Weekend Economists Enumerate the Wealth of Nations, February 10-12, 2012

[Demeter]

Well, hello!! What Makes a Nation Wealthy? And How Do You Count It?

An Inquiry into the Nature and Causes of the Wealth of Nations, generally referred to by its shortened title The Wealth of Nations, is the magnum opus of the Scottish economist and moral philosopher Adam Smith. First published in 1776, it is a reflection on economics at the beginning of the Industrial Revolution and argues that free market economies are more productive and beneficial to their societies. The book is a fundamental work in classical economics.

History

The Wealth of Nations was first published on 9 March 1776, during the British Agricultural Revolution. It influenced a number of authors and economists, as well as governments and organizations. For example, Alexander Hamilton was influenced in part by The Wealth of Nations to write his Report on Manufactures, in which he argued against many of Smith's policies. Interestingly, Hamilton based much of this report on the ideas of Jean-Baptiste Colbert, and it was, in part, to Colbert's ideas that Smith responded to with The Wealth of Nations.

Many other authors were influenced by the book and used it as a starting point in their own work, including Jean-Baptiste Say, David Ricardo, Thomas Malthus and, later, Ludwig von Mises. The Russian national poet Aleksandr Pushkin refers to The Wealth of Nations in his 1833 verse-novel Eugene Onegin.

Irrespective of historical influence, however, The Wealth of Nations represented a clear shift in the field of economics, similar to Sir Isaac Newton's Principia Mathematica for physics, Antoine Lavoisier's Traité Élémentaire de Chimie for chemistry, or Charles Darwin's On the Origin of Species for biology.

Publishing history

Five editions of The Wealth of Nations were published during Smith's lifetime: in 1776, 1778, 1784, 1786, and 1789. Numerous editions appeared after Smith's death in 1790. To better understand the evolution of the work under Smith's hand, a team led by Edwin Cannan collated the first five editions. The differences were published along with an edited sixth edition in 1904. They found minor but numerous differences (including the addition of many footnotes) between the first and the second editions, both of which were published in two volumes. The differences between the second and third editions, however, are major: In 1784, Smith annexed these first two editions with the publication of Additions and Corrections to the First and Second Editions of Dr. Adam Smith’s Inquiry into the Nature and Causes of the Wealth of Nations, and he also had published the three-volume third edition of the Wealth of Nations, which incorporated Additions and Corrections and, for the first time, an index. Among other things, the Additions and Corrections included entirely new sections. The fourth edition, published in 1786, had only slight differences from the third edition, and Smith himself says in the Advertisement at the beginning of the book, "I have made no alterations of any kind." Finally, Cannan notes only trivial differences between the fourth and fifth editions — a set of misprints being removed from the fourth and a different set of misprints being introduced.

Anachronisms and terminology

Modern commentary on the work may suffer from anachronism— the imposition of modern context on a 250-year-old work.

The book is written in English of the late 18th century, so there are some points to consider:

The term economics was not yet in use.

The term capitalism was not yet in use. Smith talks about a "system of perfect liberty" or "system of natural liberty".

Feudalism was still dominant in parts of Europe.

The term corporation, as in feudal corporations, referred to a body that regulated and, in Smith's portrayal, limited participation in a skilled trade.

http://en.wikipedia.org/wiki/The_Wealth_of_Nations

Here's a picture of the man who started the argument:



Why don't we give it a shot? What IS the Wealth of Nations?

[Demeter]

1. It IS Euchre Night, Folks

I will return. Have at it in my absence.

[WCGreen]

9. Damn, I haven't played Euchre since I left Ohio State back in 1981...

Loved it.

[Demeter]

22. I had some good cards last night

and despite one really horrible mistake in the last hand, managed to come in third, which meant net winnings of $1!

Also, winter finally arrived with a mini-blizzard, which made driving home on an unplowed highway where neither lanes nor shoulder could be discerned quite the adventure.

I can hear the plow as I type....at 5:24 AM

[WCGreen]

38. the blizzard that hit Columbus in 1978 really helped to hone my game...

We lived across from a Fisher Foods and they stayed open because the people couldn't get home.

We set up games so that the loser had to schlep to to the FF to get provisions....

[Demeter]

43. The Snow Didn't Amount to Much Out Here

Only about 3 inches. But it's only 10F at 9:40 AM. And tonight is Paper Night, and I need to be outside pretty much all day.

[Demeter]

2. 6 PM EST and NO BANKS DOWN--yet

Check back for updates.

[Demeter]

10. 2 BANKS DOWN THIS WEEKEND--TOTAL LOSS: $51.3m

Charter National Bank and Trust, Hoffman Estates, Illinois, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Barrington Bank & Trust Company, National Association, Barrington, Illinois, to assume all of the deposits of Charter National Bank and Trust.

The two branches of Charter National Bank and Trust will reopen on Saturday as Hoffman Estates Community Bank, a branch of Barrington Bank & Trust Company, National Association...As of December 31, 2011, Charter National Bank and Trust had approximately $93.9 million in total assets and $89.5 million in total deposits. In addition to assuming all of the deposits of the failed bank, Barrington Bank & Trust Company, National Association agreed to purchase essentially all of the assets.

The FDIC and Barrington Bank & Trust Company, National Association entered into a loss-share transaction on $72.1 million of Charter National Bank and Trust's assets. Barrington Bank & Trust Company, National Association will share in the losses on the asset pools covered under the loss-share agreement....As part of this transaction, the FDIC will acquire a value appreciation instrument. This instrument serves as additional consideration for the transaction.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $17.4 million. Compared to other alternatives, Barrington Bank & Trust Company, National Association's acquisition was the least costly resolution for the FDIC's DIF. Charter National Bank and Trust is the eighth FDIC-insured institution to fail in the nation this year, and the first in Illinois. The last FDIC-insured institution closed in the state was All American Bank, Des Plaines, on October 28, 2011.

SCB Bank, Shelbyville, Indiana, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with First Merchants Bank, National Association, Muncie, Indiana, to assume all of the deposits of SCB Bank.

The four branches of SCB Bank will reopen on Saturday as branches of First Merchants Bank, National Association...As of December 31, 2011, SCB Bank had approximately $182.6 million in total assets and $171.6 million in total deposits. In addition to assuming all of the deposits of the failed bank, First Merchants Bank National Association agreed to purchase essentially all of the assets...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $33.9 million. Compared to other alternatives, First Merchants Bank, National Association's acquisition was the least costly resolution for the FDIC's DIF. SCB Bank is the ninth FDIC-insured institution to fail in the nation this year, and the first in Indiana. The last FDIC-insured institution closed in the state was Integra Bank, National Association, Evansville, on July 29, 2011.

[girl gone mad]

3. The Grexit is coming sooner or later

from Edward Harrison:

I wrote this outline for Italy in November before the ECB’s Italian job. I didn’t and still don’t see an Italian exit or default as a baseline. However, a Greek exit for the eurozone has been my baseline for a number of months. Citigroup’s Willem Buiter has talked a lot about this recently. He and his colleagues call it "Grexit". Business Insider’s Simone Foxman has a good synopsis of that view.

Here’s how I see it happening, based on my Italian default post.

1. Plan. The Greek government can plan for a redenomination into New Drachma in secret that takes advantage of the Greek law jurisdiction over their sovereign debt obligations.

2. Law. “Euroization” would remain in place and the euro would continue as the currency of physical payment. However, New Drachma would become the national currency, pegged at 340.75, exactly the same rate as the Drachma was fixed on 19 June 2000 and converted into euros on 1 January 2002. All debt under Greek law would be redenominated into New Drachma at the 340.75 New Drachma exchange rate peg. This would effectively bring us back to 31 December 2001 for Greece.

(snip)

P.S. – Two posts todat at Credit Writedowns outline the social mood in pictures and video in Greece right now. My take: these deflationary policies mean that nationalism is coming back, just as it came back in the 1930s because a shrinking pie produces an us versus them mentality. See here and here.

read more: http://www.nakedcapitalism.com/2012/02/the-grexit-is-coming-sooner-or-later.html

[girl gone mad]

4. Greek police union wants to arrest EU/IMF officials

(Reuters) - Greece's largest police union has threatened to issue arrest warrants for officials from the country's European Union and International Monetary Fund lenders for demanding deeply unpopular austerity measures.

In a letter obtained by Reuters on Friday, the Federation of Greek Police accused the officials of "...blackmail, covertly abolishing or eroding democracy and national sovereignty" and said one target of its warrants would be the IMF's top official for Greece, Poul Thomsen.

The threat is largely symbolic since legal experts say a judge must first authorize such warrants, but it shows the depth of anger against foreign lenders who have demanded drastic wage and pension cuts in exchange for funds to keep Greece afloat.

"Since you are continuing this destructive policy, we warn you that you cannot make us fight against our brothers. We refuse to stand against our parents, our brothers, our children or any citizen who protests and demands a change of policy," said the union, which represents more than two-thirds of Greek policemen.

read more: http://uk.reuters.com/article/2012/02/10/uk-greece-police-idUKTRE8190UO20120210

[Po_d Mainiac]

7. shouldn't be any shortage of willing hotel staff

[Demeter]

11. Greece Will Again Be the Cradle of Democracy

It would only be fitting.

[bread_and_roses]

40. Yes! Yes!! YES!! (n/t)

[Owlet]

6. I would bet on sooner rather than later

There is the hard date of March 20, of course, when Greece has to come up with $18bn - money it doesn't have, and will not get from the ECB unless there's a deal on all of he proposed austerity measures by Feb. 15. The Greek government is falling apart, the cops are about ready to over to the side of the demonstrators and the odds of any deal being cut by next Wednesday look pretty slim. I have no crystal ball or inside knowledge, but it looks from all I can see as though the party's over and Greece begins the process of leaving the Eurozone next week, if not this weekend.

[Demeter]

17. Marshall Auerback: Greece and the Rape by the Rentiers

http://www.nakedcapitalism.com/2012/02/marshall-auerback-greece-and-the-rape-by-the-rentiers.html

Here’s the draft of the supposed agreement to “sort out” the Greek debt problem once and for all. According to Bloomberg, here are the essentials:

• Greece’s 2012 GDP will shrink by as much as 5%.

• Greece is expected to return to growth in 2013.

• Greece will cut 15,000 in state jobs in 2012.

• Minimum wage will be cut by 20 percent.

• There will be no increase to sales tax.

• The government will cut medicine spending will fall from 1.9% to 1.5% and merge all auxiliary pension funds.

• It will also sell stakes in six companies—in particular, energy companies and refineries.

Of course, the current thrust of fiscal policy will almost certainly guarantee that there still will be a default, involuntary or otherwise, in spite of this agreement. If you don’t have a mechanism to allow growth, then how can the Greeks service their debt, even with the reduced debt burden?

Perhaps that’s the idea. Make the deal so miserable for the Greek people that the Spanish, Portuguese, Irish and Italians don’t even begin to think of trying to get a similar haircut on their debt.

