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Daily Archives: January 30, 2014

Enough Is Enough: Fraud-ridden Banks Are Not L.A.’s Only Option Washington’s Blog

Enough Is Enough: Fraud-ridden Banks Are Not L.A.’s Only Option Washington’s Blog.

Guest post by Ellen Brown.

“Epic in scale, unprecedented in world history. That is how William K. Black, professor of law and economics and former bank fraud investigator, describes the frauds in which JPMorgan Chase (JPM) has now been implicated. They involve more than a dozen felonies, including bid-rigging on municipal bond debt; colluding to rig interest rates on hundreds of trillions of dollars in mortgages, derivatives and other contracts; exposing investors to excessive risk; failing to disclose known risks, including those in the Bernie Madoff scandal; and engaging in multiple forms of mortgage fraud.

So why, asks Chicago Alderwoman Leslie Hairston, are we still doing business with them? She plans to introduce a city council ordinance deleting JPM from the city’s list of designated municipal depositories. As quoted in the January 14th Chicago Sun-Times:

The bank has violated the city code by making admissions of dishonesty and deceit in the way they dealt with their investors in the mortgage securities and Bernie Madoff Ponzi scandals. . . . We use this code against city contractors and all the small companies, why wouldn’t we use this against one of the largest banks in the world?

A similar move has been recommended for the City of Los Angeles by L.A. City Councilman Gil Cedillo. But in a January 19th editorial titled “There’s No Profit in L A. Bashing JPMorgan Chase,” the L.A. Times editorial board warned against pulling the city’s money out of JPM and other mega-banks – even though the city attorney is suing them for allegedly causing an epidemic of foreclosures in minority neighborhoods.

 “L.A. relies on these banks,” says The Times, “for long-term financing to build bridges and restore lakes, and for short-term financing to pay the bills.” The editorial noted that a similar proposal brought in the fall of 2011 by then-Councilman Richard Alarcon, backed by Occupy L.A., was abandoned because it would have resulted in termination fees and higher interest payments by the city.

It seems we must bow to our oppressors because we have no viable alternative – or do we? What if there is an alternative that would not only save the city money but would be a safer place to deposit its funds than in Wall Street banks?

The Tiny State That Broke Free

There is a place where they don’t bow. Where they don’t park their assets on Wall Street and play the mega-bank game, and haven’t for almost 100 years. Where they escaped the 2008 banking crisis and have no government debt, the lowest foreclosure rate in the country, the lowest default rate on credit card debt, and the lowest unemployment rate. They also have the only publicly-owned bank.

The place is North Dakota, and their state-owned Bank of North Dakota (BND) is a model for Los Angeles and other cities, counties, and states.

Like the BND, a public bank of the City of Los Angeles would not be a commercial bank and would not compete with commercial banks. In fact, it would partner with them – using its tax revenue deposits to create credit for lending programs through the magical everyday banking practice of leveraging capital.

The BND is a major money-maker for North Dakota, returning about $30 million annually in dividends to the treasury – not bad for a state with a population that is less than one-fifth that of the City of Los Angeles. Every year since the 2008 banking crisis, the BND has reported a return on investment of 17-26%.

Like the BND, a Bank of the City of Los Angeles would provide credit for city projects – to build bridges, restore lakes, and pay bills – and this credit would essentially be interest-free, since the city would own the bank and get the interest back. Eliminating interest has been shown to reduce the cost of public projects by 35% or more.

Awesome Possibilities

 Consider what that could mean for Los Angeles. According to the current fiscal budget, the LAX Modernization project is budgeted at $4.11 billion. That’s the sticker price. But what will it cost when you add interest on revenue bonds and other funding sources? The San Francisco-Oakland Bay Bridge earthquake retrofit boondoggle was slated to cost about $6 billion. Interest and bank fees added another $6 billion. Funding through a public bank could have saved taxpayers $6 billion, or 50%.

If Los Angeles owned its own bank, it could also avoid costly “rainy day funds,” which are held by various agencies as surplus taxes. If the city had a low-cost credit line with its own bank, these funds could be released into the general fund, generating massive amounts of new revenue for the city.

The potential for the City and County of Los Angeles can be seen by examining their respective Comprehensive Annual Financial Reports (CAFRs). According to the latest CAFRs (2012), the City of Los Angeles has “cash, pooled and other investments” of $11 billion beyond what is in its pension fund (page 85), and the County of Los Angeles has $22 billion (page 66). To put these sums in perspective, the austerity crisis declared by the State of California in 2012 was the result of a declared state budget deficit of only $16 billion.

The L.A. CAFR funds are currently drawing only minimal interest. With some modest changes in regulations, they could be returned to the general fund for use in the city’s budget, or deposited or invested in the city’s own bank, to be leveraged into credit for local purposes.

Minimizing Risk

 Beyond being a money-maker, a city-owned bank can minimize the risks of interest rate manipulation, excessive fees, and dishonest dealings.

Another risk that must now be added to the list is that of confiscation in the event of a “bail in.” Public funds are secured with collateral, but they take a back seat in bankruptcy to the “super priority” of Wall Street’s own derivative claims. A major derivatives fiasco of the sort seen in 2008 could wipe out even a mega-bank’s available collateral, leaving the city with empty coffers.

