by Simon Black
I had the opportunity to tour Chile’s national military school yesterday. As you may know, I spent some time in the military myself in places that were not especially pleasant, so the visit was quite meaningful for me.
My host was a particular gung-ho Chilean Army officer; curiously, he told me that many of his fellow officers in Chile petitioned the government to authorize a deployment of soldiers to Iraq and Afghanistan. They want to participate in the action, if for no other reason than for the opportunity to improve training at home.
Chile’s politicians wouldn’t hear of it, their response being something slightly more eloquent than “no way in hell are we sending Chileans to die in that f’ing desert.” My host seemed rather disgruntled.
“Trust me,” I said, “you don’t want to go over there… and you should consider yourself lucky that your civilian leadership has the good sense to boycott the conflict. There is nothing good waiting for you in Iraq or Afghanistan.”
Young, gung-ho soldiers just want to get in the fight and don’t think much about morality, cost, or danger… so it was incredibly encouraging to hear how opposed his government was to the idea.
I further explained that, when I was at West Point in the post-Desert Storm era, the biggest thing we had to prepare for was the conflict in the Balkans. After graduation, things changed; the embassy bombings in Africa, the USS Cole, then the September 11th incident, all revolutionized the US military’s role.
In the 1980s, there was one single enemy… and the entire US military was focused on the Soviet Union. When the wall fell, the US aimlessly wandered the 1990s as the world’s policeman until ultimately adopting the role of ‘pre-emptive strike force’ in the 2000s (assuming official explanations are to be believed).
During my own career, I realized that the military was little more than a blunt instrument for bureaucrats to achieve political gain. I remember the night before the invasion of Iraq in 2003 so clearly: as all the forces were huddled at the border in Kuwait waiting to advance, I couldn’t stop thinking about the people on both sides who were about to die because George W. Bush had something to prove.
In the subsequent years, little has come from that conflict other than shattered lives, lost limbs, and a mountain of debt.
You can peel back the onion further and question the benefits of nearly every conflict– Mogadishu under Clinton, Panama under Bush I, Grenada under Reagan, the entirety of the Vietnam War under five presidents, the invasion of Greece in 1947, the occupation of Haiti in the 1920s… Cuba, the Philippines, Mexico, etc.
There are scores of other instances going all the way back to the late 1700s. And for what? To install a ruthless, puppet dictator? To maintain the country’s addiction to oil? To expand America’s domain until it matches the size of its government’s ego?
Libya is simply the latest in an endless string of folly. This logic of “let’s indiscriminately bomb a country in order to protect the civilians” can only come from the mind of a politician who quantifies benefit in votes and awards taxpayer money to defense contractors that make warfare more lethal.
Consider that there are entire industries with some of the most brilliant minds on the planet dedicated to making the military more ‘powerful’, i.e. deadly.
Today, politicians can watch a predator drone or stealth bomber rain death and destruction on a foreign population from his plasma screen. They brag about their smart bombs (which are racking up the civilian death toll) or how powerful their nuclear arsenal is, as if the efficiency of one’s destructive power is honorable.
Donald Rumsfeld famously used the phrase “shock and awe” as a promotional tool during the invasion of Iraq. It was something for the press to latch onto and fill the country with a dreamy spin on the military’s ability to exterminate foreigners like cockroaches.
They show us videos of massive explosions and Americans shriek like chimpanzees in boastful approval. Not exactly a far cry from the Roman Colosseum, is it?
In reality, there’s nothing romantic about this; the ability to kill efficiently should not be a source of pride. And the fact that a small group of elites has the power to send thousands of people to fight, die, and kill, as well as cajole an entire society into tacit support, is a total aberration of humanity.
Our descendents will surely look back on this time and wonder how we could have been so foolish– to let these people rob our freedoms; destroy our economies; kill foreigners on their home soil; and shower themselves with Peace Prize medals… all while keeping society quietly subdued with games, tricks, and bombastic patriotism.
They tell us to wave the flag, to buy yellow ribbon bumper stickers, and to remember the fallen on days like today. Truthfully, though, the memories of the fallen would be much better honored if the government quit making more of them… and stopped destroying the freedom that they supposedly died to defend.
* If you have ever doubted that freedom is on the decline, just watch this video recently shot at the Jefferson Memorial of all places.
Monday, May 30, 2011
Memorial Day Musings
by Karl Denninger
As we grill up some burgers, ribs or chicken, downing that proverbial six pack in remembrance of those who have given their lives for our Republic, perhaps we should take stock of what our alleged Republic has become.
Do we have a free country in any meaningful fashion?
Our forefathers primarily went to war with Britain over two issues: Taxation Without Representation and Writs of Assistance. While we're at it we'll add Equal Protection Under The Law.
The former everyone understands: The extraction of taxes from the people without any right to direct where the funds go.
How are we doing today?
Some half of the population pays no Federal Tax. They receive funds, net-net. Since it is now quite possible to "vote for a living", that's exactly what has happened. But this means that for each and every person who pays taxes on net, you no longer have representation.
How about the latter?
Well, we have the following:
•Searches on I-40 in Tennessee; these have been clearly identified (and admitted!) through media investigation to be effectively stopping drivers for profit. Where's the probable cause to search a traffic stop's vehicle for money and then declare it "drug proceeds" simply due to which direction the vehicle is traveling on I-40? In this case the police aren't even bothering with the formality of getting the Writ of Assistance - they're simply stealing the funds.
•Kicking down doors in Kentucky. Yes, the cops were chasing a person who allegedly sold crack cocaine. But we're then supposed to believe that seconds after this person ran into one of two apartments - being actively chased by the police - the suspect lit up a joint? (The rationale for the cops kicking down the door was that they smelled marijuana, and upon knocking heard "movement" and believed the occupants might be "destroying evidence.") That conviction was upheld in the United States Supreme Court - even though the person they were looking for wasn't in the apartment.
•Arresting a man for refusing entry to his apartment when no evidence of a crime was present and no probable cause existed. When the cops barged in anyway, he used only the amount of force necessary to prevent the unlawful entry. This event not only was upheld as "lawful" but the State Supreme Court (Indiana) ruled that you have no right to resist an unlawful entry as you can appeal to the courts. How well does that work when you've been shot dead during that unlawful entry?
•Think people being shot dead - some entirely innocent - doesn't happen? Oh really eh? Talk to the dead young girl in Detroit. Or to the dead former servicemember in Arizona. Or the deaf woodcarver in Seattle. Or the hundreds of others. In some cases was the person being sought inside? Yes. Was in some cases the person guilty of an offense? Yes. In how many cases have the circumstances justified summary execution? More to the point, in how many of these cases was this sort of violent entry justified? There's only one good excuse for that: If the person being sought has taken hostages. Otherwise good old-fashioned police work dictates that it's far more likely for the police to effectuate their lawful arrest by waiting for the subject to depart his residence and arrest him outside (where he's alone, cannot barricade himself, and cannot easily be in possession of anything more powerful than a handgun - which he has to be carrying concealed.) The use of military tactics must be reserved for those cases where imminent harm to innocent people is likely to occur. (If you think the suspect is going to flush evidence shut off the water to his house!)
•The Patriot Act. 4th Amendment? Where? And more to the point, show me where it's necessary. You can do that by documenting how it would have stopped 9/11 when we had every ability to do so as the hijackers were reported to the FBI in plenty of time to prevent the attack. Government malfeasance and misfeasance is never justification for new laws. Ever. Malfeasance and misfeasance must result in firings, not new legislation. Never mind that un-uniformed non-citizen combatants have no "Constitutional Rights" to abridge as the International Laws of War allow you to shoot such a person when caught as a spy. If there's actual evidence of criminal wrongdoing such as plotting an actual terrorist attack what's the problem with getting an ordinary warrant for your activities as a law enforcement agency?
•The increasingly secretive - and militarized - police forces. Throughout the land there are initiatives being pushed to prevent you, the average citizen, from video or audio-taping your encounters with law enforcement. Why? This, at the same time that we are treated to literal cameras on every corner, cameras in every cop car (scanning license plates in real-time in many cases!) and more. What's wrong with a nice, robust right of review of the acts of our "law enforcement" community? Exactly how many dogs have we seen video evidence of being shot execution-style when they have displayed no aggressive behavior at all? Or how about the known fact that police can and do lie to cover up their own acts of malfeasance? This is not a bald assertion; The Federal Government has in fact argued that it has the right to lie in sworn proceedings before the courts! (Islamic Sura Council .v. FBI) In that case the government's declared right to lie was rebuked - but no punishment was meted out, nor has it been in other, similar cases.
As for Equal Protection, may I ask where? Many forms of "special status" are in fact ensconced within the law. Others are notable by their absence. For example:
•It is "more illegal" to assault (or worse) a police officer, a federal official, or certain minorities than it is other people. Predicated on..... exactly what? If we have equal protection under the law, why is it more of an offense to assault someone if they're black than white, a cop than an office janitor? Either the offense is worthy of punishment or it is not. Equal protection means what it says.
•Congress can (and does) trade on inside information. I have often written on this topic. But if you do the same thing, you go to prison. It must be nice to know what the outcome will be of some Congressional action and trade in the markets on that information entirely legally and yet if you're a common person and get inside information and trade on it you go to prison. Being a Congressperson isn't just about making laws. It's also about personally profiting from the laws you make. Isn't that effectively identical to what "Kings" and "Barons" were all about?
•It's illegal to rob someone through deception and you can go to prison for many years. How is it that the words "stable prices", which are defined as the Federal Reserve's mandate, are turned into "2% inflation" which serially robs you of half of your wealth within a working man's life and yet nobody goes to prison for doing it? Just as damning, the FDIC's "Prompt Corrective Action" law contains so many "shalls" that it's difficult to count them, all of which (if complied with) prevent any depositor fund losses. Yet we have seen dozens of bank failures and in virtually every case PCA was ignored - with no punishment - and the losses have run to the billions. You'd go to prison for that sort of intentional malfeasance. Have government officials even lost their jobs, say much less faced indictment? Nope.
So as we say "Thank you" to those patriots, past and present, who have risked all, and those who have given all for our way of life in America, let us at the same time consider what it is that we have left of the founders' principles - and whether we, as a body politic and members of the armed forces, will sit for these willful and intentional acts of destruction of our Constitution, or whether we will instead use that time before the grill and while performing our 12oz curls to formulate peaceful yet forceful insistence that these, and other, violations of that Constitution be remedied.
As we grill up some burgers, ribs or chicken, downing that proverbial six pack in remembrance of those who have given their lives for our Republic, perhaps we should take stock of what our alleged Republic has become.
Do we have a free country in any meaningful fashion?
Our forefathers primarily went to war with Britain over two issues: Taxation Without Representation and Writs of Assistance. While we're at it we'll add Equal Protection Under The Law.
The former everyone understands: The extraction of taxes from the people without any right to direct where the funds go.
How are we doing today?
Some half of the population pays no Federal Tax. They receive funds, net-net. Since it is now quite possible to "vote for a living", that's exactly what has happened. But this means that for each and every person who pays taxes on net, you no longer have representation.
How about the latter?
Well, we have the following:
•Searches on I-40 in Tennessee; these have been clearly identified (and admitted!) through media investigation to be effectively stopping drivers for profit. Where's the probable cause to search a traffic stop's vehicle for money and then declare it "drug proceeds" simply due to which direction the vehicle is traveling on I-40? In this case the police aren't even bothering with the formality of getting the Writ of Assistance - they're simply stealing the funds.
•Kicking down doors in Kentucky. Yes, the cops were chasing a person who allegedly sold crack cocaine. But we're then supposed to believe that seconds after this person ran into one of two apartments - being actively chased by the police - the suspect lit up a joint? (The rationale for the cops kicking down the door was that they smelled marijuana, and upon knocking heard "movement" and believed the occupants might be "destroying evidence.") That conviction was upheld in the United States Supreme Court - even though the person they were looking for wasn't in the apartment.
•Arresting a man for refusing entry to his apartment when no evidence of a crime was present and no probable cause existed. When the cops barged in anyway, he used only the amount of force necessary to prevent the unlawful entry. This event not only was upheld as "lawful" but the State Supreme Court (Indiana) ruled that you have no right to resist an unlawful entry as you can appeal to the courts. How well does that work when you've been shot dead during that unlawful entry?
•Think people being shot dead - some entirely innocent - doesn't happen? Oh really eh? Talk to the dead young girl in Detroit. Or to the dead former servicemember in Arizona. Or the deaf woodcarver in Seattle. Or the hundreds of others. In some cases was the person being sought inside? Yes. Was in some cases the person guilty of an offense? Yes. In how many cases have the circumstances justified summary execution? More to the point, in how many of these cases was this sort of violent entry justified? There's only one good excuse for that: If the person being sought has taken hostages. Otherwise good old-fashioned police work dictates that it's far more likely for the police to effectuate their lawful arrest by waiting for the subject to depart his residence and arrest him outside (where he's alone, cannot barricade himself, and cannot easily be in possession of anything more powerful than a handgun - which he has to be carrying concealed.) The use of military tactics must be reserved for those cases where imminent harm to innocent people is likely to occur. (If you think the suspect is going to flush evidence shut off the water to his house!)
•The Patriot Act. 4th Amendment? Where? And more to the point, show me where it's necessary. You can do that by documenting how it would have stopped 9/11 when we had every ability to do so as the hijackers were reported to the FBI in plenty of time to prevent the attack. Government malfeasance and misfeasance is never justification for new laws. Ever. Malfeasance and misfeasance must result in firings, not new legislation. Never mind that un-uniformed non-citizen combatants have no "Constitutional Rights" to abridge as the International Laws of War allow you to shoot such a person when caught as a spy. If there's actual evidence of criminal wrongdoing such as plotting an actual terrorist attack what's the problem with getting an ordinary warrant for your activities as a law enforcement agency?
•The increasingly secretive - and militarized - police forces. Throughout the land there are initiatives being pushed to prevent you, the average citizen, from video or audio-taping your encounters with law enforcement. Why? This, at the same time that we are treated to literal cameras on every corner, cameras in every cop car (scanning license plates in real-time in many cases!) and more. What's wrong with a nice, robust right of review of the acts of our "law enforcement" community? Exactly how many dogs have we seen video evidence of being shot execution-style when they have displayed no aggressive behavior at all? Or how about the known fact that police can and do lie to cover up their own acts of malfeasance? This is not a bald assertion; The Federal Government has in fact argued that it has the right to lie in sworn proceedings before the courts! (Islamic Sura Council .v. FBI) In that case the government's declared right to lie was rebuked - but no punishment was meted out, nor has it been in other, similar cases.
As for Equal Protection, may I ask where? Many forms of "special status" are in fact ensconced within the law. Others are notable by their absence. For example:
•It is "more illegal" to assault (or worse) a police officer, a federal official, or certain minorities than it is other people. Predicated on..... exactly what? If we have equal protection under the law, why is it more of an offense to assault someone if they're black than white, a cop than an office janitor? Either the offense is worthy of punishment or it is not. Equal protection means what it says.
•Congress can (and does) trade on inside information. I have often written on this topic. But if you do the same thing, you go to prison. It must be nice to know what the outcome will be of some Congressional action and trade in the markets on that information entirely legally and yet if you're a common person and get inside information and trade on it you go to prison. Being a Congressperson isn't just about making laws. It's also about personally profiting from the laws you make. Isn't that effectively identical to what "Kings" and "Barons" were all about?
•It's illegal to rob someone through deception and you can go to prison for many years. How is it that the words "stable prices", which are defined as the Federal Reserve's mandate, are turned into "2% inflation" which serially robs you of half of your wealth within a working man's life and yet nobody goes to prison for doing it? Just as damning, the FDIC's "Prompt Corrective Action" law contains so many "shalls" that it's difficult to count them, all of which (if complied with) prevent any depositor fund losses. Yet we have seen dozens of bank failures and in virtually every case PCA was ignored - with no punishment - and the losses have run to the billions. You'd go to prison for that sort of intentional malfeasance. Have government officials even lost their jobs, say much less faced indictment? Nope.
So as we say "Thank you" to those patriots, past and present, who have risked all, and those who have given all for our way of life in America, let us at the same time consider what it is that we have left of the founders' principles - and whether we, as a body politic and members of the armed forces, will sit for these willful and intentional acts of destruction of our Constitution, or whether we will instead use that time before the grill and while performing our 12oz curls to formulate peaceful yet forceful insistence that these, and other, violations of that Constitution be remedied.
Today’s New… “But, You Didn’t Make Your Payment” Exemption to the Law
by Mandelman
I’m not a lawyer, so let’s be very clear about that, but I’m about to tell you how the law has always worked in this country, as far as I have understood it.
If you came to repossess my car, then you were required to be the person or entity that held the pink slip to my car, or you had to be working for the person or entity that held the pink slip to my car. If you were not the person or entity holding my pink slip, then you couldn’t come repossess my car.
In fact, if you came and repossessed my car but were NOT the person or entity holding my pink slip, then we had a phrase to describe that occurrence as well … you were STEALING MY CAR.
Pretty straightforward, right? I don’t even think you need to finish law school if that’s the extent to which you want to understand the law. And don’t let any of the attorneys that may be reading this around you try to make it more complicated, because it’s not. It is that simple… you can’t repossess someone’s car unless you’re the person or entity that holds the pink slip, or title, to that car… or are working for that person or entity, of course.
That’s the same way it’s supposed to work where houses are concerned. If you don’t make your mortgage payments, that doesn’t mean that everyone in the country is allowed to throw you out of your home… only the person or entity that holds your mortgage is supposed to be able to do that, right? Of course that’s right, silly. And don’t play semantics with me, that’s the deal.
But in this country today, there appears to be a new exemption to quite a few laws… it’s called the “But you didn’t make your mortgage payments” exemption, and when it comes into play, nothing else seems to much matter… you just lose.
Like, what if you don’t make your mortgage payments and the entity that comes to evict you from your home is one that you’ve never heard of before. And they have no proof whatsoever that they own your loan or represent the entity that owns your loan. Well, in general it’s tough cheese. The judge just says, “But you didn’t make your mortgage payments,” and that’s the end of that. And most everyone seems to be in agreement with this line of thinking.
You say, “But, your Honor… they’ve broken a dozen laws here… important laws… laws governing the transfer of property rights upon which the country has been built.” And the judge just gets annoyed saying, “But you didn’t make your mortgage payments,” and that’s the end of that. It’s almost like a get out of jail free card.
