You are browsing the archive for 2013 March 02.

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Let’s Look a Little More Closely at What Bernanke Told Congress

March 2, 2013 in Economics

By Hunter Lewis

In Congressional testimony last week, Fed Chairman Ben Bernanke slipped something in that no one much noticed. He said that the Fed might eventually  choose to exit from its current monetary expansion binge, not by selling US government securities, but by letting them mature.

Let’s stop for a moment to consider what this means. At the moment, the Fed earns interest from the Treasury on bonds which it has bought with the money it has just pulled ” out of thin air.” It then pays its expenses, including the growing cost of the new consumer finance agency created by Dodd Frank that was placed in the Fed so that its costs would not have to be included in the federal budget. Since the interest on the bonds is larger than the expenses, in the end the Fed sends money back to the Treasury.

We aren’t told exactly how much has been deducted at the Fed, but we do see the amount of money returning to the Treasury. It’s a circular flow designed to obscure what is happening, which is the government simply printing money to pay its bills.

So what happens if the Fed holds a bond to maturity? In that case, the Fed presumably receives the principal payment from the Treasury and then sends that back to the Treasury too. In effect, the government has simply canceled its own debt.

When Adair Turner, a candidate for governor of the Bank of England last fall, said that the BOE would consider canceling some of the government’s bonds, this was considered a bit shocking, and the job went to Mark Carney instead. Now Bernanke has in effect announced an intention to cancel US bonds, and it doesn’t cause a ripple.

It can certainly be argued that it shouldn’t cause a ripple, that once the Fed has bought US bond with newly created money, the debt has already been canceled. But central banks like to do these things, step by step, as quietly as possible, and Bernanke has once again succeeded in making radical policy sound so boring that everyone slumbers as he announces it.

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Source: MISES INSTITUTE

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Robert Blumen on Power Trading Radio

March 2, 2013 in Economics

By Mark Thornton

On the show Robert Blumen discusses the science of deflation and the price of gold.

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Source: MISES INSTITUTE

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Student Debt Tripled in Eight Years

March 2, 2013 in Blogs

By Natasha Lennard, Salon



 

A new report from the New York Federal Reserve further confirms what many commentators have been long saying — student debt is the bubble that just keeps expanding. Total student debt has nearly tripled in the past three years.

Total student debt stands at $966 billion as of the end of 2012, with a 70 percent increase in both the number of borrowers and the average balance per person. The overall number of borrowers past due on their student loan payments has also grown, from under 10 percent in 2004 to 17 percent in 2012.

Noting the N.Y. Fed report, HuffPo pointed out that the proliferation of indebted students and their families has knock on effects on other areas of the economy:

Fewer people with student loans are buying homes, according to data in the report. Of borrowers ages 25 to 30 who are taking out new mortgages, the percentage of those with student debt has fallen by half, from nearly 9 percent in 2005 to just above 4 percent in 2012.

The fed report sees a connection, stating, “The higher burden of student loans and higher delinquencies may affect borrowers’ access to other types of credit and the performance of other debt.”

Crucially, however, the student debt bubble can’t be construed in the same way, say, as the housing bubble. Student debt will (and already does) have crippling effects on millions of Americans, but it’s a bubble with no promise of burst. As Malcolm Harris has long pointed out, since most student loan debt is government backed and can never be discharged, the type of meltdown the student loan explosion could precipitate will take a different shape than the mortgage crisis, with the victims (student borrowers) already in place and struggling:

All the hallmarks of a bubble are there, including massive securitization and seemingly risk-free financial products. But, as the financial analysts are quick to remind us, the vast majority of this debt is government-backed. What’s the worst that could happen?

As far as investors are concerned, this line of thinking works just fine, but it should look less rosy for the Treasury. If it turns out the subsequent work of student debtors isn’t worth as much …read more
Source: ALTERNET

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Bradley Manning: The Face of Heroism

March 2, 2013 in Blogs

By Glenn Greenwald, The Guardian



In December, 2011, I wrote an Op-Ed in the Guardian arguing that if Bradley Manning did what he is accused of doing, then he is a consummate hero, and deserves a medal and our collective gratitude, not decades in prison. At his court-martial proceeding this afternoon in Fort Meade, Manning, as the Guaridan's Ed Pilkington reports, pleaded guilty to having been the source of the most significant leaks to WikiLeaks. He also pleaded not guilty to 12 of the 22 counts, including the most serious – the capital offense of “aiding and abetting the enemy”, which could send him to prison for life – on the ground that nothing he did was intended to nor did it result in harm to US national security. The US government will now almost certainly proceed with its attempt to prosecute him on those remaining counts.

