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The Cyprus Deal and the Unraveling of Fractional-Reserve Banking

March 27, 2013 in Economics

By Joseph Salerno

The “Cyprus deal” as it has been widely referred to in the media may mark the next to last act in the the slow motion collapse of fractional-reserve banking that began with the implosion of the savings-and-loan industry in the U.S. in the late 1980s. This trend continued with the currency crises in Russia, Mexico, East Asia and Argentina in the 1990s in which fractional-reserve banking played a decisive role. The unraveling of fractional-reserve banking became visible even to the average depositor during the financial meltdown of 2008 that ignited bank runs on some of the largest and most venerable financial institutions in the world. The final collapse was only averted by the multi-trillion dollar bailout of U.S. and foreign banks by the Federal Reserve.

Even more than the unprecedented financial crisis of 2008, however, recent events in Cyprus may have struck the mortal blow to fractional-reserve banking. For fractional reserve banking can only exist for as long as the depositors have complete confidence that regardless of the financial woes that befall the bank entrusted with their “deposits,” they will always be able to withdraw them on demand at par in currency, the ultimate cash of any banking system. Ever since World War Two governmental deposit insurance, backed up by the money-creating powers of the central bank, was seen as the unshakable guarantee that warranted such confidence. In effect, fractional-reserve banking was perceived as 100-percent banking by depositors, who acted as if their money was always “in the bank” thanks to the ability of central banks to conjure up money out of thin air (or in cyberspace). Perversely the various crises involving fractional-reserve banking that struck time and again since the late 1980s only reinforced this belief among depositors, because troubled banks and thrift institutions were always bailed out with alacrity–especially the largest and least stable. Thus arose the “too-big-to-fail doctrine.” Under this doctrine, uninsured bank depositors and bondholders were generally made whole when large banks failed, because it was widely understood that the confidence in the entire banking system was a frail and evanescent thing that would break and completely dissipate as a result of the failure of even a single large institution.

Getting back to the Cyprus deal, admittedly it is hardly ideal from a free-market point of view. The solution in accord with free markets would not …read more

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New Regulation Looks at Health Care Fights, the EPA, and the First Amendment

March 27, 2013 in Economics

In the latest issue of Regulation magazine, M. Todd Henderson reviews last year’s brouhaha over health insurance and birth control. According to Henderson, lost in the firestorm about religion and feminism were larger lessons about health care policy and regulation. Also in this issue, Cato scholar Richard L. Gordon argues that new federal efforts to cut emissions are the result of longstanding legal and judicial mandates, not a sudden Obama administration push.

…read more

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Rand Paul Can Shape the Future of Conservatism

March 27, 2013 in Economics

By Ilya Shapiro, Francisco Gonzalez

Ilya Shapiro and Francisco Gonzalez

In recent weeks, Sen. Rand Paul galvanized the nation with a 13-hour filibuster, became the toast of the Conservative Political Action Conference and embraced immigration reform before the Hispanic Chamber of Commerce.

It’s naive to think that a few speeches can reshape the Republican Party, but Paul may well represent a tectonic shift on the American right.

The junior senator from Kentucky has a vision of the Constitution in full, advocating the Second Amendment’s right to keep and bear arms and the Fourth Amendment’s right to be free from unreasonable search and seizure.

He’s for civil liberties — to protect against police abuse or presidential drones, as well as economic liberties and the freedom to run a business without unnecessary regulation. And he wants to give the blessings of those liberties to those who come to America in search of a better life.

Rand Paul has some ideas for Republicans

As a libertarian and a traditional conservative, we disagree with Paul on a number of issues. Yet we both see his constitutional conservatism as auguring a future in which social tolerance, fiscal temperance and a humbler role for government are pursued not as ends in themselves but because that’s the best path.

Conservatives “conserve” society by reacting to the excesses of previous generations, but the issues that prompt the reactions vary according to the times. Even the solutions to the same problems may shift with new information and reflection. National Review founder William F. Buckley, a key figure in the modern conservative movement, famously changed his mind about civil rights, the drug war and even Iraq.

Conservatives started the environmental movement with Theodore Roosevelt’s protection of national parks at a time when natural resources were plundered without regard to public health. But now, environmentalists abuse the Endangered Species Act to protect salamanders at the expense of jobs and the Clean Water Act’s wetlands protections to prevent development.

