Tuesday, July 2, 2013

The Crime of Alleviating Poverty: A Local Community Currency Battles the Central Bank of Kenya


monopoly2
Former Peace Corps volunteer Will Ruddick and several residents of Bangladesh, Kenya, face a potential seven years in prison after developing a cost-effective way to alleviate poverty in Africa’s poorest slums.  Their solution: a complementary currency issued and backed by the local community.  The Central Bank of Kenya has now initiated charges of forgery.

Complementary currencies can help eradicate poverty.
Proving that may be difficult in complex economies, due to the high number of factors influencing outcomes. But in an African slum with little of the national currency available, supplying residents with an alternative currency has a positive effect that is obvious, immediate and incontrovertible.
This was demonstrated when Will Ruddick, an American physicist, economist and former Peace Corps volunteer, introduced a complementary currency into a Kenyan slum called Bangladesh, near the coastal city of Mombasa. Will’s local development organization, Koru-Kenya, worked with over one hundred small business owners in Bangladesh, who agreed to give each other the equivalent of 400 shillings (about €3.5 or $4.60) in mutual credit in the form of business vouchers called Bangla-Pesa. Half of the vouchers would be available for spending on each others’ products and services, and half would be spent into the community on public projects such as waste collection and health services.  Allocation decisions were democratic and transparent, and the new currency was backed entirely by the community’s own resources and insured by a system of group guarantors, not by the Kenyan government or a development agency.
The project was launched on May 11, 2013.  The immediate effect was an increase in sales of 22%. That meant increasing incomes and purchasing power by 22%.  These exchanges were of goods and services that without the additional currency would have been thrown away or gone to waste, not because they were unmarketable but because potential customers did not have the money to buy them.  Introducing Bangla-Pesa worked to move the economy forward at full capacity, connecting the community to its own resources when the only things lacking were those slips of paper called “money.” A compelling video on the project is here.
The successful Kenyan experiment quickly earned endorsements from the United Nations, The Hague and  the International Reciprocal Trade Association. Indeed, no other poverty alleviation or local governance program can compete with the cost-effectiveness of this approach, which is easily replicable in poor communities across Africa. The plan was to expand it to other villages in a democratic grassroots fashion so that it could provide a local medium of exchange for people throughout the continent. This would be done via mobile phones with a system provided by Community Forge, an organization based in Geneva that supports the development of community currencies worldwide. 
But that plan was unexpectedly interrupted on May 29th, when Will and five other project participants were arrested by Kenyan police and thrown in jail.  Besides Will, who is married to a Kenyan aid worker and is a new father, the others include local community business owners who are parents and grandpa
The police at first accused the group of plotting a terrorist overthrow of the government, claiming that Bangla-Pesa was linked to the MRC, a terrorist secessionist group. When that link was easily disproven, the Central Bank of Kenya was called in and charges of forgery were formally placed.  Will and his fellow suspects have been released for now on a bail of EUR 5,000 and await trial on July 17th.  If convicted, they face seven years in a Kenyan prison.
 Despite these perilous circumstances, Will remains optimistic.  “The exciting thing,” he says, “is that these systems really do show a means of poverty reduction – and my hope is that after this case we’ll be allowed to spread them to slums across Kenya.  There have been years of precedent for Complementary Currencies as a solution to poverty, and today there is no doubting it.”
Successful Precedents from Switzerland to Brazil

Complementary currencies are endorsed by many governments worldwide. The oldest and largest is the WIR system in Switzerland, an exchange system  among 60,000 businesses – a full 20% of all Swiss businesses. This currency has been demonstrated to have a counter-cyclical effect, helping to stabilize the Swiss economy by providing additional liquidity and lending capacity when conventional credit for small businesses is scarce.

Brazil is a global leader in using the complementary currency approach for poverty alleviation. Interestingly, its experience began in much the same way as Kenya’s: Brazil’s most successful community currency, called “Palmas”, was nearly strangled at birth by the Brazilian Central Bank. How it went from criminal suspect to official state policy is told by Margrit Kennedy and co-authors in People Money:

After issuing the first Palmas currency in 2003, local organiser Joaquim Melo was arrested on suspicion of running a money laundering operation in an unregistered bank.  The Central Bank started proceedings against him, saying that the bank was issuing false money.  The defendants called on expert witnesses, including the Dutch development organisation Stro, to support their case.  Finally, the judge agreed that it was a constitutional right of people to have access to finance and that the Central Bank was doing nothing for the poor areas benefiting from the local currencies.  He ruled in favour of Banco Palmas.
What happens next shows the power of dialogue.  The Central Bank created a reflection group and invited Joaquim to join in a conversation about how to help poor people.  Banco Palmas started the Palmas Institute to share its methodology with other communities and, in 2005, the government’s secretary for “solidarity economy” created a partnership with the Institute to finance dissemination.  Support for community development banks issuing new currency is now state policy.
The Legal Debate: Mutual Credit or Counterfeiting?
If the Kenyan court follows the example of Brazil, this could be the beginning of a promising new approach to poverty reduction in Africa. The Bangla-Pesa is backed by local resources, and the villagers were very happy to have it in order to move their products and buy the surplus of others within their community.
Viewed as a case of counterfeiting, however, there is historical precedent for harsh punishment.  In the mid-eighteenth century, when the Bank of England was privately owned and had the exclusive right to issue the national currency, counterfeiting Bank of England Notes was made a crime punishable by death. That was the era of Charles Dickens’ Tale of Two Cities and Bleak House, when supplementing the national currency might have helped relieve mass poverty; but it was in the interest of the Bank to control the market for currency and keep it scarce, in order to ensure a steady demand for loans.  When there is insufficient money in the system to cover the needs of exchange, people must borrow from banks at interest, ensuring the banks a handsome profit.
The converse is also true: when sufficient money is supplied to cover the needs of exchange, debt levels and poverty are dramatically reduced.  
 In this case, the physical Bangla-Pesa voucher looks nothing like the national currency, as it would need to in order to sustain a charge of forgery. The intent of complementary currencies, as their name implies, is not to imitate or compete with the national currency but to complement it, allowing for increased sales within the local community of existing goods and services that would otherwise go unsold. Today, the Bank of England itself acknowledges this role of complementary currencies.
The Bangla-Pesa experience demonstrates what policymakers often overlook: gross domestic product is measured in goods and services sold, not goods and services produced; and for goods to be sold, purchasers must have the money to buy them. Provide consumers with excess money to spend, and GDP will go up.  (In Kenya, where nearly half the population lives in poverty and mass unemployment, increases in GDP reflect extractive practices rather than local conditions.)  
The common perception is that increasing the medium of exchange will merely devalue the currency and increase prices, but the data show that this does not happen so long as merchandise and services remain unsold or workers remain unemployed. Adding liquidity in those circumstances drives up sales, productivity and employment rather than prices.
This was demonstrated in a larger experiment in Argentina, when the country suffered a major banking crisis in 1995.  Lack of confidence in the peso and capital flight ended in a full-scale run on the banks, which closed their doors. When the national currency became unavailable, people responded by creating their own. Community currencies at the local level evolved into the Global Exchange Network (Red Global de Trueque or RGT), which went on to become the largest national community currency network in the world.  The model spread throughout Central and South America, growing to seven million members and a circulation valued at millions of U.S. dollars per year. At the local government level, provinces short of the national currency also resorted to issuing their own money, paying their employees with paper receipts called “Debt-Cancelling Bonds” that were in currency units equivalent to the Argentine Peso.
Although these various measures increased the currency in circulation, prices did not inflate.  To the contrary, studies found that in provinces in which the national money supply was supplemented with local currencies, prices actually declined compared to other Argentine provinces.  Local exchange systems allowed goods and services to be traded that would not otherwise have found a market. 
This salutary effect was also observed in Bangladesh. “With Bangla-Pesa,” says Ruddick, “we’ve seen that a circulating community-backed interest-free credit is a low-cost, effective way to increase local liquidity and decrease poverty.”
The defendants just need to prove that in court. A crowd-funding campaign is being used to raise the money urgently needed for their defense. The link for contributions is here. To sign a petition begun by a delegation at The Hague supporting the Bangla-Pesa, click here
Jamie Brown contributed to this article.

