Bill Oddie's BankWatch

Quote of the day

“the middle classes have ruined everything”

From the same source: "Nigerian millionaire Kola Karim, who has no idea how many cars he owns."

John Kyl: What Middle Class?

video link

Which side are you on?

This is the real question for people in the US: Which side are you on?

The side of the rich, exploiters?
Or the side of the exploited people?

Class War--You lose!

Elizabeth Warren, candidate for U.S. Senate in Massachusetts, made the following statement to the blathering right-wingers at a recent political event.

“I hear all this, you know, Well, this is class warfare. No it isn’t. There is nobody in this country who got rich on his own. Nobody.” She went on:

“You built a factory out there? Good for you. But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.

“Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

Economic policy in the United States and Europe has failed, and people are suffering.

Economic policy failed for three reasons: (1) policymakers focused on enabling offshoring corporations to move middle class jobs, and the consumer demand, tax base, GDP, and careers associated with the jobs, to foreign countries, such as China and India, where labor is inexpensive; (2) policymakers permitted financial deregulation that unleashed fraud and debt leverage on a scale previously unimaginable; (3) policymakers responded to the resulting financial crisis by imposing austerity on the population and running the printing press in order to bail out banks and prevent any losses to the banks regardless of the cost to national economies and innocent parties.

As reported by Manufacturing and Technology News (September 20, 2011) the Quarterly Census of Employment and Wages reports that in the last 10 years, the US lost 54,621 factories, and manufacturing employment fell by 5 million employees. Over the decade, the number of larger factories (those employing 1,000 or more employees) declined by 40 percent. US factories employing 500-1,000 workers declined by 44 percent; those employing between 250-500 workers declined by 37 percent, and those employing between 100-250 workers shrunk by 30 percent. http://www.manufacturingnews.com/

US politicians, such as Buddy Roemer, blame the collapse of US manufacturing on Chinese competition and “unfair trade practices.” However, it is US corporations that move their factories abroad, thus replacing domestic production with imports. Half of US imports from China consist of the offshored production of US corporations.

The wage differential is substantial. According to the Bureau of Labor Statistics, as of 2009 average hourly take-home pay for US workers was $23.03. Social insurance expenditures add $7.90 to hourly compensation and benefits paid by employers add $2.60 per hour for a total labor compensation cost of $33.53.

In China, as of 2008 total hourly labor cost was $1.36, and India’s is within a few cents of this amount. Thus, a corporation that moves 1,000 jobs to China saves $32,000 every hour in labor cost. These savings translate into higher stock prices and executive compensation, not in lower prices for consumers who are left unemployed by the labor arbitrage.

Republican economists blame “high” US wages for the current high rate of unemployment. However, US wages are about the lowest in the developed world. They are far below hourly labor cost in Norway ($53.89), Denmark ($49.56), Belgium ($49.40), Austria ($48.04), and Germany ($46.52). The US might have the world’s largest economy, but its hourly workers rank 14th on the list of the best paid. Americans also have a higher unemployment rate. The “headline” rate that the media hypes is 9.1 percent, but this rate does not include any discouraged workers or workers forced into part-time jobs because no full-time jobs are available.

The US government has another unemployment rate (U6) that includes workers who have been too discouraged to seek a job for six months or less. This unemployment rate is over 16 percent. Statistician John Williams (Shadowstats.com) estimates the unemployment rate when long-term discouraged workers (more than six months) are included. This rate is over 22 percent.

Most emphasis is on the lost manufacturing jobs. However, the high speed Internet has made it possible to offshore many professional service jobs, such as software engineering, Information Technology, research and design. Jobs that comprised ladders of upward mobility for US college graduates have been moved offshore, thus reducing the value to Americans of many university degrees. Unlike former times, today an increasing number of graduates return home to live with their parents as there are insufficient jobs to support their independent existence.