It’s naive to think that a few speeches can reshape the Republican Party, but Paul may well represent a tectonic shift on the American right.”

Similarly, conservatives argued for larger police and military forces in response to crime and communism, but now that cost is part of our fiscal problem.

Opinion: Rand Paul is right

Modern conservatives need to remember these lessons as they consider the future.

Their predecessors were largely successful in defeating communism, liberalizing the economy and reducing crime. …read more
Source: OP-EDS

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The Ballooning Number of Corporate Kangaroo Courts Is Destroying Our Right to a Fair Trial

March 27, 2013 in Blogs

By Jim Hightower, AlterNet


Being wronged by a corporation is painful enough, but just try getting your day in court. Most Americans don't realize it, but our Seventh Amendment right to a fair jury trial against corporate wrongdoers has quietly been stripped from us. Instead, we are now shunted into a stacked-deck game called “Binding Mandatory Arbitration.” Proponents of the process hail it as superior to the courts — “faster, cheaper and more efficient!” they exclaim.

But does it deliver justice? It could, for the original concept of voluntary, face-to-face resolution of conflict by a neutral third party makes sense in many cases. But remember what Mae West said of her own virtue: “I used to be Snow White, then I drifted.” Today's practice of arbitration has drifted far away from the purity of the concept.

All you really need to know about today's process is that it's the product of years of conceptual monkey-wrenching by corporate lobbyists, Congress, the Supreme Court and hired-gun lobbying firms looking to milk the system for steady profits. First and foremost, these fixers have turned a voluntary process into the exact opposite: mandatory. Let's look at this mess.

— Unlike courts, arbitration is not a public system, but a private business.

— Far from being neutral, “the third-party” arbitration firms are — get this! — usually hand-picked by the corporation involved in the case, chosen specifically because they have proven records of favoring the corporation.

— The corporation also gets to choose the city or town where the case is heard, allowing it to make the case inconvenient, expensive and unfair to individuals bringing a complaint.

— Arbitrators are not required to know the law relevant to the cases they judge or follow legal precedents.

— Normal procedural rules for gathering and sharing evidence and safeguarding fairness to both parties do not apply in arbitration cases.

— Arbitration proceedings are closed to the media and the public.

— Arbitrators need not reveal the reasons for their decisions, so they are not legally accountable for errors, and the decisions set no legal precedents for guiding future corporate conduct.

— Even if an arbitrator's decision is legally incorrect, it still is enforceable, carrying …read more

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Conservative Morality: Free Pass for Criminal Bankers, Restrictions for Women and Gay Citizens

March 27, 2013 in Blogs

By Robert B. Reich, Robert Reich's Blog

We're still legislating and regulating private morality, while at the same time ignoring the much larger crisis of public morality in America.

In recent weeks Republican state legislators have decided to thwart the Supreme Court's 1973 decision in Roe v. Wade, which gave women the right to have an abortion until the fetus is viable outside the womb, usually around 24 weeks into pregnancy.

Legislators in North Dakota passed a bill banning abortions after six weeks or after a fetal heart beat had been detected, and approved a fall referendum that would ban all abortions by defining human life as beginning with conception. Lawmakers in Arkansas have banned abortions within twelve weeks of conception.

The morality brigade worries about fetuses, but not what happens to children after they're born. They and other conservatives have been cutting funding for child nutrition, healthcare for infants and their mothers, and schools.

The new House Republican budget gets a big chunk of its savings from programs designed to help poor kids. The budget sequester already in effect takes aim at programs like Head Start, designed to improve the life chances of poor kids.

Meanwhile, the morality brigade continues to battle same-sex marriage.

Despite the Supreme Court's willingness to consider the constitutionality of California's ban, no one should assume a majority of the justices will strike it down. The Court could just as easily decide the issue is up to the states, or strike down California's law while allowing other states to continue their bans.

Conservative moralists don't want women to have control over their bodies or same-sex couples to marry, but they don't give a hoot about billionaires taking over our democracy for personal gain or big bankers taking over our economy.

Yet these violations of public morality are far more dangerous to our society because they undermine the public trust that's essential to both our democracy and economy.