The Crime of Alleviating Poverty: A Local Community Currency Battles the Central Bank of Kenya

Former Peace Corps volunteer Will Ruddick and several residents of Bangladesh, Kenya, face a potential seven years in prison after developing a cost-effective way to alleviate poverty in Africa’s poorest slums.  Their solution: a complementary currency issued and backed by the local community.  The Central Bank of Kenya has now initiated charges of forgery.

Complementary currencies can help eradicate poverty.
Proving that may be difficult in complex economies, due to the high number of factors influencing outcomes. But in an African slum with little of the national currency available, supplying residents with an alternative currency has a positive effect that is obvious, immediate and incontrovertible.
This was demonstrated when Will Ruddick, an American physicist, economist and former Peace Corps volunteer, introduced a complementary currency into a Kenyan slum called Bangladesh, near the coastal city of Mombasa. Will’s local development organization, Koru-Kenya, worked with over one hundred small business owners in Bangladesh, who agreed to give each other the equivalent of 400 shillings (about €3.5 or $4.60) in mutual credit in the form of business vouchers called Bangla-Pesa. Half of the vouchers would be available for spending on each others’ products and services, and half would be spent into the community on public projects such as waste collection and health services.  Allocation decisions were democratic and transparent, and the new currency was backed entirely by the community’s own resources and insured by a system of group guarantors, not by the Kenyan government or a development agency.
The project was launched on May 11, 2013.  The immediate effect was an increase in sales of 22%. That meant increasing incomes and purchasing power by 22%.  These exchanges were of goods and services that without the additional currency would have been thrown away or gone to waste, not because they were unmarketable but because potential customers did not have the money to buy them.  Introducing Bangla-Pesa worked to move the economy forward at full capacity, connecting the community to its own resources when the only things lacking were those slips of paper called “money.” A compelling video on the project is here.
The successful Kenyan experiment quickly earned endorsements from the United Nations, The Hague and  the International Reciprocal Trade Association. Indeed, no other poverty alleviation or local governance program can compete with the cost-effectiveness of this approach, which is easily replicable in poor communities across Africa. The plan was to expand it to other villages in a democratic grassroots fashion so that it could provide a local medium of exchange for people throughout the continent. This would be done via mobile phones with a system provided by Community Forge, an organization based in Geneva that supports the development of community currencies worldwide. 
But that plan was unexpectedly interrupted on May 29th, when Will and five other project participants were arrested by Kenyan police and thrown in jail.  Besides Will, who is married to a Kenyan aid worker and is a new father, the others include local community business owners who are parents and grandpa
The police at first accused the group of plotting a terrorist overthrow of the government, claiming that Bangla-Pesa was linked to the MRC, a terrorist secessionist group. When that link was easily disproven, the Central Bank of Kenya was called in and charges of forgery were formally placed.  Will and his fellow suspects have been released for now on a bail of EUR 5,000 and await trial on July 17th.  If convicted, they face seven years in a Kenyan prison.
 Despite these perilous circumstances, Will remains optimistic.  “The exciting thing,” he says, “is that these systems really do show a means of poverty reduction – and my hope is that after this case we’ll be allowed to spread them to slums across Kenya.  There have been years of precedent for Complementary Currencies as a solution to poverty, and today there is no doubting it.”
Successful Precedents from Switzerland to Brazil
Complementary currencies are endorsed by many governments worldwide. The oldest and largest is the WIR system in Switzerland, an exchange system  among 60,000 businesses – a full 20% of all Swiss businesses. This currency has been demonstrated to have a counter-cyclical effect, helping to stabilize the Swiss economy by providing additional liquidity and lending capacity when conventional credit for small businesses is scarce.
Brazil is a global leader in using the complementary currency approach for poverty alleviation. Interestingly, its experience began in much the same way as Kenya’s: Brazil’s most successful community currency, called “Palmas”, was nearly strangled at birth by the Brazilian Central Bank. How it went from criminal suspect to official state policy is told by Margrit Kennedy and co-authors in People Money:
After issuing the first Palmas currency in 2003, local organiser Joaquim Melo was arrested on suspicion of running a money laundering operation in an unregistered bank.  The Central Bank started proceedings against him, saying that the bank was issuing false money.  The defendants called on expert witnesses, including the Dutch development organisation Stro, to support their case.  Finally, the judge agreed that it was a constitutional right of people to have access to finance and that the Central Bank was doing nothing for the poor areas benefiting from the local currencies.  He ruled in favour of Banco Palmas.
What happens next shows the power of dialogue.  The Central Bank created a reflection group and invited Joaquim to join in a conversation about how to help poor people.  Banco Palmas started the Palmas Institute to share its methodology with other communities and, in 2005, the government’s secretary for “solidarity economy” created a partnership with the Institute to finance dissemination.  Support for community development banks issuing new currency is now state policy.
The Legal Debate: Mutual Credit or Counterfeiting?
If the Kenyan court follows the example of Brazil, this could be the beginning of a promising new approach to poverty reduction in Africa. The Bangla-Pesa is backed by local resources, and the villagers were very happy to have it in order to move their products and buy the surplus of others within their community.
Viewed as a case of counterfeiting, however, there is historical precedent for harsh punishment.  In the mid-eighteenth century, when the Bank of England was privately owned and had the exclusive right to issue the national currency, counterfeiting Bank of England Notes was made a crime punishable by death. That was the era of Charles Dickens’ Tale of Two Cities and Bleak House, when supplementing the national currency might have helped relieve mass poverty; but it was in the interest of the Bank to control the market for currency and keep it scarce, in order to ensure a steady demand for loans.  When there is insufficient money in the system to cover the needs of exchange, people must borrow from banks at interest, ensuring the banks a handsome profit.
The converse is also true: when sufficient money is supplied to cover the needs of exchange, debt levels and poverty are dramatically reduced.  
 In this case, the physical Bangla-Pesa voucher looks nothing like the national currency, as it would need to in order to sustain a charge of forgery. The intent of complementary currencies, as their name implies, is not to imitate or compete with the national currency but to complement it, allowing for increased sales within the local community of existing goods and services that would otherwise go unsold. Today, the Bank of England itself acknowledges this role of complementary currencies.
The Bangla-Pesa experience demonstrates what policymakers often overlook: gross domestic product is measured in goods and services sold, not goods and services produced; and for goods to be sold, purchasers must have the money to buy them. Provide consumers with excess money to spend, and GDP will go up.  (In Kenya, where nearly half the population lives in poverty and mass unemployment, increases in GDP reflect extractive practices rather than local conditions.)  
The common perception is that increasing the medium of exchange will merely devalue the currency and increase prices, but the data show that this does not happen so long as merchandise and services remain unsold or workers remain unemployed. Adding liquidity in those circumstances drives up sales, productivity and employment rather than prices.
This was demonstrated in a larger experiment in Argentina, when the country suffered a major banking crisis in 1995.  Lack of confidence in the peso and capital flight ended in a full-scale run on the banks, which closed their doors. When the national currency became unavailable, people responded by creating their own. Community currencies at the local level evolved into the Global Exchange Network (Red Global de Trueque or RGT), which went on to become the largest national community currency network in the world.  The model spread throughout Central and South America, growing to seven million members and a circulation valued at millions of U.S. dollars per year. At the local government level, provinces short of the national currency also resorted to issuing their own money, paying their employees with paper receipts called “Debt-Cancelling Bonds” that were in currency units equivalent to the Argentine Peso.
Although these various measures increased the currency in circulation, prices did not inflate.  To the contrary, studies found that in provinces in which the national money supply was supplemented with local currencies, prices actually declined compared to other Argentine provinces.  Local exchange systems allowed goods and services to be traded that would not otherwise have found a market. 
This salutary effect was also observed in Bangladesh. “With Bangla-Pesa,” says Ruddick, “we’ve seen that a circulating community-backed interest-free credit is a low-cost, effective way to increase local liquidity and decrease poverty.”
The defendants just need to prove that in court. A crowd-funding campaign is being used to raise the money urgently needed for their defense. The link for contributions is here. To sign a petition begun by a delegation at The Hague supporting the Bangla-Pesa, click here
Jamie Brown contributed to this article.
Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books, including Web of Debt and the recently-published sequel The Public Bank Solution. Her websites are http://WebofDebt.com, http://PublicBankSolution.com, and http://PublicBankingInstitute.org
Republished with permission from:: Global Research