All the while, the US government allows in each year one million legal immigrants, an unknown number of illegal immigrants, and a large number of foreign workers on H-1B and L-1 work visas. In other words, the policies of the US government maximize the unemployment rate of American citizens.

Republican economists and politicians pretend that this is not the case and that unemployed Americans consist of people too lazy to work who game the welfare system. Republicans pretend that cutting unemployment benefits and social assistance will force “lazy people who are living off the taxpayers” to go to work.

To deal with the adverse impact on the economy from the loss of jobs and consumer demand from offshoring, Federal Reserve chairman Alan Greenspan lowered interest rates in order to create a real estate boom. Lower interest rates pushed up real estate prices. People refinanced their houses and spent the equity. Construction, furniture and appliance sales boomed. But unlike previous expansions based on rising real income, this one was based on an increase in consumer indebtedness.

There is a limit to how much debt can increase in relation to income, and when this limit was reached, the bubble popped.

When consumer debt could rise no further, the large fraudulent component in mortgage-backed derivatives and the unreserved swaps (AIG, for example) threatened financial institutions with insolvency and froze the banking system. Banks no longer trusted one another. Cash was hoarded. Treasury Secretary Paulson, browbeat Congress into massive taxpayer loans to financial institutions that functioned as casinos. The Paulson Bailout (TARP) was large but insignificant compared to the $16.1 trillion (a sum larger than US GDP or national debt) that the Federal Reserve lent to private financial institutions in the US and Europe.

In making these loans, the Federal Reserve violated its own rules. At this point, capitalism ceased to function. The financial institutions were “too big to fail,” and thus taxpayer subsidies took the place of bankruptcy and reorganization. In a word, the US financial system was socialized as the losses of the American financial institutions were transferred to taxpayers.

European banks were swept up into the financial crisis by their unwitting purchase of the junk financial instruments marketed by Wall Street. The financial junk had been given investment grade rating by the same incompetent agency that recently downgraded US Treasury bonds.

The Europeans had their own bailouts, often with American money (Federal Reserve loans). All the while Europe was brewing an additional crisis of its own. By joining the European Union and (except for the UK) accepting a common European currency, the individual member countries lost the services of their own central banks as creditors.

In the US and UK the two countries’ central banks can print money with which to purchase US and UK debt. This is not possible for member countries in the EU.

When financial crisis from excessive debt hit the PIIGS (Portugal, Ireland, Italy, Greece, and Spain) their central banks could not print euros in order to buy up their bonds, as the Federal Reserve did with “quantitative easing.” Only the European Central Bank (ECB) can create euros, and it is prevented by charter and treaty from printing euros in order to bail out sovereign debt.

In Europe, as in the US, the driver of economic policy quickly became saving the private banks from losses on their portfolios. A deal was struck with the socialist government of Greece, which represented the banks and not the Greek people. The ECB would violate its charter and together with the IMF, which would also violate its charter, would lend enough money to the Greek government to avoid default on its sovereign bonds to the private banks that had purchased the bonds. In return for the ECB and IMF loans and in order to raise the money to repay them, the Greek government had to agree to sell to private investors the national lottery, Greece’s ports and municipal water systems, a string of islands that are a national preserve, and in addition to impose a brutal austerity on the Greek people by lowering wages, cutting social benefits and pensions, raising taxes, and laying off or firing government workers.

In addition, in America today savings earn nothing. Indeed, they produce an ongoing loss as the interest rate is below the inflation rate. The Federal Reserve has interest rates so low that only professionals who are playing arbitrage with algorithm-programmed computer models can make money. The typical saver and investor can get nothing on bank CDs, money market funds, municipal and government bonds. Only high risk debt, such as Greek and Spanish bonds, pay an interest rate that is higher than inflation.