Three years ago, at the behest of a right-wing group called “Citizens United,” the Supreme Court opened the floodgates to big money in politics by deciding corporations were “people” under the First Amendment.

A record $12 billion was spent on election campaigns in 2012, affecting all levels of …read more

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AERC in the Classroom

March 27, 2013 in Economics

By Mises Updates

Robert Wenzel reports, regarding his Hazlitt Memorial Lecture at AERC:

“Associate Professor Andrei Znamenski, who teaches history at the University of Memphis and received his undergraduate degree from  St. Petersburg Herzen Pedagogical University, Russia, emails:”

 Thanks much again for the great talk, which I hope all folks in Russian studies listen to. As you correctly mentioned, the mainstream view (especially in academia among the left-liberals) is that it was not so much systemic failures of socialism that killed the S Union but the Ronald Reagan arms race. Yes, here both neocons and libs share the same view with some variations. The popular neo-con argument that it was Reagan who exhausted and destroyed the S Union is widely also used today by the “red-brown” circles in Russia (the proponents of socialism in Russian today normally speak with a strong nationalism accent; hence, the nickname “red-browns”) to nostalgically dream about the glorious S Union: “if it had not been for Reagan, the glorious union would have still existed”

This semester I am teaching a course on S Union, What I am planning to do is to give the students (35 people) the video of your talk and have them critically reassess it relative to what they will find in a textbook that I am currently using. Thanks much again. Your talk arrived just in time: we are still doing the Brezhnev (stagnation) period, but in a week we are going to deal with the causes for the collapse of the Soviet Union, and that is when I am going to bring up your talk.

…read more

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Three Years of Broken Promises

March 27, 2013 in Economics

By Michael D. Tanner

Michael D. Tanner

The Patient Protection and Affordable Care Act, a.k.a. Obamacare,  turned three years old this week. But unlike fine wine, the ACA is not getting better with age. A torrent of recent studies and reports has provided new evidence — as if we needed more confirmation — that nearly everything we were told about this law was untrue.

Compare these promises to what we’ve found out about the law in just the past two months:

If you like your doctor, you will be able to keep your doctor, period. If you like your health-care plan, you’ll be able to keep your health-care plan, period.

— President Obama, June 15, 2009

People are finding it increasingly difficult to do what the president promised. According to the California health-care-consulting firm HealthPocket, in a study of more than 11,000 plans on the individual market released this month, less than 2 percent of existing plans are in compliance with the law’s benefit requirements. While current plans are technically grandfathered in, allowing people to keep them for now, any change in the plans requires that their coverage be brought into full compliance, even if that means more expensive plans that include new and unnecessary benefits. Moreover, because non-compliant plans cannot enroll new members, most of the existing plans will eventually disappear, requiring even those members who have been grandfathered in to switch plans eventually.

The president’s health-care law has done almost none of what he suggested it would. ”

The same applies to many business plans, especially for employers in the “small group” market. In a survey of small businesses, the National Federation of Independent Business found that 12 percent of companies have already been notified that their current coverage will be canceled or will not be renewed because it doesn’t meet Obamacare requirements.

At the same time, the CBO has raised, from 4 million Americans to 7 million, its estimate of the number of workers who will be dumped from their employers’ health plans and forced into the exchanges.  

And it may become increasingly hard to keep your doctor, too, or at least to see him reasonably quickly. Because the Affordable Care Act curtails physician reimbursement, medicine is apt to become a less desirable profession. A survey of physicians conducted by Deloitte found that 59 percent of them expected that at least some doctors will retire early as a result of the …read more
Source: OP-EDS

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Medical Marijuana Bill Introduced in New York State Senate & Assembly

March 27, 2013 in PERSONAL LIBERTY

By drosenfeld

Legislation Would End the Needless Suffering of Thousands of Seriously Ill New Yorkers

Statement from Drug Policy Alliance’s Julie Netherland

Today, New York State Assemblyman Richard Gottfried and Senator Diane Savino introduced a bill that would create one of the nation’s most tightly regulated medical marijuana programs.

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…read more

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Stay out of Other Nations' Civil Wars

March 27, 2013 in Economics

By Doug Bandow

Doug Bandow

The long-standing Syrian dictatorship is an abomination. The ongoing Syrian civil war is a tragedy. America should stay out.

