You are browsing the archive for 2018 February 07.

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Why Stock Market Upheaval Was Inevitable

February 7, 2018 in Economics

By James A. Dorn

James A. Dorn

The sharp plunge in stock markets around the world
earlier this week tells us that major central banks, with the US
Federal Reserve at the forefront, have severely underestimated the
risk of keeping interest rates too low for too long. Now that
markets expect higher rates — due to improved economic
growth, higher inflation, growing fiscal deficits, and the
unwinding of central bank balance sheets — it has become
clear that monetary stimulus created a pseudo wealth effect, and
that suppressing interest rates by unconventional policy to spur
risk-taking and pump up asset prices was itself a risky
strategy.

The long stock market rally
since 2009
was fueled in large part by the Federal Reserve’s
unconventional monetary policies. By promising to keep its policy
rate (the federal funds rate) near zero “for a considerable period
of time” and engaging in large-scale asset purchases, known as
“quantitative easing,” the Fed hoped to boost asset prices and
stimulate the economy.

A law of the market is that when interest rates fall, asset
prices rise. As long as markets believe the Fed will support asset
prices by keeping rates low, stocks will be the investment of
choice, rather than conservative, low-yield saving accounts, money
market funds, or highly-rated bonds.

But now it seems markets don’t believe those helpful Fed
policies will last much longer. The uptick in economic growth
forecasts, the expectation of higher inflation, and the growing federal
deficits are putting pressure on the Fed to increase the pace of
their policy rate hikes. Markets are now factoring in those forces
and the realization that stock prices are not on a sustainable path
— hence a big sell-off.

Such a downturn was inevitable, because reality tells us that
there has been a mismatch between the economy and the stock market.
Fed policy did not — and could not — permanently
increase real economic growth and wealth. If it could, then the
best policy would be to simply run the money printing presses day
and night. When stock prices increase by double digit percentages
for more than seven years while economic growth is sluggish (last
year the Dow increased by 25% and the economy grew by
less than 3%), something is amiss.

And we’ve seen what happened to the market in previous instances
when it seemed like the Fed was going to change course. In 2013,
when Fed Chairman Ben Bernanke indicated he might start exiting QE
— decreasing the support for stocks — markets dropped
sharply in the famous “taper tantrum.” Bernanke quickly reassured
markets that the low-rate policy and …read more

Source: OP-EDS

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This City Just Took a Major Step to Reform Its Oppressive and Inhumane Bail System

February 7, 2018 in Blogs

By Mehreen Kasana, AlterNet

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“The city jails are filled with people charged with misdemeanors only because they cannot pay.”


Atlanta's City Council just unanimously voted and adopted a move to reform Atlanta’s cash bail system, which frequently targets, jails and ultimately upends the lives of its poorest citizens for some of the most minor and non-violent misdemeanors. The decision took a heated six hours to reach a 13-0 vote, and has become the latest protest in a growing number of concerted efforts against the American justice system's notorious bail scam.

Atlanta Mayor Keisha Lance Bottoms signed the proposal that stipulated people guilty of nuisance offenses should not be jailed for unnecessarily lengthy durations—think in terms of days, weeks and months—simply because they do not have the financial power to pay fines starting at $100 and going up to $500 and more. The reform will take effect a month after Bottoms signs the proposal. Once active, the Atlanta Detention Center will be authorized to let people guilty of minor misdemeanors out on their own personal recognizance as long as they promise to appear in court on demand.

Efforts to address the city’s oppressive cash bail system have been taking place for a while now. According to the AJC, the Southern Center for Human Rights and the Civil Rights Corps demanded former Mayor Kasim Reed to acknowledge and rectify the conditions of impoverished people who couldn’t quite literally buy their way out of prison due to hefty bails for petty crimes.

To paint a picture of just how morally dubious the city's bail process was, Southern Center for Human Rights lawyer Sarah Geraghty told Atlanta radio station WABE that the system criminalizes poverty. “Here's how it works now,” she said. “People who can afford to pay are immediately …read more

Source: ALTERNET

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We Just Witnessed One of the Biggest Indictments You'll Ever See of a Country's Health Care System

February 7, 2018 in Blogs

By Marshall Auerback, AlterNet

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Jeff Bezos, Warren Buffett and Jamie Dimon can learn a lot from Medicare, if they're serious about a health care company.