Britain's major banks remain vulnerable to being used to fund terrorism and money laundering by criminal gangs

Major banks still vulnerable to money laundering, says top regulator

Britain's major banks remain vulnerable to being used to fund terrorism and money laundering by criminal gangs, despite being fined billions of pounds in recent years for failing to crackdown on illegal financing.

The Financial Conduct Authority (FCA) warned that its analysis of 17 banks found that half, including four major UK lenders, still did not have proper processes and procedures for ensuring they were not involved in facilitating money laundering.
Tracey McDermott, head of enforcement at the FCA, said that banks’ “trade finance” businesses remained particularly vulnerable to abuse by criminal and terrorists and that in some cases the shipments being funded by lenders were just “fresh air”.
“Some banks have a lot of work to do to raise their game to the best of their peers,” said Ms McDermott.
Martin Wheatley, chief executive of the FCA, warned that organised criminal gangs “filtered, cleaned and rebottled” £10bn in the UK every year, using banks and other financial services.
more @ http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10153728/Major-banks-still-vulnerable-to-money-laundering-says-top-regulator.html

San Diego Jury Acquits on All Counts Occupy Chalk Protestor Targeted by Bank of America

MARK KARLIN, EDITOR OF BUZZFLASH AT TRUTHOUT
boa7 1Jeff Olson, the San Diego (SD) anti-big bank public sidewalk protestor, has been acquitted of all 13 counts by a jury of his peers.  As detailed over the past four days on BuzzFlash at Truthout, Olson had used water soluble chalk to write messages that warned of the powers of big banks.
Bank of America pushed for the prosecution of Olson on vandalism charges for writing his First Amendment opinions on public sidewalks (and in one case on Bank of America pavement).  In fact the elected conservative SD City Attorney, Jan Goldsmith, didn't even initiate charges against Olson until months after he wrote in chalk on sidewalks in front of three Bank of America branches in SD.  It was only after the local security officer for Bank of America relentlessly prodded the City Attorney's office that Olson was charged with the 13 counts of vandalism.
As SD ABC 10 News reported the afternoon of July 1st:
Jurors have acquitted a 40-year-old man accused of using sidewalk chalk to write protest messages in front of three local banks.

The case received national attention, focusing on the rights of someone to protest in public against repeated impositions on bank personnel.

Jeffrey David Olson was found not guilty on all 13 counts against him. He faced 13 years in prison if jurors had convicted him of all counts and sentenced on each one consecutively....
"His purpose was not malicious. His purpose was to inform," Tosdal said of his client.

Olson has not denied that he scrawled anti-bank messages and artwork outside the banks last year. His messages included "No thanks, big banks" and "Shame on Bank of America."

The prosecution of Olson has brought condemnation of the City Attorney's Office from Mayor Bob Filner, who called it a waste of time.
According to Dorian Hargrove of the San Diego Reader, in a phone call to BuzzFlash at Truthout, presiding Judge Howard Shore condemned the media after the acquittal for sensationalizing the case.  Five city attorneys were present for the verdict, which was a rebuke of City Attorney's Jan Goldmith's pro-bank, anti-Occupy protestor prosecutorial bias.
Truthout doesn’t take corporate funding - that’s why we’re able to confront the forces of greed and regression. Support us in this mission: make a tax-deductible donation today by clicking here.
The Bank of America should likely be on trial on federal charges instead of pulling the strings on a vengeful and petty prosecution that wasted the taxpayer dollars of San Diego residents.
A BuzzFlash at Truthout reader wrote a ballad in Jeff Olson's honor.
So take a look by clicking here.  This one's for justice done.
Chalk this up to a rare defeat for the bank too big to fail emblazoned with our nation's name: The Bank of America.
Read more on the chalk sidewalk protestor vs. the Bank of America on Buzzflash at Truthout:
"Bank of America Should Be Prosecuted Instead of An Occupy Protestor Scrawling Chalk Messages on a Sidewalk"
"San Diego Judge Puts Unprecedented Gag Order on Sidewalk Chalk Protestor Trial"
"Man Who Scrawled Chalk Protests on Sidewalk Against Big Banks Faces Possible Prison"
(Photo: Rainforest Action Network)

All Central Banker Has Been Introduced As Rockstars - Jim Rogers


Jim Rickards: Gold Is Money, Look At Currencies That No Longer Exist


Rick Santelli: Europe's Road to Insolvency


Obama in Africa: ‘The Planet Will Boil Over’ If Everybody Has a Car, Air Conditioning and a Big House

Speaking at a town hall event in Johannesburg, South Africa, on Saturday, President Barack Obama claimed that “the planet will boil over” if everyone has access to air conditioning, automobiles and big houses.
That is, unless the world finds “new ways of producing energy,” he said.
Obama in Africa: The Planet Will Boil Over If Everybody Has a Car, Air Conditioning and a Big House
Credit: Getty Images
“Ultimately, if you think about all the youth that everybody has mentioned here in Africa, if everybody is raising living standards to the point where everybody has got a car and everybody has got air conditioning, and everybody has got a big house, well, the planet will boil over — unless we find new ways of producing energy,” Obama said.
The president made the comments while speaking at the University of Johannesburg-Soweto on Saturday, one day before announcing his “Power Africa” initiative for a “sustainable” African energy strategy.
Watch below:

More from CNSNews.com:
According to Obama, global warming constitutes “the biggest challenge we have environmentally,” one greater than all other environmental calamities like “dirty water, dirty air.”
However, the President’s statements do not reflect statistics released by the United Nations:  Based on a data released in October, 2012, the World Health Organization estimated that “Global warming” is responsible for approximately 140,000 excess deaths each year.
By comparison, as many as three million people died from indoor and outdoor air pollution – in other words, over 20 times the number of alleged victims of global warming, according to the Word Health Organization.
The list of victims of unclean drinking water is even more staggering.
According to UNESCO, unsanitized water causes billions of preventable diseases annually, from diarrhea (4 billion), cholera (120,000), malaria (300-500 million), intestinal parasites (25% of world’s population), typhoid (12 million), trachoma (6 million), and schistosomiesis (200 million). list from highest to least affected

