, being responsible, should speak to regulators, should speak to experts, because if I bring a case against institution A, and as a result of bringing that case, there's some huge economic effect - if it creates a ripple effect so that suddenly, counterparties and other financial institutions or other companies that had nothing to do with this are affected badly - it's a factor we need to know and understand.
In other words, no criminal charges can be levied against anyone who engaged in the crimes leading to the great financial crisis of 2008 because, get this, the implications of pursuing justice may have destabilizing implications!
Pladizow"The real menace of our republic is the invisible government which, like a giant octopus, sprawls over our city, state and nation. At the head a small group of banking houses generally referred to as "international bankers." This little faction of powerful international bankers virtually run our government for their own selfish ends." – John Hylan. N.Y.C Mayor 1922
"The few who understand the system, will either be so interested in its profits, or so dependent on its favours that there will be no opposition from that class, while on the other hand, the great body of the people mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests." – John Sherman - Protégée of the Rothschild Family
"When a government is dependent upon the bankers for money, they and not the leaders of the government control the situation, since the hand that gives is the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain."- Napolean Bonaparte
"Banking was conceived in inequity and was born in sin. The bankers own the earth. Take it away from them, but leave them the ability to create money and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But if, you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money." - Sir Josiah Stamp, Director of the bank of England in 1928, reputed to be the 2nd wealthiest man in England at the time.
Sep 11, 2013 | Asia Times
"The powers of financial capitalism had another far reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole." - Prof Caroll Quigley, Georgetown University, Tragedy and Hope (1966).
Iraq and Libya have been taken out, and Iran has been heavily boycotted. Syria is now in the cross-hairs. Why? Here is one overlooked scenario.
In an August 2013 article titled "Larry Summers and the Secret 'End-game' Memo," Greg Palast posted evidence of a secret late-1990s plan devised by Wall Street and US Treasury officials to open banking to the lucrative derivatives business. To pull this off required the relaxation of banking regulations not just in the US but globally. The vehicle to be used was the Financial Services Agreement (FSA) of the World Trade Organization (WTO).
The "end-game" would require not just coercing support among WTO members but taking down those countries refusing to join. Some key countries remained holdouts from the WTO, including Iraq, Libya, Iran and Syria. In these Islamic countries, banks are largely state-owned, and "usury" - charging rent for the "use" of money - is viewed as a sin, if not a crime.
That puts them at odds with the Western model of rent extraction by private middlemen. Publicly owned banks are also a threat to the mushrooming derivatives business, since governments with their own banks don't need interest rate swaps, credit default swaps, or investment-grade ratings by private rating agencies in order to finance their operations.
Bank deregulation proceeded according to plan, and the government-sanctioned and -nurtured derivatives business mushroomed into a US$700-plus trillion pyramid scheme. Highly leveraged, completely unregulated, and dangerously unsustainable, it collapsed in 2008 when investment bank Lehman Brothers went bankrupt, taking a large segment of the global economy with it. The countries that managed to escape were those sustained by public banking models outside the international banking net.
These countries were not all Islamic. Forty percent of banks globally are publicly owned. They are largely in the BRIC countries - Brazil, Russia, India and China - which house 40% of the global population. They also escaped the 2008 credit crisis, but they at least made a show of conforming to Western banking rules.
This was not true of the "rogue" Islamic nations, where usury was forbidden by Islamic teaching. To make the world safe for usury, these rogue states had to be silenced by other means. Having failed to succumb to economic coercion, they wound up in the crosshairs of the powerful US military.
Here is some data in support of that thesis.
The end-game memo
In his August 22 article, Greg Palast posted a screenshot of a 1997 memo from Timothy Geithner, then assistant secretary of international affairs under Robert Rubin, to Larry Summers, then deputy secretary of the Treasury. Geithner referred in the memo to the "end-game of WTO financial services negotiations" and urged Summers to touch base with the CEOs of Goldman Sachs, Merrill Lynch, Bank of America, Citibank, and Chase Manhattan Bank, for whom private phone numbers were provided.
The game then in play was the deregulation of banks so that they could gamble in the lucrative new field of derivatives. To pull this off required, first, the repeal of Glass-Steagall, the 1933 Act that imposed a firewall between investment banking and depository banking in order to protect depositors' funds from bank gambling. But the plan required more than just deregulating US banks. Banking controls had to be eliminated globally so that money would not flee to nations with safer banking laws.
The "endgame" was to achieve this global deregulation through an obscure addendum to the international trade agreements policed by the World Trade Organization, called the Financial Services Agreement. Palast wrote:
Until the bankers began their play, the WTO agreements dealt simply with trade in goods - that is, my cars for your bananas. The new rules ginned-up by Summers and the banks would force all nations to accept trade in "bads" - toxic assets like financial derivatives.WTO members were induced to sign the agreement by threatening their access to global markets if they refused; and they all did sign, except Brazil. Brazil was then threatened with an embargo, but its resistance paid off, since it alone among Western nations survived and thrived during the 2007-2009 crisis.Until the bankers' re-draft of the FSA each nation controlled and chartered the banks within their own borders. The new rules of the game would force every nation to open their markets to Citibank, JP Morgan and their derivatives "products".
And all 156 nations in the WTO would have to smash down their own Glass-Steagall divisions between commercial savings banks and the investment banks that gamble with derivatives.
The job of turning the FSA into the bankers' battering ram was given to Geithner, who was named Ambassador to the World Trade Organization.