The city itself could be propelled into bankruptcy by speculative derivatives dealings with Wall Street banks. The dire results can be seen in Detroit, where the emergency manager, operating on behalf of the city’s creditors, put it into bankruptcy to force payment on its debts. First in line were UBS and Bank of America, claiming speculative winnings on their interest-rate swaps, which the emergency manager paid immediately before filing for bankruptcy. Critics say the swaps were improperly entered into and were what propelled the city into bankruptcy. Their propriety is now being investigated by the bankruptcy judge.

Not Too Big to Abandon

Mega-banks might be too big to fail. According to U.S. Attorney General Eric Holder, they might even be too big to prosecute. But they are not too big to abandon as depositories for government funds.

There may indeed be no profit in bashing JPMorgan Chase, but there would be profit in pulling deposits out and putting them in Los Angeles’ own public bank. Other major cities currently exploring that possibility include San Franciscoand Philadelphia.

If North Dakota can bypass Wall Street with its own bank and declare its financial independence, so can the City of Los Angeles. And so can the County. And so can the State of California.


Ellen Brown is an attorney, chairman of the Public Banking Institute, and author of 12 books includingThe Public Bank Solution. She is currently running for California state treasurer on the Green Party ticket.

On the Other Side of Collapse: Notes from the Island of Cyprus

On the Other Side of Collapse: Notes from the Island of Cyprus.

by Lakis Polycarpou, originally published by City of the Future  | TODAY

This is an interview with my cousin, Sofia Matsi. Sofia is a health campaigner, artist, permaculture designer and sustainability activist. She lives in Nicosia, Cyprus.

Last year, Sofia witnessed first hand the near complete collapse of the island’s economy–an event which culminated in a highly controversial bailout plan that included an unprecedented confiscation of up to 10 percent of customer bank deposits and the dismantling of the country’s banking industry.

The deal was the fifth Eurozone bailout in recent years–after Greece, Ireland, Portugal and Spain–that was orchestrated by the European Commission (EC), the International Monetary Fund (IMF), and the European Central Bank (ECB), together called “the Troika” in Greek and Cypriot slang.

Cyprus has been de facto partitioned since 1974, when Turkey invaded and forced Greek Cypriots out of the northern part of the island. In 2004, Cyprus joined the Eurozone, in part as a way to protect the island from further Turkish aggression.

In this interview, Sofia talks about her experience of the crisis, her efforts to develop her father’s land as a permaculture site, and her work to help build “The Movement of Life,” an organization that promotes ecological sustainability, resilience and economic self-reliance for Cypriots.

LP:  Can you tell me about the situation right now in Cyprus? What is the mood of the people now? How has that changed in the past year?

SM:  Well, almost exactly a year ago we gave our first presentation as The Movement of Life here in Cyprus. At that time, those of us in the movement were aware of the danger of a financial crisis; there were new elections coming up, and along with that was the threat of committing Cyprus to the Troika plan.  And that was going to happen with the elections in mid-February.

So we were rushing around, trying to figure out what was going to happen, what the outcome would be. What eventually ended up happening is that we were told as a nation to listen to what Troika was saying. And what Troika was proposing was a huge loan, and we wouldn’t really understand where would that end.

So that brought us to the bailout announcements in March. Some people were surprised, but those of us in the Movement of Life, were already talking about these things.

After that, though, the bailout gave a big push to many, many groups in Cyprus who wanted to to be more independent and self-sufficient. It gave power to groups that were already thinking of working in this direction, like people who were saving seeds, people who had always wanted to start organic farming.

So things started popping up from this — lectures were happening all summer long, lectures on how to create your own organic farm, worm composting, and stuff like that. As a team, we decided to get more practical, and stop just lecturing people, and demonstrating how to. How to compost, how to do worm composting, how to do the seed saving.

What we observed is that before the bailout announcements, people were not so interested. People were like, “yeah, oh well, you’re saying what you’re saying, but I don’t think it affects me, and I don’t think it matters.”

But then after, we saw increased interest from people. People wanted more, wanted to be more independent and self-sufficient. Again, there’s a huge segment of the population who don’t really realize, even now, that there’s a tremendous need to be more independent as Cypriot citizens, and we cannot depend on the lifestyles we had before. Plenty of people keep going with that same lifestyle, but I think the majority, if not all of us, realize that we are in a very tight situation, financially at least.

What’s been the impact of the financial crisis on you and your family?

Well, that’s … a bit strange also. I don’t know if others from the States have heard my family’s news, but what changed for us was that we started realizing — personally, I started realizing–that we cannot maintain the same lifestyle as before.

When the bailout announcement was made, the banks were closed for 10 days. That meant that cash flow got very tight, there were fewer and fewer products at the supermarket, so we started wondering, what does it mean to be sustainable? We couldn’t produce anything at home. Personally, that filled me with panic at that point. Because I realized, I don’t have anything to eat, I don’t produce anything, and I can’t trade anything with anyone.

So that made me want to be more resilient, more independent. And talking to my parents, they also slowly started understanding what was behind this idea of becoming more independent, so permaculture came into the mix. Permaculture was in my life as a concept, but at that point it became more of a need, to learn practically more about permaculture, because it seemed like a very good answer for many of the problems.

So I started searching for workshops [for a permaculture design course], I found one, I talked to you, we narrowed down some options, and I ended up taking a course in Greece. My dad did the same; after I came back, he was convinced that this was a very good solution for the future, because we decided that the land that we have as a family, could be utilized. And why not start very well from the beginning?