Certainly, the deficit reduction won’t come. It can’t when you deflate a rapidly declining economy into the ground. Common sense suggests that a drop in private income flows while private debt loads are high is an invitation to debt defaults and widespread insolvencies...

[Demeter]

23. Greek People Start 48-Hour National Strike

http://www.truth-out.org/disgruntled-greeks-start-48-hour-national-strike/1328884013

Athens - Greek workers walked off the job for the second time this week on Friday in a snap 48-hour general strike called to protest new austerity measures the country must take to avert a disastrous default next month.

The walkout came a day after the government reached a provisional deal with the so-called troika of foreign lenders — the European Commission, the European Central Bank and the International Monetary Fund — on the terms of a new loan program. The government of Prime Minister Lucas Papademos pledged to cut private-sector wages by more than 20 percent, lay off thousands of civil servants and slash public spending.

But skeptical creditors have demanded additional cuts to cover a $430 million shortfall created by the refusal of political leaders to slash supplemental pensions as well parliamentary approval and written commitments to the terms of the deal from the leaders of the three parties in Mr. Papademos’s coalition before additional financing is released.

Condemning the new barrage of measures as “a tombstone” for Greek society, the country’s two main labor unions called the action on Thursday immediately after government officials announced the deal with creditors on the new austerity measures, which are expected to be voted on in Parliament on Sunday or Monday. Unions are planning protest rallies for both days of the strike, and the day of the vote when the crowds are expected to be largest....

[xchrom]

35. Political resignations and general strikes hit Greece

http://latimesblogs.latimes.com/world_now/2012/02/greece-austerity-general-strike-cabinet-resignations.html

http://latimesblogs.latimes.com/.a/6a00d8341c630a53ef0168e71d6379970c-600wi

REPORTING FROM ATHENS -– Greece's precarious financial and political situation was shaken further Friday by a nationwide strike and a wave of Cabinet resignations over demands by the European Union for ever-deeper spending cuts.

Four Cabinet members -– two Socialists and two far-right conservatives -- quit their posts in protest over the demands. Their exit forced Prime Minister Lucas Papademos to consider an urgent reshuffle to stanch the tide of defections ahead of a crucial parliamentary vote on the austerity measures, scheduled for Sunday.

On Thursday, after weeks of tortuous negotiations, Greek political leaders announced that they had agreed on harsh austerity measures, only to be told by EU finance ministers hours later that the measures were not enough for Athens to secure a second international bailout to avoid bankruptcy.

George Karatzaferis, the leader of the far right LAOS party and a minority partner in the coalition government, said Friday he was retracting his initial support for the new spending cuts following the “humiliating” treatment Greece received from its European peers.

[Demeter]

58. Greek Endgame in Sight posted by Philomila Tsoukala

http://www.creditslips.org/creditslips/2012/02/greek-endgame-in-sight.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+creditslips/feed+%28Credit+Slips%29

We have been hearing about the oncoming endgame to the Greek saga for almost two years now. Several developments have occurred in the past few months that may make the prediction come true sooner rather than later.

The first is a seeming shift in the attitudes of European leaders. They are not blinking in the face of Greek government resistance to the punitive conditionality of the loan agreement. In fact, they are asking for such extreme measures in the face of a complete collapse of the Greek economy that one is forced to wonder whether their aim is rather to “volunteer” Greece for a default and, perhaps most of all, a euro exit. In any case, the tone of the debate has changed considerably, with many more European voices openly discussing the scenario of a default and euro exit, some confidently asserting that Greece’s collapse will not be Lehman. A FT article last Monday nonchalantly reported that the troika was using the threat of a hard default as a bargaining chip against the Greek government. This is an amazing statement. It can mean several things:

1) the troika thinks the famous firewall is now in place to avert the infamous contagion effects

2) the troika is playing a hard game of chicken to see who blinks, even though it doesn’t want Greece to default

3) the EU and the ECB are posturing to appease northern Europeans by showing they will really not take any equivocation from Athens on austerity, while Greek politicians are also putting up a show for the sake of their own electorate.

Whichever of these things is going on, it signals a remarkable willingness to take the risk of no deal on both sides.

The second development is the dramatic, but unsurprising deterioration in economic and social conditions in Greece. Contrary to the media echo chamber rumors, Greece has managed to comply with the “internal devaluation” imperative quite well. The fiscal adjustment has been in the magnitude of 6% GDP in the course of a year and in the middle of a continued recession. Wages and pensions have been reduced, even though they are still higher than Bulgaria-as the troika indignantly points out. Consumer prices have remained stable, as nothing has been done to bust retail cartels and monopolies. Real wages have thus decreased significantly. The goal of increasing state revenue has also been achieved through an unprecedented tax campaign against the salaried, who constitute the only captive population of the Greek IRS. The same people who were already paying their taxes prior to the crisis are bearing the brunt, with potentially explosive consequences for social cohesion. Hundreds of thousands of small businesses have closed and unemployment is at a dizzying 48% among the youth. Eurostat numbers for 2010 show that one almost one in three people were at risk of poverty in Greece, up from one in five before the crisis. Homelessness, a practically unknown phenomenon in Greece until recently, has exploded, with numbers calculated around 20,000 for central Athens. A friend of mine recently told me that she has now become accustomed to the sight of people robbing the elderly of their grocery bags outside stores in central Athens. The unfolding pauperization of the middle class means that more and more people feel less threatened by the specter of a hard default because they are already in the position of not much to lose. Whether they form a critical mass already or whether we need to wait a few more months remains to be seen.

A third element that has changed is the position of the wealthy in Greece. Back in 2010 the specter of default and exit was a very real threat to Greeks with assets inside Greece who did not want to see them possibly turned into drachmas and devalued. Almost two years have passed since that time and most Greeks with any assets have turned them into bank accounts and apartments in London, Paris, Brussels, Frankfurt. According to media reports, prices in high end London apartments have gone up in the last year because of the wealthy Greek buying spree. That means that the same people who were putting pressure on the Greek government two years ago to accept the troika loan in order to avoid a default that could lead to exit, possibly stand to gain from a potential return to the drachma. Add to that the fact that politicians feel that consent to the new measures may make or break their survival in the coming reshuffling of the Greek political scene and you have a universe in which refusing to sign onto the new loan agreement (or refusing to abide by the terms of one already signed) becomes a plausible political move, even for the leader of the conservative party.

As I am writing these lines (and I had to write them several times over the last couple of days) the Greek government announced that it had reached agreement with the troika. Then some of its members started backtracking-two ministers resigned- and the German finance minister in turn refused to sign onto the new loan agreement under these conditions. Nonetheless, a vote is scheduled to happen in the Greek parliament on Sunday. Greek politicians will employ hundreds of special forces armed with tear gas when the agreement goes through the Parliament to protect themselves from the people they represent, as they did in July 2011. Since all these new elements weighing in favor of default are now in place, the demonstrations may provide a trigger accelerating political developments in Greece, even though the endgame may still drag on for some months. In either case, it is now in sight.

[girl gone mad]

84. Athens is burning.

[Demeter]

86. Been there, done that

Detroit, 1967, and STILL not recovered.

[Fuddnik]

5. Video of Yves Smith on today's Democracy Now!, with Amy Goodman.

http://www.democracynow.org/2012/2/10/50_state_25b_mortgage_settlement_relief

[Po_d Mainiac]

8. Central Bankers are never wrong

[Demeter]

12. Today's Central Banksters Are Either Idiots or Crooks

and some are bipolar.

[Tansy_Gold]

68. I assure you, they are not idiots.

By process of elimination, therefore, they are crooks.


Being bipolar is not mutually exclusive.

[Demeter]

13. Synopsis: The Wealth of Nations

Book I: Of the Causes of Improvement

Of the Division of Labour: Division of labour has caused a greater increase in production than any other factor. This diversification is greatest for nations with more industry and improvement, and is responsible for "universal opulence" in those countries. Agriculture is less amenable than industry to division of labour; hence, rich nations are not so far ahead of poor nations in agriculture as in industry.

Of the Principle which gives Occasion to the Division of Labour: Division of labor arises not from innate wisdom, but from humans' propensity to barter. The apparent difference in natural talents between people is a result of specialization, rather than any innate cause.

That the Division of Labour is Limited by the Extent of the Market: Limited opportunity for exchange discourages division of labor. Because "water-carriage" extends the market, division of labor, with its improvements, comes earliest to cities near waterways. Civilization began around the highly navigable Mediterranean Sea...

Of the Origin and Use of Money: With division of labor, the produce of one's own labor can fill only a small part of one's needs. Different commodities have served as a common medium of exchange, but all nations have finally settled on metals, which are durable and divisible, for this purpose. Before coinage, people had to weigh and assay with each exchange, or risk "the grossest frauds and impositions." Thus nations began stamping metal, on one side only, to ascertain purity, or on all sides, to stipulate purity and amount. The quantity of real metal in coins has diminished, due to the "avarice and injustice of princes and sovereign states," enabling them to pay their debts in appearance only, and to the defraudment of creditors.

Of the Real and Nominal Price of Commodities, or of their Price in Labour, and their Price in Money: In the first two passages Smith gives two conflicting definitions of the relative value of a commodity. Ricardo responded to one of Smith's inconsistencies in the Preface of his "Principles":

The writer, in combating received opinions, has found it necessary to advert more particularly to those passages in the writings of Adam Smith from which he sees reason to differ; but he hopes it will not, on that account, be suspected that he does not, in common with all those who acknowledge the importance of the science of Political Economy, participate in the admiration which the profound work of this celebrated author so justly excites.

Adam Smith defines the value of commodities by the labour embedded and also by the labour a good commands. Ricardo agrees with the first definition:

"The real price of every thing," says Adam Smith, "What every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it, or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people. That this is really the foundation of the exchangeable value of all things, excepting those which cannot be increased by human industry, is a doctrine of the utmost importance in political economy."

For Ricardo, the value of reproducible commodities and services reflects the relative difficulties of production counted in labour units: direct labour plus the dated labour of the past embedded in inputs (capital) and corrected by interests. This differs from Smith's second definition of value:

"The value of any commodity … is equal to the quantity of labour which it enables him to purchase or command. Labour, therefore, is the real measure of the exchangeable value of all commodities."

Ricardo disagrees:

"Adam Smith, who so accurately defined the original source of exchangeable value … speaks of things being more or less valuable, in proportion as they will exchange for more or less of this standard measure. … Not the quantity of labour bestowed on the production of any object, but the quantity which it can command in the market: as if these were two equivalent expressions…"

Smith's second definition pleases neoclassical economists, who determine value by the utility that a commodity provides a person rather than cost of production as do classical economists.

Of the Component Parts of the Price of Commodities: Smith argues that the price of any product reflects wages, rent of land and "...profit of stock," which compensates the capitalist for risking his resources.