Student Loan Rates Double Today













Sen. Bernard Sanders (I-VT) discusses a bill he co-sponsored that would restore the student loan rate to 3.4% and explains why it should be the first order of business after the Senate’s recess

Student loan rates double after Congress fails on fix
Interest rates on federally subsidized Stafford student loans doubled overnight, soaring from 3.4 percent to 6.8 percent after Congress failed to reach a deal.
Though lawmakers potentially could still pass a bill to undo the damage, Congress’ Joint Economic Committee has estimated the increase — unless and until it is reversed — will cost the average college student an additional $2,600.
Read more: http://www.foxnews.com/politics/2013/07/01/student-loan-rates-double-as-calendar-turns-to-july/#ixzz2XpLltz4J

Student Loan Rates Double Without Congress’ Action
http://business.time.com/2013/07/01/student-loan-rates-double-without-congress-action/

New Doomsday poll: 98% risk of 2014 stock crash

Commentary: 10 bubbles blowing into biggest crash in 30 years

By Paul B. Farrell, MarketWatch
SAN LUIS OBISPO, Calif. (MarketWatch) — Yes, 2014 is an absolute total disaster just waiting to ignite. In “Doomsday poll: 87% risk of stock crash by year-end” we analyzed 10 major crash warnings since early this year. Since then, more incoming bogies raced across our radar screen. Ticking time bombs from Congress, the Supreme Court, sex, carbon emissions, Big Oil, NSA, IRS, Tea Party austerity. Relentless. Mind-numbing.

Shutterstock
Ticking time bombs from Congress, the Supreme Court, sex, carbon emissions, Big Oil, NSA, IRS, Tea Party austerity.
So many are tuning out. Denial. Truth is, bubbles are everywhere. Ready to blow. The evidence is accelerating, with only one obvious conclusion: Max 98% risk at a flashpoint. This 2014 crash is virtually guaranteed. There’s but a narrow 2% chance of dodging this bullet.
Here are the 10 bogies, drones targeting markets, stocks, bonds and the, global economy:

1. Bubble With No Name Yet triggers the biggest crash in 30 years

All three of the big worldwide financial bubbles that have blow up in the last three decades have “been fueled by the Fed keeping policy rates below the nominal growth rate of the economy far too long,” says global strategist Kit Juckes of the French bank Societe Generale.
The three bubbles: The Asian Bubble in the early ‘90s, Dot-com Bubble of the late ‘90s and what Juckes calls the Great Big Credit Bubble that triggered the 2008 Wall Street meltdown.
Juckes warns that we’re now trapped in the fourth megabubble fueled by the Federal Reserve in the last 30 years, since the rise of conservative economics. He calls this one, the Bubble With No Name Yet. OK, we invite you to send in your nomination to name the new bubble. But whatever you call it, do it fast, it’s close to popping, like the Asian, Dot-com and Credit crashes the last 30 years.

2. Marc Faber’s Doomsday warning on Bernanke’s disastrous QE scheme

Faber laughs at Bernanke’s remark that the economy would be strong enough later this year so he could take his foot off the gas, that is begin “tapering, or scaling back it’s stimulative quantitative easing (QE) program later this year.” Yes, laughed.
According to BusinessInsider.com, “embracing hyperbole,” Faber “suggested that QE would basically be a part of everyday life for the rest of our lives,” adding that back in 2010 in the early days of Bernanke’s disastrous experiment, Faber warned “the Fed’s headed for QE99.”

3. Economy is already crashing, GDP will get even worse in 2014-2016

Over at Huffington Post Mark Gongloff warns: That “dramatic downgrade of U.S. economic growth in the first quarter revealed the economy’s lingering weakness, exposed the folly of Washington’s austerity obsession and slapped the Federal Reserve’s newfound optimism right in the face.” And with politics deteriorating, it’ll get worse.
Gongloff piles on the bad news about 2014: GDP “grew at a 1.8% annualized pace in the first quarter ... revising down its earlier estimate of 2.4% growth ... The first quarter’s dismal growth was at least better than the 0.4% GDP growth of the fourth quarter of 2012. But it was still far from healthy, and economists don’t see it getting much stronger any time soon.” And that’s real bad news for the markets going into 2014.

4. Precious metals: ‘Going dark! Economic cycles point downward’

That’s the headline flashing red warnings. After reviewing 20 cycles tracked by 20 other experts, GoldSeek.com concluded: “There are many cycles that suggest a stock-market correction or crash is near ... Preparation is important. You still have a little time remaining before the ‘window’ closes!”
Traders heading for the exits: “Unsustainable trends can survive much longer than most people anticipate, but they do end when their “time is up, at the culmination of their time cycles.” They analyzed more than 20 cycles: “Nearly unanimously point to tectonic shifts in the months and years ahead.”
Yes, they hedge on the timing but the ticking time bombs are loud, close. And “the precious-metals crash, starting in April of 2013, was the first warning of what is coming globally.”
1 2

 

Daily CEO Pay Now Exceeds U.S. Workers Annual Salary

by Richard Smallteacher



Cartoon by Khalil Bendib
U.S. corporate CEO salaries rose 16 percent in 2012 according to a new report from research firm Equilar. Top salary: Larry Ellison of Oracle - over $96 million. Top exit bonus: James Mulva of ConocoPhillips - $156 million.

Average salary for the CEOs of the top 200 U.S. companies with revenue of over $1 billion was $5.3 million. The big money, however, is paid out in stock and options which added another $9 million to the median compensation package for the CEOs.

Worst off were the workers at these companies whose median pay is now at a historic low compared to the CEOs. In 1965, according to a new report from the Economic Policy Institute, the average CEO made 20 times the average worker. Now the ratio is 273 to 1 ie the average CEO's daily salary is now greater than the annual salary of their workers.

Ellison did even better - he was paid the equivalent of the average U.S. salary of $45,790 every single hour last year.

So much for the idea that shareholders were finally getting through to corporate boards on the topic of reining in pay,” writes Gretchen Morgenson at the New York Times. The salary survey was commissioned by her newspaper.

And CEO’s sometimes do even better when they quit.

Take for example, James Mulva of ConocoPhillips. He was paid $140.8 million in 2011 but topped that in 2012 when he left the company after 10 years as CEO. Once he cashed out his stock options, took his retirement bonus and got his final paycheck, he collected a whopping $260 million in 2012.

The New York Times has a list of the rest of the top ten in departure bonanzas: Edward Breen was paid $46.2 million after leaving Tyco International, George Lindemann of Southern Union got $44.1 million, Kevin Sharer of Amgen was paid $40.4 million, Douglas Foshee of El Paso Corporation got $37.4 million, James Skinner of McDonald’s and Brian Duperreault of Marsh & McLennan were each paid $33 million, Michael Szymanczyk of Altria got $27.9 million, while John Chapman of Axis Capital Holdings made $26.5 million. Lynn Elsenhans of Sunoco was the only woman in the group with $23.6 million.

Mulva may have made the most in 2012 but three CEOs would have received even more under their current contracts had they been let go, according to Bloomberg News. David Zaslav of Discovery Communications will get $224.7 million if he’s fired, Les Moonves of CBS will get $251.4 million and John Hammergren of McKesson Corporation tops the charts with a potential $303.4 million.