A decade ago another administration began another war with a promise of enshrining Pax Americana on the Euphrates. Unfortunately, the result was a wrecked Iraq, empowered Iran, and discredited America. With the decade-long attempt to implant liberal democracy in Afghanistan finally coming to a close, Washington should reject proposals for another unnecessary war of choice.

It has been two years since a peaceful rising began against the government of President Bashar al-Assad. Despite hopes of former Secretary of State Hillary Clinton and others that he was a reformer, Assad responded with brute force.

Even then the Assad family and many of his fellow Alawites were too invested in power to yield gracefully. Now, after an estimated 70,000 deaths, surrender is inconceivable. Noted Joseph Holliday of the Institute for the Study of War: “Fears of retribution have pushed conventional and paramilitary loyalists to converge upon the common goal of survival, resulting in a broadly cohesive, ultra-nationalist, and mostly Alawite force.”

As the conflict grinds on the Assad regime is the likely loser, but the fractured opposition — whose competing groups have begun targeting each other — does not appear close to victory. Many more people will die before the fighting ebbs. And then the peace is likely to be anything but, as endless scores, ancient and new, are settled with blood.

This is precisely the sort of conflict America should stay out of. The case against joining the Syrian fratricide is simple yet overwhelming: Americans have nothing at stake that warrants going to war. War should be a last resort, employed for interests that are truly vital. War should not be just another policy choice for impatient internationalists and frustrated social engineers.

First, there is no impartial intervention. Entering the conflict is to take sides. Ronald Reagan, 241 Marines, and 17 American embassy personnel learned that lesson in Lebanon in 1983. Washington had proclaimed its commitment to peace by aiding one force in a multi-sided civil war. By becoming a de facto combatant the administration turned Americans into targets. Aiding Syria’s opposition means becoming a participant in that conflict.

Paradoxically, aiding the resistance could drive some Syrians who desire a negotiated solution toward the government. The Financial Times recently reported: “As the civil war becomes ever dirtier, rebels’ actions are starting to mirror those of the regime.” In fact, opposition …read more
Source: OP-EDS

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The High Court’s Marriage Jitters

March 27, 2013 in Economics

By Walter Olson

Walter Olson

“Can I filter out the gay marriage tweets?” wrote one Hartford lawyer on Twitter. “Coz like it’s already legal here so I don’t care.”

I think he was kidding. But even if you live in a state like New York or Connecticut where gays can already get married, this is no time to check out of the debate — not with things really heating up at the U.S. Supreme Court.

Tuesday, at oral argument on the California Proposition 8 case, there was little sign that the court’s liberal wing was itching for any so-called “50-state solution,” a sweeping ruling decreeing gay marriage lawful nationwide on equal protection grounds.

Associate Justice Ruth Bader Ginsburg approvingly brought up the obscure 1964 case of McLaughlin vs. Florida, in which the court unanimously struck down a law against interracial cohabitation, but dodged the opportunity to overturn laws against interracial marriage. Three years later — after much intervening advancement in public opinion — it got around to doing that in the much more famous case of Loving vs. Virginia.

After Tuesday, the chances of a D.I.G. resolution — and wedding bells for gay couples in California, but ending at the state line — seemed higher.”

Instead, Associate Justices Ginsburg, Elena Kagan, Sonia Sotomayor and Stephen Breyer concentrated on arguments that would knock out the Proposition 8 proponents’ standing to be in court on the ground that they are unelected private citizens with no particular stake in the case’s outcome. If they find a fifth justice to agree on this point, California would go back to having gay marriage — which a new KPIX-TV poll finds its citizens would welcome, by a whopping 67% to 30% — but the other 49 states wouldn’t see any change.

There’s an irony in standing having become a tool for possible liberal victories at the court.

Not long ago, conservative judges like Associate Justices Antonin Scalia and Samuel Alito were the ones known for using tough standing rules to throw out cases, while liberals were more broad-minded.

These days, standing doctrines have become more like castle drawbridges, raised or lowered depending on whether foe or friend is at the gate.

The liberals’ strategy ran into one serious difficulty Tuesday: Associate Justice Anthony Kennedy, whom both sides expect to be the swing vote, appeared sympathetic toward granting standing to the Proposition 8 defenders. That would mean, at least potentially, progressing to the merits.

So …read more
Source: OP-EDS