Of the Natural and Market Price of Commodities:

"When the quantity of any commodity which is brought to market falls short of the effectual demand, all those who are willing to pay... cannot be supplied with the quantity which they want... Some of them will be willing to give more. A competition will begin among them, and the market price will rise... When the quantity brought to market exceeds the effectual demand, it cannot be all sold to those who are willing to pay the whole value of the rent, wages and profit, which must be paid in order to bring it thither... The market price will sink..."

To paraphrase Smith, and the first part of this Chapter, when demand exceeds supply, the price goes up. When the supply exceeds demand, the price goes down.

[Demeter]

14. BOOK 1 Continues

He then goes on to comment on the different avenues that people can take to generate a larger profit than normal. Some of those include: finding a commodity that few others have that allows for a high profit, and being able to keep that secret; Finding a way to produce a unique commodity (The dyer who discovers a unique dye). He also states that the former usually has a short lifespan of high profitability, and the latter has a longer. He also notes that a monopoly is essentially the same as the dyers trade secret, and can thus lead to high profitability for a long time by keeping the supply below the effectual demand.

"A monopoly granted either to an individual or to a trading company has the same effect as a secret in trade or manufactures. The monopolists, by keeping the market constantly understocked, by never fully supplying the effectual demand, sell their commodities much above the natural price, and raise their emoluments, whether they consist in wages or profit, greatly above their natural rate. The price of monopoly is upon every occasion the highest which can be got. The natural price, or the price of free competition, on the contrary, is the lowest which can be taken, not upon every occasion, indeed, but for any considerable time together. The one is upon every occasion the highest which can be squeezed out of the buyers, or which, it is supposed, they will consent to give: the other is the lowest which the sellers can commonly afford to take, and at the same time continue their business."

Of the Wages of Labour: In this section, Smith describes how the wages of labour are dictated primarily by the competition among labourers and masters. When labourers bid against one another for limited opportunities for employment, the wages of labour collectively fall, whereas when employers compete against one another for limited supplies of labour, the wages of labour collectively rise. However, this process of competition is often circumvented by combinations among labourers and among masters. When labourers combine and no longer bid against one another, their wages rise, whereas when masters combine, wages fall. In Smith's day, it should be noted, organized labour was dealt with very harshly by the law.

Smith himself wrote about the "severity" of such laws against worker actions, and made a point to contrast the "clamour" of the "masters" against workers associations, while associations and collusions of the masters "are never heard by the people" though such actions are "always" and "everywhere" taking place:

"We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere in a sort of tacit, but constant and uniform, combination, not to raise the wages of labour above their actual rate [...] Masters, too, sometimes enter into particular combinations to sink the wages of labour even below this rate. These are always conducted with the utmost silence and secrecy till the moment of execution; and when the workmen yield, as they sometimes do without resistance, though severely felt by them, they are never heard of by other people". In contrast, when workers combine, "the masters [...] never cease to call aloud for the assistance of the civil magistrate, and the rigorous execution of those laws which have been enacted with so much severity against the combination of servants, labourers, and journeymen."

In societies where the amount of labour exceeds the amount of revenue available for waged labour, competition among workers is greater than the competition among employers, and wages fall. Inversely, where revenue is abundant, labour wages rise. Smith argues that, therefore, labour wages only rise as a result of greater revenue disposed to pay for labour. Smith thought labour the same as any other commodity in this respect:

"the demand for men, like that for any other commodity, necessarily regulates the production of men; quickens it when it goes on too slowly, and stops it when it advances too fast. It is this demand which regulates and determines the state of propagation in all the different countries of the world, in North America, in Europe, and in China; which renders it rapidly progressive in the first, slow and gradual in the second, and altogether stationary in the last."

However, the amount of revenue must increase constantly in proportion to the amount of labour for wages to remain high. Smith illustrates this by juxtaposing England with the North American colonies. In England, there is more revenue than in the colonies, but wages are lower, because more workers flock to new employment opportunities caused by the large amount of revenue— so workers eventually compete against each other as much as they did before. By contrast, as capital continues to flow to the colonial economies at least at the same rate that population increases to "fill out" this excess capital, wages there stay higher than in England.

Smith was highly concerned about the problems of poverty. He writes:

"poverty, though it does not prevent the generation, is extremely unfavourable to the rearing of children [...] It is not uncommon [...] in the Highlands of Scotland for a mother who has borne twenty children not to have two alive [...] In some places one half the children born die before they are four years of age; in many places before they are seven; and in almost all places before they are nine or ten. This great mortality, however, will every where be found chiefly among the children of the common people, who cannot afford to tend them with the same care as those of better station."

The only way to determine whether a man is rich or poor is to examine the amount of labour he can afford to purchase. "Labour is the real exchange for commodities".

Smith also describes the relation of cheap years and the production of manufactures versus the production in dear years. He argues that while some examples, such as the linen production in France, show a correlation, another example in Scotland shows the opposite. He concludes that there are too many variables to make any statement about this.

Of the Profits of Stock: In this chapter, Smith uses interest rates as an indicator of the profits of stock. This is because interest can only be paid with the profits of stock, and so creditors will be able to raise rates in proportion to the increase or decrease of the profits of their debtors.

Smith argues that the profits of stock are inversely proportional to the wages of labor, because as more money is spent compensating labor, there is less remaining for personal profit. It follows that, in societies where competition among laborers is greatest relative to competition among employers, profits will be much higher. Smith illustrates this by comparing interest rates in England and Scotland. In England, government laws against usury had kept maximum interest rates very low, but even the maximum rate was believed to be higher than the rate at which money was usually loaned. In Scotland, however, interest rates are much higher. This is the result of a greater proportion of capitalists in England, which offsets some competition among laborers and raises wages.

However, Smith notes that, curiously, interest rates in the colonies are also remarkably high (recall that, in the previous chapter, Smith described how wages in the colonies are higher than in England). Smith attributes this to the fact that, when an empire takes control of a colony, prices for a huge abundance of land and resources are extremely cheap. This allows capitalists to increase his profit, but simultaneously draws many capitalists to the colonies, increasing the wages of labor. As this is done, however, the profits of stock in the mother country rise (or at least cease to fall), as much of it has already flocked offshore.

Of Wages and Profit in the Different Employments of Labour and Stock: Smith repeatedly attacks groups of politically aligned individuals who attempt to use their collective influence to manipulate the government into doing their bidding. At the time, these were referred to as "factions," but are now more commonly called "special interests," a term that can comprise international bankers, corporate conglomerations, outright oligopolies, trade unions and other groups. Indeed, Smith had a particular distrust of the tradesman class. He felt that the members of this class, especially acting together within the guilds they want to form, could constitute a power block and manipulate the state into regulating for special interests against the general interest:

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary."

Smith also argues against government subsidies of certain trades, because this will draw many more people to the trade than what would otherwise be normal, collectively lowering their wages.

Chapter 10, part ii, motivates an understanding of the idea of feudalism.

Of the Rent of the Land: Rent, considered as the price paid for the use of land, is naturally the highest the tenant can afford in the actual circumstances of the land. In adjusting lease terms, the landlord endeavours to leave him no greater share of the produce than what is sufficient to keep up the stock from which he furnishes the seed, pays the labour, and purchases and maintains the cattle and other instruments of husbandry, together with the ordinary profits of farming stock in the neighbourhood. This is evidently the smallest share with which the tenant can content himself without being a loser, and the landlord seldom means to leave him any more. Whatever part of the produce, or, what is the same thing, whatever part of its price, is over and above this share, he naturally endeavours to reserve to himself as the rent of his land, which is evidently the highest the tenant can afford to pay in the actual circumstances of the land. Sometimes, indeed, the liberality, more frequently the ignorance, of the landlord, makes him accept of somewhat less than this portion; and sometimes too, though more rarely, the ignorance of the tenant makes him undertake to pay somewhat more, or to content himself with somewhat less, than the ordinary profits of farming stock in the neighbourhood. This portion, however, may still be considered as the natural rent of land, or the rent for which it is naturally meant that land should for the most part be let.

[Demeter]

15. Ballmer (MICROSOFT) Expects "A Fundamental Economic Reset” CONGRESSIONAL TESTIMONY

http://articles.businessinsider.com/2009-02-07/tech/30066819_1_pc-sales-global-economy-innovation/2

"...In my view, what we now have will be a fundamental economic reset. The economy is going to have to re-establish itself at a level of spending that reflects the real value of underlying assets before we can all start growing again at a healthy rate. This may not be the thing that people really want to hear, but it's certainly what we're planning on, and it's the truth on which we're basing sort of our model, if you will, at Microsoft.

In our opinion, in order to reach the reset point, three things need to happen.

First, the economy must be deleveraged. Private debt as a percentage of GDP has to be reduced. Restoring health to the nation's financial system is a fundamental part of this. Just for historical note, not only during the Depression, but actually in 1837 and in 1873 we had similar style resets in the economy. We actually have at least three historic periods that we can study in which similar phenomenon occurred. I think it was 1873 where even the state of Florida filed for Bankruptcy. So, we need to be thoughtful about being students I think of the history.

Second, confidence must be restored. The stimulus package, in my opinion, is vital. It will provide a cushion as we reach the reset point and it will help restart our economic engine. (Applause.) I certainly want to applaud the steps that the House has taken under the speaker's leadership to quickly pass a strong stimulus package and to help shore up our financial institutions.

Third, America really has to return to growth that's built on innovation and productivity, rather than leverage and private debt. That must happen. The good news is that the U.S. economy is still the world leader in innovation. Our universities are the envy of the rest of the world. The American workforce is the best on the planet, and U.S. companies continue to drive technological progress in almost every industry. But the time has come when we need to renew our innovation capacity. We went back and studied what innovation companies did during the time of the Great Depression. One company that stands out, if you study the Depression, is RCA. Now, the fact that RCA is not around today, this has nothing to do with their behavior during the Depression. There's probably good learnings for a lot of technology companies in that. But during the time of the Depression, RCA was probably the most broad-based R&D-centric company in America. And while it cut costs certainly to survive the Depression, it never retreated from its commitment to core research and development. And as a result, after the Depression had ended, it really led and the U.S. led TV technology developments for the next 25 years. That was good for RCA; it was good for America.

In my view, American companies aren't going to be able to weather this economic downturn just by cutting costs either. You may have heard that Microsoft, our company has decided that we need to reduce 5,000 positions. What you may not know is that at the same time we've decided we'll also create two to three thousand new jobs -- mostly in the US -- as we continue to push into new areas that require investment. In addition, despite the tough economy -- I might even say because of the tough economy -- our company will continue to invest more than US$9 billion a year in R&D, because we think it's that R&D spending that will cause us to remain strong...