For four years interest rates, when properly measured, have been negative. Americans are getting by, maintaining living standards, by consuming their capital. Even those with a cushion are eating their seed corn. The path that the US economy is on means that the number of Americans without resources to sustain them will be rising. Considering the extraordinary political incompetence of the Democratic Party, the right wing of the Republican Party, which is committed to eliminating income support programs, could find itself in power. If the right-wing Republicans implement their program, the US will be beset with political and social instability. As Gerald Celente says, “when people have nothing left to lose, they lose it.”

The New American Revolution Began on the 17th September

17 September 2011 was the first day of "Occupy Wall Street" -- at least a thousand people were in the Wall Street district to protest. There are lots of tweets going on (#OCCUPYWALLSTREET and #takewallstreet). People are getting ready to sleep in the Wall Street district. The police were out in force, guarding all entrances to Wall Street, the famous bull statue, many banks in the area -- that was only the first day; could build over the next month. It is another sign of revolt building.

The website organising this event has the following statement:

We want freedom for all, without regards for identity, because we are all people, and because no other reason should be needed. However, this freedom has been largely taken from the people, and slowly made to trickle down, whenever we get angry.

Money, it has been said, has taken over politics. In truth, we say, money has always been part of the capitalist political system. A system based on the existence of have and have nots, where inequality is inherent to the system, will inevitably lead to a situation where the haves find a way to rule, whether by the sword or by the dollar.

We agree that we need to see election reform. However, the election reform proposed ignores the causes which allowed such a system to happen. Some will readily blame the federal reserve, but the political system has been beholden to political machinations of the wealthy well before its founding.

We need to address the core facts: these corporations, even if they were unable to compete in the electoral arena, would still remain control of society. They would retain economic control, which would allow them to retain political control. Term limits would, again, not solve this, as many in the political class already leave politics to find themselves as part of the corporate elites.

We need to retake the freedom that has been stolen from the people, altogether.

If you agree that freedom is the right to communicate, to live, to be, to go, to love, to do what you will without the impositions of others, then you might be one of us.

If you agree that a person is entitled to the sweat of their brows, that being talented at management should not entitle others to act like overseers and overlords, that all workers should have the right to engage in decisions, democratically, then you might be one of us.

If you agree that freedom for some is not the same as freedom for all, and that freedom for all is the only true freedom, then you might be one of us.

If you agree that power is not right, that life trumps property, then you might be one of us.

If you agree that state and corporation are merely two sides of the same oppressive power structure, if you realize how media distorts things to preserve it, how it pits the people against the people to remain in power, then you might be one of us.

And so we call on people to act

We call for protests to remain active in the cities. Those already there, to grow, to organize, to raise consciousnesses, for those cities where there are no protests, for protests to organize and disrupt the system.

We call for workers to not only strike, but seize their workplaces collectively, and to organize them democratically. We call for students and teachers to act together, to teach democracy, not merely the teachers to the students, but the students to the teachers. To seize the classrooms and free minds together.

We call for the unemployed to volunteer, to learn, to teach, to use what skills they have to support themselves as part of the revolting people as a community.

We call for the organization of people's assemblies in every city, every public square, every township.

We call for the seizure and use of abandoned buildings, of abandoned land, of every property seized and abandoned by speculators, for the people, for every group that will organize them.

We call for a revolution of the mind as well as the body politic.

I am not sure who well this event will be covered by USMSM since it threatens the status quo. It did cause the Toronto Star to ask "Is the Arab Spring Coming to America?" That's a good question can social media be used as a means for activating the dormant left wing the way it has been used in other countries? The tea party stands for the rich, not disaffected and impoverished youth--youth who have graduated from university with a pile of debt yet see no future.

One protestor, Lisa Fithian, said she's not part of any official group and that the “occupation” of Wall Street is the work of many people coming together for the same purpose and with the same message. "Wall Street is certainly the heart of why we're here. It's the corporations — the big banks in this country have been destroying this country, Overfees or high mortgages, student loans, the banks are touching every aspect of our lives."

She added that banks and the wealthy have taken money for their own interests and their own survival. “The people here are saying enough of that".