Just to be clear, this is land that from your father’s side of the family, in the foothills …

And my mom. My mom has a field in Vysakia. So that land is sitting there, nobody’s using it. There are people who’s biggest problem is that they don’t have the land. So at least we don’t have that challenge. We only have the challenge of getting started!

So yeah, we understood — I personally realized — that we cannot maintain the same lifestyles as before.

And it’s not random. If I had a big job, if I had a big career job, then I would probably not be thinking that way. But I’ve been back from [graduate school in] the US for the three years, and I have been doing like three jobs in order to survive and it’s been exhausting. And I realized, there is no potential. And this was before the crisis. I don’t see any potential in big career jobs for us at this point. It doesn’t matter how many Ph’ds or how many Masters you have. That won’t get you anywhere. I’ve asked for a job, I’ve sent my CV out repeatedly. Every time the semester changed, I would send my CV to local colleges and universities and ask for an art position job, but things weren’t moving. And I realized that must be for a reason also.

Sofia and crew with their recently built greenhouse
Sofia and crew with their recently built greenhouse

So how’s it going with the land? What have you done so far? What do you plan to produce?

Ideally, we would like to produce as many things as we can fit on that land. That would be like a food forest, seasonal vegetables — and because we have space, we would like to make an income out of that. We would ideally like to live off of what we make.

Do you know how much land it is?

It’s 7.5 hectares (about 18 acres).

That’s a good sized piece of land. I imagine a lot of people in Cyprus have some land. In the last generation, both of your parents grew up in villages where people farmed a lot as part of their livelihood. So people in Cyprus do have land. Maybe not everybody.

Yeah, I think most of families have at least a piece of land that they can use. It’s not like other countries where people live in the city and they have no contact with an open piece of land that they can use. That’s not the case with us in Cyprus.

Sofia’s father Alexis working the compost pile
Sofia’s father Alexis working the compost pile. Photo by Sofia Matsi.

So in a way, something like permaculture is particularly useful in Cyprus.

I think so, yeah! I think that it actually makes sense on a big scale. Of course permaculture could make sense in a cityscape too because you can do more collaborative projects in urban spaces. But it actually makes a lot of sense here, because there’s a lot of land that it could be applied to.

I have a lot of memories of  Cyprus, from when we used to go back to visit. There are certain traditional attitudes and  practices there that we’re trying to rediscover in the United States, like the importance of local food, and planting productive trees — I remember the one time our grandparents came to the United States, our grandfather wondered why no one planted  productive trees. In Cyprus people plant olive trees, they plant lemon trees, it’s part of the culture. Do you think that permaculture and other sustainability ideals have an easier sell in a place like Cyprus?

I would say yes. I would say compared to other countries, we are very close to what our grandparents used to do. So functional is a part of our daily life. We have lemon trees and olive trees right down in front of the house over here. What I was sadly observing today though was that I passed by many neighborhoods and I kept seeing unpicked mandarins. It was all over the place, mandarins, mandarins, or orange trees, and they were full of fruit. That’s not a good sign! At least the fruit should be disappearing a bit, every time I pass by, but it seems like it’s the same! So the functional tree is there, but people don’t really care about it.

At least it’s there. Because it takes a lot of years to grow a tree.

Definitely. But that is also a sign that we’re don’t yet have serious hunger problems. That’s why those trees are full of fruit. Slowly, if we really had a problem, those would be utilized.

Last week you were telling me about the impact of the crisis on people’s lives– that at the beginning the media presented it  like a horror movie, but after the bailout there was almost a news blackout, even as people were losing their jobs.

It seems really strange. At the beginning they told us if we didn’t sign the Troika agreement, we were gonna, you know, go without food, we wouldn’t have anything to sustain our country, we would lose everything. And so, they said, we needed to sign those agreements in order to survive.

Now we’ve signed those agreements, and taken steps toward those “logical” solutions. And people have been losing their jobs, ever since, continuously. Nothing has improved on that side. We do have food, now of course. The tragic scenario of not having food because everything is imported in Cyprus, that we don’t produce almost anything, that we cannot sustain our country — those threats were, thankfully, solved, at least in some peoples’ minds.

But actually the situation has another face, that’s slowly leading us in that direction. We are losing our jobs at this point, and we don’t even know what to do with our spare time, because we’re not trained. We’re not trained to use the land, we’re not trained to survive. And we’re not told that that’s something that would be good to do.

The government is not really supporting … even though I have seen that the government now at least has a sponsorship for young farmers. So that’s good news at this point. Pushing that way, at least. No more lawyers, teachers, all of these people who are now unemployed. We need people who know how to do useful things.

Can you tell me about the heirloom seed movement?

We have a local group, it’s called Kyprianou Sporoi, which means Cypriot Seeds. And they are active in saving heirloom seeds from their grandparents, uncles, whoever wants to offer seed to them. They first check whether the seeds are valid–they do it with this test of repeating cycles of growth, and when the product comes out the same two consecutive times, then they know it’s traditional.

Traditional seed saving and exchange. Photo by The Movement of Life

They’ve been active with this silently, but after last year, they came out much stronger, with more focus on creating collective gardens, community gardens in schools, showing people how to be more independent. And they always use their own seeds. They never use hybrid seeds.

We are lucky that we had the chance to collaborate with the largest heirloom seed group in Greece, Peliti. They came and gave us a good solid knowledge of the importance of saving seeds. Because we knew it was important but we didn’t have enough knowledge.