So, you say, “But your Honor, they’ve forged the documents, falsified the records, committed fraud on your court.” But he says it doesn’t matter… you didn’t make your mortgage payments… you have no rights and the party that’s foreclosing is now exempt from all of the laws that might otherwise apply. In fact, those laws are now reduced to being mere “technicalities.” And no one cares about technicalities as compared to you not making your mortgage payments.
So, I’m just wondering… don’t you think this sets kind of a dangerous precedent?
Let’s say that you’re not making your mortgage payments. And one night after dinner, the doorbell rings and you answer the door and it’s a representative of your mortgage servicer… and he punches you right in the face and then proceeds to beat the crap out of you.
And you end up in court. And the judge says, “But you didn’t make your mortgage payments, “ and dismisses the case. And you say, “But, your Honor… my mortgage servicer beat the crap out of me and that’s against the law, in fact there are all sorts of laws broken by him beating the crap out of me.” But the judge just replies, “But you didn’t make your mortgage payments, “ and that’s the end of that.
Do you think I’m being ridiculous? Why? What’s the difference between ignoring one set of laws and another set of laws? If you’re allowed to foreclose and kick someone out of his or her home without being the party that either owns the loan or represents the person who owns the loan… if you can ignore those laws, why can’t you ignore other laws too? Which laws apply, when one of the parties didn’t make his or her payments?
You see, I think the reason we have laws about the transfer of property is because it was important that someone not lose their property without those laws being followed. Whether one made their payments or not, wasn’t the point… the point was simply that the transfer of property rights has always been seen as a pretty big deal under the law, as far as I can tell.
I think the reason we let things get a little loose concerning foreclosure is that we trusted the bankers who were foreclose. In California, and all of the non-judicial foreclosure states, as far as I know, you don’t need to prove to the court that you hold the title to someone’s home in order to foreclose, and I’m pretty sure that the reason that was okay to our lawmakers was that they trusted the bankers… and they never envisioned not trusting them in that regard.
The problem is that today there is an abundance of evidence that says we cannot trust our bankers… quite often they lie, commit fraud on the courts, and in general are more than willing and able to fabricate and falsify whatever is required to foreclose on someone’s home… period. They don’t care at all… and they don’t get in trouble for it either, which I find the most disturbing part of the whole thing.
So, since its become clear that bankers lie, and cannot be trusted, we’re going to need to bring back the old laws about having to prove you’re the right party to be foreclosing on someone’s home before you’re allowed to do so. Several states have already done this… Hawaii and Arkansas, most recently. Arizona tried to pass such a law, but the banking lobby got to them and killed them both.
California had a bill that would have come close, but the banking lobby killed it in committee, for heaven’s sake. It was too dangerous to even debate in the legislature.
Some have said to me, “But Mandelman… the banks need to be able to foreclose or repossess when people don’t make their house or car payments.” And I reply… “No one is debating that point. Of course they can foreclose when payments are not made. If they’re the party who holds the beneficial interest, as the lawyers says, in the loan. If they lost the pink slip, they’ll have to correct that problem before they can come take back my car.”
It’s no different than if my car gets impounded for being parked in the wrong spot. When I show up to get it out of impound, I better have the registration, right? If I don’t, what am I told by the man at the impound lot? No ticket, no laundry, right?
We have laws about the transfer of property in this country and there are reasons for these laws. None of these laws say anything about banks only being required to follow them when someone is current on his or her payments.
Let’s stop making this more complicated than it needs to be… if the trust can prove that it does hold the note, that the note was properly assigned to that trust, that the note was endorsed… or whatever was supposed to happen according to the laws and rules, did in fact happen, then fine… foreclose away. But if that’s not the case, banker people… then you have to fix it… before you’re allowed to foreclose.
Sorry, and I know how unfair you think this is, but forging the documents isn’t an okay answer to this problem. Like if you want to repossess my car and you lost the pink slip, the acceptable answer is not to fake one on your laser printer and get Linda Green to sign it, got it? That’s not how we fix things in this country, and it doesn’t matter who made payments on time and who didn’t.
If that’s inconvenient, then so be it. And I have to think it’s a damn sight less inconvenient than what’s going on today, and if it’s even more inconvenient than that, then the bankers in this country have really screwed up bad, and we should all be shown what they’ve done.
I ran all of this by a lawyer friend of mine and here is the language from the Deed of Trust (page 23):
“Reconveyance. Upon payment of all sums secured by this security instrument, lender shall request trustee to reconvey the property and shall surrender this security instrument and all notes evidencing debt secured by this security instrument to trustee. Trustee shall reconvey the property without warranty to the person or persons legally entitled to it.”
So, apparently this language appears in EVERY Deed of Trust, including yours, your Honor. So when you want your pink slip/title/note in order to have your mortgage burning party, you may be disappointed to find that no one seems to have it.
And what about title insurance in the future? Will we be able to get it as a result of this whole mess being allowed to go on unchecked? I don’t think anyone really knows the answer to that question.
Lastly, the question always seems to come around to one of damages. How did the note not being properly endorsed to the trust and the trust being permitted to foreclosing anyway damage the homeowner? Again, it’s quite simple, really…
If someone is allowed to repossess my car even though that entity doesn’t hold my pink slip or work for the entity that holds my pink slip, then whoever repossessed my car STOLE IT. And that, by itself, sounds pretty damaging.
But what if someone shows up later and says they have the pink slip? What then? Will they be understanding and say, “Oh, someone else got it. No problem, we’re sorry to have bothered you. We’ll follow up with them.”
Somehow I doubt that will happen that way. And there are several reasons I’m not at all sure that this won’t be the case in the years to come. For one thing, both Taylor Bean & Whittaker and New Century Mortgage were found to have sold mortgages to more than one person at the same time, and others have admitted that it happens all the time.
And for another, I know of several homeowners who have filed quiet title actions and are still waiting for someone to show up and say they own the loan… in one case that’s recently been brought to my attention, it’s been almost a year and still no one has shown up. Does that mean no one will? Or will someone show up years from now? (Here’s the case, click it and you’ll see.)
Harvey v Garbett, Quiet Title Case in Draper Utah
I don’t really know, but wouldn’t it just be easier for the entity foreclosing to be the entity that actually holds the beneficial interest in the loan? You know, just as the law has always intended?
There’s another reason that it makes sense to require the right entity to foreclose… because the right entity, the entity that does in fact hold the beneficial interest in the loan would be much more likely to want to modify the loan as opposed to foreclosing on it, in instances where the payments have not been made.
You see, servicers chose to foreclose because it’s in their own best interests to foreclose, but what about the investor’s best interests? After all the investor is who put up the money in the first place, so what about the investor’s best interests?
Surely the investor would rather have a modified loan, especially in instances where the home is terribly underwater and by foreclosing the investor will realize an enormous loss and then not be able to sell it… perhaps for several years… wouldn’t you think that investor would prefer to modify the loan and get payments again?
Louis Ranieri, who is often referred to as the father of mortgage-backed securities had the following to say about foreclosing:
“The cardinal principle in the mortgage crisis is a very old one. You are almost always better off restructuring a loan in a crisis with a borrower than going to a foreclosure.
In the past that was never at issue because the loan was always in the hands of someone acting as a fiduciary. The bank, or someone like a bank owned them, and they always exercised their best judgment and their interest. The problem now with the size of securitization and so many loans are not in the hands of a portfolio lender but in a security where structurally nobody is acting as the fiduciary.”
Well, what do you know about that? So, it seems there are lots of good reasons that we should make sure that the entity foreclosing is the entity who does in fact own the loan, or at least work for the entity that owns the loan.
So, why are we making this so damn difficult? And why is it such a big problem for a bank-servicer-whatever to show up and actually prove that the trust actually holds the note in question? They don’t really expect us to buy into that whole, “But we lost them, your Honor. All of them, your Honor. It was a mass misplacement, your Honor.”
I mean, come on now… are we really supposed to believe that ALL of the major banks lost ALL of the notes and ALL at the same time? Seriously? I know 14 year-old boys that could tell you that such a story is simply not believable.
It’s time to come clean banker-people. Your story stinks to high heaven and the homeowners, lawyers, investors, and even the government investigators are all getting closer to uncovering the truth every day.
And until the banks start telling the truth, or modifying loans in the best interests of the investors and homeowners like they are supposed to…
… how about we the people pass a bill that requires the entity foreclosing to prove they are the entity that owns the loan… because it’s clear… abundantly clear… that we certainly can’t trust the trustee any more.
I’m not a lawyer, so let’s be very clear about that, but I’m about to tell you how the law has always worked in this country, as far as I have understood it.
If you came to repossess my car, then you were required to be the person or entity that held the pink slip to my car, or you had to be working for the person or entity that held the pink slip to my car. If you were not the person or entity holding my pink slip, then you couldn’t come repossess my car.
In fact, if you came and repossessed my car but were NOT the person or entity holding my pink slip, then we had a phrase to describe that occurrence as well … you were STEALING MY CAR.
Pretty straightforward, right? I don’t even think you need to finish law school if that’s the extent to which you want to understand the law. And don’t let any of the attorneys that may be reading this around you try to make it more complicated, because it’s not. It is that simple… you can’t repossess someone’s car unless you’re the person or entity that holds the pink slip, or title, to that car… or are working for that person or entity, of course.
That’s the same way it’s supposed to work where houses are concerned. If you don’t make your mortgage payments, that doesn’t mean that everyone in the country is allowed to throw you out of your home… only the person or entity that holds your mortgage is supposed to be able to do that, right? Of course that’s right, silly. And don’t play semantics with me, that’s the deal.
But in this country today, there appears to be a new exemption to quite a few laws… it’s called the “But you didn’t make your mortgage payments” exemption, and when it comes into play, nothing else seems to much matter… you just lose.
Like, what if you don’t make your mortgage payments and the entity that comes to evict you from your home is one that you’ve never heard of before. And they have no proof whatsoever that they own your loan or represent the entity that owns your loan. Well, in general it’s tough cheese. The judge just says, “But you didn’t make your mortgage payments,” and that’s the end of that. And most everyone seems to be in agreement with this line of thinking.
You say, “But, your Honor… they’ve broken a dozen laws here… important laws… laws governing the transfer of property rights upon which the country has been built.” And the judge just gets annoyed saying, “But you didn’t make your mortgage payments,” and that’s the end of that. It’s almost like a get out of jail free card.
So, you say, “But your Honor, they’ve forged the documents, falsified the records, committed fraud on your court.” But he says it doesn’t matter… you didn’t make your mortgage payments… you have no rights and the party that’s foreclosing is now exempt from all of the laws that might otherwise apply. In fact, those laws are now reduced to being mere “technicalities.” And no one cares about technicalities as compared to you not making your mortgage payments.
So, I’m just wondering… don’t you think this sets kind of a dangerous precedent?
Let’s say that you’re not making your mortgage payments. And one night after dinner, the doorbell rings and you answer the door and it’s a representative of your mortgage servicer… and he punches you right in the face and then proceeds to beat the crap out of you.
And you end up in court. And the judge says, “But you didn’t make your mortgage payments, “ and dismisses the case. And you say, “But, your Honor… my mortgage servicer beat the crap out of me and that’s against the law, in fact there are all sorts of laws broken by him beating the crap out of me.” But the judge just replies, “But you didn’t make your mortgage payments, “ and that’s the end of that.
Do you think I’m being ridiculous? Why? What’s the difference between ignoring one set of laws and another set of laws? If you’re allowed to foreclose and kick someone out of his or her home without being the party that either owns the loan or represents the person who owns the loan… if you can ignore those laws, why can’t you ignore other laws too? Which laws apply, when one of the parties didn’t make his or her payments?
You see, I think the reason we have laws about the transfer of property is because it was important that someone not lose their property without those laws being followed. Whether one made their payments or not, wasn’t the point… the point was simply that the transfer of property rights has always been seen as a pretty big deal under the law, as far as I can tell.
I think the reason we let things get a little loose concerning foreclosure is that we trusted the bankers who were foreclose. In California, and all of the non-judicial foreclosure states, as far as I know, you don’t need to prove to the court that you hold the title to someone’s home in order to foreclose, and I’m pretty sure that the reason that was okay to our lawmakers was that they trusted the bankers… and they never envisioned not trusting them in that regard.
The problem is that today there is an abundance of evidence that says we cannot trust our bankers… quite often they lie, commit fraud on the courts, and in general are more than willing and able to fabricate and falsify whatever is required to foreclose on someone’s home… period. They don’t care at all… and they don’t get in trouble for it either, which I find the most disturbing part of the whole thing.
So, since its become clear that bankers lie, and cannot be trusted, we’re going to need to bring back the old laws about having to prove you’re the right party to be foreclosing on someone’s home before you’re allowed to do so. Several states have already done this… Hawaii and Arkansas, most recently. Arizona tried to pass such a law, but the banking lobby got to them and killed them both.
California had a bill that would have come close, but the banking lobby killed it in committee, for heaven’s sake. It was too dangerous to even debate in the legislature.
Some have said to me, “But Mandelman… the banks need to be able to foreclose or repossess when people don’t make their house or car payments.” And I reply… “No one is debating that point. Of course they can foreclose when payments are not made. If they’re the party who holds the beneficial interest, as the lawyers says, in the loan. If they lost the pink slip, they’ll have to correct that problem before they can come take back my car.”
It’s no different than if my car gets impounded for being parked in the wrong spot. When I show up to get it out of impound, I better have the registration, right? If I don’t, what am I told by the man at the impound lot? No ticket, no laundry, right?
We have laws about the transfer of property in this country and there are reasons for these laws. None of these laws say anything about banks only being required to follow them when someone is current on his or her payments.
Let’s stop making this more complicated than it needs to be… if the trust can prove that it does hold the note, that the note was properly assigned to that trust, that the note was endorsed… or whatever was supposed to happen according to the laws and rules, did in fact happen, then fine… foreclose away. But if that’s not the case, banker people… then you have to fix it… before you’re allowed to foreclose.
Sorry, and I know how unfair you think this is, but forging the documents isn’t an okay answer to this problem. Like if you want to repossess my car and you lost the pink slip, the acceptable answer is not to fake one on your laser printer and get Linda Green to sign it, got it? That’s not how we fix things in this country, and it doesn’t matter who made payments on time and who didn’t.
If that’s inconvenient, then so be it. And I have to think it’s a damn sight less inconvenient than what’s going on today, and if it’s even more inconvenient than that, then the bankers in this country have really screwed up bad, and we should all be shown what they’ve done.
I ran all of this by a lawyer friend of mine and here is the language from the Deed of Trust (page 23):
“Reconveyance. Upon payment of all sums secured by this security instrument, lender shall request trustee to reconvey the property and shall surrender this security instrument and all notes evidencing debt secured by this security instrument to trustee. Trustee shall reconvey the property without warranty to the person or persons legally entitled to it.”
So, apparently this language appears in EVERY Deed of Trust, including yours, your Honor. So when you want your pink slip/title/note in order to have your mortgage burning party, you may be disappointed to find that no one seems to have it.
And what about title insurance in the future? Will we be able to get it as a result of this whole mess being allowed to go on unchecked? I don’t think anyone really knows the answer to that question.
Lastly, the question always seems to come around to one of damages. How did the note not being properly endorsed to the trust and the trust being permitted to foreclosing anyway damage the homeowner? Again, it’s quite simple, really…
If someone is allowed to repossess my car even though that entity doesn’t hold my pink slip or work for the entity that holds my pink slip, then whoever repossessed my car STOLE IT. And that, by itself, sounds pretty damaging.
But what if someone shows up later and says they have the pink slip? What then? Will they be understanding and say, “Oh, someone else got it. No problem, we’re sorry to have bothered you. We’ll follow up with them.”
Somehow I doubt that will happen that way. And there are several reasons I’m not at all sure that this won’t be the case in the years to come. For one thing, both Taylor Bean & Whittaker and New Century Mortgage were found to have sold mortgages to more than one person at the same time, and others have admitted that it happens all the time.
And for another, I know of several homeowners who have filed quiet title actions and are still waiting for someone to show up and say they own the loan… in one case that’s recently been brought to my attention, it’s been almost a year and still no one has shown up. Does that mean no one will? Or will someone show up years from now? (Here’s the case, click it and you’ll see.)
Harvey v Garbett, Quiet Title Case in Draper Utah
I don’t really know, but wouldn’t it just be easier for the entity foreclosing to be the entity that actually holds the beneficial interest in the loan? You know, just as the law has always intended?
There’s another reason that it makes sense to require the right entity to foreclose… because the right entity, the entity that does in fact hold the beneficial interest in the loan would be much more likely to want to modify the loan as opposed to foreclosing on it, in instances where the payments have not been made.
You see, servicers chose to foreclose because it’s in their own best interests to foreclose, but what about the investor’s best interests? After all the investor is who put up the money in the first place, so what about the investor’s best interests?
Surely the investor would rather have a modified loan, especially in instances where the home is terribly underwater and by foreclosing the investor will realize an enormous loss and then not be able to sell it… perhaps for several years… wouldn’t you think that investor would prefer to modify the loan and get payments again?
Louis Ranieri, who is often referred to as the father of mortgage-backed securities had the following to say about foreclosing:
“The cardinal principle in the mortgage crisis is a very old one. You are almost always better off restructuring a loan in a crisis with a borrower than going to a foreclosure.
In the past that was never at issue because the loan was always in the hands of someone acting as a fiduciary. The bank, or someone like a bank owned them, and they always exercised their best judgment and their interest. The problem now with the size of securitization and so many loans are not in the hands of a portfolio lender but in a security where structurally nobody is acting as the fiduciary.”
Well, what do you know about that? So, it seems there are lots of good reasons that we should make sure that the entity foreclosing is the entity who does in fact own the loan, or at least work for the entity that owns the loan.
So, why are we making this so damn difficult? And why is it such a big problem for a bank-servicer-whatever to show up and actually prove that the trust actually holds the note in question? They don’t really expect us to buy into that whole, “But we lost them, your Honor. All of them, your Honor. It was a mass misplacement, your Honor.”
I mean, come on now… are we really supposed to believe that ALL of the major banks lost ALL of the notes and ALL at the same time? Seriously? I know 14 year-old boys that could tell you that such a story is simply not believable.