OccupyWallStreet--The American Revolution Begins Sept 17th
Occupy Wall Street: Protests Continue on Day 2
Wall St. Protesters Say They’re Settled In
A real Wall Street takeover threat
Social Networking Spurs Wall Street Protest

Class War For Idiots--7 Ways the Koch Bros. Benefit from Corporate Welfare

Class War For Idiots /Investigative Report / September 4, 2010

7 Ways the Koch Bros. Benefit from Corporate Welfare

By Yasha Levine

An abridged version of this article was first published
in the New York Observer

Mainstream America is finally getting to know the billionaire brothers backing the libertarian movement, thanks to a pair of dueling profiles in New York and The New Yorker. Now that we’ve heard about their charitable giving, David’s 240-foot mega-yacht and role as patrons of the Tea Party movement, it’s time to ask a more serious question: How libertarian are they?
The short answer…not very.
Charles and David Koch, the secretive billionaire brothers who own Koch Industries, the largest private oil company in America, have spent millions bankrolling free-market think tanks and pro-business politicians in order, as David Koch has put it, “to minimize the role of government, to maximize the role of private economy and to maximize personal freedoms.” But a closer look at their dealings reveals that for the past 35 years the brothers have never shied away from using government subsidies to maximize their own profits, even while endeavoring to limit government spending on anything else. Simply put: the Kochs have no problem with socialism — as long as they’re in on the action.
In 1977, Charles Koch founded the Cato Institute, an influential libertarian think tank, with the aim of injecting free-market ideas into the mainstream. The Kochs would go on to establish and fund a vast network of overlapping think tanks, institutes, foundations, media outlets, and lobby groups that would vilify centralized government and promote laissez-faire capitalism as the only route to economic prosperity. The Mercatus Center, Americans for Prosperity, Reason Magazine, the Federalist Society and the Heritage Foundation are just a few of the right-wing organizations that run on Koch cash today.
Koch Industries is America’s second-largest private corporation, with revenue of $100 billion in 2009, and 80,000 employees in 60 countries. According to Charles Koch, Koch Industries has grown 2,000-fold since he took over from his dad in 1967, transforming a middling oil transportation and refinement operation into a corporate mini-state involved in oil, petrochemicals, paper, agriculture and financial services. Worth just under $20 billion apiece, the brothers live like emperors. David Koch, 70, resides in a Park Avenue and likes to take a few weeks off every year to lounge on his 246-foot megayacht in the Mediterranean, which costs $500,000 a week to operate and has been rented out for pleasure cruises by Prince Charles.
Seventy-four-year-old Charles G. Koch, who runs the company from a compound in Wichita, Kansas, has attributed the company’s success to an unshakable belief in the power of the free-markets—a belief that he says can be traced back to an “intellectual epiphany” he experienced at a conference more than 40 years ago. There, Koch realized that free-market economics were an objective reality “as immutable as the laws that work in science,” he explained in 2006.
In its recent profile, the New Yorker called Charles and David Koch “the primary underwriters of hard-line libertarian politics in America.” But the magazine failed to mention that their free market philanthropy belies the immense profit they have made from corporate welfare.

1. SOCIALIST SHIPBUILDING

Two years before founding the influential Cato Institute, Charles Koch bought a supertanker from a communist regime. According to information in the Lehman Brothers business archives, as well as records found in a Croatian shipyard, in 1975, Koch Industries purchased ship from the Socialist Republic of Yugoslavia. The ship, a standard 274,330-ton dual use tanker, was named after the Kochs’ mother, Mary.
The purchase of a ship from Yugoslavia would not have been a big deal, had the Kochs not been the ones doing the buying. With the whole free world to choose from, why would a supposedly true-believer libertarian like Charles Koch buy a vessel produced in a communist country—and name it after his own dear mother, to boot? After all, didn’t Austrian school economist Ludwig Von Mises, an early influence on Charles’ intellectual journey to libertarianism, write in his 1933 seminal work, Socialism: An Economic and Sociological Analysis, that centrally planned economies are so inherently inefficient that “socialism must fail”?
It turned out that Yugoslavia’s highly-centralized economy was the opposite of inefficient—it was on fire. In the 1960s and 1970s, the country was churning out, among other things, low-cost, high-quality ships that were sold around the world. Even the old-school libertarian magazine The Freeman couldn’t help but praise the country’s economic performance, writing in 1988, “Many of Yugoslavia’s industries seemed highly competitive in world markets, and there were even astonishing reports that efficient Yugoslav shipbuilders wrested contracts away from the Japanese.”