In the past, other local teams had planted community gardens, but with no thought of the seeds they were using; they were just buying plants, ready-made, from nurseries. Now, at least, all of the teams admit that it was a mistake to use all of those hybrids, now we know that we need to return to our traditional seeds. We actually had a meeting today and we talked about how important it is to start finding traditional seeds in Cyprus, saving them and learning how to reproduce them.

So, yeah, it’s an effort, and it’s a whole campaign to convince people — not to convince, but more to make them more sensitive on this part.

To raise awareness.

It’s only a matter of realizing how important it is to not be taken advantage of by the big corporations that sell you seeds to keep you dependent on them. I think it only takes an hour or so for people to understand how urgent this matter is. I think we have made a huge step in making people more sensitive about this.

Winter lettuce in the greenhouse. Photo by Sofia Matsi
Winter vegetables in the greenhouse. Photo by Sofia Matsi

Can you tell me more about the Movement of Life?

I was involved in activating the movement. It’s like, say, the Transition Movement, which is a good theory, it says a lot on the need to change, but if someone doesn’t actually do something about it in their own towns, you can’t really grasp what is the Transition Movement about.

So that’s what we did in Cyprus. The Movement of Life was a good concept, it had a good goal, but nothing was happening, so we felt the need to activate it. We started with a few lectures, and then we started being more practical, with workshops and stuff.

What was the movement’s initial goal?

The original goal was to fight for food for all, water for all, energy for all, sustainable energy, unpatented water; food for all means organic, safe food, non genetically modified, so it’s all those matters that we’re worried about …

I guess what I’m getting at is: Was that connection between financial problems sustainability always there in the movement?

As a concept it was. And we know that we’re not the only movement, and that’ s not the goal, anyway. We just try to act through an organized structure. And then from there on we join other movements so we can have our job done. So we can learn more things. We bring specialists in so they can talk to us about such and such, and I think they also appreciate our more organized action here in Cyprus.

Do you have any last thoughts?

I believe that — what I personally understand, at this point–is that the power to change things is in the hands of each individual. We have the power. Before I was panicking and thinking “it’s all about our politicians, it’s all about the decision makers.”

But at this point, I really feel that we can shift things around. And we have the power. Each individual has the power to control and to change and to demand things. I believe that tools such as permaculture can give you the knowledge and confidence to demand changes.

I do really believe that while we might be unemployed as young people here in Cyprus, while we might be ignored, while we might not have the funds for the desired lifestyle that our parents started living …  I believe that’s also a blessing.

I have been observing Greece a lot lately, and I’ve felt really fortunate to see how many young people react to this crisis in Greece. Many of them stick around Athens, they stick around, living miserable, routine lives, with no cash and working all day long.

But at the same time, you observe these professionals, very hard working young people creating societies from scratch, like the Free and Real. They made an entire community out of nothing. They make their own buildings, they’re engineers, designers, yoga instructors, all the specialties, and they all now live together very professionally and they thrive! They thrive without money, they thrive without anyone having to give them employment! So I feel very optimistic that this crisis/opportunity is actually a gift to us young people who actually want to change things. Because if things were given to us comfortably and with luxury, I don’t think we would easily comprehend the need for change. So, yeah, I think it’s a gift, at this point!

Minimum Wage Mendacity :: The Mises Economics Blog: The Circle Bastiat

Minimum Wage Mendacity :: The Mises Economics Blog: The Circle Bastiat.


Thursday, January 30th, 2014


With President Obama’s State of the Union Address and its associated campaign prominently featuring increased minimum wage, tired arguments for raising the minimum wage are being once again retreaded. Unfortunately, they compound failures of logic, measurement and evidence.

It would stimulate the economy. If I pay $1 more than necessary to hire a worker, I get $1 less in services for my money. The increase in the workers’ consumption enabled by that $1 is a transfer from me to them, not a net gain.

It would increase others’ wages as well. Unfortunately, higher minimum wages reduce available jobs, and fewer alternatives don’t create higher wages. Unions and other competitors would see wage hikes, because alternatives become more costly, but other workers get fewer goods and services in exchange for their labor —i.e., decreased real wages.

It would make work more attractive, reducing government dependence. That would require additional jobs became available at a higher wage. However, fewer jobs will be available, so fewer people would be able to work their way out of dependence.

The minimum wage hasn’t “kept up” with inflation since the 1960s. This presumes without justification that the 1960’s minimum wage was economically justified. However, it was a Great Society aberration that coincided with a virtual stop in progress against poverty.

It also ignores that much of employers’ compensation goes to Social Security, Medicare, workmen’s compensation, new Obamacare mandates, etc., rather than as wages. As government- mandated employment costs ballon, the minimum wage substantially understates compensation.

The claim uses the CPI, widely known to overstate inflation, to calculate “real” wages. And the bias was even larger in the past. So going back to the 1960s for comparison mainly introduces a half century of compounded overstatements of inflation to dramatically understate real wage growth.

It would decrease the number of families in poverty. Unfortunately, as labor economist Mark Wilson put it, “evidence from a large number of academic studies suggests that minimum wage increases don’t reduce poverty levels.” One reason is that most minimum wage workers are secondary workers in non-poor households, while very few are heads of households.