These “golden parachute” arrangements have had a negative impact on corporate performance, say experts. “If you have a safety net of this type of gargantuan size, it starts to undermine the CEO’s desire to build long-term value for shareholders,” Paul Hodgson, a director at corporate governance researcher at BHJ Partners, told Bloomberg. “You don’t really care if you’re fired or not.”

Not all corporate titans did quite as well in 2012. Another Equilar survey conducted for the Financial Times shows that the top 15 bankers made an average of just $11.5 million down 10 percent on the previous year. Highest paid was John Stumpf of Wells Fargo who got $19.3 million followed by Jamie Dimon of JP Morgan who was paid $18.7 million.

Reassess Trans-Pacific Partnership Agreement

Nile Bowie

HAVE you heard of the Trans-Pacific Partnership Agreement? It is a multilateral trade agreement being negotiated between Malaysia, the United States and several other Pacific Rim nations, and if it becomes law, it will have an immense impact on the country's financial, economic, and even legal affairs. In other words, a strong case can be made that the TPPA would undermine Malaysia's sovereignty. Malaysia is set to host the next round of negotiations for the TPPA this month, but there are still significant challenges ahead before the trade deal can become law.

Putrajaya has taken a strong stance against any extension of intellectual property rights involving medicine in the deal, which could otherwise significantly inflate the price of generic medications. International Trade and Industry Minister Datuk Seri Mustapa Mohamed told the media that he would defend existing policies and choose not to sign the TPPA if the terms didn't benefit Malaysia.

It would be strange for Malaysia to agree to the TPPA, given its past criticism of neo-liberal capitalism and deregulated trade. Former prime minister Tun Dr Mahathir Mohamad once likened free trade to a house with all its doors and windows left open, and as a consequence, bears, wolves and other predatory beasts would invite themselves inside.

He also called for a new model of globalisation that could be more equitable, and more in service to social uplift and poverty reduction, rather than to a handful of Western banks and mega-corporations.
Dr Mahathir attempted to ingrain that philosophy in Umno, and it has served Malaysia well. Signing the TPPA would mean restructuring the entire economy and legal system to conform to the stipulations of the deal, resulting in Malaysia being a lot more vulnerable to casino capitalism and currency speculation.

The TPPA would prohibit Malaysia from banning risky financial instruments, speculation and derivatives. Tt would also be banned from enacting capital controls, while banks would enjoy significantly less regulatory oversight. Additionally, it imposes strict intellectual property legislation that would undermine access to the Internet and digital file sharing, as well as stymie the production of generic medications that could violate foreign patents.

Not only does it create incentives for multinational corporations to offshore jobs by encouraging bottom-of-the-barrel low wage conditions in participating countries, but it also makes signatory countries accountable to international trade tribunals, giving foreign corporations the ability to demand compensation for any expected future profits that may have been lost or hindered by existing national laws.

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Marine Le Pen: Austerity measures are a remedy that kills the patient


Marine Le Pen: Austerity measures are a remedy that kills the patient
June 29, 2013
French far-right leader Marine Le Pen believes her National Front party is going to come to power later in the decade and vows to overcome the burden of EU unity. Immigration, economic problems, the military, and gay rights all shape her agenda.

"Coming third after Hollande and Sarkozy in the 2012 presidential vote, Marine Le Pen and her Front National party are definitely a rising force in French politics. We talk to her about immigration and the lack of integration, EU austerity troubles, France's national priorities and of how much of a private life should spill into the public. And we get some uncommonly frank answers."

A Rare Anomaly in the Gold Market

image source
Jeff Clark
Casey Research

Gold stock investors have been pummeled, including myself. Worse, we've had to hear "I told you so" from all the gold haters in the media.

There are a few commentators expressing mild interest in gold at these levels, but one thing I haven't heard any of them talk about is a metric that gold analysts are rarely able to use, because gold stocks just don't get this undervalued.

Mainstream analysts sometimes talk about book value, especially when a stock appears cheap. Book value (BV) is a metric that, in essence, sets the floor for a stock price in a worst-case scenario. BV is equal to stockholders' equity on the balance sheet, and is the theoretical value of a company's assets minus liabilities – sometimes you'll hear this called "net asset value" (NAV). So when a stock price yields a market capitalization (share price x number of shares outstanding) equal to BV, the investor has a degree of safety, because if it dropped lower, a buyer could theoretically come in, buy up all shares, liquidate the company's assets, and pocket the difference.

Price to book value (P/BV) shows the stock price in relation to the company's book value. A stock can be considered "cheap" when it is trading at a historically low P/BV. Or, even better, it can be considered objectively " undervalued" when it is trading below book value.

Given the renewed selloff in the gold market, I wanted to see if gold equities were getting close to book values, not just because it would point to opportunity but also the margin of safety it would imply.


We analyzed the book value of all publicly traded gold producers with a market cap of $1 billion or more. The final list comprised 31 companies. We then charted book values from January 1, 2007 through last Thursday, June 27 (index equally weighted). Here's what we found.


This chart makes clear the current dramatic undervaluation of gold stocks.
  • As a group, gold producers are now selling below their book value.
  • Based on this metric, gold stocks are now cheaper than they were at the depths of the 2008 waterfall selloff.
  • The chart doesn't show it, but gold stocks were trading above book value (about 1.1x) when gold bottomed at $255.95 on April 2, 2001, which was the beginning of the bull market.
Here's an even more dramatic fact:
  • We went back as far as 1997 and could not find one episode where gold producers as a group traded below book value – and the late '90s was known as the "nuclear winter" for the gold mining industry!
Needless to say, we're in rare territory.

So does this mean we should buy now? To be sure, book values fall when precious metals prices decline, and costs have risen substantially since 2001 as well. So it's possible values could fall further. But in that scenario the relationship between stock prices and book value would remain in rarified territory, making the anomaly even more appealing to a contrarian investor.

While the waterfall decline in gold stocks is painful for those of us already invested, the reality is that this is a setup we get a shot at only a few times in our investing life. It's a cruel irony that those who are fully invested are now faced with the buying opportunity of a lifetime; however, it would be a shame for anyone to miss this blood-in-the-streets opportunity. Our future profits should be higher by an order of magnitude, when the market does turn around.

It's times like these when I remember what Doug Casey told me the first time I interviewed him:

You don't make money buying when you're optimistic. You have to actually run completely counter to your own emotional psychology.

The extent to which each of us is able to take advantage of the opportunity shaping up is of course dependent upon our personal set of circumstances. For some, this might mean doing nothing; for others, it might mean being bold for the first time in their life. I suspect most readers fall somewhere in between.

Either way, the opportunity is clear: book values for gold producers are at rarely seen levels. Gold stocks may not reverse tomorrow or could get even cheaper when producers start reporting this quarters financial results, but history shows this opportunity will not last forever. It will probably never occur again in this cycle, once gold turns – and it should be fantastically profitable.

If you've been on the fence about whether or not to give BIG GOLD or International Speculator a try, the July issues for both come out this week. We can tell you exactly which companies to buy and also which have the most upside potential. Your timing, in retrospect, could turn out to be one of the great investing decisions of your life.