Read more: http://articles.businessinsider.com/2009-02-07/tech/30066819_1_pc-sales-global-economy-innovation/2#ixzz1m483K0C6

[hamerfan]

69. Thanks for this, Demeter

I'm no fan of Ballmer (it's a wonder he hasn't driven MS into the ground) but this is pretty spot-on, IMO. Which leads me to think this testimony was ghostwritten by an underling.

hamerfan

[Hotler]

82. Of course you love this company Steve. It has made you very rich. n/t

[Hotler]

83. "The American workforce is the best on the planet"

If so Steve, why then do so many companies send their jobs over sea's???? Riddle me that Batman. You ass wipe.

[Demeter]

16. Mortgage Settlement Term Sheet: Bailout as Reward for Institutionalized Fraud

http://www.nakedcapitalism.com/2011/03/mortgage-settlement-term-sheet-bailout-as-reward-for-institutionalized-fraud.html

American Banker posted the 27 page term sheet presented by the 50 state attorneys general and Federal banking regulators to banks with major servicing operations.

Whether they recognize it or not, this deal is a suicide pact for the attorneys general in states that are suffering serious economic damage as a result of the foreclosure crisis. Tom Miller, the Iowa attorney who is serving as lead negotiator for this travesty, is in a state whose unemployment was a mere 6.2% last December. In addition he is reportedly jockeying to become the first head of the Consumer Financial Protection Bureau. So the AGs who are in the firing line and need a tough deal have a leader whose interests are not aligned with theirs.

Moreover, Miller’s refusal to discuss even general parameters of a deal goes well beyond what is necessary. He knows that well warranted public demands that a deal be tough will complicate his job, but it also does the AGs whose citizens have been most damaged a huge disservice. Pressure on the banks from the public at large is a negotiating lever they need that Miller has chosen not to use.

The argument defenders of the deal make are twofold: this really is a good deal (hello?) and it’s as far as the Obama Administration is willing to push the banks, so we have to put a lot of lipstick on this pig and resign ourselves to political necessities. And the reason the Obama camp is trying to declare victory and go home is that it is afraid that any serious effort to deal with the mortgage mess will reveal the insolvency of the banks...But the fallacy of their thinking is that addressing and cleaning up this rot would lead to a financial crisis, therefore anything other than cosmetics and making life inconvenient for the banks around the margin is to be avoided at all costs. But these losses exist already. The fallacy lies in the authorities’ delusion that they are avoiding creating losses, when we are in fact talking about who should bear costs that already exist....

[Demeter]

18. What the Mortgage Deal Reveals About The Obama Administration

http://www.nakedcapitalism.com/2012/02/what-the-mortgage-deal-reveals-about-the-obama-administration.html

Edward Harrison here. I was reading Yves’ excellent post on The Top Twelve Reasons Why You Should Hate the Mortgage Settlement and I thought about a post I wrote a year ago on what this was all about. I am re-posting this post verbatim below but I just want to say a few words first.

Clearly, the Obama Administration is positioning itself for the 2012 general election. The goal is to do the right things and say just enough to make the Administration’s policies appear successful. The messaging is designed to build up a base from which to contrast Obama from the eventual Republican nominee in order to get out the vote. I doubt seriously that Obama’s people want any of these mortgage fraud initiatives to have teeth. After all, the President is going for the Super PAC money.

This is kabuki theater for the masses. it is designed to give those people inclined to vote for a Democrat a reason to do so in November, nothing more...

[Demeter]

19. What the Mortgage Deal In The Works Reveals About The Obama Administration

http://www.creditwritedowns.com/2011/03/what-the-mortgage-deal-in-the-works-reveals-about-the-obama-administration.html

...More than ever, Tim Geithner runs the show for economic policy. He is the last man standing of the Old Obama team. Volcker, Summers, Orszag, and Romer are all gone. So Geithner’s vision of bailouts and settlements is the one that carries the most weight.

What is Geithner saying with his policies?

• The financial system was on the verge of collapse. We all know that now – about US banks and European ones too. Fed Chair Ben Bernanke has said so as has Bank of England head Mervyn King. The WikiLeaks cables affirmed systemic insolvency as the real issue most demonstrably.
  
  
• When presented with a choice of Japan or Sweden as the model for crisis resolution, the US felt the Japan banking crisis response was the best historical precedent. It is still unclear whether this was a political or an economic decision.
  
  
• The most difficult political aspect of the banking crisis response was socialising bank losses. All banking crisis bailouts involve some form of loss socialisation and this is a policy which citizens find abhorrent. That’s what Geithner meant most directly about ‘deeply unpopular, deeply hard to understand’.
  
  
• Using pro-inflationary monetary policy and fiscal stimulus, the U.S. can put this crisis in the rear view mirror. Low interest rates and a steep yield curve combined with bailouts, stress tests, dividend reductions and private capital will allow time to heal all wounds. That is the Geithner view.
  
  
• Once the system is healthy again, it should expand. The reason you need to bail the banks out is that they have expansion opportunities abroad. As emerging markets develop more sophisticated financial markets, the Treasury secretary believes American banks are well positioned to profit. American finance can’t profit if you break up the banks.

I would argue that Tim Geithner believes we are almost at that final stage where the banks are now healthy enough to get bigger and take share in emerging markets. His view is that a more robust regulatory environment will keep things in check and prevent another financial crisis.

I hope this helps to explain why the Obama Administration is keen to get this $20 billion mortgage settlement done. The prevailing view in the Administration is that the U.S. is in a fragile but sustainable recovery. With emerging markets leading the economic recovery and U.S. banks on sounder footing, now is the time to resume the expansion of U.S. financial services. I should also add that given the balance sheet recession in the U.S., the only way banks can expand is via an expansion abroad.

I strongly disagree with this vision of America’s future economic development. But this is the road we are on.

[Demeter]

20. TALK ABOUT DELUSIONAL!

The Administration in general, and Geithner in particular, has bought into their own propaganda and phony data.

We're Freaking Doomed.

[Demeter]

24. This Is No Bailout for Main Street America

http://www.guardian.co.uk/commentisfree/cifamerica/2012/feb/09/bailout-main-street-america

...Typically, modern governments intervene in two ways when – as has been true since 2007 – free-enterprise capitalist economies produce particularly bad versions of their recurring economic "downturns". One economic policy is aptly called "trickle down" economics. It involves throwing heaps of money at the top of the economic pyramid – to mammoth banks, insurance companies, and other corporations at or near economic collapse. Policy-makers hope that such help for these institutions will revive their activity and thereby trickle down – as credit and orders for medium-sized and small businesses, and then, finally, to jobs and maybe wage increases for the majority of workers...The alternative is "trickle up" economic policy. It involves government financial aid aimed chiefly at helping the mass of workers. That policy's goal is for the assisted workers to resume purchasing, which will, in turn, boost business revenues and so rebuild prosperity.

The historical record is quite clear: trickle down is no better or more effective a policy to end deep recessions and depressions than trickle up. In the last great capitalist downturn of the 1930s, the Roosevelt administration first tried trickle down. Its poor results, coupled with profound political pressures from below – the Congress of Industrial Organizations (CIO) membership drives that brought new millions into labor unions and the surging socialist and communist parties – forced Roosevelt to add major trickle up policies. They worked better, but not well enough to overcome the Great Depression. Of course, large corporations, their shareholders and stock markets prefer trickle down. They get bailed out and they "recover", while the rest of us watch to see what may or may not trickle down. The US working class has been waiting for over four years. Precious little has yet trickled down. The majority of citizens prefer trickle up and for parallel reasons. Which kind of policy prevails depends on which side wields more power over the policy-makers...The Obama team was beginning to learn what the Roosevelt team had learned sooner in their Great Depression. It turns out that bailouts for the top of the economic pyramid, which never trickle down, leave an economically depressed mass at the bottom. Governments that also try to pay for trickle-down policies by imposing "austerity programs" on the bottom only make matters worse. Sustained depression at the bottom eventually threatens the top: first economically and then also politically.

That happened sooner and more powerfully in the more depressed and more politically mobilized conditions of the 1930s. But the Tea Parties and the Occupy Wall Street movement, in their radically different ways, suggest something comparable unfolding now in the US. In Europe, the process is further along, as the Greek example shows...

Consider simply that the negative equity of US homeowners is estimated now at $ 700bn. That is how much more they owe on their homes than those homes are worth. This new bill proposes $26bn in aid for that problem. No such timidity attended the trillions provided for the trickle-down bailouts since 2007. The banks are happy with this proposed settlement's low cost to them.



****************************************************************

Richard D. Wolff

Richard D. Wolff is Professor of Economics Emeritus, University of Massachusetts, Amherst where he taught economics from 1973 to 2008. He is currently a Visiting Professor in the Graduate Program in International Affairs of the New School University, New York City. He also teaches classes regularly at the Brecht Forum in Manhattan. Earlier he taught economics at Yale University (1967-1969) and at the City College of the City University of New York (1969-1973). In 1994, he was a Visiting Professor of Economics at the University of Paris (France), I (Sorbonne).

[Demeter]

25. Why Millions Won’t Get Help From Big Mortgage Settlement

http://www.propublica.org/article/why-millions-wont-get-help-from-big-mortgage-settlement

The Obama administration is billing today's $25 billion agreement between most states and five banks that engaged in flawed or deceptive practices as a big win for struggling homeowners. Most of the money in the settlement isn't a penalty, or a fine levied on the banks. Instead, the biggest slice of the settlement will be money banks put toward principal reduction -- reducing the amount owed by struggling or underwater borrowers. (Banks will also put smaller amounts toward refinancing and other ways of helping people get back in control of spiraling debt.)

Getting a break on their mortgages could help the millions of homeowners who owe more on their home than it is worth. But many of them won't qualify -- thanks to government-owned Fannie Mae and Freddie Mac. The two mortgage companies, who were bailed out by the government in 2008, were described by former Obama economic advisor Jared Bernstein as "the boulder" in the way of principal reduction. Their federal regulator, the Federal Housing Finance Agency, is tasked with maximizing profits from the companies -- and thus minimizing taxpayer losses. The head of the agency, Edward DeMarco, argues that allowing principal reductions would result in a big loss for Fannie and Freddie and ultimately taxpayers...The two companies aren't directly part of the settlement. They don't service mortgages, or deal directly with borrowers. But Fannie and Freddie do guarantee or own roughly half of the mortgages in the U.S. They also hold more than 3 million of the nation's nearly 11 million underwater mortgages. Since Fannie and Freddie are backing the loans -- and are the ones who will take a loss if the mortgage isn't paid back in full -- they often have a veto on whether homeowners get a break. Even if Bank of America, for example, services your mortgage, you would not be eligible for principal reduction if Freddie or Fannie back it.

Principal reduction is being pushed heavily by the Obama administration as a way to lower the rate of foreclosures. The administration recently tried to encourage Fannie and Freddie by offering to triple incentives for principal reduction. So far, the companies and their federal overseer, DeMarco, have declined to do so. An FHFA spokesperson said that the agency is "not a party to the agreement. We await a copy of the agreement to determine its implications." Lowering the amount of money owed on a loan would result in at least short-term losses for Fannie and Freddie, as well as to any other investors in mortgages that are reduced. But many economists and analysts argue that Fannie and Freddie would ultimately benefit since such moves could help restore the health of the housing market as a whole. The reluctance by Fannie, Freddie and others to take on principal reduction is partly why the administration's mortgage modification programs have been so ineffective.