It’s time to come clean banker-people. Your story stinks to high heaven and the homeowners, lawyers, investors, and even the government investigators are all getting closer to uncovering the truth every day.
And until the banks start telling the truth, or modifying loans in the best interests of the investors and homeowners like they are supposed to…
… how about we the people pass a bill that requires the entity foreclosing to prove they are the entity that owns the loan… because it’s clear… abundantly clear… that we certainly can’t trust the trustee any more.
The Truth About the American Economy
By Robert Reich
Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written thirteen books, including The Work of Nations, Locked in the Cabinet, Supercapitalism, and his most recent book, Aftershock.
The U.S. economy continues to stagnate. It’s growing at the rate of 1.8 percent, which is barely growing at all. Consumer spending is down. Home prices are down. Jobs and wages are going nowhere.
It’s vital that we understand the truth about the American economy.
How did we go from the Great Depression to 30 years of Great Prosperity? And from there, to 30 years of stagnant incomes and widening inequality, culminating in the Great Recession? And from the Great Recession into such an anemic recovery?
The Great Prosperity
During three decades from 1947 to 1977, the nation implemented what might be called a basic bargain with American workers. Employers paid them enough to buy what they produced. Mass production and mass consumption proved perfect complements. Almost everyone who wanted a job could find one with good wages, or at least wages that were trending upward.
During these three decades everyone’s wages grew — not just those at or near the top.
Government enforced the basic bargain in several ways. It used Keynesian policy to achieve nearly full employment. It gave ordinary workers more bargaining power. It provided social insurance. And it expanded public investment. Consequently, the portion of total income that went to the middle class grew while the portion going to the top declined. But this was no zero-sum game. As the economy grew almost everyone came out ahead, including those at the top.
The pay of workers in the bottom fifth grew 116 percent over these years — faster than the pay of those in the top fifth (which rose 99 percent), and in the top 5 percent (86 percent).
Productivity also grew quickly. Labor productivity — average output per hour worked — doubled. So did median incomes. Expressed in 2007 dollars, the typical family’s income rose from about $25,000 to $55,000. The basic bargain was cinched.
The middle class had the means to buy, and their buying created new jobs. As the economy grew, the national debt shrank as a percentage of it.
The Great Prosperity also marked the culmination of a reorganization of work that had begun during the Depression. Employers were required by law to provide extra pay — time-and-a-half — for work stretching beyond 40 hours a week. This created an incentive for employers to hire additional workers when demand picked up. Employers also were required to pay a minimum wage, which improved the pay of workers near the bottom as demand picked up.
When workers were laid off, usually during an economic downturn, government provided them with unemployment benefits, usually lasting until the economy recovered and they were rehired. Not only did this tide families over but it kept them buying goods and services — an “automatic stabilizer” for the economy in downturns.
Perhaps most significantly, government increased the bargaining leverage of ordinary workers. They were guaranteed the right to join labor unions, with which employers had to bargain in good faith. By the mid-1950s more than a third of all America workers in the private sector were unionized. And the unions demanded and received a fair slice of the American pie. Non-unionized companies, fearing their workers would otherwise want a union, offered similar deals.
Americans also enjoyed economic security against the risks of economic life — not only unemployment benefits but also, through Social Security, insurance against disability, loss of a major breadwinner, workplace injury and inability to save enough for retirement. In 1965 came health insurance for the elderly and the poor (Medicare and Medicaid). Economic security proved the handmaiden of prosperity. In requiring Americans to share the costs of adversity it enabled them to share the benefits of peace of mind. And by offering peace of mind, it freed them to consume the fruits of their labors.
The government sponsored the dreams of American families to own their own home by providing low-cost mortgages and interest deductions on mortgage payments. In many sections of the country, government subsidized electricity and water to make such homes habitable. And it built the roads and freeways that connected the homes with major commercial centers.
Government also widened access to higher education. The GI Bill paid college costs for those who returned from war. The expansion of public universities made higher education affordable to the American middle class.
Government paid for all of this with tax revenues from an expanding middle class with rising incomes. Revenues were also boosted by those at the top of the income ladder whose marginal taxes were far higher. The top marginal income tax rate during World War II was over 68 percent. In the 1950s, under Dwight Eisenhower, whom few would call a radical, it rose to 91 percent. In the 1960s and 1970s the highest marginal rate was around 70 percent. Even after exploiting all possible deductions and credits, the typical high-income taxpayer paid a marginal federal tax of over 50 percent. But contrary to what conservative commentators had predicted, the high tax rates did not reduce economic growth. To the contrary, they enabled the nation to expand middle-class prosperity and fuel growth.
The Middle-Class Squeeze, 1977-2007
During the Great Prosperity of 1947-1977, the basic bargain had ensured that the pay of American workers coincided with their output. In effect, the vast middle class received an increasing share of the benefits of economic growth. But after that point, the two lines began to diverge: Output per hour — a measure of productivity — continued to rise. But real hourly compensation was left in the dust.
It’s easy to blame “globalization” for the stagnation of middle incomes, but technological advances have played as much if not a greater role. Factories remaining in the United States have shed workers as they automated. So has the service sector.
But contrary to popular mythology, trade and technology have not reduced the overall number of American jobs. Their more profound effect has been on pay. Rather than be out of work, most Americans have quietly settled for lower real wages, or wages that have risen more slowly than the overall growth of the economy per person. Although unemployment following the Great Recession remains high, jobs are slowly returning. But in order to get them, many workers have to accept lower pay than before.
Starting more than three decades ago, trade and technology began driving a wedge between the earnings of people at the top and everyone else. The pay of well-connected graduates of prestigious colleges and MBA programs has soared. But the pay and benefits of most other workers has either flattened or dropped. And the ensuing division has also made most middle-class American families less economically secure.
Government could have enforced the basic bargain. But it did the opposite. It slashed public goods and investments — whacking school budgets, increasing the cost of public higher education, reducing job training, cutting public transportation and allowing bridges, ports and highways to corrode.
It shredded safety nets — reducing aid to jobless families with children, tightening eligibility for food stamps, and cutting unemployment insurance so much that by 2007 only 40 percent of the unemployed were covered. It halved the top income tax rate from the range of 70 to 90 percent that prevailed during the Great Prosperity to 28 to 35 percent; allowed many of the nation’s rich to treat their income as capital gains subject to no more than 15 percent tax; and shrunk inheritance taxes that affected only the top-most 1.5 percent of earners. Yet at the same time, America boosted sales and payroll taxes, both of which took a bigger chunk out of the pay the middle class and the poor than of the well off.
How America Kept Buying: Three Coping Mechanisms
Coping mechanism No. 1: Women move into paid work. Starting in the late 1970s, and escalating in the 1980s and 1990s, women went into paid work in greater and greater numbers. For the relatively small sliver of women with four-year college degrees, this was the natural consequence of wider educational opportunities and new laws against gender discrimination that opened professions to well-educated women. But the vast majority of women who migrated into paid work did so in order to prop up family incomes as households were hit by the stagnant or declining wages of male workers.
This transition of women into paid work has been one of the most important social and economic changes to occur over the last four decades. In 1966, 20 percent of mothers with young children worked outside the home. By the late 1990s, the proportion had risen to 60 percent. For married women with children under the age of 6, the transformation has been even more dramatic — from 12 percent in the 1960s to 55 percent by the late 1990s.
Coping mechanism No. 2: Everyone works longer hours. By the mid 2000s it was not uncommon for men to work more than 60 hours a week and women to work more than 50. A growing number of people took on two or three jobs. All told, by the 2000s, the typical American worker worked more than 2,200 hours a year — 350 hours more than the average European worked, more hours even than the typically industrious Japanese put in. It was many more hours than the typical American middle-class family had worked in 1979 — 500 hours longer, a full 12 weeks more.
Coping mechanism No. 3: Draw down savings and borrow to the hilt. After exhausting the first two coping mechanisms, the only way Americans could keep consuming as before was to save less and go deeper into debt. During the Great Prosperity the American middle class saved about 9 percent of their after-tax incomes each year. By the late 1980s and early 1990s, that portion had been whittled down to about 7 percent. The savings rate then dropped to 6 percent in 1994, and on down to 3 percent in 1999. By 2008, Americans saved nothing. Meanwhile, household debt exploded. By 2007, the typical American owed 138 percent of their after-tax income.
The Challenge for the Future
All three coping mechanisms have been exhausted. The fundamental economic challenge ahead is to restore the vast American middle class.
That requires resurrecting the basic bargain linking wages to overall gains, and providing the middle class a share of economic gains sufficient to allow them to purchase more of what the economy can produce. As we should have learned from the Great Prosperity — the 30 years after World War II when America grew because most Americans shared in the nation’s prosperity — we cannot have a growing and vibrant economy without a growing and vibrant middle class.
Robert Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. He has written thirteen books, including The Work of Nations, Locked in the Cabinet, Supercapitalism, and his most recent book, Aftershock.
The U.S. economy continues to stagnate. It’s growing at the rate of 1.8 percent, which is barely growing at all. Consumer spending is down. Home prices are down. Jobs and wages are going nowhere.
It’s vital that we understand the truth about the American economy.
How did we go from the Great Depression to 30 years of Great Prosperity? And from there, to 30 years of stagnant incomes and widening inequality, culminating in the Great Recession? And from the Great Recession into such an anemic recovery?
The Great Prosperity
During three decades from 1947 to 1977, the nation implemented what might be called a basic bargain with American workers. Employers paid them enough to buy what they produced. Mass production and mass consumption proved perfect complements. Almost everyone who wanted a job could find one with good wages, or at least wages that were trending upward.
During these three decades everyone’s wages grew — not just those at or near the top.
Government enforced the basic bargain in several ways. It used Keynesian policy to achieve nearly full employment. It gave ordinary workers more bargaining power. It provided social insurance. And it expanded public investment. Consequently, the portion of total income that went to the middle class grew while the portion going to the top declined. But this was no zero-sum game. As the economy grew almost everyone came out ahead, including those at the top.
The pay of workers in the bottom fifth grew 116 percent over these years — faster than the pay of those in the top fifth (which rose 99 percent), and in the top 5 percent (86 percent).
Productivity also grew quickly. Labor productivity — average output per hour worked — doubled. So did median incomes. Expressed in 2007 dollars, the typical family’s income rose from about $25,000 to $55,000. The basic bargain was cinched.
The middle class had the means to buy, and their buying created new jobs. As the economy grew, the national debt shrank as a percentage of it.
The Great Prosperity also marked the culmination of a reorganization of work that had begun during the Depression. Employers were required by law to provide extra pay — time-and-a-half — for work stretching beyond 40 hours a week. This created an incentive for employers to hire additional workers when demand picked up. Employers also were required to pay a minimum wage, which improved the pay of workers near the bottom as demand picked up.
When workers were laid off, usually during an economic downturn, government provided them with unemployment benefits, usually lasting until the economy recovered and they were rehired. Not only did this tide families over but it kept them buying goods and services — an “automatic stabilizer” for the economy in downturns.
Perhaps most significantly, government increased the bargaining leverage of ordinary workers. They were guaranteed the right to join labor unions, with which employers had to bargain in good faith. By the mid-1950s more than a third of all America workers in the private sector were unionized. And the unions demanded and received a fair slice of the American pie. Non-unionized companies, fearing their workers would otherwise want a union, offered similar deals.
Americans also enjoyed economic security against the risks of economic life — not only unemployment benefits but also, through Social Security, insurance against disability, loss of a major breadwinner, workplace injury and inability to save enough for retirement. In 1965 came health insurance for the elderly and the poor (Medicare and Medicaid). Economic security proved the handmaiden of prosperity. In requiring Americans to share the costs of adversity it enabled them to share the benefits of peace of mind. And by offering peace of mind, it freed them to consume the fruits of their labors.
The government sponsored the dreams of American families to own their own home by providing low-cost mortgages and interest deductions on mortgage payments. In many sections of the country, government subsidized electricity and water to make such homes habitable. And it built the roads and freeways that connected the homes with major commercial centers.
Government also widened access to higher education. The GI Bill paid college costs for those who returned from war. The expansion of public universities made higher education affordable to the American middle class.
Government paid for all of this with tax revenues from an expanding middle class with rising incomes. Revenues were also boosted by those at the top of the income ladder whose marginal taxes were far higher. The top marginal income tax rate during World War II was over 68 percent. In the 1950s, under Dwight Eisenhower, whom few would call a radical, it rose to 91 percent. In the 1960s and 1970s the highest marginal rate was around 70 percent. Even after exploiting all possible deductions and credits, the typical high-income taxpayer paid a marginal federal tax of over 50 percent. But contrary to what conservative commentators had predicted, the high tax rates did not reduce economic growth. To the contrary, they enabled the nation to expand middle-class prosperity and fuel growth.
The Middle-Class Squeeze, 1977-2007
During the Great Prosperity of 1947-1977, the basic bargain had ensured that the pay of American workers coincided with their output. In effect, the vast middle class received an increasing share of the benefits of economic growth. But after that point, the two lines began to diverge: Output per hour — a measure of productivity — continued to rise. But real hourly compensation was left in the dust.
It’s easy to blame “globalization” for the stagnation of middle incomes, but technological advances have played as much if not a greater role. Factories remaining in the United States have shed workers as they automated. So has the service sector.
But contrary to popular mythology, trade and technology have not reduced the overall number of American jobs. Their more profound effect has been on pay. Rather than be out of work, most Americans have quietly settled for lower real wages, or wages that have risen more slowly than the overall growth of the economy per person. Although unemployment following the Great Recession remains high, jobs are slowly returning. But in order to get them, many workers have to accept lower pay than before.
Starting more than three decades ago, trade and technology began driving a wedge between the earnings of people at the top and everyone else. The pay of well-connected graduates of prestigious colleges and MBA programs has soared. But the pay and benefits of most other workers has either flattened or dropped. And the ensuing division has also made most middle-class American families less economically secure.
Government could have enforced the basic bargain. But it did the opposite. It slashed public goods and investments — whacking school budgets, increasing the cost of public higher education, reducing job training, cutting public transportation and allowing bridges, ports and highways to corrode.
It shredded safety nets — reducing aid to jobless families with children, tightening eligibility for food stamps, and cutting unemployment insurance so much that by 2007 only 40 percent of the unemployed were covered. It halved the top income tax rate from the range of 70 to 90 percent that prevailed during the Great Prosperity to 28 to 35 percent; allowed many of the nation’s rich to treat their income as capital gains subject to no more than 15 percent tax; and shrunk inheritance taxes that affected only the top-most 1.5 percent of earners. Yet at the same time, America boosted sales and payroll taxes, both of which took a bigger chunk out of the pay the middle class and the poor than of the well off.
How America Kept Buying: Three Coping Mechanisms
Coping mechanism No. 1: Women move into paid work. Starting in the late 1970s, and escalating in the 1980s and 1990s, women went into paid work in greater and greater numbers. For the relatively small sliver of women with four-year college degrees, this was the natural consequence of wider educational opportunities and new laws against gender discrimination that opened professions to well-educated women. But the vast majority of women who migrated into paid work did so in order to prop up family incomes as households were hit by the stagnant or declining wages of male workers.
This transition of women into paid work has been one of the most important social and economic changes to occur over the last four decades. In 1966, 20 percent of mothers with young children worked outside the home. By the late 1990s, the proportion had risen to 60 percent. For married women with children under the age of 6, the transformation has been even more dramatic — from 12 percent in the 1960s to 55 percent by the late 1990s.
Coping mechanism No. 2: Everyone works longer hours. By the mid 2000s it was not uncommon for men to work more than 60 hours a week and women to work more than 50. A growing number of people took on two or three jobs. All told, by the 2000s, the typical American worker worked more than 2,200 hours a year — 350 hours more than the average European worked, more hours even than the typically industrious Japanese put in. It was many more hours than the typical American middle-class family had worked in 1979 — 500 hours longer, a full 12 weeks more.
Coping mechanism No. 3: Draw down savings and borrow to the hilt. After exhausting the first two coping mechanisms, the only way Americans could keep consuming as before was to save less and go deeper into debt. During the Great Prosperity the American middle class saved about 9 percent of their after-tax incomes each year. By the late 1980s and early 1990s, that portion had been whittled down to about 7 percent. The savings rate then dropped to 6 percent in 1994, and on down to 3 percent in 1999. By 2008, Americans saved nothing. Meanwhile, household debt exploded. By 2007, the typical American owed 138 percent of their after-tax income.
The Challenge for the Future
All three coping mechanisms have been exhausted. The fundamental economic challenge ahead is to restore the vast American middle class.
That requires resurrecting the basic bargain linking wages to overall gains, and providing the middle class a share of economic gains sufficient to allow them to purchase more of what the economy can produce. As we should have learned from the Great Prosperity — the 30 years after World War II when America grew because most Americans shared in the nation’s prosperity — we cannot have a growing and vibrant economy without a growing and vibrant middle class.
Saturday, May 28, 2011
How to destroy the web of Debt
By Golem XIV
Here's a question for you. Why have we heard nothing in the media or parliament about A People's or a Sovereign Debt Jubilee? Is it because a People's Debt Jubilee is simply a nice but unworkable fantasy dreamt up by crackpot bloggers like me?
This is what I have been wondering. And then in response to the Jubilee article, a regular contributor to this blog, Hawkeye, wrote to me and suggested I take a look at "The Great EU Debt Write Off".
The web site contains details of a 'proof of concept' study of the Jubilee idea done by Professor Anthony Evans and his colleagues at The ESCP Europe Business School. The study used up to date figures from the IMF and the Bank of International Settlement (BIS) to see what would happen if Portugal, Ireland, Italy, Greece, Spain, Britain, France, and Germany simply cross cancelled all the foreign debt they owed each other - a Sovereign debt jubilee.
The web of mutually destroying debt they studied looks something like this. The image is from a New York Times article called Europe's Web of Debt. (The original article has a larger version)
Professor Evans said what he and his colleagues found "was astounding".
The countries can reduce their total debt by 64% through cross cancellation of interlinked debt, taking total debt from 40.47% of GDP to 14.58%
Six countries – Ireland, Italy, Spain, Britain, France and Germany – can write off more than 50% of their outstanding debt
Ireland can reduce its debt from almost 130% of GDP to under 20% of GDP
France can virtually eliminate its debt – reducing it to just 0.06% of GDP
Among the 'debtor' nations a Debt Jubilee means Ireland reduces its debt load to from 130% of GDP to under 20%! That would virtually wipe out the crippling cuts being forced upon the Irish. While even among the 'Creditor' nations France benefits by nearly eliminating its debt. So the French people too would benefit. Which does beg the question - who is benefiting by enforcing all the debts? I'll give you one guess.