Banking without banksters

 

Bravo to the  Public Banking Institute for suggesting an alternative vision of what banks are and for raising a basic question: what should a bank do, and who should it serve?
I attended the Institute’s recent conference, which drew activists and interested citizens from around the country to San Rafael, California, to hear about public banking and to brainstorm about ways to fund a new economy that creates a sustainable economy for all of us, since current government officials and bankers are doing such a lousy job at it.
The varied presentations included nuts and bolts sessions on the steps involved in developing a plan and pushing for a public bank, reports on worker-owned cooperatives across the country, as well as an eye-opening session on how the government has been  selling off our most gorgeous post offices, many built as part of the federal government’s robust effort to get the country back to work during the Great Depression – the Works Progress Administration.
It’s the lack of any such effort now, either by government or the private sector, that made the public banking conference so key. While it’s fashionable to minimize government’s ability to do anything right, it’s hard to argue with the track record of the Bank of North Dakota, the sole publicly owned bank in the U.S., operating successfully in that state since 1919, when it started with $2 million in capital.The solidly Republican state started its bank as part of a populist wave of anger that swept the state against Wall Street and big city bankers who were denying North Dakota farmers a credit lifeline. Though the state may have turned Republican since then, its residents continue their strong support of their public bank. The state places its revenues from taxes and fees into the bank, which currently holds $2.7 billion in deposits. It has plowed more than $300 million into the state’s economy over the past 10 years, including emergency assistance, state and local government funding and support for small businesses (in partnership with local banks) over the past 10 years, and has enjoyed a 25-26 percent return on equity annually. During that same time, we know what the too big to fail banks were up to – they paid their bankers outrageous bonuses while sinking the economy with risky investments they didn’t understand and relied on taxpayers’ generosity to keep them in business, then improperly foreclosed on millions of homeowners with forged or otherwise fraudulent documents while illegally manipulating the key mortgage interest rate known as LIBOR.
In North Dakota, the public bank makes below-market rate loans to business – but they come with strings attached: every $100,000 in loans must result in the creation of at least one job.
And while the  president and CEO of the Bank of North Dakota earns a handsome living by most people’s standards – $232, 500 a year, it’s a pittance compared to the money lavished on the kings and queens of Wall Street.
North Dakota’s success has attracted attention around the country in the last few years: 20 states are now considering legislation to either enable public banks or study their feasibility.
California, with the eighth largest economy in the world, is a particularly intriguing case. The Public Banking Institute’s Ellen Brown  estimates, based on the Bank of North Dakota’s experience, a California public bank might generate $148 billion in deposits; with a 10 percent reserve requirement, that could generate $133 billion for credit.
In 2011, California’s legislature passed a proposal to establish a commission to study the feasibility of setting up a such legislation a couple of years ago but then-Gov. Brown vetoed it, saying if the Legislature wanted to evaluate public banking, it should do so with its existing resources. Even though both Assembly and Senate passed the measure Gov. Brown vetoed, two years later, California’s Democratic-majority legislature has yet to answer Gov. Brown’s challenge. That might have something to do with the political contributions from the financial industry, which  lavished nearly $78 million to influence state politics last year, according to the National Institute on Money in State Politics. The question we’re going to have to answer is: just how long will stand for private bankers standing in the way of the progress for the common good? If these banks want to gamble with their own money and take the consequences of their losses, that’s one thing. But why should we continue to give them our money? Shame on us if we do, with better alternatives like the Bank of North Dakota staring us in the face.

The Coming Monetary Revolution 'Public Banking'

Payday loans summit in UK ‘a sham’

Some British firms charge annual interest rates of more than 5,800% on some loans.
A summit to tackle payday loans in Britain has been slammed as sham as the government rules out capping the exorbitant lending costs, local media reported. .
MPs have been accused of failing to safeguard the UK™s poorest and most vulnerable by refusing to properly clamp down on unscrupulous payday loans company.
Consumer Affairs minister Jo Swinson was holding a meeting with payday loan firms, regulators and charities on Monday to look at how to rein in the £2billion industry.
But Swinson admitted a day earlier that they would not be discussing introducing a cap on interest rates or the total amount a company could charge.

The number of payday lenders has doubled in the last four years with firms charging annual interest rates of more than 5,800 percent on some loans.
Swinson said she wants to stamp out any œirresponsible behaviour” by the industry.

But she added: “Some people say we should just cap the interest rates.
“But that could shut down short-term loans and force people towards illegal loan sharks or other extreme measures.”
Labour MP Stella Creasy, who has been at the forefront of campaigns to rein in the industry, said a cap on the total cost of lending was the only way to protect vulnerable people.
She said limits on lending costs were in force in most other countries but the government was refusing to even discuss the idea.
œHaving a summit on payday lending without talking about a cap is the same as holding summit on arson and not mentioning matches,” she said.
The Office for Fair Trading has written to 50 payday lenders giving them 12 weeks to prove they are up to scratch or risk being put out of business.
So far five lenders have told the watchdog they have left the payday market, including two which have surrendered their licences.
Which? executive director, Richard Lloyd, said the consumer group wants to see more action from government to tackle the œtoxic market”.
œWe want new rules banning excessive charges, a restriction on the number of times a payday loan can roll over and clearer advertising to help people struggling with spiralling debt”, he said.
Labour Treasury spokesman Chris Leslie MP added: œUrgent action is needed to grip the regulation of the payday loan industry, as the number of cases of misery and hardship are growing rapidly because of pressures on living standards and personal finance.
œThe government have consistently ducked clamping down on predatory pricing and extortionate interest charges – despite Labour securing an amendment in the House of Lords last year which gives regulators the ability to control costs and loan duration.”
MOL/HE
Republished with permission from:: Press TV

Obama tries to ease NSA tensions and insists: Europe spies on US too

President says intelligence services all over the world use spying programs but promises US will investigate allegations
Obama in Dar es Salaam
Barack Obama in Dar es Salaam. The president insisted the US was behaving no differently from other countries. Photograph: Saul Loeb/AFP/Getty Images
Barack Obama sought to defuse growing international tension on Monday over fresh revelations of US surveillance programmes on its allies by claiming European countries are also spying on him.
Amid an outcry among EU leaders at alleged diplomatic espionage including the bugging of embassies and parliament buildings, the president insisted the US was behaving no differently from other countries.
"We should stipulate that every intelligence service – not just ours, but every European intelligence service, every Asian intelligence service, wherever there's an intelligence service … here's one thing that they're going to be doing: they're going to be trying to understand the world better and what's going on in world capitals," he told a press conference during a long-scheduled trip Tanzania. "If that weren't the case, then there'd be no use for an intelligence service."
"And I guarantee you that in European capitals, there are people who are interested in, if not what I had for breakfast, at least what my talking points might be should I end up meeting with their leaders. That's how intelligence services operate," Obama added.
Nevertheless, he acknowledged concern over the revelations in Der Spiegel and the Guardian and said the National Security Agency would evaluate the claims and will then inform allies about the allegations.
"What I've said to my team is: take a look at this article, figure out what they may or may not be talking about, and then we'll communicate to our allies appropriately," Obama said.
As the White House seeks to contain the diplomatic fallout from the controversy, Obama also sought to reassure fellow world leaders that the scale of US espionage against friendly nations did not signify a lack of trust.
"I'm the end user of this kind of intelligence," he said. "And if I want to know what Chancellor Merkel is thinking, I will call Chancellor Merkel. If I want to know President Hollande is thinking on a particular issue, I'll call President Hollande. And if I want to know what, you know, David Cameron's thinking, I call David Cameron. Ultimately, you know, we work so closely together that there's almost no information that's not shared between our various countries."
Earlier, secretary of state John Kerry, who is also seeing his foreign travel overshadowed by the continuing revelations, confirmed that he had spoken to EU foreign affairs representative Catherine Ashton on the matter.
"Lady Ashton did indeed raise it with me today, and we agreed to stay in touch. I agreed to find out exactly what the situation is, and I would get back to her," said Kerry at a press conference in Brunei.
"I will say that every country in the world that is engaged in international affairs of national security undertakes lots of activities to protect its national security, and all kinds of information contributes to that, and all I know is that that is not unusual for lots of nations."
White House officials insisted the controversy would not affect wider international relations amid reports that European leaders could block trade talks in retaliation.
Talking to reporters aboard Air Force One, deputy national security adviser Ben Rhodes said: "I think that at the end of the day, we co-operate with Europe on so many issues and are so closely aligned in terms of our interests in the world that those relationships are going to stay strong and we're going to cooperate with them on security issues, economic issues and, frankly, obviously also share a set of democratic values with them that I think can transcend any controversy."
"We have very close intelligence-sharing relationships with these governments insofar as their questions and concerns raised about these various reports we can discuss that with the Europeans through those close relationships that we have," he added.
Kerry also tried to limit the impact that disputes over extraditing Edward Snowden, the source of the leaks, might have on relations with China and Russia.
"With respect to the conversation with the Chinese foreign minister, I think it's safe to say that the United States of America – the administration, the Obama administration – believes that our friends in China could, in fact, have made a difference here. But we have a lot of issues that we're dealing with right now," he said.
"So life in international relationships is often complicated by the fact that you have many things you have to work on simultaneously, and so we will continue to do that, even as we are obviously concerned about what happened with Mr Snowden."
President Obama declined to elaborate on reports that Russia had reached an agreement with the US on how to handle the impasse over Snowden's fate and White House sources insisted there had been no change in the co-operation between the two nations.
"We are hopeful that the Russian government makes decisions based on the normal procedures regarding international travel and the normal interactions that law enforcement has," Obama said.