As for the others:
The new FSA pulled the lid off the Pandora's box of worldwide derivatives trade. Among the notorious transactions legalized: Goldman Sachs (where Treasury Secretary Rubin had been Co-Chairman) worked a secret euro-derivatives swap with Greece which, ultimately, destroyed that nation. Ecuador, its own banking sector de-regulated and demolished, exploded into riots. Argentina had to sell off its oil companies (to the Spanish) and water systems (to Enron) while its teachers hunted for food in garbage cans. Then, Bankers Gone Wild in the Eurozone dove head-first into derivatives pools without knowing how to swim - and the continent is now being sold off in tiny, cheap pieces to Germany.... ... ...
Ellen Brown is an attorney and president of the Public Banking Institute, PublicBankingInstitute.org. In Web of Debt, her latest of 11 books, she shows how a private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her websites are WebofDebt.com and EllenBrown.com.
|
|
|
01/26/2013
"Why do we consider banks to be like holy churches?" is the rhetorical question that Iceland's President Olafur Ragnar Grimson asks (and answers) in this truly epic three minutes of truthiness from the farce that is the World Economic Forum in Davos. Amid a week of back-slapping and self-congratulatory party-outdoing, as John Aziz notes, the Icelandic President explains why his nation is growing strongly, why unemployment is negligible, and how they moved from the world's poster-child for banking crisis 5 years ago to a thriving nation once again. Simply put, he says, "we didn't follow the prevailing orthodoxies of the last 30 years in the Western world." There are lessons here for everyone - as Grimson explains the process of creative destruction that remains much needed in Western economies
|
|
|
Submitted by Tyler Durden on 01/26/2013 - 18:45The past and present bailouts of each and every bank (and 'important' industry) will, one day, be seen as a generational offense is how MEP Daniel Hannan begins this thoroughly British demolition of the three critical myths surrounding the crisis, that despite market optics, we are still living through.
From the idea that capitalism has failed (it has not in his view, it has been ravaged by political pandering), to the crisis being caused by lack of regulation, and that greed is the single-driver of the mess that we remain in; Hannan suggests in a brief but extremely eloquent debate that there is a world of difference between being pro business and pro market as he destroys any semblance of credibility that the political (and elite) class has echoing a young Ron Paul in his thoroughly libertarian free-market sensibilities.
|
|
|
Jesse's Café Américain
"The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday's logic."Peter Drucker
I would of course add 'with self-serving dishonesty' to Mr. Drucker's prescription. But I think in a better age that sort of thing was understood.
The manner in which the financial crisis was handled, and is still being managed, is a policy error that will be studied by history, and hopefully the next school of Economics that will rise out of the ashes of their failure to provide meaningful reform for what really went wrong.
The worst of the economists and politicians have been acting as hacks in support of a massive fraud for the usual benefits. And some of what we might have hoped would be the better ones have been mindlessly applying old remedies, or at least a portion of them without understanding and admitting the underlying problems, caught up in a credibility trap of dull atavism and careerism.
The intellectual and political leadership of this generation has been weighed and found wanting. A great generation often produces one that lapses into crisis, before the next rises to the challenge of the occasion.
So I have some hope that a new school of Economics and policy making will rise out of the abject failure of the old. Not a school that has better and more intricate tools, broader power, and flashier gimmicks, but one that aspires to wisdom and virtue, especially the value of open honesty.
"The best lack all conviction, while the worst are filled with passionate intensity."This crisis has been all about the failure of the best to uphold their oaths, and to let justice be done, at the urging of the worst. And now they compound their errors and dissemble in their embarrassment and shame. Or at least those who are still capable of feeling such emotions.There will be no real and sustainable recovery without reform.
The Guardian
Wall Street thanks you for your service, Tim Geithner
By Dean Baker
11 January 2013Treasury Secretary Timothy Geithner's departure from the Obama administration invites comparisons with Klemens von Metternich. Metternich was the foreign minister of the Austrian empire who engineered the restoration of the old order and the suppression of democracy across Europe after the defeat of Napoleon.
This was an impressive diplomatic feat – given the widespread popular contempt for Europe's monarchical regimes. In the same vein, protecting Wall Street from the financial and economic havoc they brought upon themselves and the country was an enormous accomplishment.
During his tenure as head of the New York Fed and then as treasury secretary, most, if not all, of the major Wall Street banks would have collapsed if the government had not intervened to save them. This process began with the collapse of Bear Stearns, which was bought up by JP Morgan in a deal involving huge subsidies from the Fed.
The collapse of Lehman Brothers, a second major investment bank, started a run on the three remaining investment banks that would have led to the collapse of Merrill Lynch, Morgan Stanley, and Goldman Sachs if the Fed, FDIC, and treasury had not taken extraordinary measures to save them. Citigroup and Bank of America both needed emergency facilities established by the Fed and treasury explicitly for their support, in addition to all the below market-rate loans they received from the government at the time. Without this massive government support, there can be no doubt that both of them would currently be operating under the supervision of a bankruptcy judge.
Of the six banks that dominate the US banking system, only Wells Fargo and JP Morgan could conceivably have survived without hoards of cash rained down on them by the federal government. Even these two are questionmarks, since both helped themselves to trillions of dollars of below market-rate loans, in addition to indirectly benefiting from the bailout of the other banks that protected many of their assets.
Had it not been for Geithner and his sidekicks, therefore, we would have been permanently rid of an incredibly bloated financial sector that haunts the economy like a horrible albatross...
Read the entire article here.
|
|
|
Gold Daily and Silver Weekly Charts - The Silly Season
"So comes snow after fire, and even dragons have their endings."
J.R.R. Tolkien, The Hobbit
"This empire, unlike any other in the history of the world, has been built primarily through economic manipulation, through cheating, through fraud, through seducing people into our way of life, through the economic hit men."
John Perkins
Earnings season tomorrow after the bell with Alcoa.
The silly season continues as the debt ceiling has caught the can which was kicked down the road by the fiscal cliff.
It will only get stupider as the year goes on.