Of course there can always be a devil lurking in the detail ready to spoil a happy ending, so I called Professor Evans and asked him about his methods and their limitations.
First thing he pointed out is that by 'All Foreign Debt" he included foreign debts held by Private banks. But as he also said, considering that in many countries the Tax Payer owns large chunks of the Private banks in question and so the line between truly sovereign and private bank debt is already blurred and sadly we 'own' both.
Professor Evans said the main limitation they had was not being able to determine the duration or rates of the different bonds for different countries. So he was cancelling debts which although of the same capital amount would have been worth different amounts because of different interest rates and durations. Understandably this makes him wary of making too much of his results. However he did agree that on such large gross amounts, such interest rates and duration differences could be considered marginal. In the grand scheme of the massive debt reductions achieved the differences of rate and duration could be justifiably seen as a small cost to bear for the over all gain.
So there are grounds for criticizing his findings. BUT the criticisms are not so large that they derail the force of the findings. The simple fact of the matter is that the PEOPLE of all our nations would be immensely better off. They would not be facing crippling austerity cuts, nor be being forced into selling their National heritage and wealth at Fire Sale prices to the very banks who are the cause of the debt crisis, and who will profit from the fire sales.
Which brings us back to the reason there has been no discussion at all of a Debt Jubilee. Keeping the debts is going to profit the banks and their bond holders. Not only that, but making sure there is no discussion of mutual debt cancellation, and thereby keeping sovereign debt levels as high as possible, gives those on the political Right, the perfect crowbar they have wished for but never had, for forcing through a political agenda of privatizing and destroying the social fabric of welfare. An agenda for which they never quite got a mandate through the ballot box.
That is why the debts are being maintained and why there has been no discussion of any alternative. Our politicians are 'protecting' the debts and those whose will profit from their payment over and above the welfare of the people they are supposed to serve.
The bankers don't want any discussion of mutual debt cross cancellation because it would force a necessary deleveraging. The bankers do not want deleveraging because leverage is the secret of how the bankers make their profits and without it they wouldn't look nearly so smart. The reason debt cancellation would force deleveraging is because much of the debt which would be cancelled is currently being held on bank books as an 'asset' serving to underpin yet more loans and debt. So start cancelling debt and the bankers pyramid of leveraged debt begins to crumble. The fact that it has to crumble if we are to recover without being crippled with trying to pay unpayable debts never gets a mention in banker-world.
A second reason bankers don't like cancelling debt is that what would quickly get revealed is which banks are the walking dead kept alive by transfusions from us. At the moment they are all hiding each others debts.
Think about it - they all want the debts they owe each other to be paid in full - but since they can't afford to pay them, they have got our politicians to make US pay all the debts they owe to each other, for them.
I don't think our government's have any interest in protecting us. They may say they do, and may make noises about 'necessary measures' but they seem mind-blind to any alternatives to what the bankers whisper in their ears. So here are a few ideas the bankers won't like AT ALL.
As a start let us say that we will only consider paying debts which we can see. What I mean by that is the debts we are expected to pay must be transparently clear to us. They must be in an auditable form not held in mystery SIV's in off-shore in tax havens. They must be held on balance sheet, not off it and on shore where we can inspect and audit them.
These are perfectly reasonable and entirely enforceable requests. We, the public simply want to be sure that what we are being asked to pay, is in a place and form such that we can verify for ourselves that the debts are legal, above board and ours to pay.
If the bond holders have nothing to hide then they have nothing to fear. Any bond holder who refused and any debt which was kept off-shore and un-auditable would not be payed. It would be not even be considered for counting against other debt it would simply be zeroed. Simple, fair, clear, transparent and legal.
First thing this would do is destroy tax evasion and avoidance. Every nation would get a colossal windfall of tax THAT SHOULD HAVE BEEN PAID IN THE FIRST PLACE. That would help the austerity a bit.
Second there has been so much fraud, so much of it now clearly known and documented, that only a cretin would pay 'debts' on faith. Show me the paper or go away.
It is a fact that the vast bulk of the global stock pile of wealth and particularly debt backed 'wealth' is held off-shore in tax havens and Banking secrecy jurisdictions. Why? Why should we pay debts to people who won't pay their taxes?
Here's a question for you. Why have we heard nothing in the media or parliament about A People's or a Sovereign Debt Jubilee? Is it because a People's Debt Jubilee is simply a nice but unworkable fantasy dreamt up by crackpot bloggers like me?
This is what I have been wondering. And then in response to the Jubilee article, a regular contributor to this blog, Hawkeye, wrote to me and suggested I take a look at "The Great EU Debt Write Off".
The web site contains details of a 'proof of concept' study of the Jubilee idea done by Professor Anthony Evans and his colleagues at The ESCP Europe Business School. The study used up to date figures from the IMF and the Bank of International Settlement (BIS) to see what would happen if Portugal, Ireland, Italy, Greece, Spain, Britain, France, and Germany simply cross cancelled all the foreign debt they owed each other - a Sovereign debt jubilee.
The web of mutually destroying debt they studied looks something like this. The image is from a New York Times article called Europe's Web of Debt. (The original article has a larger version)
Professor Evans said what he and his colleagues found "was astounding".
The countries can reduce their total debt by 64% through cross cancellation of interlinked debt, taking total debt from 40.47% of GDP to 14.58%
Six countries – Ireland, Italy, Spain, Britain, France and Germany – can write off more than 50% of their outstanding debt
Ireland can reduce its debt from almost 130% of GDP to under 20% of GDP
France can virtually eliminate its debt – reducing it to just 0.06% of GDP
Among the 'debtor' nations a Debt Jubilee means Ireland reduces its debt load to from 130% of GDP to under 20%! That would virtually wipe out the crippling cuts being forced upon the Irish. While even among the 'Creditor' nations France benefits by nearly eliminating its debt. So the French people too would benefit. Which does beg the question - who is benefiting by enforcing all the debts? I'll give you one guess.
Of course there can always be a devil lurking in the detail ready to spoil a happy ending, so I called Professor Evans and asked him about his methods and their limitations.
First thing he pointed out is that by 'All Foreign Debt" he included foreign debts held by Private banks. But as he also said, considering that in many countries the Tax Payer owns large chunks of the Private banks in question and so the line between truly sovereign and private bank debt is already blurred and sadly we 'own' both.
Professor Evans said the main limitation they had was not being able to determine the duration or rates of the different bonds for different countries. So he was cancelling debts which although of the same capital amount would have been worth different amounts because of different interest rates and durations. Understandably this makes him wary of making too much of his results. However he did agree that on such large gross amounts, such interest rates and duration differences could be considered marginal. In the grand scheme of the massive debt reductions achieved the differences of rate and duration could be justifiably seen as a small cost to bear for the over all gain.
So there are grounds for criticizing his findings. BUT the criticisms are not so large that they derail the force of the findings. The simple fact of the matter is that the PEOPLE of all our nations would be immensely better off. They would not be facing crippling austerity cuts, nor be being forced into selling their National heritage and wealth at Fire Sale prices to the very banks who are the cause of the debt crisis, and who will profit from the fire sales.
Which brings us back to the reason there has been no discussion at all of a Debt Jubilee. Keeping the debts is going to profit the banks and their bond holders. Not only that, but making sure there is no discussion of mutual debt cancellation, and thereby keeping sovereign debt levels as high as possible, gives those on the political Right, the perfect crowbar they have wished for but never had, for forcing through a political agenda of privatizing and destroying the social fabric of welfare. An agenda for which they never quite got a mandate through the ballot box.
That is why the debts are being maintained and why there has been no discussion of any alternative. Our politicians are 'protecting' the debts and those whose will profit from their payment over and above the welfare of the people they are supposed to serve.
The bankers don't want any discussion of mutual debt cross cancellation because it would force a necessary deleveraging. The bankers do not want deleveraging because leverage is the secret of how the bankers make their profits and without it they wouldn't look nearly so smart. The reason debt cancellation would force deleveraging is because much of the debt which would be cancelled is currently being held on bank books as an 'asset' serving to underpin yet more loans and debt. So start cancelling debt and the bankers pyramid of leveraged debt begins to crumble. The fact that it has to crumble if we are to recover without being crippled with trying to pay unpayable debts never gets a mention in banker-world.
A second reason bankers don't like cancelling debt is that what would quickly get revealed is which banks are the walking dead kept alive by transfusions from us. At the moment they are all hiding each others debts.
Think about it - they all want the debts they owe each other to be paid in full - but since they can't afford to pay them, they have got our politicians to make US pay all the debts they owe to each other, for them.
I don't think our government's have any interest in protecting us. They may say they do, and may make noises about 'necessary measures' but they seem mind-blind to any alternatives to what the bankers whisper in their ears. So here are a few ideas the bankers won't like AT ALL.
As a start let us say that we will only consider paying debts which we can see. What I mean by that is the debts we are expected to pay must be transparently clear to us. They must be in an auditable form not held in mystery SIV's in off-shore in tax havens. They must be held on balance sheet, not off it and on shore where we can inspect and audit them.
These are perfectly reasonable and entirely enforceable requests. We, the public simply want to be sure that what we are being asked to pay, is in a place and form such that we can verify for ourselves that the debts are legal, above board and ours to pay.
If the bond holders have nothing to hide then they have nothing to fear. Any bond holder who refused and any debt which was kept off-shore and un-auditable would not be payed. It would be not even be considered for counting against other debt it would simply be zeroed. Simple, fair, clear, transparent and legal.
First thing this would do is destroy tax evasion and avoidance. Every nation would get a colossal windfall of tax THAT SHOULD HAVE BEEN PAID IN THE FIRST PLACE. That would help the austerity a bit.
Second there has been so much fraud, so much of it now clearly known and documented, that only a cretin would pay 'debts' on faith. Show me the paper or go away.
It is a fact that the vast bulk of the global stock pile of wealth and particularly debt backed 'wealth' is held off-shore in tax havens and Banking secrecy jurisdictions. Why? Why should we pay debts to people who won't pay their taxes?
What We Better Be Thinking About....
by Karl Denninger
Your next vote may be your last. And no, the RINOs and TPINOs (Tea Party in Name Only) will not get it done. They went to Washington claiming opposition to the Patriot Act, then not only reauthorized it but added to it. The other side has removed your right to NOT buy a thing (health insurance.)
Think this is simply "vote Republican" or "vote Democrat"?
Oook. How's that "hope and change" working out for you? Economically? Jobs? Did health insurance costs go up or down after Obamacare was passed? What were you promised, and what was delivered?
Not just for those on the left - but those on the right.
Think folks.
Think carefully.
Your next vote may be your last. And no, the RINOs and TPINOs (Tea Party in Name Only) will not get it done. They went to Washington claiming opposition to the Patriot Act, then not only reauthorized it but added to it. The other side has removed your right to NOT buy a thing (health insurance.)
Think this is simply "vote Republican" or "vote Democrat"?
Oook. How's that "hope and change" working out for you? Economically? Jobs? Did health insurance costs go up or down after Obamacare was passed? What were you promised, and what was delivered?
Not just for those on the left - but those on the right.
Think folks.
Think carefully.
America Will Not Survive Without Alternative Markets
by Brandon Smith of Alt Market
Commerce is the lifeblood of a nation. Without the free flow of trade, without financial adaptability, without intuitive markets driven by the natural currents of supply, demand, and innovation, cultures stagnate, countries whither, and one generation after the next finds itself deeper in the somber doldrums of economic disintegration. In an environment of transparency, honesty, and the absence of monopoly (government or corporate), on the rare occasions in history that these conditions are actually present in one place at one time, we often see an explosion of prosperity and true wealth creation. When local, decentralized markets are given precedence over subversive elitist leviathans like mercantilism or globalism, a wellspring of abundance bursts forward. Free people, building true free markets that serve the specific needs of individual communities and insulating the overall economy from systemic collapse; this has always been the wave of the future. Not “integration”, “harmonization”, or some fantastical nonsensical “global village” administrated by a faceless unaccountable transnational entity like the IMF, infested with sociopathic maid raping euro-trolls.
Unfortunately, average Americans today have grown far too accustomed to having their commerce, and thus their livelihoods, micromanaged for them. Most cities and states in this country today are entirely dependent on corporate infrastructure or federal funding for ready employment and steady incomes. Most people have never even considered life without the Dollar; a highly flawed and unstable fiat currency. They exist enslaved, without any means to carry on even the most remedial exchanges in the event that the worthless paper notes finally hyperinflate into oblivion. Most Americans have never even imagined where they might obtain food or other goods if grocery chains were to shut down for more than a week; a very likely scenario considering the extent to which such businesses are indebted, not to mention the effects of destructive price increases due to inflation in commodities and freight rates. The bottom line is, if the daily fiscal life of the average American were to deviate from today’s norm even slightly, the results would be devastating. There is no flexibility in our current system. All is rigid and fragile. There is no backup plan.
The problem, of course, is in educating the populace on the necessity of alternative markets. To many, the U.S. economy has been and always will be the standard. How could it change? Surely, people have been discussing the possibility of total economic collapse for decades, and it hasn’t happened yet, so why should we worry now?
What these people don’t realize is that first, economic storms are progressive events. They rarely happen in the blink of an eye. Far more like a wounded airplane struggling to maintain altitude but invariably crashing into the unforgiving earth. The collapse of our dollar has been an ongoing program since at least the early 1970’s, when Nixon removed our currency completely from any vestige of a gold standard. Our industrial infrastructure has been dismantled over many years and replaced with low paying, remedial, and unreliable service employment. And, our national debt has been snowballing, more than doubling every decade since 1970. You can only put so much weight on the camel’s back before it finally snaps. This brings us to the second point; that snap has already occurred here in the U.S., many just don’t seem to recognize it.
Make no mistake, the year of 2008 was the breaking point. As soon as the private Federal Reserve in tandem with a paid for and pocketed U.S. government began rampant production of fiat without oversight, without guidelines, and without the consent of the American people, it was all over for our existing economy. The consequences of quantitative easing measures initiated in 2008 will be far reaching into the foreseeable future, and will probably go down in history as the catalyst for immense international catastrophes soon to come. For people who argue that collapse is a farfetched “conspiracy theory”, I simply point out that the collapse they scoff at is going on right now, right under their gullible noses.
This realization usually brings us to the next obvious question; what can we do to stop this terrible landslide?
To begin with, we need to abandon the idea that our economic implosion is something that can be mended before the pain it creates is felt. Like every sickness, it is something that we will have to struggle through, and suffer through, before a cure is made viable. There is also no single magical solution to defuse the situation, and anyone who tries to sell you one is probably not to be trusted. We must accept that no matter what we do from this point on, we WILL see a breakdown of the U.S. dollar and by attrition the rest of our financial system. Our only practical options are those which insulate and shield us as much as possible from the effects of that breakdown, so that the country might have the opportunity to remove manipulative elements (global corporatists) from the equation, and rebuild.
Do we wait around for politicians, legislators, and courts, to set up protective barriers in our communities and our local economies for us? I certainly hope not. Anyone doing that will be twiddling their thumbs long after the nation has fallen apart. Elections at the federal level have proven time and again to be utterly useless in effecting any meaningful improvements in our society, let alone preventing calamity. There are only so many Ron Paul’s and Rand Paul’s operating in our government today. Vote for them, but don’t put all your hopes for prosperity and liberty into one candidate, or one election.
At the state level (depending on your state), there tends to be a bit more breathing room, and a chance for free market and sound money legislation to be pushed to the forefront (as has been done in Utah). However, relying on state representatives alone will not turn the tide. When it comes down to it, the only person that can protect your financial future, and your community’s financial future, is you. Yes, they created the mess, and now YOU are responsible for cleaning it up. Sorry, that’s just the way it goes…
This means that if we want to ensure any level of safety to our economic environment, we as Americans must do it ourselves. We must stop buying into the lie that participation in commerce is about mere "consumption", and actually take ownership of our economy. We must decouple from the unstable mainstream system and the dollar, and construct our own local markets with our own stable non-fiat currencies. They’ll call them “black markets”, they’ll call it an undermining of the dollar, they’ll even call it terrorism, but the fact remains, life, and thus trade, must go on. If the globalist based economy does not provide an environment that facilitates free trade, or tries to dominate trade as a method of social control, then alternative markets are going to arise. It is unavoidable.
Must we go cold turkey on the Greenback, or weekly trips to Walmart? Not necessarily. Alternative markets can be organized in parallel with the existing system, and used in tandem until the primary economy takes the final plunge, or, can be replaced entirely. That is to say, as localized markets, barter networks, and gold and silver based currencies become more popular in the midst of the comparably feeble and poisonous mainstream economy, they will begin to supplant the old system. Why? Because the laws of supply and demand cannot be undone. People want a strong currency, and they want reliable foundations for local trade. If you provide these things, they will cast aside that which doesn’t work, and adapt that which does.
This is why the globalist system strains so hard to undermine any concept of “choice”. Either you use the dollar, or you starve. Either you work within the corporate framework, or you starve. Either you accept the autocratic puppeteering of groups like the Federal Reserve, or you starve. As soon as people begin to recognize that they actually have other options beyond the establishment status quo, the base of power for the elites falls apart.