The settlement does have potential benefits for future borrowers, including new protections and disclosures to prevent what Attorney General Eric Holder called "abusive practices" by the mortgage industry...A small portion of the overall settlement -- about $5 billion -- will amount to penalties for past abuses by the banks. Some of it will go to state governments that were afflicted by banks' shoddy practices, and some of it will go directly to about 750,000 homeowners who were foreclosed upon. If you lost your home, you could get up to $2,000.

[Demeter]

26. Gov. Scott Walker To Use Foreclosure Settlement Money To Balance His Budget, Not Help Homeowners

http://thinkprogress.org/economy/2012/02/10/422744/walker-settlement-budget/?mobile=nc

...Wisconsin Gov. Scott Walker (R) — whose high profile assault on workers’ rights has prompted a recall effort against him — isn’t planning to use the money to help homeowners. Under the terms of the settlement, Wisconsin is set to receive $140 million, $31.6 million of which comes directly to the state government. And Walker is planning to use $25.6 million of that money to help balance his state’s budget:

Of a $31.6 million payment coming directly to the state government, most of that money – $25.6 million – will go to help close a budget shortfall revealed in newly released state projections. [Wisconsin Attorney General J.B. Van Hollen], whose office said he has the legal authority over the money, made the decision in consultation with Walker.

“Just like communities and individuals have been affected, the foreclosure crisis has had an effect on the state of Wisconsin, in terms of unemployment. … This will offset that damage done to the state of Wisconsin,” Walker said.

A memo from Wisconsin’s Legislative Fiscal Bureau released yesterday notes “it is anticipated that Wisconsin will receive $31.6 million. Based on discussions between the Attorney General and the administration, of the amounts received by the state, $25.6 million will be deposited to the general fund as GPR-Earned in 2011-12, and the remaining $6 million will be retained by the Department of Justice to be allocated at a later date.”

Milwaukee Mayor Tom Barrett (D) criticized Walker’s move, saying “not one dime [of the settlement] should be used to fund the unbalanced state budget.” Adding insult to injury, Walker has previously criticized using one-time settlement money to fill budget holes.

The settlement money already doesn’t come close to addressing the depths of the nation’s housing problem, though it will provide real relief to the people whom it does reach. But the money was certainly not intended to paper over state budget problems, particularly in a state whose governor assured everybody up and down that busting his state’s public unions was the key to fiscal solvency.

[Demeter]

29. How to Occupy the Economy, According to Richard Wolff

http://www.truth-out.org/how-occupy-economy-according-richard-wolff/1328888306

PODCAST AND TRANSCRIPT AT LINK

[Demeter]

30. TANSY GOLD: THIS ONE IS FOR YOU!

I think you'll like what he says

[Tansy_Gold]

47. I will take a look/listen later Saturday afternoon

My office desk is a catastrophe, my entire studio is even worse. The BF is gone for the day and I am determined to accomplish something.

The day job has been such a nightmare all week I didn't even get a chance to take photos of the goodies I brought back Monday from the gem shows.

I made this ring yesterday afternoon with one of the rose quartz beads I bought.




And this is another of my "treasures" from Tucson, a fancy jasper bead set on sterling silver wire. One of my goals for this week-end is to make a bunch more and get them on my Etsy site.




Seriously, I could have spent two days just strolling through that one show, and there were about 45 more! Talk about the wealth of nations!

[Demeter]

21. what Could Be Better Than Dilbert?

[Tansy_Gold]

48. #1 = me, x 20,000,000,000,000 or so n/t

[Demeter]

27. Nuclear Regulatory Commission Ignores Fukushima, Green-Lights First New Reactors in 34 Years

http://www.truth-out.org/nuclear-regulatory-commission-ignores-fukushima-green-lights-first-new-reactors-34-years/1328886423

The Nuclear Regulatory Commission has granted a construction and operating licenseto Southern Co. for two reactors to be added to its Plant Vogtle facility in Georgia. The OK is the first granted by the US regulator since 1978.

The NRC approved the license over the objections of its chairman, Gregory Jaczko, who wanted the license to stipulate that the units would meet new standards recommended by the agency’s Fukushima Near-Term Task Force (NTTF) report...“I cannot support this licensing as if Fukushima never happened,” said Gregory Jaczko after the Thursday vote–but thanks to the four other commissioners of his captured agency, licensing as if Fukushima never happened is exactly what the NRC did.

[Demeter]

28. On the News With Thom Hartmann: Spencer Bachus Investigated for Insider Trading, and More

VIDEO PODCAST AT LINK

http://www.truth-out.org/news-thom-hartmann-spencer-bachus-investigated-insider-trading/1328898288

[xchrom]

31. good morning...

[xchrom]

32. since the weather got mentioned --Weekend Storm Looms for U.S. Northeast

http://www.bloomberg.com/news/2012-02-10/weekend-storm-looms-for-u-s-northeast.html

A storm developing off the East Coast will probably bring 2 to 4 inches (5 to 10 centimeters) of snow to New York and Boston over the weekend, the National Weather Service said.

Heavy snowfall began in Chicago at midday. The Eastern storm will move south and east of Long Island and mix with colder air from the north, spreading snow across the New York area starting late tonight, said John Murray, a weather service meteorologist in Upton, New York.

Ice and snow have been rare in much of the U.S. this winter. The two-month start of the season, December and January, was the fourth-warmest on record with an average temperature 3.8 degrees Fahrenheit (2.1 Celsius) above normal, according to the National Oceanic and Atmospheric Administration.

“There have been glancing blows of the cold but it won’t stay for the couple of periods where it is brutally cold like we have had in other winters,” said Paul Walker, senior meteorologist at AccuWeather Inc. in State College, Pennsylvania.

[xchrom]

33. i stole this from n2doc: Ultrafast Trades Trigger Black Swan Events Every Day, Say Econophysicists

http://www.technologyreview.com/blog/arxiv/27562/?p1=blogs



On 6 May 2010, shares on US financial markets suddenly dropped on average by around 10 per cent but in over 300 stocks by more than 60 per cent. Moments later the prices recovered.

The event mystified economists because they had never seen anything like it (and have enough trouble explaining the ordinary workings of markets). Econophysicists have since blamed this so-called flash crash on the automated behaviour of ultrafast computer trades, which take place in periods measured in milliseconds.

These kinds of trades appear to generate emergent behaviour that has nothing to do with the actual value of a company. Instead, these events are unavoidable properties of the system itself.

That raises an important question: how can authorities prevent flash crashes and price spikes in which billions of dollars can be won and lost?

[xchrom]

34. Justice Department calls Swiss Bank a "fugitive"

http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2012/02/10/national/a144412S39.DTL&type=business

The Justice Department is calling Switzerland's largest private bank a fugitive from justice after it didn't show up for a court hearing in New York.

The bank was indicted on Feb. 2. Since then, U.S. officials haven't found a way to move the case forward.

Wegelin & Co. is charged with conspiring with American clients to hide $1.2 billion from the Internal Revenue Service.

In a statement issued in Switzerland after the court hearing, the bank said it had not been properly served with the criminal summons. It said it was therefore under no obligation to appear in court. As for the charges, the bank suggested that there was a conflict between US and Swiss law.

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2012/02/10/national/a144412S39.DTL#ixzz1m4myJKPK

[kickysnana]

49. This is a look over here ruse because Switzerland is one of many and not the biggest. n/t

[Demeter]

59. They haven't forked over the bribe (translation)

"Disgust" is the weakest word in the English language.

[DemReadingDU]

36. MF Global: Trail Growing Cold - 'No One to Blame"'

Jesse writes...
I did predict something like this would happen in about the second week of the scandal, didn't I?

Did you ever imagine that in America a major brokerage firm would brazenly steal over a billion dollars in customer funds and assets, and that no one would even be prosecuted?

And that the financiers would use the courts to just keep the money, and basically tell the broker's customers to eat shit?

The money? Oh no, that's just vaporized. Just a freak accident, practically an act of God. Very mysterious, but could not happen again. Protection? Sorry don't know anything about that.

No one knows anything. Except that the financial system can't be trusted, and that nothing in it is safe. But they are afraid to admit it.

http://jessescrossroadscafe.blogspot.com/2012/02/mf-global-trail-growing-cold-no-one-to.html


2/9/12 ANALYSIS-Criminal probe trail going cold at MF Global
http://af.reuters.com/article/commoditiesNews/idAFL2E8D9IKR20120209

[DemReadingDU]

37. Mack the Knife

I saw this in the above post by Jesse

Mack the Knife

&feature=player_embedded#!

[xchrom]

39. Unaccountable ECB creates a genuine democratic deficit in EU

http://www.irishtimes.com/newspaper/finance/2012/0210/1224311563799.html

ANALYSIS : Ireland will gain from the checks and balances of the fiscal treaty – it’s a democratic deficit in the EU that’s worrying

ANY COMMITMENT, no matter how deep or long-term, requires re-evaluation from time to time. Ireland’s commitment to European integration is one such. The commitment is long-standing and shared by an overwhelming majority of people and sectional interests in Irish society who have seriously weighed up the costs and benefits of being involved in Europe against those of going it alone.

In the interest of transparency, I have always shared the majority view, believing the European construct was good for Europe and a model of interstate co-operation that the rest of an increasingly interconnected world could well emulate.

For Ireland, the dynamic effects of liberalisation alone have been huge – both on international and elements of domestic trade. The benefits have been greater still when one adds the boost to foreign direct investment (as a result of being part of the European space), large capital transfers and farming subsidies.

[Demeter]

41. DON'T READ THIS IF YOU'RE FEELING SUICIDAL: Obama’s Worst Year

(AND HERE THEY'VE BEEN TOUTING IT AS HIS BEST, ELSEWHERE!) IT'S ABOUT POLITICS AND ECONOMICS AS PRACTICED BY THIS ADMINISTRATION, AND IT IS......INDESCRIBABLE.

http://www.tnr.com/article/politics/100595/obama-escape-artist-excerpt?page=0,0

[Hotler]

78. That was a good read and a sad read all at the same time. I could just imagine...

the howling from the Obama can do no wrong crowd if this was posted in GD. The article tells us nothing we here didn't already know, that Obama had no fight in him from the beginning. O should have known better than to try and play nice with the republican from the start. He might as well walk away from a second term and let the repugs finish driving the country off the cliff. Nothing is going to change until more people feel the pain and take to the streets by tens of thousands in every state. I have no hope he will find a spine in his second term. Like a festering sore that has to be lanced and the infection squeezed out, there has to be pain, stink and ugliness before it will get and feel better. Sorry to be such a downer.