Manning's heroism has long been established in my view, for the reasons I set forth in that Op-Ed. But this was bolstered on Friday as he spoke for an hour in court about what he did and why, reading from a prepared 35-page statement. Wired's Spencer Ackerman was there and reported:

“Wearing his Army dress uniform, a composed, intense and articulate Pfc. Bradley Manning took 'full responsibility' Thursday for providing the anti-secrecy organization WikiLeaks with a trove of classified and sensitive military, diplomatic and intelligence cables, videos and documents. . . .

“Manning's motivations in leaking, he said, was to 'spark a domestic debate of the role of the military and foreign policy in general', he said, and 'cause society to reevaluate the need and even desire to engage in counterterrorism and counterinsurgency operations that ignore their effect on people who live in that environment every day.'

“Manning explain[ed] his actions that drove him to disclose what he said he 'believed, and still believe . . . are some of the most significant documents of our time' . . . .

“He came to view much of what the Army told him — and the public — to be false, such as the suggestion the military had destroyed a graphic video of an aerial …read more
Source: ALTERNET

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America's Incarceration Rate Is Crazy — Here's How to Fix It

March 2, 2013 in Blogs

By Mugambi Jouet, Salon



Racial discrimination is often used to explain the fact that 1 percent of American adults is behind bars and that we’re the only Western democracy not to have abolished the death penalty. Given that America’s prisoners are disproportionately black and Hispanic, this is understandable. But what’s often overlooked is class — even though the clear majority of white, black and Hispanic prisoners stems from the underclass and working class.

Criminal justice systems are largely a reflection of economic systems. It is no coincidence that their practices are the most humane in Scandinavian countries, known for their high degree of economic solidarity. In a society marked by sharp wealth inequality, such as modern-day America, the criminal justice system can come to negate solidarity and embody the notion that those at the bottom rungs of society are little more than a nuisance. Thus, the U.S. criminal justice system emphasizes harsh retribution, disfavors rehabilitation and tends to ignore social factors behind crime, such as poverty, failing public schools or lax gun control.

America could put an end to mass incarceration by following the example of other Western democracies. Prison terms in those countries are much shorter in all types of cases, and very lengthy terms are usually reserved for the worst offenders. With regard to nonviolent offenders, these countries are also less likely to rely on incarceration as opposed to fines or probation. In addition to other reforms, America should therefore abandon peculiar and counterproductive policies like the “War on Drugs,” “three strikes laws” and harsh mandatory-minimum stays in prison.

Authorizing the recreational use of marijuana — like the Netherlands, Colorado and Washington have done — could go a long way. In 2011, over 750,000 people were arrested for marijuana offenses in America, 87 percent of whom were charged with possession only. As documented by Michelle Alexander in her book “The New Jim Crow,” local police departments have received substantial federal funding to aggressively pursue minor offenders as part of the “War on Drugs.” Such incentives should be eliminated.

However, it is difficult to imagine meaningful reforms without a change of perspective. The main reason why mass incarceration exists — despite well-known solutions — is …read more
Source: ALTERNET

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The Keystone XL Pipeline Is an Eco-Threat — Why Doesn't the State Department Think So?

March 2, 2013 in Blogs

By Michael Brune, AlterNet



 

This article was published in partnership with GlobalPossibilities.org.

You know the news is going to be bad when they bury it at 4pm on a Friday. We dealt with this for eight years during the Bush administration. I never thought we'd be doing it again under John Kerry's State Department. 

The State Department's analysis of the Keystone XL pipeline proposal acknowledges that tar sands crude is 17 percent more greenhouse gas intensive than conventional oil. But State says that the overall environmental impacts of the pipeline are limited because, according to their analysis, the oil would be mined and drilled anyway. That's not accurate. Currently, 1.8 million barrels of oil per day are being produced in the tar sands. Permits have already been issued that would allow that extraction to expand to 5 million barrels of oil per day, and the oil industry would like to go even higher. But the oil industry is the first to admit that it needs new pipeline capacity before it can expand:

“When I talk to producers in Alberta, as long as Keystone XL goes ahead, they view that there's pretty sufficient takeaway capacity to get us to late in the next decade.”  –Alex Pourbaix, president of energy and oil pipelines, Transcanada

“All of the crude oil export pipelines are pretty much full, running at maximum capacity… And we're not likely to see any meaningful capacity added to these networks until the end of the year.”  –Vern Yu, VP of business development and market development, Enbridge, Inc.

So the State Department's analysis is not only inaccurate but also incredibly cynical. By this same logic, why would anyone in North America stop new coal plants from being built, if the coal would just be burned in China and India anyway? Why would we try to replace fracked gas or mountaintop-removal coal with solar and wind, if we're powerless as a country to lead the world to a clean energy economy? This is shockingly defeatist thinking from a bureaucracy that is now led by someone who has been a proven and courageous champion of the climate throughout his career.  

I spent this morning on a …read more
Source: ALTERNET