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The Sanders-AOC Protection for Loan Sharks Act

June 2, 2019 in Economics

By Todd Zywicki

Todd Zywicki

Last month, Sen. Bernie Sanders and Rep. Alexandria
Ocasio-Cortez debuted the Loan Shark Prevention Act, whose chief
provision amounts to a national interest rate ceiling of 15%. In
a video accompanying the announcement, Sanders
invoked Hollywood’s version of loan sharks to illustrate his
point: “You’ve got all these guys in their three-piece
suits who are now the new loan shark hoodlums that we used to see
in the movies. You know, in the movies, they say, ‘I’ll
break your kneecaps if you don’t pay back.’ Well, I
don’t know that they break kneecaps …”

Sanders’s invocation of yesterday’s leg-breakers is
obviously intended to conjure the colorful figures of American
imagination, from Don Corleone to Tony Soprano. But the terror that
real loan sharks inflicted on immigrant and working-class families
is not merely the stuff of Hollywood; it was a brutal reality for
much of American history. And the ubiquity of loan sharks in
American history is directly attributable to forerunners of the
interest-rate ceilings proposed by Sanders and Ocasio-Cortez.

“Usury ceilings,” as interest-rate price controls
were traditionally labeled, began as a paternalistic effort to
protect low-income and supposedly vulnerable consumers from
exploitation by greedy bankers. Yet, as well-intentioned
regulations so often do, usury ceilings backfired spectacularly,
primarily harming those they were intended to help. And far from
shutting down loan sharks, history shows that usury ceilings have
been the primary catalyst for the loan sharks that have preyed on
low-income and vulnerable Americans throughout history.

Comparing today’s
financial markets to Hollywood villains diminishes the real terror
that loan sharks inflicted on generations of immigrant and
working-class families and ignores the pivotal role of usury
ceilings in creating the conditions for loan sharks to
operate.

The advent of industrialization saw thousands of prewar
immigrants and farmers flood into American cities in search of
work. The challenges of city living created unprecedented demand
for small-dollar, short-term loans. Yet making small loans to wage
earners was an expensive business. First, it was risky — the
same factors that necessitated borrowing in the first place (low
wages, periodic unemployment, and unexpected expenses such as
medical bills and home repairs) translated into high loss rates.
Second, the costs of small loans is high relative to the amount
borrowed -operating expenses such as rent, employee wages, and
utilities are very similar regardless of whether the customer
borrows $50, $500, or $5,000. In order to cover losses and those
operating expenses, therefore, the effective interest rate on a
small loan will have to be higher.

As a result, prohibitively low usury ceilings made it impossible
for working families to borrow the money they needed from
legitimate lenders. …read more

Source: OP-EDS

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Assange Espionage Indictment: Classified Hypocrisy and a Prosecutorial Trojan Horse

June 2, 2019 in Economics

By Patrick G. Eddington

Patrick G. Eddington

The May 23 Espionage Act indictment of Wikileaks founder Julian
Assange evoked justified outrage and condemnation from media
organizations and free speech advocates. Federal prosecutors claim
in the indictment that Assange illegally received classified U.S.
government information on United States military operations in Iraq
and Afghanistan, State Department cables involving U.S. foreign
relations and the identities of human sources helping American
forces in Iraq and Afghanistan.

Carrie DeCell of the Knight Institute at Columbia University
observed on Twitter that the “government argues that Assange
violated the Espionage Act by soliciting, obtaining, and then
publishing classified information. That’s exactly what good
national security and investigative journalists do every
day.”

Masha Gessen at The New Yorker addressed an equally
weighty issue when she observed, “The last thing we want the
U.S. government, or any government, to do is to start deciding who
is and who is not a journalist.”

The last thing we want is
executive branch departments and agencies unilaterally and
selectively asserting what should or should not be considered
legitimately classified information.

I’m going to take that analogy one step further: the last
thing we want is executive branch departments and agencies
unilaterally and selectively asserting what should or should not be
considered legitimately classified information.