It is not a matter of IF alternative markets are built. It is only a matter of WHEN alternative markets are built. Barter organizations, food co-ops, and sound money, are a matter of survival. No modern economic collapse that I know of has occurred without causing the sudden ascent of localized commerce to fill the void. For example, Greece has recently seen a significant rise in barter networking programs in the past year, although some of these programs are still rather primitive, and many are still too dependent on the internet instead of encouraging more face to face community building:
Argentina has had barter networks and alternative markets for years following the collapse of its currency and economy. The Argentine financial system has yet to recover from its collapse, despite IMF claims that they “saved the country” from certain destruction. Because of this, barter organizations continue to operate there even today (again, still in primitive fashion and with their own shortcomings, including a continued dependence on unbacked “coupons” as currency):
Economic collapse forces the issue of alternative commerce. The problem is that nearly every culture to face such dire straights waits until after they are thoroughly desperate before they launch a replacement economy. In my view, Americans can do much better. First, we have foreknowledge of collapse. Many citizens are at least aware that the threat exists and treat it more seriously than they did a few years ago. Others in the Liberty Movement are fully cognizant of the inevitable danger and have a complex understanding of economics in general. Next, we still have some wealth (fiat wealth), though dwindling, which can be converted into tangible commodities like gold and silver, as well as materials for micro-industries (a skill set you have achieved that is useful in a post collapse economy could be turned into a micro-industry you can use for trade). We have extremely wide usage of the internet (for now), which is the perfect tool for connecting people and groups together, setting the stage for face to face organization later on. We have states, with 10th Amendments rights, which can be converted into “safe havens”; financially, politically, and socially protected areas of the U.S. where independent citizens can congregate that provide shelter and mutual defense from the chaos that collapse imposes. And, most importantly, we have the will to make these things possible, though it seems hidden or even non-existent, it is there in many of us. All that is required are vehicles which give that will a direction and a means.
The Alternative Market Project, which I recently founded, could be one of those vehicles, and could be used as a way to accelerate the creation of barter networks and sound money programs. However, to be clear, ANYONE with enough focus and enough patience can set up a barter network within their town or city. The primary thing to remember, is that this must be done now, while we still have the ability to maneuver, not after we’re already in a financial stranglehold.
For anyone out there that still doubts the need for localized commerce, sound money, and private trade groups, I suggest they consider the following:
1) In 2010, for the first time in two decades, central banks around the world became net buyers of gold, driving prices to record highs:
http://www.bloomberg.com/news/2011-04-29/gold-buying-central-banks-may-signal-bullion-extending-record-price-rally.html
Some skeptics site George Soros’ recent dumping of his gold holdings which was partly attributed to the drop in metals this past month. However, what they don’t seem to grasp is that Soros dumped his ETF holdings, or paper gold, which were likely unbacked by any physical as most ETF securities are unbacked. He dumped inherently worthless stocks. Unfortunately, this kind of manipulative action by bankers still has psychological effects on the markets. But, as always, gold and silver are coming back stronger than ever, and foreign banks continue to buy.
If global banks are buying up precious metals in enormous quantities, then logically, it serves our interests to protect ourselves in the same fashion. More states need to adopt sound money legislation now, as Utah did, before it is too late.
2) The method that the Bureau of Labor Statistics uses to calculate inflation has been changed 24 times since 1978, making the CPI the most skewed index in history. The Fed reports inflation at 2.7 percent, and core inflation at 1.2 percent. If one were to calculate inflation using the old methods, the CPI would actually be 10 percent, and this is still a conservative estimate when one considers that most commodities, from oil to grains, have doubled in price in the past two to three years. The Fed and the BLS hide true inflation because it signals bad monetary policy and warns the world that the dollar is devaluing at an alarming rate. Any economy that is still tied to the dollar as this process escalates will be beaten bloody. This includes your local economy. Decoupling from the dollar and building alternative markets using methods outside of the mainstream is the only way to cushion the blow. Foreign economies are slowly distancing themselves from the Greenback, and so should we.
3) Remember the mortgage crisis that triggered the never-ending bailouts of corporate bankers who gave themselves huge Christmas bonuses as a special thanks to the American taxpayer? Well, the crisis never stopped. Foreclosure sales have continued to climb, and home values dropped in 75 percent of U.S. cities in the first quarter of 2011:
http://www.bloomberg.com/news/2011-05-10/home-prices-drop-in-three-fourths-of-u-s-metro-areas-realtors-group-says.html
What have global banks done in response? They continue to make wild bets on housing! Why not! It’s not their money! Bank of America in particular has thrown billions into a gamble that housing prices will bounce back in the last half of this year, even while the fundamentals of the economy show no signs whatsoever that house prices will return, or that people will suddenly begin buying again en masse.
http://www.bloomberg.com/news/2011-05-10/bank-of-america-billions-of-dollars-in-losses-at-stake-on-moynihan-outlook.html
Will bailouts of the “Too Big To Fails” continue? Absolutely. This signals not only the disintegration of America’s last store of value (property), but also the relentless creation of debt and currency devaluation caused by an out of control quantitative easing policy. Bailouts have severe consequences. Don’t ever let old Benanke tell you otherwise…
4) U.S. long term Treasury auctions continue to perform dismally. Foreign buyers are few, and most prefer not to invest in American debt for more than six to eight weeks at a time, let alone thirty years:
http://www.zerohedge.com/article/30-year-prices-438-very-weak-auction-indirects-flee
The Federal Reserve now revels in its role as the only serious purchaser of U.S. bonds, expanding new national debt while paying for old national debt with a printing press, of all things. The question is not whether Congress will raise the debt ceiling to continue this madness. Of course they will raise the debt ceiling! The real question is; what will happen when they do? Are you willing to bet your own survival on the hope that foreign holders of U.S. treasury bonds will not dump their reserves in protest of the cycle of inflationary debt doom created by the Treasury and the Fed? I’m not…
5) Are you a state or federal employee planning retirement? Expecting your pension fund to cover it? Don’t bother. Currently, the U.S. Treasury under the ever shameless Timothy Geithner is siphoning revenues from federal employee pension funds and 401K’s and using them to pay for the horrible machine to keep rolling while they create even more debt. Of course, Timmy assures us that they’ll put the money back once the debt ceiling is settled:
http://www.washingtonpost.com/business/economy/treasury-to-tap-pensions-to-help-fund-government/2011/05/15/AF2fqK4G_story.html
States have been creeping towards pension confiscation for at least a year. New propaganda talking points include arguments that many pensions are “padded” by employees using legal loopholes to “manipulate overtime” or steal more money from taxpayers. In some cases this may be true, but already you can see that the rationalizations are being formed in the public mind which will allow states to more easily confiscate all pension funds, as if all state employees nickel and dime the system and should be punished. In reality, pension confiscation will only be about poor state management and fiscal ineptness. Austerity is about to go into full swing here in the U.S.:
http://www.bloomberg.com/news/2011-05-20/california-legislation-takes-aim-at-pension-padding-for-460-000-official.html
Without the retirement nest egg you spent half your life procuring, what will you do? Continue to rely on the establishment structure that stabbed you in the back? Or, will you step away from the structure completely, and build your own?
6) “Low Food Security” in U.S. households, which is measured by the Census Bureau, grew by 39 percent from 2007 to 2008. The poverty rate has hit a 15 year high. Considering that the Census sets the poverty level standard as thin as a family of four living for under $21,000 a year (a ridiculously low income for four people to live on), it would be safe to assume that poverty is much higher in this country than is officially reported:
http://www.worldhunger.org/articles/Learn/us_hunger_facts.htm
This mass of destitution and potential homelessness is hidden away by one thing; entitlement programs. Welfare and foodstamps have created an illusory barrier between our society and the poor that inhabit it. What happens if entitlement programs disappear? All of that ugly truth we tried to ignore will come flooding into full view. Alternative markets aren’t just a stop gap for ourselves, they are also a new option for those who have lost everything to the volatile mainstream economy. We can either make a safety net for those millions struck by poverty, and help them to become self sufficient, or we can let them stew out on the streets, waiting for more government handouts, until they turn towards more violent means to get what they need. Ultimately, by creating new methods of commerce today, we can prevent far greater turmoil and destruction later on.
7) I don’t know if you have noticed, but the world seems to be going loony tunes lately. Unrest is washing over the Middle East like a boiling tidal wave. Protestors are being mowed down by gunfire in Syria, Yemen, and Egypt. The Libyan War is going to go on for years. Pakistan is barely able to hide its own destabilization. The U.S. is sending predator drones into people’s bathrooms in countries across the planet. The EU is now continuing its steady descent into debt default, one overleveraged country at a time. And, Japan is living up to its reputation as the birthplace of such luminaries as Godzilla and Mothra, its seas and air absorbing radioactive material beyond anything we ever saw at Chernobyl. You have to wonder if this is all leading to some kind of climax.
Because of globalization, almost every nation on Earth has been pushed into interdependency with every other nation. At least economically. What happens on one side of the planet effects the other side of the planet. This fact should be considered by those Americans who live oblivious to world events, or ignorantly believe that what happens in Vegas stays in Vegas. We are certainly not protected from the strife across the oceans. Why? Because we have no independent decentralized systems in place to counter the failings of global “harmonization”.
We as average Americans with limited incomes cannot quickly develop alternative markets on a global scale, but we can create such markets in our immediate communities. Each new free and self contained market reinforces the others, until eventually, you have a network of independent organizations which serve to support each other simply by being independent. It sounds like a contradiction, or perhaps even a paradox, but it is an undeniable model. The more free a culture is, the more self reliant a culture is, the more prosperous it becomes. Our job, is to bring America back to that realm of prosperity, one town, one city, one state at a time.
Commerce is the lifeblood of a nation. Without the free flow of trade, without financial adaptability, without intuitive markets driven by the natural currents of supply, demand, and innovation, cultures stagnate, countries whither, and one generation after the next finds itself deeper in the somber doldrums of economic disintegration. In an environment of transparency, honesty, and the absence of monopoly (government or corporate), on the rare occasions in history that these conditions are actually present in one place at one time, we often see an explosion of prosperity and true wealth creation. When local, decentralized markets are given precedence over subversive elitist leviathans like mercantilism or globalism, a wellspring of abundance bursts forward. Free people, building true free markets that serve the specific needs of individual communities and insulating the overall economy from systemic collapse; this has always been the wave of the future. Not “integration”, “harmonization”, or some fantastical nonsensical “global village” administrated by a faceless unaccountable transnational entity like the IMF, infested with sociopathic maid raping euro-trolls.
Unfortunately, average Americans today have grown far too accustomed to having their commerce, and thus their livelihoods, micromanaged for them. Most cities and states in this country today are entirely dependent on corporate infrastructure or federal funding for ready employment and steady incomes. Most people have never even considered life without the Dollar; a highly flawed and unstable fiat currency. They exist enslaved, without any means to carry on even the most remedial exchanges in the event that the worthless paper notes finally hyperinflate into oblivion. Most Americans have never even imagined where they might obtain food or other goods if grocery chains were to shut down for more than a week; a very likely scenario considering the extent to which such businesses are indebted, not to mention the effects of destructive price increases due to inflation in commodities and freight rates. The bottom line is, if the daily fiscal life of the average American were to deviate from today’s norm even slightly, the results would be devastating. There is no flexibility in our current system. All is rigid and fragile. There is no backup plan.
The problem, of course, is in educating the populace on the necessity of alternative markets. To many, the U.S. economy has been and always will be the standard. How could it change? Surely, people have been discussing the possibility of total economic collapse for decades, and it hasn’t happened yet, so why should we worry now?
What these people don’t realize is that first, economic storms are progressive events. They rarely happen in the blink of an eye. Far more like a wounded airplane struggling to maintain altitude but invariably crashing into the unforgiving earth. The collapse of our dollar has been an ongoing program since at least the early 1970’s, when Nixon removed our currency completely from any vestige of a gold standard. Our industrial infrastructure has been dismantled over many years and replaced with low paying, remedial, and unreliable service employment. And, our national debt has been snowballing, more than doubling every decade since 1970. You can only put so much weight on the camel’s back before it finally snaps. This brings us to the second point; that snap has already occurred here in the U.S., many just don’t seem to recognize it.
Make no mistake, the year of 2008 was the breaking point. As soon as the private Federal Reserve in tandem with a paid for and pocketed U.S. government began rampant production of fiat without oversight, without guidelines, and without the consent of the American people, it was all over for our existing economy. The consequences of quantitative easing measures initiated in 2008 will be far reaching into the foreseeable future, and will probably go down in history as the catalyst for immense international catastrophes soon to come. For people who argue that collapse is a farfetched “conspiracy theory”, I simply point out that the collapse they scoff at is going on right now, right under their gullible noses.
This realization usually brings us to the next obvious question; what can we do to stop this terrible landslide?
To begin with, we need to abandon the idea that our economic implosion is something that can be mended before the pain it creates is felt. Like every sickness, it is something that we will have to struggle through, and suffer through, before a cure is made viable. There is also no single magical solution to defuse the situation, and anyone who tries to sell you one is probably not to be trusted. We must accept that no matter what we do from this point on, we WILL see a breakdown of the U.S. dollar and by attrition the rest of our financial system. Our only practical options are those which insulate and shield us as much as possible from the effects of that breakdown, so that the country might have the opportunity to remove manipulative elements (global corporatists) from the equation, and rebuild.
Do we wait around for politicians, legislators, and courts, to set up protective barriers in our communities and our local economies for us? I certainly hope not. Anyone doing that will be twiddling their thumbs long after the nation has fallen apart. Elections at the federal level have proven time and again to be utterly useless in effecting any meaningful improvements in our society, let alone preventing calamity. There are only so many Ron Paul’s and Rand Paul’s operating in our government today. Vote for them, but don’t put all your hopes for prosperity and liberty into one candidate, or one election.
At the state level (depending on your state), there tends to be a bit more breathing room, and a chance for free market and sound money legislation to be pushed to the forefront (as has been done in Utah). However, relying on state representatives alone will not turn the tide. When it comes down to it, the only person that can protect your financial future, and your community’s financial future, is you. Yes, they created the mess, and now YOU are responsible for cleaning it up. Sorry, that’s just the way it goes…
This means that if we want to ensure any level of safety to our economic environment, we as Americans must do it ourselves. We must stop buying into the lie that participation in commerce is about mere "consumption", and actually take ownership of our economy. We must decouple from the unstable mainstream system and the dollar, and construct our own local markets with our own stable non-fiat currencies. They’ll call them “black markets”, they’ll call it an undermining of the dollar, they’ll even call it terrorism, but the fact remains, life, and thus trade, must go on. If the globalist based economy does not provide an environment that facilitates free trade, or tries to dominate trade as a method of social control, then alternative markets are going to arise. It is unavoidable.
Must we go cold turkey on the Greenback, or weekly trips to Walmart? Not necessarily. Alternative markets can be organized in parallel with the existing system, and used in tandem until the primary economy takes the final plunge, or, can be replaced entirely. That is to say, as localized markets, barter networks, and gold and silver based currencies become more popular in the midst of the comparably feeble and poisonous mainstream economy, they will begin to supplant the old system. Why? Because the laws of supply and demand cannot be undone. People want a strong currency, and they want reliable foundations for local trade. If you provide these things, they will cast aside that which doesn’t work, and adapt that which does.
This is why the globalist system strains so hard to undermine any concept of “choice”. Either you use the dollar, or you starve. Either you work within the corporate framework, or you starve. Either you accept the autocratic puppeteering of groups like the Federal Reserve, or you starve. As soon as people begin to recognize that they actually have other options beyond the establishment status quo, the base of power for the elites falls apart.
It is not a matter of IF alternative markets are built. It is only a matter of WHEN alternative markets are built. Barter organizations, food co-ops, and sound money, are a matter of survival. No modern economic collapse that I know of has occurred without causing the sudden ascent of localized commerce to fill the void. For example, Greece has recently seen a significant rise in barter networking programs in the past year, although some of these programs are still rather primitive, and many are still too dependent on the internet instead of encouraging more face to face community building:
Argentina has had barter networks and alternative markets for years following the collapse of its currency and economy. The Argentine financial system has yet to recover from its collapse, despite IMF claims that they “saved the country” from certain destruction. Because of this, barter organizations continue to operate there even today (again, still in primitive fashion and with their own shortcomings, including a continued dependence on unbacked “coupons” as currency):
Economic collapse forces the issue of alternative commerce. The problem is that nearly every culture to face such dire straights waits until after they are thoroughly desperate before they launch a replacement economy. In my view, Americans can do much better. First, we have foreknowledge of collapse. Many citizens are at least aware that the threat exists and treat it more seriously than they did a few years ago. Others in the Liberty Movement are fully cognizant of the inevitable danger and have a complex understanding of economics in general. Next, we still have some wealth (fiat wealth), though dwindling, which can be converted into tangible commodities like gold and silver, as well as materials for micro-industries (a skill set you have achieved that is useful in a post collapse economy could be turned into a micro-industry you can use for trade). We have extremely wide usage of the internet (for now), which is the perfect tool for connecting people and groups together, setting the stage for face to face organization later on. We have states, with 10th Amendments rights, which can be converted into “safe havens”; financially, politically, and socially protected areas of the U.S. where independent citizens can congregate that provide shelter and mutual defense from the chaos that collapse imposes. And, most importantly, we have the will to make these things possible, though it seems hidden or even non-existent, it is there in many of us. All that is required are vehicles which give that will a direction and a means.
The Alternative Market Project, which I recently founded, could be one of those vehicles, and could be used as a way to accelerate the creation of barter networks and sound money programs. However, to be clear, ANYONE with enough focus and enough patience can set up a barter network within their town or city. The primary thing to remember, is that this must be done now, while we still have the ability to maneuver, not after we’re already in a financial stranglehold.
For anyone out there that still doubts the need for localized commerce, sound money, and private trade groups, I suggest they consider the following:
1) In 2010, for the first time in two decades, central banks around the world became net buyers of gold, driving prices to record highs:
http://www.bloomberg.com/news/2011-04-29/gold-buying-central-banks-may-signal-bullion-extending-record-price-rally.html
Some skeptics site George Soros’ recent dumping of his gold holdings which was partly attributed to the drop in metals this past month. However, what they don’t seem to grasp is that Soros dumped his ETF holdings, or paper gold, which were likely unbacked by any physical as most ETF securities are unbacked. He dumped inherently worthless stocks. Unfortunately, this kind of manipulative action by bankers still has psychological effects on the markets. But, as always, gold and silver are coming back stronger than ever, and foreign banks continue to buy.
If global banks are buying up precious metals in enormous quantities, then logically, it serves our interests to protect ourselves in the same fashion. More states need to adopt sound money legislation now, as Utah did, before it is too late.
2) The method that the Bureau of Labor Statistics uses to calculate inflation has been changed 24 times since 1978, making the CPI the most skewed index in history. The Fed reports inflation at 2.7 percent, and core inflation at 1.2 percent. If one were to calculate inflation using the old methods, the CPI would actually be 10 percent, and this is still a conservative estimate when one considers that most commodities, from oil to grains, have doubled in price in the past two to three years. The Fed and the BLS hide true inflation because it signals bad monetary policy and warns the world that the dollar is devaluing at an alarming rate. Any economy that is still tied to the dollar as this process escalates will be beaten bloody. This includes your local economy. Decoupling from the dollar and building alternative markets using methods outside of the mainstream is the only way to cushion the blow. Foreign economies are slowly distancing themselves from the Greenback, and so should we.