Warren Buffett has long decried the ballooning cost of health care as a “hungry tapeworm on the American economy,” eating up the country’s wealth from within. Evidently, Jeff Bezos and Jamie Dimon all feel the same way, as evidenced by the recent joint announcement by their three companies, Amazon, Berkshire Hathaway and JPMorgan Chase, of their plan to form a new entity that will tackle the high costs associated with U.S. health care. In a tortuously phrased press release, the announcement proclaimed that the new company would be “free from profit-making incentives and constraints,” but an Amazon spokesperson declined to comment on whether the entity would actually be a non-profit.

It seems a pretty squirrely way of admitting that our current system, dominated by for-profit private insurance, does not represent the optimal means of delivering health care. The call to action also implies that the three executives have little faith that the magic of the market on its own will somehow manage to provide insurance so cheap that everyone will be able to afford it whatever their income and medical status. Buffett himself has long been in the skeptics’ camp. As early as 2010, he opined that the current system was “hurting the U.S. economy in relation to other developed nations where costs are lower, even though there are more doctors, nurses and hospital beds per person… we have a health system that, in terms of costs, is really out of control. And if you take this line and you project what has been happening into the future, we will get less and less competitive. So we need something else.”

But what …read more

Source: ALTERNET

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Thom Hartmann: GOP Is Wrecking Your Retirement Savings

February 7, 2018 in Blogs

By Thom Hartmann, AlterNet

The rich get richer, and the poor will never be able to retire.


The #GOPTaxScam was the straw that broke the markets’ back.  Here’s why and how.

First, America is hugely in debt (known as “overleveraged” in econ wonkspeak).  

There’s over $1.4 trillion in student debt, a number never, ever before seen in the US, and nonexistent in the rest of the world because we’re the only developed country in the world that makes students pay so much for college that they can’t attend without taking out loans.

Consumer credit card debt is over $1 trillion (the highest in history), because people have been using household debt (including low-interest of mortgages and car loans for a total of $13 trillion, a record) to maintain what was once a middle-class lifestyle, once easy with a union job.  

This trend has been going on ever since Reagan declared war on working people in 1981 and began the process of destroying good union jobs.  

As a result, wages have been flat or declining for over 30 years.  Corporations, feeding off artificially low interest rates provided by the Fed, are also massively in debt.  In fact, one of the most common hustles running over the past 7 years has been to borrow billions at less than 1% interest rate and “invest” that borrowed money in the stock market that’s been giving much higher returns than bonds.

All of these mini-economies (markets) are based on cheap and easy credit that was largely produced by the Fed pouring money into the economy by buying up trillions' worth of US government bonds (debt) and filling the market with low-interest cash.

Because of the repeal of Glass-Steagall, and thus the deregulation of banks and investment houses, banks have actually bought or become investment houses (gamblers; for example, Bank of America now owns Merrill Lynch).  

They’re even now making and selling derivatives based on student loans, car loans, and credit card debt, just like they were with mortgages in 2007 (and they’re securitizing mortgages again, too).  

Like the GOP deregulation of the …read more

Source: ALTERNET

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These Worker Cooperatives Chart a Different Course Than Trump's Retrograde Economics

February 7, 2018 in Blogs

By Sarah Aziza, Waging Nonviolence

The movement is only just beginning to reveal its potential.


Announcing his presidency in 2016, Donald Trump promised the nation that he’d become “the greatest job president God ever created.” His plan to accomplish this rested on a retrograde economic vision that would “make America great again,” by restoring waning coal and manufacturing jobs, as well as putting an end to the alleged assault on American work by foreign immigrants and global competition.

A year later, his attempts to realize this vision have largely consisted of backwards motion. In October, he rolled back the Clean Power Plan, arguing that carbon emissions regulations, rather than the widespread shift away from fossil fuels, were responsible for the decline of U.S. coal. While the striking of these environmental protections leaves the door open for corporations to exacerbate climate change, it has done little to uplift the so-called “Rust Belt,” where he garnered so much support. Meanwhile, at the Indiana Carrier plant — where Trump made a dramatic showing of his “deal” to keep manufacturing jobs from moving to Mexico — hundreds of workers have been laid off, including over 200 just last week.

While the struggle for living wages and steady work is a real concern for millions of Americans, these high-profile gestures are emblematic of a persistent, fallacious narrative. It is one that touts an era of bygone American prosperity, which Trump, and those like him, promise can be restored through top-down, reactionary policies. Not only does this telling obscure or scapegoat communities of color — which are often disproportionately affected by the loss of manufacturing work and the suppression of wages — it also erases the agency of the American worker, who is left at the mercy of politicians and corporate executives.