You can read some commentary about 'The Platinum Coin' if you scroll down for the last few postings.
I suspect strongly that this is all jawboning and political posturing. Who can take these jokers seriously excepting for the power of the office that they hold? The approval rating for Congress is around a disgraceful ten percent. But since they do not care what the people think, but only those few wealthy patrons who pay them their millions in contributions, it ought not surprise us all that much.
But in the interest of keeping it 'real' I think that all those who promote this Platinum Coin idea should be paid this year with a nice shiny single platinum coin, as a symbol in lieu of their normal salary.
Perhaps that will help them to understand why people who have saved their money and are receiving almost no interest for it are so aghast at this latest frivolous idea coming down from the economic sophisticates and their fellow travelers.
The lying and looting will continue until confidence improves.
|
|
|
Jesse's Café Américain
"The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday's logic."Peter Drucker
I would of course add 'with self-serving dishonesty' to Mr. Drucker's prescription. But I think in a better age that sort of thing was understood.
The manner in which the financial crisis was handled, and is still being managed, is a policy error that will be studied by history, and hopefully the next school of Economics that will rise out of the ashes of their failure to provide meaningful reform for what really went wrong.
The worst of the economists and politicians have been acting as hacks in support of a massive fraud for the usual benefits. And some of what we might have hoped would be the better ones have been mindlessly applying old remedies, or at least a portion of them without understanding and admitting the underlying problems, caught up in a credibility trap of dull atavism and careerism.
The intellectual and political leadership of this generation has been weighed and found wanting. A great generation often produces one that lapses into crisis, before the next rises to the challenge of the occasion.
So I have some hope that a new school of Economics and policy making will rise out of the abject failure of the old. Not a school that has better and more intricate tools, broader power, and flashier gimmicks, but one that aspires to wisdom and virtue, especially the value of open honesty.
"The best lack all conviction, while the worst are filled with passionate intensity."This crisis has been all about the failure of the best to uphold their oaths, and to let justice be done, at the urging of the worst. And now they compound their errors and dissemble in their embarrassment and shame. Or at least those who are still capable of feeling such emotions.There will be no real and sustainable recovery without reform.
The Guardian
Wall Street thanks you for your service, Tim Geithner
By Dean Baker
11 January 2013Treasury Secretary Timothy Geithner's departure from the Obama administration invites comparisons with Klemens von Metternich. Metternich was the foreign minister of the Austrian empire who engineered the restoration of the old order and the suppression of democracy across Europe after the defeat of Napoleon.
This was an impressive diplomatic feat – given the widespread popular contempt for Europe's monarchical regimes. In the same vein, protecting Wall Street from the financial and economic havoc they brought upon themselves and the country was an enormous accomplishment.
During his tenure as head of the New York Fed and then as treasury secretary, most, if not all, of the major Wall Street banks would have collapsed if the government had not intervened to save them. This process began with the collapse of Bear Stearns, which was bought up by JP Morgan in a deal involving huge subsidies from the Fed.
The collapse of Lehman Brothers, a second major investment bank, started a run on the three remaining investment banks that would have led to the collapse of Merrill Lynch, Morgan Stanley, and Goldman Sachs if the Fed, FDIC, and treasury had not taken extraordinary measures to save them. Citigroup and Bank of America both needed emergency facilities established by the Fed and treasury explicitly for their support, in addition to all the below market-rate loans they received from the government at the time. Without this massive government support, there can be no doubt that both of them would currently be operating under the supervision of a bankruptcy judge.
Of the six banks that dominate the US banking system, only Wells Fargo and JP Morgan could conceivably have survived without hoards of cash rained down on them by the federal government. Even these two are questionmarks, since both helped themselves to trillions of dollars of below market-rate loans, in addition to indirectly benefiting from the bailout of the other banks that protected many of their assets.
Had it not been for Geithner and his sidekicks, therefore, we would have been permanently rid of an incredibly bloated financial sector that haunts the economy like a horrible albatross...
Read the entire article here.
|
|
|
Jun 04, 2017 | turcopolier.typepad.com
Gordon Wilson , 31 May 2017 at 09:39 PMColonel I have refrained from any posting anywhere for any reason for months, but since the discussion seems to turn to decryption so often I thought you might be interested in knowing about network management systems built into Intel and AMD based machines for years, https://en.wikipedia.org/wiki/Intel_Active_Management_TechnologyHardware-based management does not depend on the presence of an OS or locally installed management agent. Hardware-based management has been available on Intel/AMD based computers in the past, but it has largely been limited to auto-configuration using DHCP or BOOTP for dynamic IP address allocation and diskless workstations, as well as wake-on-LAN (WOL) for remotely powering on systems.[6] AMT is not intended to be used by itself; it is intended to be used with a software management application.[1] It gives a management application (and thus, the system administrator who uses it) access to the PC down the wire, in order to remotely do tasks that are difficult or sometimes impossible when working on a PC that does not have remote functionalities built into it.[1][3][7]I think our second O in OODA is getting fuzzed if we don't consider some of the observations found in "Powershift" by Toffler as well.
...
Intel has confirmed a Remote Elevation of Privilege bug (CVE-2017-5689) in its Management Technology, on 1 May 2017.[12] Every Intel platform with either Intel Standard Manageability, Active Management Technology, or Small Business Technology, from Nehalem in 2008 to Kaby Lake in 2017 has a remotely exploitable security hole in the IME (Intel Management Engine) .[13][14]The point being is that many Intel and AMD based computers can and have been owned by various governments and groups for years, and at this level have access to any information on these machines before the encryption software is launched to encrypt any communications.