[bread_and_roses]

42. King of UAW wants to have his cake and eat it too

http://www.detroitnews.com/article/20120210/AUTO01/202100428/King-says-UAW-prepping-nationwide-protests?odyssey=tab

February 10, 2012 at 7:47 pm
King says UAW prepping for nationwide protests

Flint— United Auto Workers President Bob King used the occasion of the 75th anniversary of the Flint Sit-Down Strike to call for "direct action" — including nonviolent civil disobedience — to take back America from the "right-wing Republicans" and "one-percenters" who he says have hijacked this democracy.

King said the UAW would begin training its members and other activists this spring to take part in peaceful, but potentially illegal, protests across America to stop what he called the rollback of workers' rights and civil rights.

Yes, Brother! About time! but then....

The union leader would not go into detail about the UAW's plans, but King said he is working with the leaders of other labor unions and "faith groups" to fan the flames sparked by last year's Occupy Wall Street movement. He said their first priority would be to re-elect President Barack Obama...

Sorry, Brother, but you'll suck all the energy out of your direct actions if you divert people to politics as usual - what, you're going to try to fire them all up like '08 to elect Obama and then ask them to turn around and engage in direct action against same?

... and finally, you really go off the rails here, Bob - have you learned nothing from your members being the screw-ees in the great "rescue" of the US auto industry?

He would not comment on reports that he will soon be named to Opel's managing board, but he did say labor and management "can accomplish more by working together," as the UAW and GM did during the recent recession.

You have to know your enemy, Bob, before you can fight him.
edit for quote boxes & spelling

[Demeter]

44. WOW

The more things change....the less some people adapt.

[Fuddnik]

63. "Labor and management can accomplish more by working together:

That's the language of a serf. You don't beg for cooperation when you have all the power. Right before you get kicked in the head....again.

Cooperation: "Why certainly sir! Would you kindly hold my hat, before I stick my head into the guillotine?"

[bread_and_roses]

64. "That's the language of a serf."

Exactly. It's too bad - I hate to call a brother a Quisling, but that's what it amounts to. "Which side are you on, " Brother? Which side? I think it was Jim Hightower said it - there's nothing but a big yellow stripe down the middle of the road.

[Demeter]

45. Mortgage Settlement as AG Sellout: Deal NOT Done, Final Guaranteed Worse Than Advertised

http://www.nakedcapitalism.com/2012/02/mortgage-settlement-as-attorney-general-sellout-deal-is-not-done-and-final-version-guaranteed-to-be-worse-than-advertised.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

You know it’s bad when banks are the most truthful guys in the room... in fact, Bank of America’s press release said that the deal was “agreements in principle” as opposed to a final agreement. The Charlotte bank had to be more precise than politicians because it is subject to SEC regulations about the accuracy of its disclosures. And if you read the template for the AG press release carefully, you can see how it finesses where the pact stands. And today, American Banker confirmed that the settlement pact is far from done, and the details will be kept from the public as long as possible, until it is filed in Federal court (because it includes injunctive relief, a judge must bless the agreement). This may not sound all that important to laypeople, but most negotiators and attorneys will react viscerally to how negligent the behavior of the AGs has been. The most common reaction among lawyers I know who been with white shoe firms (including former partners) is “shocking”. Let me explain why. Negotiating of large, complex deals (or even little deals) does not happen in one fell swoop. Even when the two sides have outlined the major terms, and in some cases hammered out the really important ones in some detail, there is still a great deal of negotiating that takes place in finalizing the text of the contract. The negotiation over the definitive agreement makes a great deal of difference on how fair the pact turns out to be. For instance, one of the sayings of transaction lawyers is “He who controls the document controls the deal.” The party that writes up the initial version of the contract has undue influence because that becomes the default and the other side has to negotiate back from that language.

As attorney Max Gardner said via e-mail (boldface ours):

I would never tell a client that I had settled a case or claim against a creditor until the ink was on the final written settlement agreement. I would of course advise the client of the verbal offer and secure the client’s acceptance but would always say something like “don’t spend any of the money because as Yogi might say it ain’t over until we have the signed agreement and their check has cleared my trust account.” An attorney would be guilty of serious ethical violations if he or she told a client we have a settlement with BoA and it is final before the deal was closed out by written agreement and in my bankruptcy practice the agreement was approved by the court. The AGs have said this agreement must be approved by a Federal District Court Judge so really why would you make such public announcements before at the least a written agreement signed and inked by ALL of the parties.

Why is it deeply troubling that the attorneys general have gone along with the Administration’s messaging and have all fallen in line with the “biggest Federal-state settlement ever” when no such settlement in fact exists? This isn’t just acceding to the Administration’s pet wish to build on its State of the Union PR. They’ve completely abandoned their negotiating leverage at a critical stage. Let’s look at this equation. The Administration and the banks both want a pro-bank deal (the only minor point of difference is how much in populist gestures the banks have to submit to in order to get the much more valuable bennies they want). The only parties that cared to any degree about ordinary citizens were the dissident AGs. But they now have now given up any bargaining leverage over how this deal turns out. The only power any party has in a negotiation is his threat to leave the bargaining table. The AGs can no longer do that. They’ve taken star turns, made ringing pronouncements of how great this pact is. They can’t possibly reverse themselves mere weeks down the road and say, whoops, this deal isn’t go great after all. The AGs had to have known what they were doing in capitulating. Delaware’s Beau Biden was one of the most outspoken AGs after the Schneiderman destabilized the opposition by putting himself on the sidelines, making it clear he had not signed on when most other AGs remained silent. Yet in an interview with Dylan Ratigan early last week, he sounded as if the fight had been beaten out of him, that he was resigned to signing on to the agreement if he could preserve the MERS suit he had filed and add bank names to it later if the facts warranted. What sort of veiled or not so veiled threats did the Democratic party operatives make to get him to fall into line? I hate using Biden as an example because he resisted down to the end. I don’t see how any seasoned attorney could possibly have misunderstood what he was giving up. Maybe the last holdouts felt even en bloc that they had no sway and even if they all stood aside, it would hurt them with little upside for their constituents. But agreeing to a pig in the poke would never be acceptable in the private sector, and the AGs can’t pretend not to know how outside the pale their conduct was. We’ve seen an analogous process at work in the Dodd Frank bill. It was widely described as a “bill to come up with a bill,” with a lot of provisions either subjected to studies or kicked over to regulatory rulemaking to come up with a final version of the provision. The result has been that it has given the banks another go at the bill, and various media reports indicate that they’ve done a very good job in blunting the impact of many provisions....Now some readers might argue that this analogy is unfair, that the mortgage settlement is much further along that Dodd Frank was. That might seem to be true. However, the attorneys general are not experts in securitization, and benign-sounding language can have implication that they don’t appreciate. And some of the responses from AG offices to simple questions suggest they are over their heads on this deal.

And the American Banker article indicates that the deal has a lot more points still open than the Administration’s victory lap would lead you to believe:

…a fully authorized, legally binding deal has not been inked yet….A representative for the North Carolina attorney general downplayed the significance of the document’s non-final status, saying that the terms were already fixed…

Other sources who spoke with American Banker raised doubts that everything is yet in place. A person familiar with the mortgage servicing pact says that a settlement term sheet does not yet exist. Instead, there are a series of nearly-complete documents that will be attached to a consent judgment eventually filed with the court. That truly final version will include things such as servicing standards, consumer relief options, legal releases, and enforcement terms. There will likely be separate state and a federal versions of the release…

Whatever the reason for the document’s continued non-appearance, the lack of a public final settlement is already the cause for disgruntlement among those who closely follow the banking industry. Quite simply, the actual terms of a settlement matter.

“The devil’s in the details,” says Ron Glancz, chairman of law firm Venable LLP’s Financial Services Group. “Until you see the document you’re never quite sure what your rights are.”…

And there is plenty more still to be worked out under all circumstances.

“Even once we get to the final terms, the servicers we’re told are going to be allowed to develop their own plans,” says NCLC’s Thompson. “They’re going to have three months to develop those from when the settlement is approved by the court. We are a long way in lots of ways from being able to kick the tires.

Now why the rush to get a photo op? I don’t buy that this was driven by election timing. A lot of studies show undecided voters make up their minds in the last month or at most two before the election. Big news is more effective closer to the election. Maybe the Administration believes its own PR and thinks this measley program will help the housing market, or more important, secure the fealty of banks. But my guess is that the fact that 15 AGs concerned about the negotiations had met is what pushed the Administration into high gear. They did not want a meaningful, cohesive opposition forming. In addition, I am certain some evil genius in the Administration understood full well the value of destroying the AGs’ bargaining leverage before the final phase of negotiations.

Oh, and what about the other bombshell in the American Banker story:

American Banker asked The Department of Justice, the Department of Housing and Urban Development, and the offices of Attorneys General in Iowa, North Carolina and Colorado for a copy of the settlement last night. Only Iowa, North Carolina and the Department of Justice have responded, saying that the document would not be available until it is filed with the court on a yet-undetermined date.

Diane Thompson, an attorney with the National Consumer Law Center, said it was “unusual” that a settlement agreement had not been released. But the officialdom has gone further than that, and has said they won’t release the document until it has to be made public, via a Federal court filing. Why would they choose to delay publicizing such important information? The most logical reason is they want it to be public the bare minimum amount of time possible prior to court approval, so as to give opponents (read aggrieved investors) the tightest window possible for filing motions opposing the pact. This deal was done within a very small group, and the two parties most affected, homeowners and investors, were and continue to be kept as far away from the process as possible. And there are signs that AGs were really over their heads on this one, independent of the Administration’s gamesmanship. This was from reader LucyLulu:

Spoke yesterday with an associate of my attorney general yesterday and had a most frustrating conversation….

One of the many interesting tidbits she did share however (and I am unsure how reliable her info was) was that no investor owned modifications of loans would occur without first obtaining consent of the investors…I tried to nail down how this consent would be obtained, she was reluctant to provide details, just to say how consents from shareholders are normally obtained.

Now this may simply be an out-of-the loop staffer making things up, but another correspondent heard pretty much the same “we’ll get approvals” palaver from another AG’s office. I have to tell you, they most certainly WON’T obtain consents as they do in shareholder land (as in preparing and sending out proxies and soliciting votes on contested matters). Moreover, the standards for what level of approval is required varies by deal: some it’s a simple majority (presumably by par value), some require majority approval of each tranche, some require a supermajority (2/3 or even 75%). The Administration is likely to be taking the position that they don’t need consent in most deals if the mod is NPV positive. And given that they can pick the parameters that are most flattering (loan level v. portfolio level, discretion over time horizon chosen for measurement), I’d suspect that investor consent will not be obtained (unless investors start making serious noises, which seems less likely than it did last weekend).

Reader Mikent was correct when he called this deal a robosettlement. Just like its namesake, it’s more about getting it done than doing it right.