3) Remember the mortgage crisis that triggered the never-ending bailouts of corporate bankers who gave themselves huge Christmas bonuses as a special thanks to the American taxpayer? Well, the crisis never stopped. Foreclosure sales have continued to climb, and home values dropped in 75 percent of U.S. cities in the first quarter of 2011:
http://www.bloomberg.com/news/2011-05-10/home-prices-drop-in-three-fourths-of-u-s-metro-areas-realtors-group-says.html
What have global banks done in response? They continue to make wild bets on housing! Why not! It’s not their money! Bank of America in particular has thrown billions into a gamble that housing prices will bounce back in the last half of this year, even while the fundamentals of the economy show no signs whatsoever that house prices will return, or that people will suddenly begin buying again en masse.
http://www.bloomberg.com/news/2011-05-10/bank-of-america-billions-of-dollars-in-losses-at-stake-on-moynihan-outlook.html
Will bailouts of the “Too Big To Fails” continue? Absolutely. This signals not only the disintegration of America’s last store of value (property), but also the relentless creation of debt and currency devaluation caused by an out of control quantitative easing policy. Bailouts have severe consequences. Don’t ever let old Benanke tell you otherwise…
4) U.S. long term Treasury auctions continue to perform dismally. Foreign buyers are few, and most prefer not to invest in American debt for more than six to eight weeks at a time, let alone thirty years:
http://www.zerohedge.com/article/30-year-prices-438-very-weak-auction-indirects-flee
The Federal Reserve now revels in its role as the only serious purchaser of U.S. bonds, expanding new national debt while paying for old national debt with a printing press, of all things. The question is not whether Congress will raise the debt ceiling to continue this madness. Of course they will raise the debt ceiling! The real question is; what will happen when they do? Are you willing to bet your own survival on the hope that foreign holders of U.S. treasury bonds will not dump their reserves in protest of the cycle of inflationary debt doom created by the Treasury and the Fed? I’m not…
5) Are you a state or federal employee planning retirement? Expecting your pension fund to cover it? Don’t bother. Currently, the U.S. Treasury under the ever shameless Timothy Geithner is siphoning revenues from federal employee pension funds and 401K’s and using them to pay for the horrible machine to keep rolling while they create even more debt. Of course, Timmy assures us that they’ll put the money back once the debt ceiling is settled:
http://www.washingtonpost.com/business/economy/treasury-to-tap-pensions-to-help-fund-government/2011/05/15/AF2fqK4G_story.html
States have been creeping towards pension confiscation for at least a year. New propaganda talking points include arguments that many pensions are “padded” by employees using legal loopholes to “manipulate overtime” or steal more money from taxpayers. In some cases this may be true, but already you can see that the rationalizations are being formed in the public mind which will allow states to more easily confiscate all pension funds, as if all state employees nickel and dime the system and should be punished. In reality, pension confiscation will only be about poor state management and fiscal ineptness. Austerity is about to go into full swing here in the U.S.:
http://www.bloomberg.com/news/2011-05-20/california-legislation-takes-aim-at-pension-padding-for-460-000-official.html
Without the retirement nest egg you spent half your life procuring, what will you do? Continue to rely on the establishment structure that stabbed you in the back? Or, will you step away from the structure completely, and build your own?
6) “Low Food Security” in U.S. households, which is measured by the Census Bureau, grew by 39 percent from 2007 to 2008. The poverty rate has hit a 15 year high. Considering that the Census sets the poverty level standard as thin as a family of four living for under $21,000 a year (a ridiculously low income for four people to live on), it would be safe to assume that poverty is much higher in this country than is officially reported:
http://www.worldhunger.org/articles/Learn/us_hunger_facts.htm
This mass of destitution and potential homelessness is hidden away by one thing; entitlement programs. Welfare and foodstamps have created an illusory barrier between our society and the poor that inhabit it. What happens if entitlement programs disappear? All of that ugly truth we tried to ignore will come flooding into full view. Alternative markets aren’t just a stop gap for ourselves, they are also a new option for those who have lost everything to the volatile mainstream economy. We can either make a safety net for those millions struck by poverty, and help them to become self sufficient, or we can let them stew out on the streets, waiting for more government handouts, until they turn towards more violent means to get what they need. Ultimately, by creating new methods of commerce today, we can prevent far greater turmoil and destruction later on.
7) I don’t know if you have noticed, but the world seems to be going loony tunes lately. Unrest is washing over the Middle East like a boiling tidal wave. Protestors are being mowed down by gunfire in Syria, Yemen, and Egypt. The Libyan War is going to go on for years. Pakistan is barely able to hide its own destabilization. The U.S. is sending predator drones into people’s bathrooms in countries across the planet. The EU is now continuing its steady descent into debt default, one overleveraged country at a time. And, Japan is living up to its reputation as the birthplace of such luminaries as Godzilla and Mothra, its seas and air absorbing radioactive material beyond anything we ever saw at Chernobyl. You have to wonder if this is all leading to some kind of climax.
Because of globalization, almost every nation on Earth has been pushed into interdependency with every other nation. At least economically. What happens on one side of the planet effects the other side of the planet. This fact should be considered by those Americans who live oblivious to world events, or ignorantly believe that what happens in Vegas stays in Vegas. We are certainly not protected from the strife across the oceans. Why? Because we have no independent decentralized systems in place to counter the failings of global “harmonization”.
We as average Americans with limited incomes cannot quickly develop alternative markets on a global scale, but we can create such markets in our immediate communities. Each new free and self contained market reinforces the others, until eventually, you have a network of independent organizations which serve to support each other simply by being independent. It sounds like a contradiction, or perhaps even a paradox, but it is an undeniable model. The more free a culture is, the more self reliant a culture is, the more prosperous it becomes. Our job, is to bring America back to that realm of prosperity, one town, one city, one state at a time.
How “Social Proof” Helps Smart Investors
by David Galland of The Casey Report
As a young man in a foreign land, my curiosity was piqued by the crowd standing five or six deep in a circle. On pushing my way forward, the focus of the crowd’s attention quickly became apparent – a fight, although for reasons I’ll explain momentarily, “fight” is not the right word.
The setting was the annual wine festival in Neuchâtel, Switzerland. I was just 18, a wet-behind-the-ears puppy from a small town in Hawaii. But even in the remote backwaters of my youth, the Swiss reputation for a certain decorum and circumspection had made its way into my consciousness. How then to explain the sight of several dozen Swiss citizens, a cross-cut of ages and gender, standing placidly by as one young man proceeded to batter another?
Now I have seen a number of fights in my life – in pre-PC days it was how kids often concluded their strongest disagreements (today, very much not the case) – and this was no fight. It was a beating, and a brutal one at that.
Adding to the surrealism of the scene – already surrealistic enough given the tableau of a polite crowd of plain Swiss folks watching the brutality, cow-like, against a setting of the placid beauty of the Swiss countryside – was that the girlfriend of the man being beaten was screaming in anguish as she appealed, futilely, to the crowd to intercede.
While memory can dim with time, I can still recall the scene, and my emotions, quite vividly. My initial reaction was that this was wrong, and I was unable to comprehend why no one did anything – especially in that the champion of this country fight had so dominated the contest that his opponent was all but knocked out, lying bloody on the ground unable to defend himself. Not content at his domination and ignoring the man’s screaming girlfriend, the champion pulled his victim to his feet as I watched in shock and, holding him standing with one hand, brought his other fist back dramatically and bashed the poor guy in the jaw, sending him crashing back to earth.
Clearly intending to do it all over again, he bent over and began to lift the target back to his feet. It was at that point that it dawned on me that no one else in the crowd was going to intercede in the carnage, not even to raise a voice in opposition. Instead, they were quite content to stare stupidly at what could have very well evolved into murder.
Recognizing the situation as some form of societal aberrance – though not understanding then how apparently normal people could fail to act against such wanton viciousness – I pushed my way through the crowd and into the circle and grabbed the brute, spun him around, and yelled “Enough!” in his face.
Things then proceeded to get a little wiggly. Dropping his victim, whose girlfriend quickly helped him crawl off into the crowd, the brute stared at me, uncomprehendingly at first, probably because of my use of an English word. But with his blood still up, it quickly became clear I was to be his next target. At which point, and I kid you not at all, someone tugged at my sleeve and when I turned, forced the handle of a knife into my palm. While I was still trying to register what had just happened, the herd made a noise that brought my attention back to the Swiss brute, and I was shocked to discover that he, too, was now similarly armed.
Now there were any number of reasons I had made the trip to Neuchâtel that day – to sample the local viniculture, tuck into a nice fondue for lunch, perhaps even to meet a cute Swiss girl – and I can assure you without double-checking that nowhere on the list was “get into a knife fight.”
And so without the slightest shame at overtly exhibiting cowardice, I dropped the knife and turned tail, shoving my way through the tightly packed crowd and making good my escape by leaping up on a parked car and running its length, then diving back into the crowd on the other side.
What Happened?
In the years following the events just related, I often wondered what happened that day. How was it that a crowd of otherwise normal-looking people – and Swiss at that! – could have stood by so passively as one man brutalized another, ignoring even the dramatic pleadings of the victim’s girlfriend?
Answers didn’t begin to come to me until some years later when I picked up Professor Robert Cialdini’s excellent book, Influence. In it, Professor Cialdini discusses a number of stimuli that trigger an automatic response in people, including the effect that “social proof” has on the human mind.
The mechanics of social proof, while somewhat complex, are pretty easy to understand. Simplistically, we humans have a strong tendency to glance over at other members of the herd in an attempt to gauge the correct action or reaction to take in any given circumstance. While this tendency can be useful in identifying the right bread plate to use at a fancy dinner party, it can also have devastating consequences.
In one of the most notorious examples of the downside of social proof, in 1964 Kitty Genovese was slowly murdered on a New York sidewalk over the course of about 30 minutes, despite 40 or so witnesses, none of whom took action. They figured someone else would.
Likewise, the very average Swiss citizens I encountered that day in Neuchâtel clumped together and, seeing that no one else was making a move to intercede, stood mute.
In any event, understanding the concept of social proof – and its close cousin “social convention” – seems to me to be of fundamental importance to us as members of the human race, and as investors.
As far as the former is concerned, if you ever find yourself doing the same thing as everyone else, it should concern you. Stop and ask whether you are doing the thing because you want to or because you think it is the right thing to do – or are you doing it just because it’s what everyone else does?
As for the latter, if you rely on the cues coming from the mainstream financial media and officialdom, you would likely believe the country has exited the latest economic crisis and will now steadily make progress towards a return to normalcy.
Even I find myself fretting that maybe we have it wrong about the nature, depth, and likely duration of this crisis. The hard data say the crisis will almost certainly again worsen and – given the tenuous nature of the world’s monetary and economic systems – perhaps even result in a wholesale breakdown.
Yet, the indicators we look to for warning signals – the stock market and interest rates, to name two – are signaling that nothing particularly untoward is headed this way. This despite the data related to the “big two” of unemployment and housing being truly terrible, and zero progress being made in reducing the runaway deficit.
It gets harder to reconcile when the data clearly point to the eurozone as being in the grips of a slow-motion break-up, but yet the euro continues to hold up remarkably well.
Or that the Middle East is in flames and gasoline prices are over $4.00 a gallon in many U.S. localities. This week the International Energy Agency went on record with a statement that if additional supplies of petroleum don’t come online urgently, prices could spike higher and do serious further damage to the global economy.
Meanwhile, restaurants appear to be doing good business, and the parking lots in the local “box town” (Dick’s Sporting Goods, Best Buy, etc.) are full on the weekends: social proof that all is well, even though my own research tells me it very much isn’t.
It Gets Worse
The seeming disconnect between the true state of the world’s economy and the public reaction is actually not a particularly bad thing for those who have their eyes open. After all, anyone who can see what’s coming, while the masses do not, has the opportunity to get positioned in investments that will do well when the truth of the situation becomes evident to all.
But there are matters much more important in this life than money-making.
This week, the Supreme Court ruled by an 8-to-1 majority that search warrants are no longer required before police commence to kick in your doors. Instead, the new test of armed intrusion into your house revolves around whether a policeman hears what he or she interprets to be “suspicious” noises coming from within your abode.
And this is just the latest in a long, long series of actions of a similar ilk that, together, add up to a vicious beating of the citizenry’s constitutional rights.
Where’s the public clamor, the outrage? A casual glance around reveals the masses as dumbly going along with these and other such travesties. But only because they are.
In the face of such apathy, it should come as a surprise to no one when the government continues to degrade individual liberties in favor of the all-powerful state.
It’s always been something of a joke that you can tell if a politician is lying by whether or not his lips are moving. But the joke has now morphed into a hard fact. Thanks in no small part to the mechanics of social proof, lying, deceiving, self-dealing, and obfuscating by the leadership are now considered perfectly normal and acceptable.
Now, I wish I could muster up some hopeful thought to interject at this point – even the smallest sign of a pushback against the state’s growing envelopment of all that comes under its gaze – but for the life of me, I can’t.
Rather, I feel today as I might have all those years ago in Neuchâtel if, on discovering the brutal beating going on, I had been bound and gagged and forced to stand in the crowd and watch it continue to its bloody conclusion.
Hopeless.
But Not Helpless
The fact is that I am not bound and gagged. At least not yet.
And thus, while I still have the ability to do so, I will continue to take measures to protect my family and myself – first and foremost, by diversifying globally.
For many people, the idea of packing up and picking up in order to head elsewhere is a non-starter. They may feel an obligation to aging family members back home or have small children and worry that somehow a life abroad will not suit. Or they may not have the funds or income stream to assure they’ll be able to get by for a protracted period.
While there are good responses to all of those concerns, the truth is that physically expatriating is not for everyone. Yet that shouldn’t stop you from prudently – legally – diversifying some of your wealth globally.
Although I have mentioned it before, I’ll again mention what I took away as the biggest lesson of Adam Fergusson’s book When Money Dies. And that lesson is that if in the early days of the great German inflation, you had taken the simple step of investing money even one foot across the border with France or Switzerland, you would have saved yourself. Those who stayed put – who out of apathy, ignorance, or misguided nationalism left their money in the currency units of their native country, Germany – saw that money made worthless over the course of just a few years.
Of course, it is not strictly required that you have your wealth parked in assets domiciled in another political jurisdiction – gold and silver close at hand can serve much the same purpose. That said, if all of your eggs are in one basket, and that basket is located in a single, corrupt political jurisdiction, then the potential for that basket being grabbed away from you remains a constant threat.
For those of you with the means and a sense of adventure, creating a home away from home in a place you like is also a very worthwhile endeavor – though should you do so, I can assure you that your friends and family will think you unconventional. Maybe even unpatriotic or paranoid.
But that’s only because that is what they have been taught to think, and because they look around and don’t see other people doing it – so it seems strange to them.
Now don’t get me wrong: the United States is certainly still largely an agreeable place to live and to do business in. And it’s likely to remain that way for years to come. If I had to place a bet on any one scenario, that is the bet I would make.
That said, if the current trends continue, as they show every appearance of doing, then in our lifetime individual liberty could, de facto, be extinguished. While that may seem a radical statement, just ask yourself how secure your liberty will be if all three branches of the government purposely degrade the substance and intent of the U.S. Constitution and Bill of Rights?
The records of the last decade or so make it clear that the Executive branch and Congress are all too willing to push constitutional rights aside for political purposes, or in an “emergency” – even institutionalized torture is no longer off the table. With the latest ruling on search warrants, the Supreme Court has thrown its hat into the same ring.
And things could get much worse, much quicker than most think they could. All it would take is another 9/11 – perhaps like the Oklahoma bombing, with domestic origins. Regardless of where it comes from, should an attack of the scale of 9/11 happen – as it almost certainly will – the final nails on Liberty’s coffin would be pounded in and the already-militarized domestic security apparatus will become openly antagonistic to those who take opposing views.
When sitting down to write today, I hadn’t planned on writing on this particular topic. But the Supreme Court’s ruling has clearly gotten under my skin. Even more bothersome than that has been the lack of public outrage at the ruling. After a day or two in the news, the ruling has now vanished from the public discourse, injected into the code of law like a dose of slow-acting poison.
Some readers may think that diversifying internationally is the wrong thing to do – that as a good American I should burn the proverbial boats and fight for what’s right. To which I would reply that I don’t intend on wasting what remains of my life in a knife fight with a far better armed opponent.
You’ll make your own decisions about how to best look after yourself and your family. But if you look to your fellow citizens for clues as to what’s going on, and how to react to it, you will be setting yourself up for a very rude awakening.
As a young man in a foreign land, my curiosity was piqued by the crowd standing five or six deep in a circle. On pushing my way forward, the focus of the crowd’s attention quickly became apparent – a fight, although for reasons I’ll explain momentarily, “fight” is not the right word.
The setting was the annual wine festival in Neuchâtel, Switzerland. I was just 18, a wet-behind-the-ears puppy from a small town in Hawaii. But even in the remote backwaters of my youth, the Swiss reputation for a certain decorum and circumspection had made its way into my consciousness. How then to explain the sight of several dozen Swiss citizens, a cross-cut of ages and gender, standing placidly by as one young man proceeded to batter another?
Now I have seen a number of fights in my life – in pre-PC days it was how kids often concluded their strongest disagreements (today, very much not the case) – and this was no fight. It was a beating, and a brutal one at that.
Adding to the surrealism of the scene – already surrealistic enough given the tableau of a polite crowd of plain Swiss folks watching the brutality, cow-like, against a setting of the placid beauty of the Swiss countryside – was that the girlfriend of the man being beaten was screaming in anguish as she appealed, futilely, to the crowd to intercede.
While memory can dim with time, I can still recall the scene, and my emotions, quite vividly. My initial reaction was that this was wrong, and I was unable to comprehend why no one did anything – especially in that the champion of this country fight had so dominated the contest that his opponent was all but knocked out, lying bloody on the ground unable to defend himself. Not content at his domination and ignoring the man’s screaming girlfriend, the champion pulled his victim to his feet as I watched in shock and, holding him standing with one hand, brought his other fist back dramatically and bashed the poor guy in the jaw, sending him crashing back to earth.