If this known software management tool is already on board, then extrapolation Toffler's chipping warning to unannounced or unauthorized by various actors, one begins to see where various nation states have gone back to typewriters for highly sensitive information, or are building their own chip foundries, and writing their own operating systems and TCP/IP protocols, and since these things are known knowns, one would not be too far fetched in assuming the nation state level players are communicating over something entirely different than you and I are using. How that impacts the current news cycle, and your interpretation of those events, I leave to your good judgment.
I would urge all of my fellow Americans, especially those with a megaphone, to also take care that we are not the subject of the idiom divide and conquer instead of its' master. To that end I think the concept of information overload induced by the internet may in fact be part of the increasing polarization and information bubbles we see forming with liberals and conservatives. This too fuzzes the second O in OODA and warps the D and thus the A, IMHO.
|
|
|
Dec 01, 2007 | democracyjournal.org
All markets have a politics, reflecting conflict among economic interests over the rules and policies that determine–as the American political scientist Harold Lasswell once famously put it–"who gets what." And when markets expand, so do their politics. Thus, in the nineteenth century, driven by improvements in transportation and communication technologies, commerce spilled across state borders beyond the capacity of states to regulate them. The power of large corporations went unchecked, generating bitter and violent class conflict. Fortunately, the democratic framework of the U.S. Constitution permitted popular challenges to the excessive concentration of wealth and influence. Ultimately, through the Progressive and New Deal eras, the United States developed a national politics that imposed a social contract–a New Deal that provided workers, as well as business, with enforceable economic rights. Over time, the contract was extended to racial minorities, women, and others who had been previously excluded from expanding economic opportunities.
Today, markets have expanded again, beyond national borders–and beyond the capacity of the world's nation-based political institutions to manage them. As a result, the global economy is sputtering. Witness the collapse of the Doha Round of trade negotiations, popular hostility to the "Washington Consensus" of development in Latin America and other underdeveloped regions, and the spread of social tensions over immigration and foreign-wage competition in both rich and poor countries. The current pattern of globalization is undercut- ting the social contract that national governments, in developed and in many less-developed countries, had imposed over the last century in order to stabilize their economies and protect their citizens from laissez-faire's brutal insecurities. Even as the world grows more tightly knit, it still lacks a common politics for managing its integration.
Just as bringing stability to the American economy in the last century required stronger national institutions, bringing social balance to the global economy in this century will require stronger global political institutions to regulate global markets. Already, many such institutions exist–such as the World Bank, World Trade Organization (WTO), and International Monetary Fund (IMF). But in make-up and in culture, they are dominated by those who own and manage large concentrations of internationally mobile capital, whose goal is to escape market regulation and break free of obligations to stakeholders other than the global corporate investor. In the politics of the global market, these institutions are dominated by a single party: Call it the Party of Davos, after the Swiss resort where several thousand global corporate CEOs, government leaders, and their assorted clientele of journalists, academics, and an occasional nongovernmental organization (NGO) or trade union head have the equivalent of their party convention every winter.
We are therefore faced with a catch-22: a global economy that is both prosperous and fair requires strong global institutions, but given the lack of a constitutional framework for democracy on that scale, strengthening existing global institutions is unlikely to generate a better distribution of global income and wealth. Indeed, under the present structure, as the world's markets become more integrated, world inequality grows.
This fundamental contradiction cannot be resolved by unruly demonstrators at the entrance to the World Bank or the IMF. Nor will it be resolved in polite public policy seminars with proposals for globalization's winners to share their gains with the losers; that is not what winners voluntarily do. Serious reform will only come from the development of a cross-border politics that challenges the cross-border power of the Party of Davos. Pulling together a worldwide movement is a utopian goal, but doing this in a region-by-region process is not. In fact, American progressives could begin the process right here in North America by transforming the North American Free Trade Agreement (NAFTA) into an instrument for continent-wide social progress. A redesigned NAFTA, in turn, could serve as a critical building block in constructing a global economy that is more equitable, more stable, and more democratic.
The Politics of Expanding Markets
The politics of the New Deal and social democratic analogues across the world rested on a new understanding of how national economies worked. The British economist John Maynard Keynes and his American followers showed that in a modern economy the worker/consumer was as important an actor in the market drama as the investor/manager. The government therefore had an obligation to pump income into the economy during downturns to assure that workers continued to buy the products they had made. Although many of America's business elites resisted the egalitarian implications of the New Deal, the smartest of them understood that Franklin Roosevelt and Keynes had saved them from much worse, namely, Marx's prediction of inevitable class warfare. When Dwight Eisenhower's nominee for secretary of defense, Charlie Wilson, said, "What's good for General Motors is good for America," liberals snickered, but the country – and the United Auto Workers – thought he was right. By 1971, Richard Nixon could claim, with some justification, that "we are all Keynesians now."
Shortly afterward, the slow fusion of the U.S. economy with the rest of the world accelerated. Between 1969 and 1979, the share of the U.S. Gross Domestic Product (GDP) represented by foreign trade rose from 10 to almost 20 percent, and the trade balance shifted from a surplus to deficit. By 2005, trade was 26 percent of our economy, and the relentlessly rising trade deficit was at 6 per- cent of our GDP. Along the way, the American industrial base–from apparel to steel to high-technology products–has been dramatically eroded, wages have stagnated, and the economic security of the typical American worker has been systematically undercut. Economists will always debate the exact numbers, and globalization is not the only factor driving the erosion of American economic security, but by now few can doubt that it is a major cause.
Keynes – whose ideas inspired the IMF and what eventually became the WTO – was no protectionist. Yet he cautioned nations to limit their foreign trade, because he believed it weakened a democratic government's ability to maintain the economic growth needed to keep social peace. For example, if a large share of consumer demand went for imports, government deficit spending to overcome a recession would stimulate production in the exporting country rather than at home. And where growth depended heavily on exports, reducing wages to become more competitive would take priority over raising incomes to stimulate domestic consumption.