Even important businesses endorse raising the minimum wage. Unionized businesses and those who already pay more than the federal minimum gain from raising it, by increasing rivals’ costs. That those employers who would gain at others’ expense endorse a higher minimum wage says nothing about the validity of arguments against it.

A higher minimum wage will pay for itself in higher productivity, lower turnover, employee morale, etc. Every employer who believed that to be true in their circumstances would pay more without needing any mandate. Are those businesses always accused of being too greedy not greedy enough? Further, why do those states with the highest state minimum wages have higher unemployment rates and lower economic growth rates?

Even if some lose their jobs, most low-wage workers will gain from a higher minimum wage. This assumes that other terms of work will remain unchanged, which is false. For those who keep their jobs, fringe benefits, on-the-job training, etc., will fall to offset additional mandated wages. And the increased wages may well be less valuable (as well as taxable) than what is given up, especially on-the-job training that helps people learn their way out of poverty. That is why labor force participation rates fall and quit rates rise when the minimum wage rises, in contrast to what would happen if those workers were made better off.

Supporters of a higher minimum wage claim altruism to help working families as their motive. But it actually harms most of those supposedly be helped, while benefitting supporters by raising costs facing competitors. They may claim, as did the Chairman of Ben & Jerry’s Board, “I support a living wage economically, morally and with deep conviction,” but it is really a self-interested infringement on freedom that is economically stupid and morally abusive.

Photo Credit: Kristina Hoeppner

Our take on the State of the Union address: It’s time for climate action | – Environmental Defence

Our take on the State of the Union address: It’s time for climate action | – Environmental Defence.

photo credit: 350.org

President Obama delivered the annualState of the Union address last night. And while we usually keep our attention north of the border, there are a few key reasons that we tuned in. As climate impacts hit harder and closer to home with floods, forest fires, heat waves and cold snaps, the time for ambitious climate action has never been clearer.

Last night the President reaffirmed his commitment to climate action through emissions reductions, clean energy, cuts to fossil fuel subsidies, and efficiency. But a ramping up of the ‘all of the above’ energy strategy, with increased natural gas and oil, threatens to hold the U.S. back as a climate leader. Nonetheless, the President’s determination to protect future generations from climate change stands in sharp contrast to what’s happening here in Canada, where the reckless expansion of the tar sands is making it impossible to do our share to prevent the worst of climate change.

Here are the key reasons we watched the speech:

  1. A tale of two countries and climate changeThe Canadian government claims, when it comes to action on climate change, we are harmonizing with the U.S., our largest trading partner. So when President Obama stepped up earlier this year (in the President’s June climate speech) by committing to tackle the U.S.’s biggest source of pollution (coal), it put pressure on Canada to finally take action to regulate the tar sands, our fastest growing source of climate change pollution.Rather than being harmonized, it seems our leaders are singing different tunes. Recently, Prime Minister Harper suggested that any rules to deal with tar sands emissions are still a couple of years away. In contrast, as we heard last night, the President remains dedicated to working to tackle carbon pollution and invest in clean energy and efficiency – commitments that are lacking in Canada.

    We’d welcome real cross-border collaboration on climate action, clean energy and efficiency. The U.S. is committed to taking advantage of the growing clean energy economy (solar got a shout out last night). If we don’t get on board soon with clean energy, Canada will miss out on the jobs and benefits of this growing sector.

  2. The Keystone XL tar sands pipelinePresident Obama holds the key to significant tar sands expansion (and climate pollution) through the Keystone XL tar sands pipeline. While he wasn’t expected to – and didn’t – mention the pipeline in last night’s speech, the heat was still on the President with over 100 people gathered in the cold outside of the White House,demanding a rejection of this massive pipeline that would enable major industry expansion and significant climate pollution.The pipeline is in the midst of a final environmental impact assessment, which the State Department is expected to release in the coming weeks or months. The impact assessment follows the President’s June climate speech, where he was clear that the pipeline would not be approved if it significantly exacerbatesclimate pollution. Industry and governments have been lobbying heavily for the Keystone pipeline, precisely because it would open up export routes and allow for tar sands expansion.

    After the assessment is presented, the pipeline will go through a National Interest Determination process where the public can weigh in. But the final decision rests with the President. The Keystone XL tar sands pipeline is an example of the infrastructure we should not build if we’re serious about stabilizing our climate, which requires us to move away from polluting fossil fuels. Rejecting the pipeline would be yet another signal for investors who are coming to terms with the risks of investing in dirty fuels. And it would be very good news for the climate, which would be saved tens of millions of tonnes of carbon pollution.

  3. Our shared atmosphereBecause we share an atmosphere with the U.S, we care about what our southern neighbour does on climate change, pipelines, fracking, clean energy and energy efficiency. While we work hard every day to push for climate and clean energy policy in Canada, it isn’t just our pollution that matters. The U.S. is one of the world’s largest polluters and what it does or doesn’t do to tackle global warming pollution will impact us in Canada.Every country must try to do its fair share to reduce greenhouse gas emissions. Here at home we will work even harder, because we have further to go. Some important change is happening in Canada, led by cities and provinces. Look at Ontario’s move to shut its last coal plant down for good or Nova Scotia’s impressive success at cutting energy waste. But as a country we need to grapple with the fact that expanding fossil fuel production is incompatible with action on climate change. If the tar sands are allowed to expand, pollution from them will cancel out every other effort in the country to reduce greenhouse gas emissions.