[Demeter]

46. It's Nothing We Haven't Seen Before

It sure sounds Rovian, too!

My kingdom for an opposition!

[kickysnana]

50. [phone]

[Demeter]

51. Some recession-hit horse owners freeing animals into wild herds

http://www.mcclatchydc.com/2012/02/09/138368/some-recession-hit-horse-owners.html

..Missouri's only wild horse herd... descends from animals set free in the Great Depression by farmers who couldn't afford to feed them....it’s happening again in the Great Recession. Strapped owners are dumping horses in what is now the Ozark National Scenic Riverways, apparently thinking they will be warmly received by the wild bunch that runs the thousands of public acres along the Current and Jacks Fork rivers. “Don’t work that way,” said Smith, part of a group called the Missouri Wild Horse League that keeps an eye on the local herd.

Stallions will run off, even rise up and fight the old pets and saddle horses, he said. Wild horses have to forage for food, know how to dig through snow to find grass and acorns. Coyotes will prey on colts and old horses. There are even a few cougars around. In other words, being wild ain’t easy. No oats, no shoes, no roof, no pats on the nose...In recent months, Jim Smith, Bill’s second cousin, helped pull out at least 25 dumped horses from the Shawnee fields east of Eminence. “Two of them had brands from a ranch in Utah,” Jim Smith said this week. “I called out there. They said they were adopted by somebody in Missouri. Don’t know how they ended up here.”

The Wild Horse League, which foiled the National Parks Service’s efforts to remove the animals in the mid-1990s, tries to find the orphaned horses and adopt them out. But lately there have been too many. “They don’t know how to forage,” said Carolyn Dyer, the league’s secretary who also runs a large trail riding operation. “In the summer they can eat grass, but this time of year they don’t know to paw through snow and leaves to find acorns. They will literally starve to death. I know why people think they can’t keep them. But they don’t belong out here.”...Some horse people say the lame economy may not be the only culprit with what’s going on in Eminence. They point to a federal appropriations bill in 2006 that closed every horse slaughterhouse in the country. People no longer have an outlet for old and sick horses, they complain...Mindy Patterson, board vice president of the Missouri Equine Council, recognizes that hard times can lead people to make unwise decisions. But she also blames the 2006 decision by Congress — after intense lobbying by the national Humane Society — to halt funding of meat inspectors for horse slaughter operations. In effect, the result was a backdoor ban on horse slaughter because meat can’t be sold without a USDA stamp of approval. But Patterson says the ban’s effect has been the opposite of what the Humane Society says it wanted.

“Many old and sick horses are dying terrible deaths because the owners don’t have anyplace to take them,” Patterson said. “Some people can’t afford to hire a vet to come out and put a horse down. If they can, then they’ve got a dead horse so they have to hire a backhoe to dig a hole. All that gets expensive. This is going on all over the country.” In November, Congress restored money for the inspections, but some people doubt a slaughter operation will start up because the funding could go away in next year’s appropriations debate. And the Humane Society has pledged an all-out push to make that happen. Simply put, it doesn’t think horses should be raised for meat in America. Society officials say the “horse slaughter proponents” twist the truth when they say most horses going to slaughter were old and sick. They cite a USDA study that says of more than a thousand horses that arrived at two slaughter plants in Texas, 92 percent were “in good shape.” The study did not address age. Of the country’s 9 to 10 million horses, about 700,000 die each year, according to Humane Society President Wayne Pacelle. But only 130,000 were being shipped to slaughter. That means most owners were acting responsibly, Pacelle said. Slaughter opponents say horses were being raised for export meat to Europe and Asia. Some American horses are now being sent to Mexico for processing. “The predatory horse slaughter industry has cash signs in its eyes, and it is unrestrained by any compassion for these creatures,” Pacelle said. “Its profiteers treat horses like commodities on the hoof.” As for owners of old and sick horses, the society says that if people are going to own a horse, they need to be responsible for its care, to the very end....

THIS ARTICLE SAYS MORE ABOUT THE PEOPLE THAN THE HORSES, I THINK

[Demeter]

52. Petrol 3-Month Rolling Ave. Sharply Lower; Neg. Shipping Rates; Collapse in Global Trade

http://globaleconomicanalysis.blogspot.com/2012/02/petroleum-3-month-rolling-average-turns.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed:+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

On February 6, I noted (with huge thanks to reader Tim Wallace) a Huge Plunge In Petroleum and Gasoline Usage.

Tim used weekly numbers, which show, much week-to-week volatility. Instead, I proposed using rolling three-month averages, compared to the same three months in prior years.

Today I received some updated charts that are much easier to see precisely what is happening.

Gasoline Usage Last Three Months vs. Last Three Months Prior Years



Gasoline Usage by Quarter Ending December 2011



Wallace writes "Gasoline and petroleum demand recently has plunged more than at any time in the recession. When you see petroleum usage back to numbers in the 1990's, you know there is serious economic trouble no matter what the talking heads say."

Wallace willing, each month I will post the "Petroleum Rolling Three-Month Average Index". Hopefully we can get a derivative of that first chart, "Percent Change From a Year Ago".

At the end of February the comparison will be December - January - February vs. the same three months in prior years.

[Demeter]

54. A Combination of Speculation-Driven Oil Prices and Wage Depression will do that

And that's probably why we can export it now, to nations that are not squeezing people dry. Wankers.

[xchrom]

53. “Good life does not come easily in Lithuania”

http://www.presseurop.eu/en/content/article/1498571-good-life-does-not-come-easily-lithuania

Between 1990 and 2011, approximately 670,000 Lithuanians emigrated, while 110,000 returned to the country. In the space of two decades, Lithuania, a country with a population of 3.5 million, has lost half a million people – and that is only according to official figures. All of this has made the Lithuanians one of most migratory peoples in Europe. And in fact, mass emigration is nothing new in the country where waves of migrants have been leaving for centuries.

In the 18th and 19th centuries, Lithuanians, most of whom were subsistence farmers, packed the bare minimum into two suitcases and headed off to the United States. Today, once they have rented out their houses, they head for the United Kingdom, Ireland or Norway, sometimes with their families and sometime without, now that the Internet has done so much to reduce distances.

Certainly times have changed, but one constant has remained: today Lithuanians from all kinds of backgrounds, just like their forbears a century ago, are still succumbing to the temptation to move to places where living and working conditions are better.

One-way tickets

Ignas and Rimante Mockai, both in their thirties, were also intent on packing the strict minimum. They brought their dog back to the village, distributed their house plants to friends, and took their two children out of nursery school before embarking on a one-way trip to London. That was 18 months ago.


***2 thoughts come to mind --1st-- the only real wealth any nation has is it's citizens and the labor those citizens produce.

2nd -- it's very hard here in america to understand, visualize migration in europe.
it's just very, very different than say the relationship with migration we've had w/ mexico and central america.

[Demeter]

55. Negative Shipping Rents

http://globaleconomicanalysis.blogspot.com/2012/02/petroleum-3-month-rolling-average-turns.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed:+MishsGlobalEconomicTrendAnalysis+%28Mish%27s+Global+Economic+Trend+Analysis%29

Amazingly, shipping rates have dropped so low, shippers will pay you to ship, just to get the cargo vessels to better locations.

Bloomberg reports Charter Rates Go Negative http://www.bloomberg.com/news/2012-02-06/glencore-hires-grain-carrier-at-minus-2-000-a-day-global-marine-says.html

Glencore International Plc paid nothing to hire a dry-bulk ship with the vessel’s operator paying $2,000 a day of the trader’s fuel costs after freight rates plunged to all-time lows.

The vessel will haul a cargo of grains to Europe, putting the carrier in a better position for its next shipment, he said.

“Our other option was to stay in the Pacific and earn poor revenues or ballast to the Atlantic and pay the fuel ourselves,” Rodley said. Ballasting refers to sailing without a cargo. Charles Watenphul, a spokesman for Glencore, declined to comment in an e-mailed response to questions.

Charters for the so-called backhaul routes that reposition ships to the Atlantic Ocean region from the Pacific are falling to the lowest since indexes started, exchange data show. Rents for Capesize ships that haul ore and grain on backhaul routes were at minus $7,342 a day, the lowest since that index began in 1999, exchange data show.

D/S Norden A/S, Europe’s biggest publicly trading commodity shipping company, said Feb. 3 it hired a Supramax vessel at no cost other than fuel charges, its first such transaction in a quarter century.

Baltic Dry Index - $BDI



The Baltic Dry shipping index (a measure of shipping costs) was down 32 days in a row before turning up on Tuesday.

The Harper-Peterson Shipping Index is also in dismal shape.



Many ships came online in the last couple years but a plunge this deep cannot be blamed entirely on new ships added.

Rather, the huge dropoff in gasoline and petroleum usage in the US, coupled with falling shipping rates, a drop in Japanese Exports Three Consecutive Months, and a European Recession poised to get much worse, makes a strong case that a collapse in global trade is underway.

[Demeter]

56. Richard Nixon gets it / Edward Harrison

http://www.creditwritedowns.com/2012/02/richard-nixon-gets-it.html

We should take no comfort from the fact that the level of unemployment in this transition from a wartime to a peacetime economy is lower than in any peacetime year of the sixties.

This is not good enough for the man who is unemployed… We must do better for workers in peacetime and we will do better.

...I ask the Congress to accept… the concept of a full employment budget.

-Richard Nixon: 1971 Annual Message to the Congress on the State of the Union

For me, this speech is the clearest demonstration of what 40 years means in terms of national priorities and the general mindset. This is not the guiding ethos of today.

Nixon said a lot more in his statement than this, but I have stripped it to its essence to demonstrate the intent behind his comments. He was saying that low employment is not enough. Full employment should be the standard.

[xchrom]

57. S&P downgrades 34 Italian banks

http://uk.reuters.com/article/2012/02/11/uk-italy-banks-idUKTRE8191QJ20120211

(Reuters) - Rating agency Standard & Poor's downgraded 34 Italian banks on Friday, including heavyweights UniCredit (CRDI.MI) and Intesa Sanpaolo (ISP.MI), citing a reduced ability to roll over their wholesale debt and expected weak profitability.

The move follows S&P's downgrade of Italy's sovereign rating last month to BBB+, part of a mass downgrade of nine euro zone countries.

In a statement, S&P said its so-called Banking Industry Country Risk Assessment had worsened to group 4 from group 3 -- out of 10 groups -- reflecting its more negative view on Italy's banking system.

"Italy's vulnerability to external financing risks has increased, given its high external public debt, resulting in Italian banks' significantly diminished ability to roll over their wholesale debt," it said.

[Demeter]

60. MF Global Trustee Sees $1.6 Billion Customer Shortfall (DEFICIT CLIMBING STILL)

http://dealbook.nytimes.com/2012/02/10/mf-global-trustee-sees-1-6-billion-customer-shortfall/?ref=business

MF Global commodity customers whose cash vanished when the firm collapsed last year are owed $1.6 billion — up significantly from previous estimates — the trustee tasked with recovering the money said on Friday.