He was right to worry. Whatever else one might want to argue about the last 25 years of globalization, there is little question that it has undermined the New Deal–era social contract that rests on the mutual dependence of workers and employers. As companies become global, they increasingly find their workers and customers in other nations, loosening the economic bonds of shared self-interest that previously connected them with their fellow citizens. Indeed, for the last two decades, CEOs of major "American" multinationals have openly acknowledged that their future no longer depends on the prosperity of their fellow nationals. In the 1980s, Carl Gerstacker, chairman of Dow Chemical, said that he yearned to put his headquarters on an island where it would be "beholden to no nation or society " rather than being governed in prime by the laws of the United States." A decade later, Alex Trotman, chairman of Ford Motor Company, observed bluntly: "Ford isn't even an American company, strictly speaking. We're global. We're investing all over the world " Our managers are multinational. We teach them to think and act globally."
As American industry went global, the political lines over trade and globalization began to be redrawn. In the past, workers and employers in the same industry were, for example, on the same side on the question of raising or lowering tariffs, depending on the industry's competitiveness. After World War II, which had eliminated much of America's industrial competition, both capital and labor became champions of free trade. But as American companies began to transform themselves into global corporations, free trade agreements have become a way for them to shift production to places where labor was cheap. The 1993 debate over NAFTA, the first major political battle of the new global economy, reflected this new division: American workers on one side, investors and executives on the other.
A similar division over NAFTA occurred in Mexico and Canada, whose working classes also anticipated the loss of bargaining power. Their fears were justified. A decade later, in all three nations, the gap between what workers produced and what they were paid grew dramatically. In the United States, labor productivity in manufacturing rose 80 percent, while real wages rose only 6 percent. In Mexico, productivity rose 68 percent, while real wages rose 2 percent. In Canada, the numbers are 34 and 3 percent, respectively. As Jorge Casta"eda, former foreign minister of Mexico, observed at the time, NAFTA was "an agreement for the rich and powerful in the United States, Mexico, and Canada, an agreement effectively excluding ordinary people in all three societies." It is not surprising that the rich and powerful in all three nations gained most of the benefits while the "ordinary people" paid most of the costs. The relentless tide of Mexicans desperately crossing the border for work–a dozen years after NAFTA's promoters predicted substantially reduced illegal immigration–is just one sign of the agreement's failure to deliver on its promises.
The fallout from NAFTA echoes the current pattern of globalization generally. As capital becomes both more internationally mobile and more protected, its bargaining power over domestic labor is strengthened. Offshore outsourcing expands, and the threat to outsource becomes more credible, forcing workers to agree to work for less and local governments to weaken regulation. The result is rising global inequality of income and wealth–and the inequality in political power that follows.
The Garbled Language of Globalization
As globalization relentlessly reorders American economic and political life, the policy debate remains mired in an obsolete paradigm that clouds our under - standing of what is happening. On the one hand, pundits like the New York Times' Thomas Friedman tell us that the global economy has obliterated borders, making government irrelevant. On the other hand, the discussion of policy remains trapped in the language that defines globalization as competition among sovereign Westphalian nation-states, in which the conflicting interest of domestic politics stops at the water's edge. Thus, for example, politicians and journalists speak of economic competition between "China" and "America" as national rivalries. Yet the business news channels are replete with celebratory segments on the profitable integration of U.S. and Chinese firms. Indeed, the "China threat" is actually a business partnership between local commissars who provide the cheap labor and American and other transnational capitalists who provide the technology and financing. Similarly, while analysts frame the discussion of world poverty in terms of rich and poor countries, they ignore the reality that there are poor people in rich countries and rich people in poor countries, leading to foreign-aid programs that are merely an inefficient transfer of resources from the former to the latter.
Most confusing and damaging to the debate is the wide use of "free trade" as a synonym for globalization. Leaving aside the theoretical issues, simple liberalized trade among sovereign nations does not describe how the world's economy is evolving. The process is rather global economic integration, which aims at imposing a universal set of rules and policies on all nations. As Renato Ruggiero, the first director-general of the WTO, observed, "We are no longer writing the rules of interaction among separate national economies. We are writing the constitution of a single global economy."
That an integrated global economy should be regulated by universal rules is obvious. The problem is that the "constitution"–which includes the policies of the international financial agencies as well as so-called trade agreements–protects and supports just one category of citizen, the global corporate investor. The interests of other stakeholders–workers, communities, civil society, and others whose hard-fought rights were finally established in democratic national societies–have been excluded. Even among sophisticated policy intellectuals, the political implications of economic integration are ignored by stuffing them safely back into the nation-state, whose citizens are assumed to have suffered no loss of power. One of many examples is economist Jagdish Bhagwati, a prominent proponent of global laissez-faire economics, who writes that "moral suasion," "democratic politics," and "judicial activism" at the national level are sufficient safeguards for labor, human rights, and environmental protections. Although goods and capital are acknowledged to flow and commingle in borderless markets, the class conflicts that markets inevitably generate are not. Yet these are global political conflicts that befit a global economy. By confining them to the nation-state box, the popular cross-border politics needed to countervail the cross-border power of private wealth is suppressed.
Thus a disconnect emerges between the theoretical notion of "national interest" and its actual promotion on the international stage. The conventional wisdom implicitly assumes that while tactics and style may differ according to which party is in power, a nation's representatives to the IMF or the WTO are assumed to be furthering the "national interest," a phrase frequently referenced but rarely specified. One of the few foreign policy commentators to address, even in passing, the question of how to define the national interest is Harvard's Joseph Nye, Jr. As he wrote in The Paradox of American Power, "In a democracy, the national interest is simply what citizens, after proper deliberation, say it is " If the American people think that our long-term shared interests include certain values and their promotion abroad, then they become part of the national interest. Leaders and experts may point out the costs of indulging certain values, but if an informed public disagrees, experts cannot deny the legitimacy of their opinion."