2. VENEZUELAN FERTILIZER

In 1998, Koch Industries entered into a lucrative partnership with two state-owned companies–one Venezuelan, the other Italian–to open a massive $1 billion nitrogen-based fertilizer plant in Venezuela called Fertinitro.
A business venture with two state-run companies? How did Koch Industries find itself in this libertarian nightmare scenario? After all, Charles Koch’s own Cato Institute brain trust has been writing for decades that state-owned enterprises are less efficient and productive than private companies.
Fertilizer production requires massive amounts of natural gas, and obtaining it can account for 50 percent of operating costs. Luckily for Koch, Fertinitro’s semi-state-owned status allowed it to tap into a guaranteed supply of natural gas subsidized by the state. Steven Bodzin, a former Bloomberg journalist, found that “just on the natural gas, never mind the electricity or water subsidies, Koch profits from a direct Venezuelan government subsidy of $1.23 for every thousand cubic feet of gas consumed at Fertinitro.” For Koch Industries, whose role in the partnership is to unload half of the 6 million tons of fertilizer produced by Fertinitro every year on the American market, that equals up to $123.6 million in subsidies every year.
Savor the irony: While tea partiers wave Koch-funded placards comparing President Obama to Hugo Chavez, the Kochs are busy profiting off Chavez’s socialist economy—only to turn around and blame Venezuela’s poverty on Hugo Chavez’s socialist policies.

3. RANCHING

For the past fifty years, through its Matador Cattle Company subsidiary, Koch Industries has been quietly milking a New Deal program that allows ranchers to use federal land basically for free. Matador, one of the ten biggest domestic cattle ranching operations, has something in the neighborhood of 300,000 acres of grazing land for its cows—two-thirds of which belong to American taxpayers, who will never see a penny of profit.

4. LOGGING

In 2006, Koch Industries acquired pulp and paper giant Georgia-Pacific for a $21-billion cash payment, allowing the Koch brothers to tap into a whole new area of government largesse: the ability to log public forests for private gain and have taxpayers cover the operating costs. Not only can companies like Georgia-Pacific, which is the world’s leading manufacturer of paper products, exploit a publicly-shared resource without sharing the profits, but the U.S. Forestry Service subsidizes them to do it by forcing taxpayers to fund the construction of new logging roads that provide loggers with access to virgin growth—a nice welfare arrangement for the industry that costs taxpayers over $1 billion a year.
“Private logging of America’s National Forests is a heavily subsidized form of corporate welfare,” wrote Scott Silver, founder and executive director of Wild Wilderness, a conservation watchdog, at the time of the Georgia-Pacific’s sale to Koch Industries. “Logging companies such as Georgia-Pacific strip lands bare, destroy vast acreages and pay only a small fee to the federal government in proportion to what they take from the public.”

5. ETHANOL

Just two weeks ago, Koch Industries got into the ethanol business by buying two ethanol plants in Iowa. Other than defense, ethanol is possibly the most subsidized industry in America. Koch’s own Cato Institute has called ethanol a “boondoggle,” writing that “the dizzying array of federal, state and local subsidies, preferences and mandates for ethanol fuel are a sad reflection of how a mix of cynical politics and we-can-do-anything American naiveté can cloud minds and distort markets.” The institute has sharply criticized the billions of dollars in federal and state subsidies that are poured into the ethanol industry (between $5 billion and $6.8 billion in 2006 alone).
Koch Industries has traded ethanol for years on the commodities market, but their entry into the production side of the business puts them in a position to profit off the subsidies in a more direct manner.