Yet across the country, many of the nation’s most disenfranchised are writing a different story. In dozens of cities, worker-owner cooperatives are establishing new enterprises based on joint decision-making, dignified work conditions and fair pay. Utilizing their existing skills and harnessing new ones, these groups are leveraging their labor on their own terms, with a vision to change their industries and the economic …read more

Source: ALTERNET

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Trump's Desperate New Low

February 7, 2018 in Blogs

By Heather Digby Parton, Salon

Trump and his flunkies claim they’re surrounded by a vast treasonous conspiracy: Democrats, DOJ, FBI and media.


Apparently the stock market felt left out of the Trump roller-coaster ride so it decided to go a little bit crazy on Monday: The Dow Jones average dropped by 1,500 points before climbing back just a bit to settle at a loss of 1,100 for the day. Whee! We have had many such days that were more significant in terms of percentage, but it was the largest single-day point drop in history.

What made it even more dramatic than usual was the fact that President Trump, who has repeatedly taken credit for the market's steady rise, was giving a televised speech on his glorious economic success while the stock ticker in the corner of the screen told a dire tale. There are myriad factors behind the plunge, but one possible contributor is that tax-cut euphoria is wearing off and investors are realizing the freak show in Washington might just be a little bit destabilizing.

The Nunes memo and all the congressional shenanigans may be a nice distraction for the president, but there is a little matter of another possible government shutdown this week and a budget that doesn't seem likely to come together, largely because the GOP leadership doesn't want anyone to see the new debt projections. In other words, the mess is getting messier.

In the midst of all this excitement, the House Intelligence Committee voted to release the Democratic rebuttal to the Nunes memo — if Trump approves the release, that is. Cable news pundits all seem to believe that part is a slam dunk, because the White House has said it wants transparency. I have to wonder if they've been watching the same Trump administration as I've been watching. I think it's entirely possible that Trump will refuse to release it, if only for the chance to demand the arrest of Rep. Adam Schiff, D-Calif., if it were to leak. Don't think he wouldn't do that:

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New Research Reveals Britain’s Oldest Ancestor Had Dark Skin and Blue Eyes

February 7, 2018 in History

By Thad Morgan

The skeleton of Cheddar Man, at the London Natural History Museum, which was unearthed in Gough's Cave at Cheddar Gorge, Somerset in 1903. (Credit: London Natural History Museum/REX/Shutterstock)

The 10,000-year-old skeleton of “Cheddar Man,” the oldest complete skeleton found in Britain, recently became a bit less mysterious. It was just revealed through DNA analysis that the man recognized as the first modern Brit had a “dark to black” skin tone.

“Cheddar Man” was discovered in 1903 in Gogh’s Cave within the village of Cheddar, Somerset. For years, little was known about this European ancestor, outside of his 5’ 5” height and assumed death in his early 20s.

However, using the DNA extracted from his skull, researchers from the London Natural History Museum and University College London surmised that “Cheddar Man” had blue eyes, dark curly hair and dark skin. “The discovery suggests that the lighter pigmentation now considered to be a defining feature of northern Europe is a far more recent phenomenon,” the researchers wrote in a statement.

The skeleton of Cheddar Man, at the London Natural History Museum, which was unearthed in Gough’s Cave at Cheddar Gorge, Somerset in 1903. (Credit: London Natural History Museum/REX/Shutterstock)

People with pale skin likely arrived in Britain about 6,000 years ago, according to the BBC, via migration from the Middle East. Europeans and Britons of the Mesolithic Era, to which “Cheddar Man” belongs, would have had a similar genetic make-up to him.

“’Cheddar Man’s’ genetic profile places him with several other Mesolithic-era Europeans from Spain, Hungary and Luxembourg whose DNA has already been analyzed,” Professor Mark Thomas of UCL noted in the statement. Approximately 10 percent of Europeans are believed to be descendants of Mesolithic hunter-gatherers like “Cheddar Man.”

Prior to this DNA analysis, it was commonly believed that “Cheddar Man” would have had the same traits of pale skin and hair that became common among future generations of Britons. However, that assumption has now been debunked.

…read more

Source: HISTORY

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Why Poland Punishes Those Who Accuse It of the Holocaust

February 7, 2018 in History

By Erin Blakemore

Adolf Hitler overseeing his military troop during the Nazi occupation of Poland, 1939. (Credit: Hulton Archive/Getty Images)

Auschwitz. Treblinka. The Warsaw Ghetto. During World War II, Poland became the epicenter of the Nazis’ crimes—but soon, implying that those crimes were committed by the Polish state will itself be a crime. A controversial new law in Poland makes it illegal to accuse the nation of being complicit with Nazi crimes like the Holocaust. It also outlaws the phrase “Polish death camps.” Both are punishable by prison sentences of up to three years.