The description of U.S. foreign policy being driven by the citizenry, with leaders and experts passively "pointing out the costs," would be suspect under any circumstance. The Iraq war, to cite one obvious example, was hardly initiated by a spontaneous grass-roots movement in America demanding Saddam Hussein's head. But in the context of the global economy, where cosmopolitan elites have more in common with peers in other countries than they do with people who simply share their nationality, it is stunningly na've.
A more accurate description of how the new world economy is governed comes from Anne-Marie Slaughter, dean of Princeton's Woodrow Wilson School of International Affairs, who in her book The New World Order describes informal networks of global bureaucrats and business-people that bypass traditional governments. According to Slaughter, this "disaggregated" state has the speed and flexibility to "perform many of the functions of a world government -- legislation, administration, and adjudication -- without the form." The most advanced part of this virtual state is the networks of people who run, manage, and regulate international finance. Political scientist Judith Teichman, a less enthusiastic analyst of cross-border networks, quotes a senior IMF official who manages its Western Hemisphere portfolio: "We are all the same–people who come and go through the [World] Bank, the [International Monetary] Fund, and Finance Ministries and Central Banks of Latin American countries. We all studied at the same universities; we all attend the same seminars, conferences " we all know each other very well. We keep in touch with each other on a daily basis. There are some differences, such as between those who studied at Harvard and those who studied at the University of Chicago, but these are minor things."
Slaughter, for her part, believes these networks bring accountability back to the people. "We need more [global] government," she writes, "but we don't want the centralization of decision-making and the coercive authority so far from the people actually to be governed." But, far from solving the globalization paradox, Slaughter's networks are likely to transfer more power from ordinary people to the hands of international technocrats whose career paths, like those of their domestic counterparts, depend on those with financial–and therefore political–influence. The WTO, one of its officials told the Financial Times in a moment of candor, "is the place where governments collude in private against their domestic pressure groups." The comment reveals both contempt for democracy and disingenuousness about political influence. In fact, the WTO's work is suffused with the interests of domestic pressure groups with global business interests. Corporate representatives dominate its many advisory committees and working groups; its dispute settlement panels are chosen from pools of experts who regularly work for transnational corporations; and business even directly pays for the organization's expenses. In the last WTO ministerial meeting held in America–scene of the famous "Battle of Seattle" in 1999–business corporations, for instance, paid $250,000 each for special access to the trade ministers. The Office of the U.S. Trade Representative is a well known revolving door of lawyers and trade specialists (such as former Trade Representative Robert Zoellick, now working at Goldman Sachs) whose next move is often to those transnational corporate sector, where success comes to those who "think and act globally"–and do so on behalf of those who are benefiting from this global system.
The Party of Davos is no monolith. It has its factions, competing ambitions, and interests. And because the world's economies, while globalizing, are far from being completely globalized, important concentrations of economic power are still rooted in national economies. Corporations in China and Russia, for example, are constrained by a state apparatus that is decidedly nationalist. But it is only a matter of time before these national connections erode, too; meanwhile, the concentrations of private capital that have their roots in Europe, the Americas, and large parts of Asia have a shared agenda in weakening the power of national governments to restrict the freedom of capital in both rich and poor countries. As one prominent member of the Party of Davos blurted out at a conference at the Council of Foreign Relations, "When we negotiate economic agreements with these poorer countries, we are negotiating with people from the same class. That is, people whose interests are like ours."
There is no countervailing force at the level of global governance to balance the Party of Davos's power. The International Labor Organization (ILO), which is often erroneously thought of as the worker's equivalent of the WTO or the IMF, is really a tripartite structure in which labor, government, and business have equal voting strength. More importantly, unlike the IMF, which has money, and the WTO, which has trade sanctions, the ILO has no leverage over any nation or company. A global capitalist class, of course, implies a global working class. In response to the Party of Davos, international cooperation among trade unionists on issues of collective bargaining and organizing in specific industries is growing. But, by and large, unions are too involved in fighting for survival in their national economies to mount a global challenge to corporate power. And what might be called (after the Brazilian city where it holds a counter-Davos summit) the "Party of Porto Alegre"–the loose network of dissenters and protestors that the media calls the "anti-globalization forces," seen protesting at IMF meetings–is much more bark than bite. It is too diverse, disorganized, and disdainful of power to get much beyond demonstrations that make the nightly news but little else.
Next Steps for NAFTA
How then to reshape the politics–and power relationships–of the global economy? A social contract did not come to an expanded American economy until American workers became conscious of their common interests. Similarly, one will come to the global economy only when working families see that in a global labor market, they have more in common with working families in other countries than they do with those on the other side of the bargaining table. Yet in a world of 6.5 billion people in almost 200 separate countries–representing wide differences in culture, living standards, and political consciousness–the prospect of seeing, to use an old phrase, "workers of the world unite" enough to humanize the relentlessly interconnecting markets seems hopelessly utopian. But if we begin to think of establishing a global social contract as a step-by-step process, in which political solidarity is built first among neighboring societies, region by region, rather than some grand, all-embracing design, there may yet be light at the end of this dark global tunnel.