6. EMINENT DOMAIN

Although highly diversified, Koch Industries’ vast network of oil and gas pipelines remains the company’s core business and main source of revenue. The exact size of their pipeline network is not known, but some estimate that Koch Industries operates anywhere between 35,000 and 50,000 miles of pipelines between Texas and Canada—enough plumbing to wrap around the globe twice or zigzag between New York and Los Angeles 15 times. How did the Kochs manage to build up a pipeline network of this magnitude? By getting the government to use its tyrannical powers of eminent domain to forcibly seize private property on Koch Industries’ behalf.
As far as libertarians are concerned, eminent domain is a socialist tyranny straight out of the Leninist playbook, as it recognizes the government as the real owner of all land and vests it with the power to expropriate private property for alleged public good. At the most fundamental level, libertarians believe that eminent domain invalidates the notion of private property rights, threatening not just prosperity, but freedom. Charles Koch is clear on this. “Countries that clearly define and protect individual private property rights stimulate investment and grow,” he writes in his book The Science of Success. “Those that threaten and confiscate private property lose capital and decline.”
But not all property rights are created equal. A Koch Industries oil pipeline recently built in Minnesota shows that Charles Koch does not see an is anything wrong with the government confiscating private property, as long as he stands to make a profit.
Completed in 2008, the 304-mile line now carries crude oil from the Canadian border to a Koch Industries refinery near the Twin Cities area via a two-foot-wide pipe. Company PR execs pitched the pipeline as a public benefit project, as it would increase Minnesota’s gasoline supply. But the 1,000-plus landowners who were forced to handover their private property so that Koch Industries could run its pipeline didn’t quite see it that way. “People’s rights were violated, and they never got their due process,” a farmer whose fields were going to be cut in two by the pipeline told a newspaper in 2007. “It’s wrong. People’s property is one of the most important things to their livelihood.”

7. STALIN

Before Fredrick Koch suddenly developed a pinko paranoia and helped start up the John Birch Society, he was making piles of cash laying the foundation of Soviet oil infrastructure in the 1920s and early 1930s. He designed and built refineries, hosted Soviet engineers for training in Wichita, Kansas, and made an invaluable contribution to the rapid industrialization of the Soviet Union during Joseph Stalin’s first Five-Year Plan. This is a touchy issue for the Koch family: without the Commie Reds providing his future seed capital, Koch Industries would not exist today—and neither would the Tea Parties.
When I wrote about the Koch family’s wealth and its connection to the Soviet Union in April 2010, libertarians rushed to the Kochs’ defense, arguing that business decisions made when they were children had no bearing on Charles and David Koch. They are not their father, and cannot be blamed for his sins―which is true. The brothers are better at the libertarian lie than their father ever was: their self-help libertarianism is more effective pro-billionaire propaganda than his racist Bircher rants. But while the tone may be different, the objective is very much the same: to con the American people into voting against their own interests.

8. TAKEAWAY MESSAGE

The next time you hear Michele Bachmann (who’s a welfare queen in her own right) screaming at the top of her lungs that socialized healthcare is “reaching down the throat and ripping the guts out of freedom” or watch a Cato Institute shill on Meet the Press layout a case for why you should support the privatization of social security, remember: they aren’t hypocrites, they’re cons looking to rip you off.

Yasha Levine is an editor of The eXiled. Levine and co-author Mark Ames first broke the connection between the Tea Party and the billionaire Koch brothers in Playboy.com in February 2009, sparking lawsuit threats, and causing CNBC’s Rick Santelli to publicly distance himself from the Tea Party movement and cancel his Daily Show appearance.
Read other takedowns of the Koch brothers by Levine and Ames…