    The good news is that on both sides of the border there a diverse, powerful and growing  movement of committed individuals, organizations and communities standing up for a safer future for our shared environment and climate. This movement has made the tar sands the defining energy conversation on the continent, with many voices calling for an end to expanding the tar sands. As the impacts of climate change continue to hit close to home, this movement is only going to get stronger.

Presenting the latest country to lose confidence in the dollar….

Presenting the latest country to lose confidence in the dollar…..


January 30, 2014
Sovereign Valley Farm, Chile

Zimbabwe. You remember those guys, right?

The country’s plight with its currency became world famous, the butt of untold jokes in economic circles. At its height, hyperinflation in Zimbabwe reached nearly 90 sextillion in 2008.

That’s a 9 with 22 zeros.

To put it in context, if you had 90 sextillion grains of sand, you could cover the entire surface of the earth all the way to the outmost layers of the atmosphere.

Then, in April 2009, the government effectively abandoned the Zimbabwe dollar. The US dollar became the official currency for all government transactions, and US dollars, British pounds sterling, euros, and South African rand became the most widely used tender in circulation.

I’ve traveled to Zimbabwe frequently; they have some of the best stories you could ever hear about standing in line at the banks with wheelbarrows, and using stacks of paper currency at home for toilet paper or furniture.

Given that Zimbabwe is literally THE poster child for hyperinflation over the last half-century, one cannot understate the irony of their latest announcement.

Just yesterday, the government there announced that the Chinese renminbi (among other currencies) will become legal tender in Zimbabwe.

This is big news. As we have discussed so many times in the past, the current fiscal and monetary antics in the United States are absolutely no different than what Zimbabwe employed several years ago.

Zimbabwe printed its currency in nearly infinite quantities. So has the United States. The only difference is that the US dollar is readily accepted around the world thanks to good ole’ American credibility that was built by previous generations.

But that credibility is rapidly deteriorating. And everywhere you look, there are obvious signs that the rest of the world is quickly moving on from the dollar.

Central banks around the world are stocking up on gold. Major powers like China and Russia are calling for a new reserve currency. And a number of nations (Zimbabwe is the latest) have already begun to use other currencies like the renminbi for international trade and central bank reserves.

It’s happening. And it’s one of those things that will play out like what Hemingway wrote about going bankrupt: gradually, then suddenly.

The dollar’s share of global reserves has slowly fallen from roughly 75% in 2001, to just over 60% today.

But the world will eventually reach a bifurcation point where investors, foreign governments, central banks, etc. panic and start rushing for the exits.

It’s something that could happen tomorrow. Or five years from now. No one knows. But rational, intelligent people shouldn’t be waiting around for it to happen.

I very strongly recommend that you take a portion of your savings and move them into real assets– precious metals and productive land are the most obvious. But even things like collectibles or nonperishable goods (like ammunition) would be preferable to US dollars.

Then there’s other currencies that you can hold. Right now, the Norwegian krone has the strongest fundamentals in the world as it is backed by the most solvent central bank on the planet.

The Hong Kong dollar is also an interesting option because it minimizes your downside currency risk while providing protection against the US dollar’s deterioration.

(Premium members: please refer to your SMC welcome guide for actionable information about holding Hong Kong dollars and Norwegian krone.)

The IMF’s Emerging Confusion On Emerging Markets | Zero Hedge

The IMF’s Emerging Confusion On Emerging Markets | Zero Hedge.

The IMF’s woeful forecasting record, chronicled extensively before, has just taken yet another hit, following the latest flip flop on emerging markets. Try to spot the common theme of these assessments by the IMF.

IMF Chief economist Olivier Blanchard, April 11, 2011 (source):

In emerging market economies, by contrast, the crisis left no lasting wounds. Their initial fiscal and financial positions were typically stronger, and the adverse effects of the crisis were more muted. High underlying growth and low interest rates are making fiscal adjustment much easier. Exports have recovered, and whatever shortfall in external demand they experienced has typically been made up through increases in domestic demand. Capital outflows have turned into capital inflows, due to both better growth prospects and higher interest rates than in the advanced economies. The challenge for most emerging market economies is thus quite different from that of the advanced economies—namely, how to avoid overheating in the face of closing output gaps and higher capital flows.”

IMF Chief economist Olivier Blanchard, July 9, 2013 (source):

“If you look country by country it seems to be specific . . . so in China it looks like unproductive investment, in Brazil it looks like low investment and in India it looks like policy and administrative uncertainty. But you wonder whether there is not something behind. I think behind this is a slowdown in underlying growth – not the cyclical component but just the average rate. It’s clear that these countries are not going to grow as fast as they did before the crisis.”

IMF Chief economist Olivier Blanchard, January 23, 2014 (source)

“Finally, we forecast that both emerging market and developing economies will sustain strong growth

A few days later, EMs around the globe crashed, and central banks virtually everywhere had to step in to bail out their crashing currencies, and hit the tape with even more impressive verbal intervention every several hours.

Finally, today we get IMF economist Alejandro Werner, January 30, 2014 (source)

“Conditions in global financial markets will stay tighter than they were before the U.S. central bank’s “taper talk” in the first half of 2013, translating into higher international borrowing costs,particularly with the recent volatility in emerging markets…. sustained turbulence in emerging markets could tighten global financial conditions further…. Rebuilding fiscal buffers, and using monetary policy and flexible exchange rates to absorb shocks where possible, remains the order of the day.