Unlike global elites, who have easy access to global culture but little connection to their hometowns, ordinary citizens in countries in the same region tend to have more in common with one another than they do with people half a world away. Culture and language are closer, and trading relations are usually the strongest and most sustainable. True, wars historically have been fought mostly among neighbors, but the European Union (EU) demonstrates that at least among the more advanced societies, the future need not necessarily be prisoner of such a past. Moreover, regional integration would seem to be a much more promising path toward the inevitable trial-and-error involved in building competent and accountable institutions to manage cross-border economic integration. American states were, and to some extent still are, "laboratories of democracy" for the national government. In the same way, the process of creating regional institutions that match expanding regional markets might well produce "laboratories" for the construction of a social contract that might eventually stretch to the range of the global economy.
For all its slowness and the pain of its "two steps forward, one step backward" process, the effort to build a "Social Europe" to match the expanded European market offers the best real-world example of the development of a politics around a cross-border social contract among historically splintered neighbors. The future shape of Europe is contested political terrain, and the conflicts between workers and bosses, regulators and deregulators, and Europeanists and nationalists reflect the inevitably messy way in which democracy is addressing this historic experiment. The fragile democracies of the Mercosur countries in the southern cone of South America are beginning a similar project of economic integration that, if it continues, will inevitably involve some political integration as well. A germ of the same idea also lies in the economic collaboration among Southeast Asian nations.
This brings us back to the question of North America. Although NAFTA failed to deliver on its promises, it succeeded in integrating the three economies to the point of no return. Too many economic channels have been redirected north-south to reverse the course of economic integration. Every day, along with commingling labor markets, intracontinental connections in finance, marketing, and production are being hardwired for a seamless North American economy. We may not like NAFTA, but there is no reversing its course.
But that does not mean that it's sacrosanct. Even those who designed NAFTA to accommodate their own interests understand that it is an inadequate instrument with which to govern this new political economy. Revising NAFTA is already a topic of conversation among North American business and political elites: The U.S. Council on Foreign Relations, the Mexican Council on Foreign Affairs, and the Canadian Council of Chief Executives have set up an ongoing "Task Force" to map out the next steps. Their 2005 report called for a commonly administered military security perimeter, common energy policies, and a modest investment fund for Mexico. And Mack McLarty, former Clinton chief of staff and now partner with Henry Kissinger in a consulting firm, has called for planning an oil-for-infrastructure deal with Mexico to be ready for the next U.S. president. But, while these and similar proposals contain some sensible ideas, the framework is the familiar one–an expanded market to feed global corporate ambitions–and gets us no closer to solving the catch-22 of unaccountable governance.
Instead, we need to transform NAFTA into a set of rules that recognizes the common economic future that now connects all of the people of the three nations. It would need to include, at a minimum, a "bill of rights" for citizens of North America, enforceable in all countries, that would reestablish rights for people at least as strong as the extraordinary privileges NAFTA gives to corporate investors. They would include guarantees of freedom of association and collective bargaining across borders, as well as an independent judiciary and public transparency in government dealings with the private sector. A new NAFTA would have to be a continental grand bargain in which Canada and the United States commit substantial long-term aid to Mexico in order to nurture higher and sustainable economic growth, while Mexico commits to policies (independent trade unions, minimum wages, equitable taxes, assistance to its depressed farm sector) that assure wages in all three nations rise with their productivity. To that end, it would require a North American customs union in which foreign trade would be managed in the service of the needs of all three countries for greater industrial self-sufficiency, resource conservation, and increased investment in health and education. Such a new vision for NAFTA would more strongly unite the three nations in a single competitive bloc that provides all of the citizens of North America, not just its corporate interests, an investment in its success.
North America is, of course, not Europe. It is easy to make the case that the political and economic conditions that motivated and nurtured the EU are quite unique. But at its conception, it was also easy to argue that the EU would be still born. Indeed, in at least some dimensions, a unified North American economy is a more credible idea. There are only three languages (counting Quebecois French) to deal with. All are relatively new countries. For at least two centuries people have been moving, marrying, and interconnecting culturally. The one time the United States and Canada fought was in the War of 1812, while the Mexican-American War ended in 1848.
When the twenty-first century began, polls showed Americans, Canadians, and Mexicans possessed highly favorable opinions of one another. Asked in a 2000 World Values Survey poll if they would be willing to form a new single country if it meant having a higher quality of life, majorities in each country said yes. In the aftermath of September 11, Canadians and Mexicans expressed massive solidarity with Americans (although the invasion of Iraq, which they overwhelmingly opposed, has rekindled some latent anti-Americanism). Many on the U.S. side, when they still supported the war, resented that Mexico and Canada refused to send troops. Still, the sense that–like it or not–the three societies share a common future comes through in a report of polls taken between 2003 and 2005, which shows support for North American economic integration in all three nations, even though people in each thought that NAFTA had been a "loser" for their country.
Moreover, gathering economic forces might actually force an acceleration toward integration. At some point, the unsustainable rise in the U.S. trade deficit will have to be reversed, threatening the economies of Canada and Mexico, whose growth since NAFTA has depended on the U.S. market. In order to avoid the political consequences (e.g., more illegal immigration from Mexico, less cooperation on national security from Canada), the United States may well be forced to establish a North American trading bloc anyway that protects its neighbors' access to a U.S. economy that will be forced to reduce its overall imports.
One thing is certain. The global economy will continue to undermine both democracy and economic security until we develop the institutions to support a social contract across borders. To do that, what better place to start than in our own continental backyard?
Jeff Faux is the Founder and now Distinguished Fellow at the Economic Policy Institute. His most recent books are The Servant Economy and The Global Class War.