Nick Barisheff: The Case for (Much) Higher Gold Prices


Full description and comments can be read at:
http://www.peakprosperity.com/podcast…
This interview was recorded three weeks ago. We’ve been unsure of how well-received an interview about “$10,000 gold” would be received while the yellow metal experiences its worst quarter, price-wise, in history. But rather than sit on it any longer, we’re releasing it now and will trust our readers to look past the current price of gold and focus on the long term macro arguments Nick presents. ~ Adam
Nick Barisheff, CEO of Bullion Management Group recently published the provocatively-titled book: $10,000 Gold: Why Gold’s Inevitable Rise Is the Investor’s Safe Haven. In this week’s podcast, Chris sits down with Nick to learn the math behind this forecast.

ILLINOIS: STATE ENDS FISCAL YEAR $6.1 BILLION IN RED

zerohedge‏@zerohedge1 min
ILLINOIS: STATE ENDS FISCAL YEAR $6.1 BILLION IN RED
zerohedge‏@zerohedge40 s
ILLINOIS SEES DEFICIT AT ABOUT $7.5B BY AUGUST. “Bullish” – Keynesianism
SPRINGFIELD — Illinois finished the fiscal year on Sunday $6.1 billion in the red.
But Comptroller Judy Baar Topinka said Monday the backlog of unpaid bills to schools, agencies, hospitals and businesses is expected to grow another $1.4 billion by next month.
The state collected $1.3 billion in unexpected tax revenue this spring from residents selling assets before new tax laws took effect.
http://www.pantagraph.com/news/local/government-and-politics/illinois-ends-fiscal-year-billion-in-red/article_a7c0f850-e26e-11e2-bcf9-001a4bcf887a.html

Illinois Ends Fiscal Year $6.1 Billion in Red
http://www.wsiltv.com/news/local/Illinois-Ends-Fiscal-Year-61-Billion-in-Red-213857531.html
http://www.dailyjournal.net/view/story/3d43179f3d3248c18a902e313af2c479/IL–Deadbeat-Illinois/

Europe demands explanation on snooping

Fresh revelations by The Guardian alleging that the U.S. systematically spied upon several “target” countries in Europe and around the world has further fuelled anger in France, Germany, Greece and Italy.
French President Francois Hollande called on Washington to “immediately” cease espionage activities targeting France. “France cannot accept such behaviour between allies and partners. There are enough elements for us to demand explanations,” Mr. Hollande said during a trip to Brittany, northwestern France. Mr. Hollande thus became the first Head of State to speak out openly about the spying allegations.
Mr. Hollande became the first European Head of State to directly attack the proposed Europe-USA free trade agreement saying “There can be negotiations, transactions in all fields, only once France has obtained these guarantees — and this goes for the rest of Europe and other partners of the United States,” Mr. Hollande said.
Earlier French Foreign Minister Laurent Fabius called on his American counterpart Secretary of State John Kerry to make a stopover in Europe on his way back from the West Asia. “Mr. Kerry should contact us immediately so we can have the required information and explanations,” Mr. Fabius said.
France is particularly outraged because press reports say the U.S. spied on the French mission in Washington and at the United Nations. The former was baptised Wabash while snooping operations against the French U.N. mission were called “Blackfoot”. The operation against the Italians and the snooping operations against the Italians went under the code name “Bruneau”.
The Guardian’s revelations that France, Italy or Greece were described as “targets to be attacked” by the U.S. National Security Agency (NSA) in order to understand the dissensions within Europe has literally made the pot boil over. Germany and the European Union (EU) on Monday formally demanded explanation from Washington. “Between partners, we don’t spy on each other,” exclaimed Viviane Reding, the European Commissioner for Justice. “There can be no negotiations on an enlarged transatlantic market if there is the slightest doubt that our partners are listening to what goes on in the offices of our negotiators,” Ms. Reding said. The French Green party has called for giving asylum to Edward Snowden in Europe.
As far as the U.S. is concerned, the Office of the Director of National Intelligence (ODNI) in a statement said that the USA would respond “appropriately” through diplomatic channels. In a communiqué, the agency said it did not publicly comment on alleged intelligence activity, adding that it had clarified the USA engaged in information gathering outside its frontiers like any other foreign nation.
Keywords: John KerryUS-EU tiesU.S. bugging EU officesDer SpiegelCatherine AshtonFrancois HollandeFranceGreeceItalyGermanyEuropean UnionEU-US FTA,

We must hate our children

We crush them with debt to go to college -- and today, rates are actually set to double. Are we out of our minds? 

We must hate our children(Credit: Reuters/Brian Snyder)
This article has been corrected since it first published.
Next time you’re watching a college graduation, as you look out over the sea of caps and gowns, make sure you notice the ball and chain most graduates are wearing as they march onstage to receive their diplomas. That’s student loan debt, which at over $1 trillion tops credit card debt in the U.S. today. The average burden is $28,000, but add in their credit cards and they’re graduating with an average of $35,000 in debt. It’s no wonder that people who’ve paid off their student loan debt are 36 percent more likely to own homes than those who haven’t, according to new research by the One Wisconsin Now Institute and Progress Now.
What kind of society sends its young people from higher education into adulthood this way? I’m aware I’m only talking about those lucky enough to go to college, when roughly one-third of high school graduates don’t – but if this is the way we treat our relatively lucky kids, the rest of them don’t have a prayer. For many, the school to prison pipeline functions much more efficiently than the school to college one; California is one of at least 10 states that now spends more on prison than higher education. According to the Federal Reserve Bank, two-thirds of college graduates leave with some debt, and 37 million Americans are repaying a student loan right now.
Unbelievably, interest rates on federally subsidized loans are doubling today, from 3.4 to 6.8 percent. As Congress bickers over alternatives, even Democrats are backing “market-based” plans that aren’t as bad as GOP ideas, but aren’t good either. I hope they can find a way to lower interest rates, but the real scandal isn’t the rate hike. The real scandal is that we take for granted that young people must go into debt – at whatever interest rate – to pay for college.
Of course, the truly lucky kids – those blessed wealthy members of the Lucky Sperm Club – sail through higher education without debt. But today, even upper-middle-class kids are having to take out loans, as the average annual cost of a four-year public university soars above $22,000, while private schools are over $50,000.  Who the hell thinks this is a good idea?
* * *