In other words, going from a forecast of “high underlying growth”, to “not going to grow as fast as they did”, to “sustain strong growth”, to violent EM crash, to “turbulence”, “volatility”, and urging EMs to “using monetary policy to absorb shocks”, what is clear is that nobody knows what is going on, nobody has any handle on the future of Emerging Markets, but let’s all just pretend that the MIT central-planners in control, are in control, and all shall be well.

charles hugh smith-In a Typhoon, Even Pigs Can Fly (for a while)

charles hugh smith-In a Typhoon, Even Pigs Can Fly (for a while).

Here’s the global financial crisis in a nutshell: access to easy credit can solve a temporary liquidity problem, but it can’t increase the value of collateral or generate income.

The Chinese culture has a wonderful vocabulary of colorful analogies and metaphors, and today’s title refers to the typhoon of liquidity (freely available credit) that has flooded the global economy for the past five years.

The source of the phrase is Liu Chuanzhi, the Chairman of Lenovo and the iconic figure of Chinese manufacturing. When asked a few years ago why 60% of Lenovo Group’s profit came from asset investment and only 40% came from manufacturing. He said “when the typhoons come, even a pig can fly in the sky. Everybody is profiteering from this. Why can’t we?”

The typhoon in this case is China’s credit/liquidity-driven real estate speculative frenzy, in which the only losers are those who don’t borrow to the hilt in the shadow banking system and buy, buy, buy empty flats in vacant buildings.

The critical distinction to make about typhoons of credit-driven speculation (in China, Japan, the U.S., Europe, etc.) is between liquidity and valuation.

Let’s take a household as an example to explain the difference. Say the household owns a $300,000 house with a $150,000 mortgage. The household has home equity of $150,000.

Let’s say one of the household loses their job and the sole remaining income is not enough to pay the monthly bills. This is a liquidity crisis. The household could borrow money based on the collateral of the home equity to tide them over until the second worker finds a new job.

A valuation crisis is different: let’s say the household decides to sell the house and discovers the market value is only $150,000–the same as the mortgage. After deducting the real estate transaction costs, the household has negative equity. So instead, the owners claim the house is worth $250,000 and try to get a home equity line of credit to solve their income/liquidity crisis.

Here’s the global financial crisis in a nutshell: access to easy credit can solve a temporary liquidity problem, but it can’t increase the value of collateral or generate income. The owner can misrepresent the value of the asset to borrow money based on phantom collateral, but that doesn’t change the market value of the underlying asset or increase the income needed to make loan payments.

Simply put, credit/liquidity cannot solve valuation/collateral crises. Correspondent J.B. recently addressed this issue:


“RE: accounting and real life. Sometimes they differ but over the long run they always synch up. For instance let’s say a bank has a lot of quality assets but a liquidity issue. It will take that good paper to the Fed to get liquidity for the bank to get through the hard time (no write down required and it works out). On the other hand if the bank has a bunch of bad assets, it now has a solvency issue and not a liquidity issue (i.e. not marking to market does not agree with reality). Sure if CRE goes bad it can postpone marking it to market for a while but soon it has no cashflow and accounting does not matter because it cannot pay its bills, payroll or redeem demand deposits. The failure to properly mark assets to market will not save it and ultimately accounting and reality will re-synch.”

The world’s central banks and governments have tried for the past five years to fix a valuation/collateral/income crisis with liquidity. No wonder they’ve failed–enabling insolvent owners to borrow more money doesn’t make the borrowers any less insolvent.

Once the liquidity typhoon dies down, the insolvent pigs will plummet back to earth. That’s what we’re seeing in the periphery economies and shadow banking systems around the world.

US-China Rivalry More Dangerous Than Cold War? | The Diplomat

US-China Rivalry More Dangerous Than Cold War? | The Diplomat.

US-China Rivalry More Dangerous Than Cold War?

Mearsheimer says a war between the US and China will be more likely than a US-Soviet one was during the Cold War.

January 28, 2014
 1.6kThe prominent realist international relations scholar John Mearsheimer says there is a greater possibility of the U.S. and China going to war in the future than there was of a Soviet-NATO general war during the Cold War.

Mearsheimer made the comments at a lunch hosted by the Center for the National Interest in Washington, DC on Monday. The lunch was held to discuss Mearsheimer’s recent article in The National Interest on U.S. foreign policy towards the Middle East. However, much of the conversation during the Q&A session focused on U.S. policy towards Asia amid China’s rise, a topic that Mearsheimer addresses in greater length in the updated edition of his classic treatise, The Tragedy of Great Power Politics, which is due out this April.

In contrast to the Middle East, which he characterizes as posing little threat to the United States, Mearsheimer said that the U.S. will face a tremendous challenge in Asia should China continue to rise economically. The University of Chicago professor said that in such a scenario it is inevitable that the U.S. and China will engage in an intense strategic competition, much like the Soviet-American rivalry during the Cold War.

While stressing that he didn’t believe a shooting war between the U.S. and China is inevitable, Mearsheimer said that he believes a U.S.-China Cold War will be much less stable than the previous American-Soviet one. His reasoning was based on geography and its interaction with nuclear weapons.