The law has provoked an academic and diplomatic firestorm, drawing criticism from historians and rebukes from people like Secretary of State Rex Tillerson, who said the law “adversely affects freedom of speech and academic inquiry.” Israel’s memorial to Holocaust victims, Yad Vashem, called the legislation “liable to blur the historical truths regarding the assistance the Germans received from the Polish population during the Holocaust.”

Those historical truths have long been the subject of passionate debate—and are sensitive in Poland, which suffered immense persecution and loss during World War II. Adolf Hitler didn’t just wage war against Poland: He wanted to wipe the country off the map entirely and re-populate it with Germans. Three million Polish Jews were murdered in the Holocaust; another 3 million Polish civilians and military personnel are thought to have perished at the hands of the Nazis. Nearly 18 percent of Poland’s population died during World War II, including 90 percent of Polish Jews, the largest group of Jews murdered in the Holocaust.

Adolf Hitler overseeing his military troop during the Nazi occupation of Poland, 1939. (Credit: Hulton Archive/Getty Images)

Poland’s experience under Nazi occupation was different than that of many of its European neighbors. Occupied Poland’s government did not collaborate with the Nazis—it was replaced by a German administrative government that set about “Germanizing” Poland. This entailed forcing Poles off of their land to make room for Germans, rounding up intellectuals and political elites, prohibiting the Polish language in some areas, and closing or destroying cultural and educational institutions. An estimated 50,000 Polish children were kidnapped by the Nazis, resettled with German elites or killed.

The Nazis saw occupied Poland as the ideal site not only for German resettlement, but also for the extermination of Jews. Hundreds of ghettos and concentration camps were built by the …read more

Source: HISTORY

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The Scam That Is Urban "Land Use" Planning

February 7, 2018 in Economics

By Lee Friday

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By: Lee Friday

For many years, property owners with vacant buildings in London, Ontario have applied for a 30 percent rebate on their property taxes. However, City Council decided to cut the rebate in half for 2018, then eliminate it entirely at year’s end. Additionally, despite insufficient parking in downtown London, Council is seriously considering a reduction in the number of parking lot permits.

Ending the rebate and reducing the number of parking lots will stimulate development, according to the politicians. Unfortunately, these actions may produce the opposite result.

Regarding the tax rebate, the London Free Press (LFP) quotes Councillor Stephen Turner:

The policy benefits land speculators, those who buy land to sit on it, and hurts development . . . We want to offer incentives to develop, not disincentives . . . If someone has been holding on to a vacant building since 1998, they are clearly speculators. That decreases development potential . . .

Similarly, Councillor Tanya Park was quoted by the LFP:

Any owner with vacant lots downtown are not doing themselves or the city any service. The earning potential is huge . . . It behooves one to get them (developed). . .

The Scourge of Speculators?

Politicians constantly vilify “speculators.” We are all speculators! Each of us makes decisions on a regular basis, the outcomes of which are often unknown to us until some future time. This means we are speculating. My wife and I decide to dine at a restaurant that is new to us. We may love it. We may be disappointed. We are speculating.

When entrepreneurs initiate new projects, they do not know if they will be successful. There are many unknown factors awaiting them, not the least of which is the fickle, discriminating consumer. Entrepreneurs are speculating, and most new businesses fail within five years.

Our standard of living i.e. the goods and services we enjoy in modern society, are an outcome of successful entrepreneurial efforts. Thus, speculators should be praised, not condemned. As Ludwig von Mises wrote in Human Action:

. . . dealing with the uncertain conditions of the unknown future – that is, speculation – is inherent in every action, and . . . profit and loss are necessary features of acting which cannot be conjured away by any wishful thinking.

Developers Want Profits — But Also Must Avoid Losses

Councillor Turner says long-term owners of vacant land and buildings are “decreasing development potential”, and …read more

Source: MISES INSTITUTE

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Filibuster in Nicaragua, Part 2: Nicaragua Conquered

February 7, 2018 in Economics

By Chris Calton

Historical Controversies Podcast: Season 2

By: Chris Calton

Despite the bitter defeat in the First Battle of Rivas, William Walker and his small army of American filibusters successfully take control of the Democratico capital of Nicaragua, ending the Nicaraguan civil war. This episode is Part 2 of 6 of the story of William Walker’s attempt to establish his own Republic of Nicaragua.

…read more

Source: MISES INSTITUTE