The very law being used to charge Assange was passed over 100
years ago at the beginning of America’s entry into World War
I. The Espionage Act of 1917 was used by the Justice Department and
Postal Service to cow, investigate, shut down and even prosecute
news outlets that challenged the Wilson administration’s
wartime policies.

One of the most prominent targets was former Rep. Victor Berger
of Wisconsin and his newspaper, the Milwaukee Leader. For
publishing editorials critical of the war, Berger was charged and
convicted under the Espionage Act in 1919. Though the conviction
was overturned two years later, in the interim, Berger won
reelection to the House twice but his colleagues refused to seat
him.

In Assange’s case, he and Wikileaks did exactly what
newspapers have done for decades — seek information about
U.S. government policies and actions that were either questionable
or outright illegal and publish information accordingly.

In 1971 for the New York Times it was the Pentagon
Papers — the classified history of the Vietnam War leaked by
then-RAND Corporation analyst and former Marine Corps infantry
captain Daniel Ellsberg.

For the Washington Post, it was Watergate, including
then-Attorney General John Mitchell’s illegal, secret
surveillance slush fund used to target Democratic politicians. For
Assange and his then-U.S. Army intelligence analyst accomplice,
Chelsea Manning, it was about exposing U.S. war crimes in
Afghanistan and Iraq.

In the Assange Espionage Act indictment, federal prosecutors
specifically invoke Manning’s sharing and …read more

Source: OP-EDS

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Understanding the Failure of U.S. Foreign Policy: The Albright Doctrine

June 2, 2019 in Economics

By Doug Bandow

Doug Bandow

How to describe U.S. foreign policy over the last couple of
decades? Disastrous comes to mind. Arrogant and murderous also seem
appropriate.

Since 9/11, Washington has been extraordinarily active
militarily—invading two nations, bombing and droning several
others, deploying special operations forces in yet more countries,
and applying sanctions against many. Tragically, the threat of
Islamist violence and terrorism only have metastasized. Although Al
Qaeda lost its effectiveness in directly plotting attacks, it
continues to inspire national offshoots. Moreover, while losing its
physical “caliphate” the Islamic State added further
terrorism to its portfolio.

Three successive administrations have ever more deeply ensnared
the United States in the Middle East. War with Iran appears to be
frighteningly possible. Ever-wealthier allies are ever-more
dependent on America. Russia is actively hostile to the United
States and Europe. Washington and Beijing appear to be a collision
course on far more than trade. Yet the current administration
appears convinced that doing more of the same will achieve
different results, the best definition of insanity.

Despite his sometimes abusive and incendiary rhetoric, the
president has departed little from his predecessors’
policies. For instance, American forces remain deployed in
Afghanistan and Syria. Moreover, the Trump administration has
increased its military and materiel deployments to Europe. Also,
Washington has intensified economic sanctions on Cuba, Iran, North
Korea, and Russia, and even penalized additional countries, namely
Venezuela.

Albright typifies the
arrogance and hawkishness of Washington blob.

U.S. foreign policy suffers from systematic flaws in the
thinking of the informal policy collective which former Obama aide
Ben Rhodes dismissed as “The Blob.” Perhaps no official
better articulated The Blob’s defective precepts than
Madeleine Albright, United Nations ambassador and Secretary of
State.

First is overweening hubris. In 1998 Secretary of State Albright
declared that “If we have to use force, it is because we are
America: we are the indispensable nation. We stand tall and we see
further than other countries into the future, and we see the danger
here to all of us.”

Even then her claim was implausible. America blundered into the
Korean War and barely achieved a passable outcome. The Johnson
administration infused Vietnam with dramatically outsize
importance. For decades, Washington foolishly refused to engage the
People’s Republic of China. Washington-backed dictators in
Cuba, Nicaragua, Iran, and elsewhere fell ingloriously. An economic
embargo against Cuba that continues today helped turn Fidel Castro
into a global folk hero. Washington veered dangerously close to
nuclear war with Moscow during the Cuban Missile Crisis in 1962 and
again two decades later during military exercises in Europe.

U.S. officials rarely were prepared for events that occurred in
the next week or month, let alone years later. Americans did no
better than the …read more

Source: OP-EDS