Clearly intending to do it all over again, he bent over and began to lift the target back to his feet. It was at that point that it dawned on me that no one else in the crowd was going to intercede in the carnage, not even to raise a voice in opposition. Instead, they were quite content to stare stupidly at what could have very well evolved into murder.
Recognizing the situation as some form of societal aberrance – though not understanding then how apparently normal people could fail to act against such wanton viciousness – I pushed my way through the crowd and into the circle and grabbed the brute, spun him around, and yelled “Enough!” in his face.
Things then proceeded to get a little wiggly. Dropping his victim, whose girlfriend quickly helped him crawl off into the crowd, the brute stared at me, uncomprehendingly at first, probably because of my use of an English word. But with his blood still up, it quickly became clear I was to be his next target. At which point, and I kid you not at all, someone tugged at my sleeve and when I turned, forced the handle of a knife into my palm. While I was still trying to register what had just happened, the herd made a noise that brought my attention back to the Swiss brute, and I was shocked to discover that he, too, was now similarly armed.
Now there were any number of reasons I had made the trip to Neuchâtel that day – to sample the local viniculture, tuck into a nice fondue for lunch, perhaps even to meet a cute Swiss girl – and I can assure you without double-checking that nowhere on the list was “get into a knife fight.”
And so without the slightest shame at overtly exhibiting cowardice, I dropped the knife and turned tail, shoving my way through the tightly packed crowd and making good my escape by leaping up on a parked car and running its length, then diving back into the crowd on the other side.
What Happened?
In the years following the events just related, I often wondered what happened that day. How was it that a crowd of otherwise normal-looking people – and Swiss at that! – could have stood by so passively as one man brutalized another, ignoring even the dramatic pleadings of the victim’s girlfriend?
Answers didn’t begin to come to me until some years later when I picked up Professor Robert Cialdini’s excellent book, Influence. In it, Professor Cialdini discusses a number of stimuli that trigger an automatic response in people, including the effect that “social proof” has on the human mind.
The mechanics of social proof, while somewhat complex, are pretty easy to understand. Simplistically, we humans have a strong tendency to glance over at other members of the herd in an attempt to gauge the correct action or reaction to take in any given circumstance. While this tendency can be useful in identifying the right bread plate to use at a fancy dinner party, it can also have devastating consequences.
In one of the most notorious examples of the downside of social proof, in 1964 Kitty Genovese was slowly murdered on a New York sidewalk over the course of about 30 minutes, despite 40 or so witnesses, none of whom took action. They figured someone else would.
Likewise, the very average Swiss citizens I encountered that day in Neuchâtel clumped together and, seeing that no one else was making a move to intercede, stood mute.
In any event, understanding the concept of social proof – and its close cousin “social convention” – seems to me to be of fundamental importance to us as members of the human race, and as investors.
As far as the former is concerned, if you ever find yourself doing the same thing as everyone else, it should concern you. Stop and ask whether you are doing the thing because you want to or because you think it is the right thing to do – or are you doing it just because it’s what everyone else does?
As for the latter, if you rely on the cues coming from the mainstream financial media and officialdom, you would likely believe the country has exited the latest economic crisis and will now steadily make progress towards a return to normalcy.
Even I find myself fretting that maybe we have it wrong about the nature, depth, and likely duration of this crisis. The hard data say the crisis will almost certainly again worsen and – given the tenuous nature of the world’s monetary and economic systems – perhaps even result in a wholesale breakdown.
Yet, the indicators we look to for warning signals – the stock market and interest rates, to name two – are signaling that nothing particularly untoward is headed this way. This despite the data related to the “big two” of unemployment and housing being truly terrible, and zero progress being made in reducing the runaway deficit.
It gets harder to reconcile when the data clearly point to the eurozone as being in the grips of a slow-motion break-up, but yet the euro continues to hold up remarkably well.
Or that the Middle East is in flames and gasoline prices are over $4.00 a gallon in many U.S. localities. This week the International Energy Agency went on record with a statement that if additional supplies of petroleum don’t come online urgently, prices could spike higher and do serious further damage to the global economy.
Meanwhile, restaurants appear to be doing good business, and the parking lots in the local “box town” (Dick’s Sporting Goods, Best Buy, etc.) are full on the weekends: social proof that all is well, even though my own research tells me it very much isn’t.
It Gets Worse
The seeming disconnect between the true state of the world’s economy and the public reaction is actually not a particularly bad thing for those who have their eyes open. After all, anyone who can see what’s coming, while the masses do not, has the opportunity to get positioned in investments that will do well when the truth of the situation becomes evident to all.
But there are matters much more important in this life than money-making.
This week, the Supreme Court ruled by an 8-to-1 majority that search warrants are no longer required before police commence to kick in your doors. Instead, the new test of armed intrusion into your house revolves around whether a policeman hears what he or she interprets to be “suspicious” noises coming from within your abode.
And this is just the latest in a long, long series of actions of a similar ilk that, together, add up to a vicious beating of the citizenry’s constitutional rights.
Where’s the public clamor, the outrage? A casual glance around reveals the masses as dumbly going along with these and other such travesties. But only because they are.
In the face of such apathy, it should come as a surprise to no one when the government continues to degrade individual liberties in favor of the all-powerful state.
It’s always been something of a joke that you can tell if a politician is lying by whether or not his lips are moving. But the joke has now morphed into a hard fact. Thanks in no small part to the mechanics of social proof, lying, deceiving, self-dealing, and obfuscating by the leadership are now considered perfectly normal and acceptable.
Now, I wish I could muster up some hopeful thought to interject at this point – even the smallest sign of a pushback against the state’s growing envelopment of all that comes under its gaze – but for the life of me, I can’t.
Rather, I feel today as I might have all those years ago in Neuchâtel if, on discovering the brutal beating going on, I had been bound and gagged and forced to stand in the crowd and watch it continue to its bloody conclusion.
Hopeless.
But Not Helpless
The fact is that I am not bound and gagged. At least not yet.
And thus, while I still have the ability to do so, I will continue to take measures to protect my family and myself – first and foremost, by diversifying globally.
For many people, the idea of packing up and picking up in order to head elsewhere is a non-starter. They may feel an obligation to aging family members back home or have small children and worry that somehow a life abroad will not suit. Or they may not have the funds or income stream to assure they’ll be able to get by for a protracted period.
While there are good responses to all of those concerns, the truth is that physically expatriating is not for everyone. Yet that shouldn’t stop you from prudently – legally – diversifying some of your wealth globally.
Although I have mentioned it before, I’ll again mention what I took away as the biggest lesson of Adam Fergusson’s book When Money Dies. And that lesson is that if in the early days of the great German inflation, you had taken the simple step of investing money even one foot across the border with France or Switzerland, you would have saved yourself. Those who stayed put – who out of apathy, ignorance, or misguided nationalism left their money in the currency units of their native country, Germany – saw that money made worthless over the course of just a few years.
Of course, it is not strictly required that you have your wealth parked in assets domiciled in another political jurisdiction – gold and silver close at hand can serve much the same purpose. That said, if all of your eggs are in one basket, and that basket is located in a single, corrupt political jurisdiction, then the potential for that basket being grabbed away from you remains a constant threat.
For those of you with the means and a sense of adventure, creating a home away from home in a place you like is also a very worthwhile endeavor – though should you do so, I can assure you that your friends and family will think you unconventional. Maybe even unpatriotic or paranoid.
But that’s only because that is what they have been taught to think, and because they look around and don’t see other people doing it – so it seems strange to them.
Now don’t get me wrong: the United States is certainly still largely an agreeable place to live and to do business in. And it’s likely to remain that way for years to come. If I had to place a bet on any one scenario, that is the bet I would make.
That said, if the current trends continue, as they show every appearance of doing, then in our lifetime individual liberty could, de facto, be extinguished. While that may seem a radical statement, just ask yourself how secure your liberty will be if all three branches of the government purposely degrade the substance and intent of the U.S. Constitution and Bill of Rights?
The records of the last decade or so make it clear that the Executive branch and Congress are all too willing to push constitutional rights aside for political purposes, or in an “emergency” – even institutionalized torture is no longer off the table. With the latest ruling on search warrants, the Supreme Court has thrown its hat into the same ring.
And things could get much worse, much quicker than most think they could. All it would take is another 9/11 – perhaps like the Oklahoma bombing, with domestic origins. Regardless of where it comes from, should an attack of the scale of 9/11 happen – as it almost certainly will – the final nails on Liberty’s coffin would be pounded in and the already-militarized domestic security apparatus will become openly antagonistic to those who take opposing views.
When sitting down to write today, I hadn’t planned on writing on this particular topic. But the Supreme Court’s ruling has clearly gotten under my skin. Even more bothersome than that has been the lack of public outrage at the ruling. After a day or two in the news, the ruling has now vanished from the public discourse, injected into the code of law like a dose of slow-acting poison.
Some readers may think that diversifying internationally is the wrong thing to do – that as a good American I should burn the proverbial boats and fight for what’s right. To which I would reply that I don’t intend on wasting what remains of my life in a knife fight with a far better armed opponent.
You’ll make your own decisions about how to best look after yourself and your family. But if you look to your fellow citizens for clues as to what’s going on, and how to react to it, you will be setting yourself up for a very rude awakening.
We've Gone from a Nation of Laws to a Nation of Powerful Men Making Laws in Secret
By Washington's Blog
The U.S. Supreme Court has ruled that judges can throw out cases because they don't like or believe the plaintiff ... even before anyone has had the chance to conduct discovery to prove their case. In other words, judges' secret biases can be the basis for denying people their day in court, without even having to examine the facts. Judges are also becoming directly involved in politics with the other branches of government.
Claims of national security are being used to keep the shenanigans of the biggest banks and corporations secret, and to crush dissent.
But this essay focuses on something else: the fact that the laws themselves are now being kept secret.
America is supposed to be a nation of laws which apply to everyone equally, regardless of wealth or power.
Founded on the Constitution and based upon the separation of powers, we escaped from the British monarchy - a "nation of men" where the law is whatever the king says it is.
However, many laws are now "secret" - known only to a handful of people, and oftentimes hidden even from the part of our government which is supposed to make laws in the first place: Congress.
The Patriot Act
Congress just re-authorized the Patriot Act for another 4 years.
However, Senator Wyden notes that the government is using a secret interpretation of the Patriot Act different from what Congress and the public believe. Senator Wyden's press release yesterday states:
Speaking on the floor of the U.S Senate during the truncated debate on the reauthorization of the PATRIOT ACT for another four years, U.S. Senator Ron Wyden (D-Ore.) – a member of the Senate Select Committee on Intelligence -- warned his colleagues that a vote to extend the bill without amendments that would ban any Administration’s ability to keep internal interpretations of the Patriot Act classified will eventually cause public outrage.
Known as Secret Law, the official interpretation of the Patriot Act could dramatically differ from what the public believes the law allows. This could create severe violations of the Constitutional and Civil Rights of American Citizens.
***
I have served on the Senate Intelligence Committee for ten years, and I don’t take a backseat to anybody when it comes to the importance of protecting genuinely sensitive sources and collection methods. But the law itself should never be secret – voters have a need and a right to know what the law says, and what their government thinks the text of the law means, so that they can decide whether the law is appropriately written and ratify or reject decisions that their elected officials make on their behalf.
As TechDirt points out:
It's not just the public that's having the wool pulled over their eyes. Wyden and [Senator] Udall are pointing out that the very members of Congress, who are voting to extend these provisions, do not know how the feds are interpreting them:
As members of the Senate Intelligence Committee we have been provided with the executive branch's classified interpretation of those provisions and can tell you that we believe there is a significant discrepancy between what most people - including many Members of Congress - think the Patriot Act allows the government to do and what government officials secretly believe the Patriot Act allows them to do.
***
By far the most important interpretation of what the law means is the official interpretation used by the U.S. government and this interpretation is - stunningly -classified.
What does this mean? It means that Congress and the public are prevented from having an informed, open debate on the Patriot Act because the official meaning of the law itself is secret. Most members of Congress have not even seen the secret legal interpretations that the executive branch is currently relying on and do not have any staff who are cleared to read them. Even if these members come down to the Intelligence Committee and read these interpretations themselves, they cannot openly debate them on the floor without violating classification rules.
Here's Wyden's speech on the Senate floor.
The Surveillance State and Unauthorized Wars
Former constitutional lawyer Glenn Greenwald noted last week:
The government's increased ability to learn more and more about the private activities of its citizens is accompanied -- as always -- by an ever-increasing wall of secrecy it erects around its own actions. Thus, on the very same day that we have an extension of the Patriot Act and a proposal to increase the government's Internet snooping powers, we have this:
The Justice Department should publicly release its legal opinion that allows the FBI to obtain telephone records of international calls made from the U.S. without any formal legal process, a watchdog group asserts.
***
The decision not to release the memo is noteworthy... By turning down the foundation's request for a copy, the department is ensuring that its legal arguments in support of the FBI's controversial and discredited efforts to obtain telephone records will be kept secret.
What's extraordinary about the Obama DOJ's refusal to release this document is that it does not reveal the eavesdropping activities of the Government but only its legal rationale for why it is ostensibly permitted to engage in those activities. The Bush DOJ's refusal to release its legal memos authorizing its surveillance and torture policies was unquestionably one of the acts that provoked the greatest outrage among Democratic lawyers and transparency advocates (see, for instance, Dawn Johnsen's scathing condemnation of the Bush administration for its refusal to release OLC legal reasoning: "reliance on 'secret law' threatens the effective functioning of American democracy" and "the withholding from Congress and the public of legal interpretations by the Justice Department Office of Legal Counsel (OLC) upsets the system of checks and balances between the executive and legislative branches of government."
The way a republic is supposed to function is that there is transparency for those who wield public power and privacy for private citizens. The National Security State has reversed that dynamic completely, so that the Government (comprised of the consortium of public agencies and their private-sector "partners") knows virtually everything about what citizens do, but citizens know virtually nothing about what they do (which is why WikiLeaks specifically and whistleblowers generally, as one of the very few remaining instruments for subverting that wall of secrecy, are so threatening to them). Fortified by always-growing secrecy weapons, everything they do is secret -- including even the "laws" they secretly invent to authorize their actions -- while everything you do is open to inspection, surveillance and monitoring.
This dynamic threatens to entrench irreversible, absolute power for reasons that aren't difficult to understand. Knowledge is power, as the cliché teaches. When powerful factions can gather unlimited information about citizens, they can threaten, punish, and ultimately deter any meaningful form of dissent ...
Conversely, allowing government officials to shield their own conduct from transparency and (with the radical Bush/Obama version of the "State Secrets privilege") even judicial review ensures that National Security State officials (public and private) can do whatever they want without any detection and (therefore) without limit or accountability. That is what the Surveillance State, at its core, is designed to achieve: the destruction of privacy for individual citizens and an impenetrable wall of secrecy for those with unlimited surveillance power. And as these three events just from the last 24 hours demonstrate, this system -- with fully bipartisan support --- is expanding more rapidly than ever.
So patently illegal is Obama's war in Libya as of today that media reports are now coming quite close to saying so directly; see, for instance, this unusually clear CNN article today from Dana Bash. As a result, reporters today bombarded the White House with questions about the war's legality, and here is what happened, as reported by ABC News' Jake Tapper:
Talk about "secret law." You're not even allowed to know the White House's rationale (if it exists) for why this war is legal. It simply decrees that it is, and you'll have to comfort yourself with that. That's how confident they are in their power to operate behind their wall of secrecy: they don't even bother any longer with a pretense of the most minimal transparency.
Secret Memos
Secret laws are not a brand new problem.
As I've previously noted:
Scott Horton - a professor at Columbia Law School and writer for Harper's - says of the Bush administration memos authorizing torture, spying, indefinite detention without charge, the use of the military within the U.S. and the suspension of free speech and press rights:
We may not have realized it at the time, but in the period from late 2001-January 19, 2009, this country was a dictatorship. The constitutional rights we learned about in high school civics were suspended. That was thanks to secret memos crafted deep inside the Justice Department that effectively trashed the Constitution. What we know now is likely the least of it.
Yale law professor Jack Balkin agrees, writing that the memos promoted "reasoning which sought, in secret, to justify a theory of Presidential dictatorship." Constitutional law professor Jonathan Turley says that the memos are the "very definition of tyranny". And former White House counsel John Dean says "Reading these memos, you've gotta almost conclude we had an unconstitutional dictator."
State of Emergency Cuts the Constitutional Government Out of the Picture
As I wrote in February:
The United States has been in a declared state of emergency from September 2001, to the present. Specifically, on September 11, 2001, the government declared a state of emergency. That declared state of emergency was formally put in writing on 9/14/2001:
A national emergency exists by reason of the terrorist attacks at the World Trade Center, New York, New York, and the Pentagon, and the continuing and immediate threat of further attacks on the United States.
NOW, THEREFORE, I, GEORGE W. BUSH, President of the United States of America, by virtue of the authority vested in me as President by the Constitution and the laws of the United States, I hereby declare that the national emergency has existed since September 11, 2001 . . . .
That declared state of emergency has continued in full force and effect from 9/11 to the present. President Bush kept it in place, and President Obama has also.
On September 10, 2010, President Obama declared:
Section 202(d) of the National Emergencies Act, 50 U.S.C. 1622(d), provides for the automatic termination of a national emergency unless, prior to the anniversary date of its declaration, the President publishes in the Federal Register and transmits to the Congress a notice stating that the emergency is to continue in effect beyond the anniversary date. Consistent with this provision, I have sent to the Federal Register the enclosed notice, stating that the emergency declared with respect to the terrorist attacks on the United States of September 11, 2001, is to continue in effect for an additional year.
The terrorist threat that led to the declaration on September 14, 2001, of a national emergency continues. For this reason, I have determined that it is necessary to continue in effect after September 14, 2010, the national emergency with respect to the terrorist threat.
The Washington Times wrote on September 18, 2001:
Simply by proclaiming a national emergency on Friday, President Bush activated some 500 dormant legal provisions, including those allowing him to impose censorship and martial law.