Google matched content |
Society
Groupthink : Two Party System as Polyarchy : Corruption of Regulators : Bureaucracies : Understanding Micromanagers and Control Freaks : Toxic Managers : Harvard Mafia : Diplomatic Communication : Surviving a Bad Performance Review : Insufficient Retirement Funds as Immanent Problem of Neoliberal Regime : PseudoScience : Who Rules America : Neoliberalism : The Iron Law of Oligarchy : Libertarian Philosophy
Quotes
War and Peace : Skeptical Finance : John Kenneth Galbraith :Talleyrand : Oscar Wilde : Otto Von Bismarck : Keynes : George Carlin : Skeptics : Propaganda : SE quotes : Language Design and Programming Quotes : Random IT-related quotes : Somerset Maugham : Marcus Aurelius : Kurt Vonnegut : Eric Hoffer : Winston Churchill : Napoleon Bonaparte : Ambrose Bierce : Bernard Shaw : Mark Twain Quotes
Bulletin:
Vol 25, No.12 (December, 2013) Rational Fools vs. Efficient Crooks The efficient markets hypothesis : Political Skeptic Bulletin, 2013 : Unemployment Bulletin, 2010 : Vol 23, No.10 (October, 2011) An observation about corporate security departments : Slightly Skeptical Euromaydan Chronicles, June 2014 : Greenspan legacy bulletin, 2008 : Vol 25, No.10 (October, 2013) Cryptolocker Trojan (Win32/Crilock.A) : Vol 25, No.08 (August, 2013) Cloud providers as intelligence collection hubs : Financial Humor Bulletin, 2010 : Inequality Bulletin, 2009 : Financial Humor Bulletin, 2008 : Copyleft Problems Bulletin, 2004 : Financial Humor Bulletin, 2011 : Energy Bulletin, 2010 : Malware Protection Bulletin, 2010 : Vol 26, No.1 (January, 2013) Object-Oriented Cult : Political Skeptic Bulletin, 2011 : Vol 23, No.11 (November, 2011) Softpanorama classification of sysadmin horror stories : Vol 25, No.05 (May, 2013) Corporate bullshit as a communication method : Vol 25, No.06 (June, 2013) A Note on the Relationship of Brooks Law and Conway Law
History:
Fifty glorious years (1950-2000): the triumph of the US computer engineering : Donald Knuth : TAoCP and its Influence of Computer Science : Richard Stallman : Linus Torvalds : Larry Wall : John K. Ousterhout : CTSS : Multix OS Unix History : Unix shell history : VI editor : History of pipes concept : Solaris : MS DOS : Programming Languages History : PL/1 : Simula 67 : C : History of GCC development : Scripting Languages : Perl history : OS History : Mail : DNS : SSH : CPU Instruction Sets : SPARC systems 1987-2006 : Norton Commander : Norton Utilities : Norton Ghost : Frontpage history : Malware Defense History : GNU Screen : OSS early history
Classic books:
The Peter Principle : Parkinson Law : 1984 : The Mythical Man-Month : How to Solve It by George Polya : The Art of Computer Programming : The Elements of Programming Style : The Unix Hater’s Handbook : The Jargon file : The True Believer : Programming Pearls : The Good Soldier Svejk : The Power Elite
Most popular humor pages:
Manifest of the Softpanorama IT Slacker Society : Ten Commandments of the IT Slackers Society : Computer Humor Collection : BSD Logo Story : The Cuckoo's Egg : IT Slang : C++ Humor : ARE YOU A BBS ADDICT? : The Perl Purity Test : Object oriented programmers of all nations : Financial Humor : Financial Humor Bulletin, 2008 : Financial Humor Bulletin, 2010 : The Most Comprehensive Collection of Editor-related Humor : Programming Language Humor : Goldman Sachs related humor : Greenspan humor : C Humor : Scripting Humor : Real Programmers Humor : Web Humor : GPL-related Humor : OFM Humor : Politically Incorrect Humor : IDS Humor : "Linux Sucks" Humor : Russian Musical Humor : Best Russian Programmer Humor : Microsoft plans to buy Catholic Church : Richard Stallman Related Humor : Admin Humor : Perl-related Humor : Linus Torvalds Related humor : PseudoScience Related Humor : Networking Humor : Shell Humor : Financial Humor Bulletin, 2011 : Financial Humor Bulletin, 2012 : Financial Humor Bulletin, 2013 : Java Humor : Software Engineering Humor : Sun Solaris Related Humor : Education Humor : IBM Humor : Assembler-related Humor : VIM Humor : Computer Viruses Humor : Bright tomorrow is rescheduled to a day after tomorrow : Classic Computer Humor
The Last but not Least Technology is dominated by two types of people: those who understand what they do not manage and those who manage what they do not understand ~Archibald Putt. Ph.D
Copyright © 1996-2021 by Softpanorama Society. www.softpanorama.org was initially created as a service to the (now defunct) UN Sustainable Development Networking Programme (SDNP) without any remuneration. This document is an industrial compilation designed and created exclusively for educational use and is distributed under the Softpanorama Content License. Original materials copyright belong to respective owners. Quotes are made for educational purposes only in compliance with the fair use doctrine.
FAIR USE NOTICE This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available to advance understanding of computer science, IT technology, economic, scientific, and social issues. We believe this constitutes a 'fair use' of any such copyrighted material as provided by section 107 of the US Copyright Law according to which such material can be distributed without profit exclusively for research and educational purposes.
This is a Spartan WHYFF (We Help You For Free) site written by people for whom English is not a native language. Grammar and spelling errors should be expected. The site contain some broken links as it develops like a living tree...
|
|
You can use PayPal to to buy a cup of coffee for authors of this site |
Disclaimer:
The statements, views and opinions presented on this web page are those of the author (or referenced source) and are not endorsed by, nor do they necessarily reflect, the opinions of the Softpanorama society. We do not warrant the correctness of the information provided or its fitness for any purpose. The site uses AdSense so you need to be aware of Google privacy policy. You you do not want to be tracked by Google please disable Javascript for this site. This site is perfectly usable without Javascript.
Last modified: March, 29, 2020