The revised figure reflects growing concerns that the trustee will not be able to claw back $700 million in customer money trapped overseas. Until now, the trustee did not include the $700 million when projecting the shortfall, hoping to avoid a battle with MF Global’s British arm, which is holding the customer money.

But now the trustee, James W. Giddens, has acknowledged that he is making little headway in recovering the money from KPMG, the court-appointed administrator for MF Global’s British subsidiary. That money, Mr. Giddens said, was held for American clients who traded on foreign exchanges.

The problem echoes a cross-border fight in the Lehman Brothers bankruptcy, when customer money was trapped overseas. More than three years later, that issue remains unresolved...(MFGLOBAL) Customers who traded in the United States have received about 70 percent of their cash back. But customers who traded overseas have yet to see a penny...

SO MUCH FOR GLOBAL INVESTING....LONDON IS A PIRATES' NEST

MUCH MORE GRUESOMENESS AT LINK

[Demeter]

61. Mind-Blowing Charts From the Senate's Income Inequality Hearing

http://motherjones.com/mojo/2012/02/mind-blowing-charts-senates-income-inequity-hearing

CLICK AND WEEP

[Demeter]

62. Lanny Breuer’s Theory of Chatting Accountability for CEOs

http://www.emptywheel.net/2012/02/10/lanny-breuers-theory-of-chatting-accountability-for-ceos/

VIDEO CONFESSIONS BY SEVERAL OF THE PIRATES....CLICK ON LINK

[rfranklin]

65. The wealth of the U.S.A.: It's all about oil...

In the 20th century, America repeated the feat. We built oil-fueled cars, power plants, farms and factories; and then exported that technology to client states all over the world. The American dollar, backed by control of both the world's oil and most of the technology that made it useful, became the global currency standard. Powered by oil, we became the richest nation in history — so permeated with the stuff that very few of us can even see the degree to which we're soaking in it, let alone really grasp the fact that almost all of the wealth we have originally flowed out of the ground as crude...

....Even before 9/11, the Bush Administration has always had a sense of panicked desperation about it — a desperation we've usually attributed to conservative revolutionary zeal, religious fanaticism, or free-market fundamentalism. But it's also plausible to interpret some of this as the desperation of people who were tasked with protecting the American empire by keeping the oil taps open and under control at any cost — and who know, deep in their guts, that time is running out.

The Project for a New American Century's stated strategy for maintaining the American superpower in the face of a rising China was to invade and dominate the Middle East, and thus control China's access to oil for the next several decades. That was the intended long-term payoff of the Iraq War: control the oil, and thus control the world. In their minds, if we have to bankrupt the country, tear up the Constitution, and piss off every other country in the world along the way, it's worth it — since they know we're not worth a damn economically or politically without the oil anyway. Sure, the means are ugly; but according to their view of the ends, there's simply no alternative — and no other possible future worth discussing. They don't care if we hate them now, because they're convinced we'll thank them in 20 years for having the statesmanlike foresight to do what had to be done.

http://www.ourfuture.org/blog-entry/americas-energy-empire-100-year-view

[Demeter]

66. Are 'sweatshops' an economic necessity?

http://business.blogs.cnn.com/2012/02/06/are-sweatshops-an-economic-necessity/

A few years back, influential New York Times columnist Nicholas Kristof shocked readers by opening a column this way: “Africa desperately needs Western help in the form of schools, clinics and sweatshops.”
For Kristof, who regularly advocates better conditions for people in the developing world, this advice seems to belie his progressive views. But he’s part of a chorus of liberal economic thinkers who advocate that sweatshops – a broad term for factories or workshops characterized low wages, long hours, sometimes underage workers and unsafe conditions – are an unsavory but necessary first step to help bootstrap the world’s poorer economies. Nobel Laureate Paul Krugman penned a 1997 piece for Slate entitled “In Praise of Cheap Labor” that argued “bad jobs at bad wages are better than no jobs at all.”

That brings us to the once sleepy fishing village of Shenzhen, across the border from Hong Kong, which was the center for China's economic reforms in 1979. In just three decades the city has grown to more than 10 million people. Shenzhen is now home for numerous technology manufacturers and a large part of the Chinese operations of Foxconn, the electronics manufacturing giant that help builds the bulk of the world’s Apple iPhones, Microsoft Xboxes and Amazon Kindles. Foxconn – and by association, Apple, Microsoft and other multinational tech companies who lean on Foxconn’s million-plus Chinese workforce – are now under the microscope for allegations of poor labor conditions, especially after a more than a dozen of employee suicides at company plants in 2010.

Under the “sweatshop economics” argument, the troubles at Foxconn suggests Chinese labor development has reached an adolescent stage, with workers no longer content that any job is better than no job at all. The progression follows the route that Singapore, South Korea, Hong Kong and Taiwan took toward building their developed economies – a path laid out by post-World War II Japan. “Made in Japan” has disappeared from back of low-cost electronics, much like the once proliferate “Made in Hong Kong” or “Made in Singapore” can no longer be found clothing labels. Foxconn itself is a Taiwanese company that has shifted the bulk of its labor-intensive operations to the mainland. The sweat from the first generation of factory laborers in those East Asian nations paid for the education of their children and grandchildren, and the rise of their companies and economies creates higher value jobs in management, research and design, marketing and the like.

At least, that’s the dream. The ultimate macroeconomic test of the virtue of the sweatshop is does it really create upward social mobility? Some critics say no. In a piece for Foreign Policy in Focus, Jason Hickel of the London School of Economics, argues that especially in post-colonial areas of the third world, sweatshops arose not because of market forces but “the outcome of a deliberate strategy to render people desperate enough to take jobs that paid pennies...People — in Thailand and Peru, for example — only choose sweatshop jobs because they have been made desperate and given no alternatives for livelihood. So it’s not really a 'choice' at all,” he wrote. Yet looking at the macroeconomic success of China, it’s hard to not be awed by the country’s incredible strides since cracking open its markets to capitalism “with Chinese characteristics.” Since 1979 about 600 million people – or 10% of the entire population of the planet – have escaped poverty in China, according to the World Bank, a feat more successful “than all the aid programs we have seen throughout the world,” as Stanford economist Paul Romer put it.

Whether Western consumers will start to feel guilty – and switch off – from electronics products made in China remains to be seen. But as thousands lined up for jobs late last month at a new Foxconn plant in Zhengzhou, the spigot of Chinese workers who want to make your iPhone appears in no danger of running dry.

[Demeter]

67. SO, WHAT MAKES A NATION WEALTHY?

What is 'wealth"?

From Wikipedia:

Wealth is the abundance of valuable resources or material possessions. The word wealth is derived from the old English weal, which is from an Indo-European word stem. An individual, community, region or country that possesses an abundance of such possessions or resources is known as wealthy.

The concept of wealth, or its increase, is of significance in all areas of economics, and clearly so for growth economics and development economics. Yet the meaning of wealth is context-dependent and there is no universally agreed upon definition. At the most general level, economists may define wealth as "anything of value" which captures both the subjective nature of the idea and the idea that it is not a fixed or static concept. Various definitions and concepts of wealth have been asserted by various individuals and in different contexts. Defining wealth can be a normative process with various ethical implications, since often wealth maximization is seen as a goal or is thought to be a normative principle of its own.

Although precise data are not available, the total household wealth in the world has been estimated at $125 trillion (USD 125 x1012) in year 2000. About 90% of global wealth is distributed in North America, Europe, and "rich Asia-Pacific" countries (not including India), and 1% of adults are estimated to hold 40% of world wealth, a number which falls to 32% when adjusted for purchasing power parity.

From the Dictionary:

wealth (wlth) n.

1.obsolete : weal, welfare

a. An abundance of valuable material possessions or resources; riches.

b. The state of being rich; affluence.

2. All goods and resources having value in terms of exchange or use.

Origin of WEALTH
Middle English welthe, from wele weal
First Known Use: 13th century

3. A great amount; a profusion: a wealth of advice.

I'd go for the things that are priceless, myself. Development of that thought follows:

[xchrom]

70. bon jour!

it's fashion week -- and i'm in heaven.

[DemReadingDU]

72. I never pay attention to Fashion Week, lol

I wear what I like and feel comfortable in

[xchrom]

73. there's probably 3 serious fashionistas on du.

i know when i say something like that -- i'm probably the only one interested.

[snot]

79. Nope.

Got any fave fashion sites?

[xchrom]

80. oh cool! i like ny times, london telegraph,

and some blogs:

http://fashionbombdaily.com/

http://nymag.com/daily/fashion/

http://www.thesartorialist.com/


those are some i keep up with.

[snot]

85. Thanks! I'll check 'em out.

[xchrom]

71. Soros: Greek Bailout Won’t Rid Europe of ‘Danger’

http://www.bloomberg.com/news/2012-02-11/soros-says-greek-bailout-not-enough-to-rid-europe-of-danger-.html

Billionaire investor George Soros predicted weak growth and lingering political tension that could shatter Europe’s economic union even if Greece agrees to austerity measures.

“Right now the European Union and particularly the heavily indebted countries face a lost decade,” Soros said. “It might actually be longer than a decade because Japan that had a similar situation with the real estate boom and the banking crisis has had now 25 years of no growth,” Soros said.

“That will create tensions within the European Union, which could destroy the European Union,” he said. “And that’s a real danger.”

Soros spoke in an interview taped on Feb. 9 for CNN’s “Fareed Zakaria GPS,” scheduled to air today.

[xchrom]

74. Bankers arrested in tax probe {uk}

http://uk.reuters.com/article/2012/02/12/uk-british-banks-probe-idUKTRE81B09K20120212

(Reuters) - Several British bankers have been arrested as part of an investigation into alleged tax-related criminal offences, the country's customs and revenue service said on Sunday, including some from Royal Bank of Scotland.

"As a result of an ongoing HMRC investigation into tax-related criminal offences, HMRC has arrested a number of people, some of whom work for UK banks," Her Majesty's Revenue & Customs (HMRC) department said in a statement.

"This investigation relates to the actions of the people arrested in relation to their own financial affairs and is not connected to the business activities of the banks," it added.

The arrests come as Britain's top banks are under attack from politicians over paying large salaries and bonuses while the rest of the country suffers in the UK's faltering economy, and for not lending enough to businesses.

[Demeter]

75. You See, Tax Evasion is Theft from the Politicians' Power and Influence

Fraud is just theft from ordinary people....

[xchrom]

76. well said. nt

[xchrom]

77. In 'Money Shot,' Poet Reacts to Financial Crisis in Verse

[Demeter]

81. Well, the Party was a great success

and there wasn't hardly anything left over.

Bu this topic is going to hold over to next weekend...as the surface hasn't even been scratched (due to my AWOLness).

See you all later! Have a good week!