Continuity of Government ("COG") measures were implemented on 9/11. For example, according to the 9/11 Commission Report, at page 38:
At 9:59, an Air Force lieutenant colonel working in the White House Military Office joined the conference and stated he had just talked to Deputy National Security Advisor Stephen Hadley. The White House requested (1) the implementation of continuity of government measures, (2) fighter escorts for Air Force One, and (3) a fighter combat air patrol over Washington, D.C.
The Washington Post reported in March 2002 that "the shadow government has evolved into an indefinite precaution." The same article goes on to state:
Assessment of terrorist risks persuaded the White House to remake the program as a permanent feature of 'the new reality, based on what the threat looks like,' a senior decisionmaker said.
As CBS pointed out, virtually none of the Congressional leadership knew that the COG had been implemented or was still in existence as of March 2002:
Key congressional leaders say they didn’t know President Bush had established a “shadow government,” moving dozens of senior civilian managers to secret underground locations outside Washington to ensure that the federal government could survive a devastating terrorist attack on the nation's capital, The Washington Post says in its Saturday editions.
Senate Majority Leader Thomas A. Daschle (D-S.D.) told the Post he had not been informed by the White House about the role, location or even the existence of the shadow government that the administration began to deploy the morning of the Sept. 11 hijackings.
An aide to House Minority Leader Richard A. Gephardt (D-Mo.) said he was also unaware of the administration's move.
Among Congress's GOP leadership, aides to House Speaker J. Dennis Hastert (Ill.), second in line to succeed the president if he became incapacitated, and to Senate Minority Leader Trent Lott (Miss.) said they were not sure whether they knew.
Aides to Sen. Robert C. Byrd (D-W. Va.) said he had not been told. As Senate president pro tempore, he is in line to become president after the House speaker.
Similarly, the above-cited CNN article states:
Senate Majority Leader Tom Daschle, D-South Dakota, said Friday he can't say much about the plan.
"We have not been informed at all about the role of the shadow government or its whereabouts or what particular responsibilities they have and when they would kick in, but we look forward to work with the administration to get additional information on that."
Indeed, the White House has specifically refused to share information about Continuity of Government plans with the Homeland Security Committee of the U.S. Congress, even though that Committee has proper security clearance to hear the full details of all COG plans.
Specifically, in the summer 2007, Congressman Peter DeFazio, on the Homeland Security Committee (and so with proper security access to be briefed on COG issues), inquired about continuity of government plans, and was refused access. Indeed, DeFazio told Congress that the entire Homeland Security Committee of the U.S. Congress has been denied access to the plans by the White House (video; or here is the transcript). The Homeland Security Committee has full clearance to view all information about COG plans. DeFazio concluded: "Maybe the people who think there’s a conspiracy out there are right”.
As University of California Berkeley Professor Emeritus Peter Dale Scott warned:
If members of the Homeland Security Committee cannot enforce their right to read secret plans of the Executive Branch, then the systems of checks and balances established by the U.S. Constitution would seem to be failing.
To put it another way, if the White House is successful in frustrating DeFazio, then Continuity of Government planning has arguably already superseded the Constitution as a higher authority.
Indeed, continuity of government plans are specifically defined to do the following:
•Those within the new government would know what was going on. But those in the “old government” – that is, the one created by the framers of the Constitution – would not necessarily know the details of what was happening
•Normal laws and legal processes might largely be suspended, or superseded by secretive judicial forums
•The media might be ordered by strict laws – punishable by treason – to only promote stories authorized by the new government
See this, this and this
In 2007, President Bush issued Presidential Directive NSPD-51, which purported to change Continuity of Government plans. NSPD51 is odd because:
•NSPD51 was passed without Congressional input
•Even the New York Times wrote in an editorial:
Beyond cases of actual insurrection, the President may now use military troops as a domestic police force in response to a natural disaster, a disease outbreak, terrorist attack, or to any ‘other condition.’ Changes of this magnitude should be made only after a thorough public airing. But these new Presidential powers were slipped into the law without hearings or public debate.
So continuity of government laws were enacted without public or even Congressional knowledge, and neither the public or even Congress members on the Homeland Security Committee - let alone Congress as a whole - are being informed of whether they are still in effect and, if so, what laws govern.
Postscript: As I've repeatedly noted, economics, politics and law are inseparable and intertwined. As Aristotle pointed out thousands of years ago, "The only stable state is the one in which all men are equal before the law." Without the rule of law, the state crumbles, and the government bonds and other investments crumble with it.
As I wrote last year:
What's the hole that is swallowing up the economy? The failure to follow the rule of law.
The rule of law is what provides trust in our economy, which is essential for a stable economy.
The rule of law is the basis for our social contract. Indeed, it is the basis for our submission to the power of the state.
We are supposed to be a nation of laws, not of men. That's what humanity has fought for ever since we forced the king to sign the Magna Carta.
Indeed, lawlessness - the failure to enforce the rule of law - is dragging the world economy down into the abyss.
The U.S. Supreme Court has ruled that judges can throw out cases because they don't like or believe the plaintiff ... even before anyone has had the chance to conduct discovery to prove their case. In other words, judges' secret biases can be the basis for denying people their day in court, without even having to examine the facts. Judges are also becoming directly involved in politics with the other branches of government.
Claims of national security are being used to keep the shenanigans of the biggest banks and corporations secret, and to crush dissent.
But this essay focuses on something else: the fact that the laws themselves are now being kept secret.
America is supposed to be a nation of laws which apply to everyone equally, regardless of wealth or power.
Founded on the Constitution and based upon the separation of powers, we escaped from the British monarchy - a "nation of men" where the law is whatever the king says it is.
However, many laws are now "secret" - known only to a handful of people, and oftentimes hidden even from the part of our government which is supposed to make laws in the first place: Congress.
The Patriot Act
Congress just re-authorized the Patriot Act for another 4 years.
However, Senator Wyden notes that the government is using a secret interpretation of the Patriot Act different from what Congress and the public believe. Senator Wyden's press release yesterday states:
Speaking on the floor of the U.S Senate during the truncated debate on the reauthorization of the PATRIOT ACT for another four years, U.S. Senator Ron Wyden (D-Ore.) – a member of the Senate Select Committee on Intelligence -- warned his colleagues that a vote to extend the bill without amendments that would ban any Administration’s ability to keep internal interpretations of the Patriot Act classified will eventually cause public outrage.
Known as Secret Law, the official interpretation of the Patriot Act could dramatically differ from what the public believes the law allows. This could create severe violations of the Constitutional and Civil Rights of American Citizens.
***
I have served on the Senate Intelligence Committee for ten years, and I don’t take a backseat to anybody when it comes to the importance of protecting genuinely sensitive sources and collection methods. But the law itself should never be secret – voters have a need and a right to know what the law says, and what their government thinks the text of the law means, so that they can decide whether the law is appropriately written and ratify or reject decisions that their elected officials make on their behalf.
As TechDirt points out:
It's not just the public that's having the wool pulled over their eyes. Wyden and [Senator] Udall are pointing out that the very members of Congress, who are voting to extend these provisions, do not know how the feds are interpreting them:
As members of the Senate Intelligence Committee we have been provided with the executive branch's classified interpretation of those provisions and can tell you that we believe there is a significant discrepancy between what most people - including many Members of Congress - think the Patriot Act allows the government to do and what government officials secretly believe the Patriot Act allows them to do.
***
By far the most important interpretation of what the law means is the official interpretation used by the U.S. government and this interpretation is - stunningly -classified.
What does this mean? It means that Congress and the public are prevented from having an informed, open debate on the Patriot Act because the official meaning of the law itself is secret. Most members of Congress have not even seen the secret legal interpretations that the executive branch is currently relying on and do not have any staff who are cleared to read them. Even if these members come down to the Intelligence Committee and read these interpretations themselves, they cannot openly debate them on the floor without violating classification rules.
Here's Wyden's speech on the Senate floor.
The Surveillance State and Unauthorized Wars
Former constitutional lawyer Glenn Greenwald noted last week:
The government's increased ability to learn more and more about the private activities of its citizens is accompanied -- as always -- by an ever-increasing wall of secrecy it erects around its own actions. Thus, on the very same day that we have an extension of the Patriot Act and a proposal to increase the government's Internet snooping powers, we have this:
The Justice Department should publicly release its legal opinion that allows the FBI to obtain telephone records of international calls made from the U.S. without any formal legal process, a watchdog group asserts.
***
The decision not to release the memo is noteworthy... By turning down the foundation's request for a copy, the department is ensuring that its legal arguments in support of the FBI's controversial and discredited efforts to obtain telephone records will be kept secret.
What's extraordinary about the Obama DOJ's refusal to release this document is that it does not reveal the eavesdropping activities of the Government but only its legal rationale for why it is ostensibly permitted to engage in those activities. The Bush DOJ's refusal to release its legal memos authorizing its surveillance and torture policies was unquestionably one of the acts that provoked the greatest outrage among Democratic lawyers and transparency advocates (see, for instance, Dawn Johnsen's scathing condemnation of the Bush administration for its refusal to release OLC legal reasoning: "reliance on 'secret law' threatens the effective functioning of American democracy" and "the withholding from Congress and the public of legal interpretations by the Justice Department Office of Legal Counsel (OLC) upsets the system of checks and balances between the executive and legislative branches of government."
The way a republic is supposed to function is that there is transparency for those who wield public power and privacy for private citizens. The National Security State has reversed that dynamic completely, so that the Government (comprised of the consortium of public agencies and their private-sector "partners") knows virtually everything about what citizens do, but citizens know virtually nothing about what they do (which is why WikiLeaks specifically and whistleblowers generally, as one of the very few remaining instruments for subverting that wall of secrecy, are so threatening to them). Fortified by always-growing secrecy weapons, everything they do is secret -- including even the "laws" they secretly invent to authorize their actions -- while everything you do is open to inspection, surveillance and monitoring.
This dynamic threatens to entrench irreversible, absolute power for reasons that aren't difficult to understand. Knowledge is power, as the cliché teaches. When powerful factions can gather unlimited information about citizens, they can threaten, punish, and ultimately deter any meaningful form of dissent ...
Conversely, allowing government officials to shield their own conduct from transparency and (with the radical Bush/Obama version of the "State Secrets privilege") even judicial review ensures that National Security State officials (public and private) can do whatever they want without any detection and (therefore) without limit or accountability. That is what the Surveillance State, at its core, is designed to achieve: the destruction of privacy for individual citizens and an impenetrable wall of secrecy for those with unlimited surveillance power. And as these three events just from the last 24 hours demonstrate, this system -- with fully bipartisan support --- is expanding more rapidly than ever.
So patently illegal is Obama's war in Libya as of today that media reports are now coming quite close to saying so directly; see, for instance, this unusually clear CNN article today from Dana Bash. As a result, reporters today bombarded the White House with questions about the war's legality, and here is what happened, as reported by ABC News' Jake Tapper:
Talk about "secret law." You're not even allowed to know the White House's rationale (if it exists) for why this war is legal. It simply decrees that it is, and you'll have to comfort yourself with that. That's how confident they are in their power to operate behind their wall of secrecy: they don't even bother any longer with a pretense of the most minimal transparency.
Secret Memos
Secret laws are not a brand new problem.
As I've previously noted:
Scott Horton - a professor at Columbia Law School and writer for Harper's - says of the Bush administration memos authorizing torture, spying, indefinite detention without charge, the use of the military within the U.S. and the suspension of free speech and press rights:
We may not have realized it at the time, but in the period from late 2001-January 19, 2009, this country was a dictatorship. The constitutional rights we learned about in high school civics were suspended. That was thanks to secret memos crafted deep inside the Justice Department that effectively trashed the Constitution. What we know now is likely the least of it.
Yale law professor Jack Balkin agrees, writing that the memos promoted "reasoning which sought, in secret, to justify a theory of Presidential dictatorship." Constitutional law professor Jonathan Turley says that the memos are the "very definition of tyranny". And former White House counsel John Dean says "Reading these memos, you've gotta almost conclude we had an unconstitutional dictator."
State of Emergency Cuts the Constitutional Government Out of the Picture
As I wrote in February:
The United States has been in a declared state of emergency from September 2001, to the present. Specifically, on September 11, 2001, the government declared a state of emergency. That declared state of emergency was formally put in writing on 9/14/2001:
A national emergency exists by reason of the terrorist attacks at the World Trade Center, New York, New York, and the Pentagon, and the continuing and immediate threat of further attacks on the United States.
NOW, THEREFORE, I, GEORGE W. BUSH, President of the United States of America, by virtue of the authority vested in me as President by the Constitution and the laws of the United States, I hereby declare that the national emergency has existed since September 11, 2001 . . . .
That declared state of emergency has continued in full force and effect from 9/11 to the present. President Bush kept it in place, and President Obama has also.
On September 10, 2010, President Obama declared:
Section 202(d) of the National Emergencies Act, 50 U.S.C. 1622(d), provides for the automatic termination of a national emergency unless, prior to the anniversary date of its declaration, the President publishes in the Federal Register and transmits to the Congress a notice stating that the emergency is to continue in effect beyond the anniversary date. Consistent with this provision, I have sent to the Federal Register the enclosed notice, stating that the emergency declared with respect to the terrorist attacks on the United States of September 11, 2001, is to continue in effect for an additional year.
The terrorist threat that led to the declaration on September 14, 2001, of a national emergency continues. For this reason, I have determined that it is necessary to continue in effect after September 14, 2010, the national emergency with respect to the terrorist threat.
The Washington Times wrote on September 18, 2001:
Simply by proclaiming a national emergency on Friday, President Bush activated some 500 dormant legal provisions, including those allowing him to impose censorship and martial law.
Continuity of Government ("COG") measures were implemented on 9/11. For example, according to the 9/11 Commission Report, at page 38:
At 9:59, an Air Force lieutenant colonel working in the White House Military Office joined the conference and stated he had just talked to Deputy National Security Advisor Stephen Hadley. The White House requested (1) the implementation of continuity of government measures, (2) fighter escorts for Air Force One, and (3) a fighter combat air patrol over Washington, D.C.
The Washington Post reported in March 2002 that "the shadow government has evolved into an indefinite precaution." The same article goes on to state:
Assessment of terrorist risks persuaded the White House to remake the program as a permanent feature of 'the new reality, based on what the threat looks like,' a senior decisionmaker said.
As CBS pointed out, virtually none of the Congressional leadership knew that the COG had been implemented or was still in existence as of March 2002:
Key congressional leaders say they didn’t know President Bush had established a “shadow government,” moving dozens of senior civilian managers to secret underground locations outside Washington to ensure that the federal government could survive a devastating terrorist attack on the nation's capital, The Washington Post says in its Saturday editions.
Senate Majority Leader Thomas A. Daschle (D-S.D.) told the Post he had not been informed by the White House about the role, location or even the existence of the shadow government that the administration began to deploy the morning of the Sept. 11 hijackings.
An aide to House Minority Leader Richard A. Gephardt (D-Mo.) said he was also unaware of the administration's move.
Among Congress's GOP leadership, aides to House Speaker J. Dennis Hastert (Ill.), second in line to succeed the president if he became incapacitated, and to Senate Minority Leader Trent Lott (Miss.) said they were not sure whether they knew.
Aides to Sen. Robert C. Byrd (D-W. Va.) said he had not been told. As Senate president pro tempore, he is in line to become president after the House speaker.
Similarly, the above-cited CNN article states:
Senate Majority Leader Tom Daschle, D-South Dakota, said Friday he can't say much about the plan.
"We have not been informed at all about the role of the shadow government or its whereabouts or what particular responsibilities they have and when they would kick in, but we look forward to work with the administration to get additional information on that."
Indeed, the White House has specifically refused to share information about Continuity of Government plans with the Homeland Security Committee of the U.S. Congress, even though that Committee has proper security clearance to hear the full details of all COG plans.
Specifically, in the summer 2007, Congressman Peter DeFazio, on the Homeland Security Committee (and so with proper security access to be briefed on COG issues), inquired about continuity of government plans, and was refused access. Indeed, DeFazio told Congress that the entire Homeland Security Committee of the U.S. Congress has been denied access to the plans by the White House (video; or here is the transcript). The Homeland Security Committee has full clearance to view all information about COG plans. DeFazio concluded: "Maybe the people who think there’s a conspiracy out there are right”.
As University of California Berkeley Professor Emeritus Peter Dale Scott warned:
If members of the Homeland Security Committee cannot enforce their right to read secret plans of the Executive Branch, then the systems of checks and balances established by the U.S. Constitution would seem to be failing.
To put it another way, if the White House is successful in frustrating DeFazio, then Continuity of Government planning has arguably already superseded the Constitution as a higher authority.
Indeed, continuity of government plans are specifically defined to do the following:
•Those within the new government would know what was going on. But those in the “old government” – that is, the one created by the framers of the Constitution – would not necessarily know the details of what was happening
•Normal laws and legal processes might largely be suspended, or superseded by secretive judicial forums
•The media might be ordered by strict laws – punishable by treason – to only promote stories authorized by the new government
See this, this and this
In 2007, President Bush issued Presidential Directive NSPD-51, which purported to change Continuity of Government plans. NSPD51 is odd because:
•NSPD51 was passed without Congressional input
•Even the New York Times wrote in an editorial:
Beyond cases of actual insurrection, the President may now use military troops as a domestic police force in response to a natural disaster, a disease outbreak, terrorist attack, or to any ‘other condition.’ Changes of this magnitude should be made only after a thorough public airing. But these new Presidential powers were slipped into the law without hearings or public debate.
So continuity of government laws were enacted without public or even Congressional knowledge, and neither the public or even Congress members on the Homeland Security Committee - let alone Congress as a whole - are being informed of whether they are still in effect and, if so, what laws govern.
Postscript: As I've repeatedly noted, economics, politics and law are inseparable and intertwined. As Aristotle pointed out thousands of years ago, "The only stable state is the one in which all men are equal before the law." Without the rule of law, the state crumbles, and the government bonds and other investments crumble with it.
As I wrote last year:
What's the hole that is swallowing up the economy? The failure to follow the rule of law.
The rule of law is what provides trust in our economy, which is essential for a stable economy.
The rule of law is the basis for our social contract. Indeed, it is the basis for our submission to the power of the state.
We are supposed to be a nation of laws, not of men. That's what humanity has fought for ever since we forced the king to sign the Magna Carta.
Indeed, lawlessness - the failure to enforce the rule of law - is dragging the world economy down into the abyss.
Subscribe to:
Posts (Atom)