I used to find it endearing when President Obama talked about how he and Michelle finally paid off their student loans after he was elected to the Senate. But in a way, the president’s folksy anecdote helped normalize what should be outrageous: that we expect young people to go deep in debt, well into middle age, to get a good education. Of course, the Obamas’ story should come with an asterisk, since much of their debt was built up paying for Harvard Law School, and clearly, that paid off for them. The assumption that students should borrow money to pay for an undergraduate degree, and that the only debate is over how high their interest rate should be, is seriously crazy.
As David Dayen explained in this great Salon piece, we shouldn’t even call them student “loans,” because you can’t refinance them, and you can’t get out from under them by declaring bankruptcy. It’s more like indenture. There’s no statute of limitation on collecting student loans, and lenders can garnish wages, tax refunds and even Social Security checks. Back in 2007, now-Sen. Elizabeth Warren asked: “Why should students who are trying to finance an education be treated more harshly than someone … who racked up tens of thousands of dollars gambling?” Nothing’s changed, although Warren is part of a limited number of people in Congress who are trying.
In the survey of 61,700 student loan holders recently completed by One Wisconsin Now and Progress Now, students with bachelor’s degrees took an average of 19 years to pay off their loans, at an average cost of $117,000. Their average monthly payment was $499. And this isn’t a brand-new problem: Of the $1 trillion in student debt, 60 percent is owed by people over 30.
It wasn’t always this way. The postwar American economic boom had at its heart an intentional, comprehensive program of making higher education much more accessible. In 1946, 2 million Americans attended college or university, representing only one in eight college-age students; by 1970, there were 8 million undergraduates, one in three in that age group. And the balance of enrollment shifted to public institutions: In the ’40s, more college students attended private colleges; by 1970 three-quarters were enrolled in public ones. Graduate enrollment spiked, thanks to expanded research funding, from 120,000 in 1946 to 900,000 in 1970.
States competed to expand their public university systems – and many were free, or close to it. The stellar University of California system was tuition free (though there were fees) until Ronald Reagan became governor in 1967; so was the City University of New York system for a long time. CUNY was from the start an “experiment,” in the words of co-founder Horace Webster, in “whether the children of the people, the children of the whole people, can be educated.” It was a contentious experiment, with its admission and tuition policies shifting back and forth over many years, but the egalitarianism at its heart, and through much of its history, can’t be denied. And that was true of most public university systems. Late in the game, when I graduated from the University of Wisconsin in 1980, I was still paying less than $400 a semester. Now it’s amost 15 times that, at $5,500 a semester; the annual cost to an in-state student (including room, board, books and other fees) is $24,000.
Aaron Bady and Mike Konczal ran down the California history in a piece about “the slow death of public higher education” last year. With the U.C. system’s bipartisan 1960 master plan:
The doors of the University of California were thrown open, tuition-free, for the top 12.5 percent of high school graduates. The top 33.3 percent could find a place in one of the California State Universities, which were also tuition-free. Everyone else, if they so chose, could go to one of the many California Community Colleges, which were open not only to high school graduates but also to qualifying non-traditional students. Perhaps most important, community college graduates had the opportunity to transfer to one of the UCs or CSUs to finish their bachelor’s degree, if their grades were above a certain point. In theory and to a significant extent in practice, anyone from anywhere in California could, if they worked hard enough, get a bachelor’s degree from one of the best universities in the country (and, therefore, in the world), almost free of charge. The pronounced social and economic mobility of the postwar period would have been unthinkable without institutions of mass higher education, like this one, provided at public expense.
I got angry about this all over again having dinner with a friend who’s a little older than me. He finished at the very bottom of his high school class – and wound up at the University of Wisconsin-Milwaukee, which as late as the ’60s had “open enrollment,” and cost $80 a semester. College unlocked something high school didn’t; he thrived and transferred to Columbia University and eventually got a Ph.D. That isn’t happening for anyone today, unless their wealthy parents can buy them into a private university.
Meanwhile, public universities are spending on new buildings, but they’re sharply hiking tuition as well as either cutting or just maintaining enrollment. (University of Wisconsin in-state tuition has doubled in just the last decade.) The Public Policy Institute of California (PPIC) found that the share of young people enrolled in U.C. or California State University campuses dropped 20 percent in the five years between 2007 and 2012. “You can go into any community and talk to somebody whose son or daughter either can’t get in or can’t finish [college] because they can’t get this or that course,” David Wolf, co-founder of the Campaign for College Opportunity, told California Watch. “Meanwhile, they go on campus and there’s all that fresh cement. That’s embarrassing, and it’s wrong.”
In the 1980s, at the flagship U.C.-Berkeley, more than half of all applicants were accepted; this year it was closer to 20 percent, as 67,000 applicants vied for 14,000 acceptances to the incoming freshman class (of 4,200 students, unchanged in the last 10 years).  Meanwhile, both public and private aid has shifted from “need-based aid,” which tends to go to lower-income kids, to “merit-based aid,” which is tied to income but less directly.  Not surprisingly, at Ivy League schools and the “public Ivies” (which includes the U.C. and U.W. flagship schools), 80 percent of  students admitted come from the top income quartile of American families; only 2 percent come from the bottom quartile.
Astonishingly, in 2008, older people born in California were a third more likely to have college degrees than younger native Californians, according to PPIC; elsewhere around the country, the difference was only 1/16th (30.9 percent versus 29.0 percent) – but still: young American adults are less likely than older Americans to have attended college. This has to be the first generation for whom that’s true. We’re putting the history of American progress in reverse.
* * *
With student debt so pervasive and crushing, of course it matters that Congress do something to keep interest rates from rising. The House GOP is gloating that (in a bizarre role switch) they’ve passed a plan, and the Senate hasn’t. The House GOP plan would send students out into a maze of “market-based” adjustable rate loans.  Why should someone at age 18 have to navigate a thicket of variable rate loans, where their interest rate could double over time? But even the compromise Obama plan, which would let students lock in a rate once they decided on a loan, has no cap on interest rates.
A growing number of voices, including the Fed, are pointing to the way this debt burden is a drag not just on the borrowers but the wider economy. That One Wisconsin Now survey found that student debt reduces average aggregate car purchasing by $6.4 billion a year. Young people are leaving school with the kind of debt that was once only incurred by the purchase of a first home; not surprisingly, it’s depressing home buying too.
That practical economic argument is important, but almost no one is making the larger economic argument, that expanded access to higher education is good for everyone, period. There are proposals to reform the student loan system to make it more like a standard loan agreement and less like indenture. The Obama administration has expanded opportunities to have debt reduced for those in education or other public interest careers, which is great. But when we talk about doing big things again, when we dream about infrastructure, why are none of our major leaders advocating for new campuses for our state universities and colleges?
A Washington Post piece on the interest-rate impasse noted that Obama and Mitt Romney both called for Congress to stop the rate hike last summer, and it happened. “But student-loan policy has drawn less attention this year now that the presidential election is over.” Indeed. We should stop mouthing platitudes about how “children are our future.” From preschool to post-graduate education, we are proving the opposite is true.