Specifically, the center of gravity of the U.S.-Soviet competition was the central European landmass. This created a rather stable situation as, according to Mearsheimer, anyone that war gamed a NATO-Warsaw conflict over Central Europe understood that it would quickly turn nuclear. This gave both sides a powerful incentive to avoid a general conflict in Central Europe as a nuclear war would make it very likely that both the U.S. and Soviet Union would be “vaporized.”

The U.S.-China strategic rivalry lacks this singular center of gravity. Instead, Mearsheimer identified four potential hotspots over which he believes the U.S. and China might find themselves at war: the Korean Peninsula, the Taiwan Strait and the South and East China Seas. Besides featuring more hotspots than the U.S.-Soviet conflict, Mearsheimer implied that he felt that decision-makers in Beijing and Washington might be more confident that they could engage in a shooting war over one of these areas without it escalating to the nuclear threshold.

For instance, he singled out the Sino-Japanese dispute over the Senkaku/Diaoyu Islands, of which he said there was a very real possibility that Japan and China could find themselves in a shooting war sometime in the next five years. Should a shooting war break out between China and Japan in the East China Sea, Mearsheimer said he believes the U.S. will have two options: first, to act  as an umpire in trying to separate the two sides and return to the status quo ante; second, to enter the conflict on the side of Japan.

Mearsheimer said that he thinks it’s more likely the U.S. would opt for the second option because a failure to do so would weaken U.S. credibility in the eyes of its Asian allies. In particular, he believes that America trying to act as a mediator would badly undermine Japanese and South Korean policymakers’ faith in America’s extended deterrence. Since the U.S. does not want Japan or South Korea to build their own nuclear weapons, Washington would be hesitant to not come out decisively on the side of the Japanese in any war between Tokyo and Beijing.

Mearsheimer did add that the U.S. is in the early stages of dealing with a rising China, and the full threat would not materialize for at least another ten years. He also stressed that his arguments assumed that China will be able to maintain rapid economic growth. Were China’s growth rates to streamline or even turn negative, then the U.S. would remain the preponderant power in the world and actually see its relative power grow through 2050.

In characteristically blunt fashion, Mearsheimer said that he hopes that China’s economy falters or collapses, as this would eliminate a potentially immense security threat for the United States and its allies. Indeed, Mearsheimer said he was flabbergasted by Americans and people in allied states who profess wanting to see China continue to grow economically. He reminded the audience that at the peak of its power the Soviet Union possessed a much smaller GDP than the United States. Given that China has a population size over four times larger than America’s, should it reach a GDP per capita that is comparable to Taiwan or Hong Kong today, it will be a greater potential threat to the United States than anything America has previously dealt with.

Loss of Librarians Devastating to Science and Knowledge in Canada | DeSmog Canada

Loss of Librarians Devastating to Science and Knowledge in Canada | DeSmog Canada.

Loss of librarians leaves researchers without vital resources

It has been a difficult few years for the curators of knowledge in Canada. While the scientific community is still reeling from the loss of seven of the Department of Fisheries and Oceans’ eleven libraries, news has broken that scientists with Health Canada were left scrambling for resources after the outsourcing and then closure of their main library.

In January CBC news uncovered a report from a consultant hired by the federal government cataloguing mistakes in the government’s handling of the closure. “Staff requests have dropped 90 per cent over in-house service levels prior to the outsource. This statistic has been heralded as a cost savings by senior HC [Health Canada] management,” the report said.

“However, HC scientists have repeatedly said during the interview process that the decrease is because the information has become inaccessible — either it cannot arrive in due time, or it is unaffordable due to the fee structure in place.”

Government spokespeople dismissed the report, saying it was “returned to its author for corrections, which were never undertaken.”

The consultancy company fired back through a letter from its lawyer. “Representations that our client provided a factually inaccurate report and then neglected to respond to requests for changes are untrue,” it read.

However, Health Canada and the DFO are not the only government bodies to lose access to vital archival material in the past two years. Postmedia reports more than twelve departments losing libraries due to the Harper government’s budget cuts, including the Canada Revenue Agency, Citizenship and Immigration, Employment and Social Development Canada, Environment Canada, Foreign Affairs and International Trade, Natural Resources Canada, Parks Canada, the Public Service Commission, Public Works and Government Services, and Transport Canada.

Many of these departments lost multiple libraries, with historical records and books disappearing from shelves, scattered across private collections or tossed in dumpsters. In 2013 even the country’s main home for historic documents, Library and Archives Canada, faced major cuts to service, including hours, interlibrary loans and staffing.

This unprecedented process has triggered concerns about the loss of physical documents and imperfections in the digitization process. A recent report from the Canadian Libaries Association (CLA) expresses these fears in no uncertain terms.

“Currently in Canada the vast majority of research data is at risk of being lost because it is not being systematically managed and preserved. While certain disciplines and research projects have institutional, national, or international support for data management, this support is available for a minority of researchers only. A coordinated and national approach to managing research data in Canada is required in order to derive greater and longer term benefits, both socially and economically, from the extensive public investments that are made in research.”

But equally as worrisome is the loss of the librarians themselves, some of whom have spent decades familiarizing themselves with the extremely specialized materials in their collections.

Anyone who has written an undergraduate research paper knows how maddening it can be to dig through online databases for a single piece of information. The same is true for high level researchers, according to Jeff Mason, past president of the Canadian Health Libraries Association (CHLA/ABSC).

Mason is a librarian at a hospital in Saskatchewan with firsthand experience of working with health professionals. “Much as you would think a doctor would be an expert at treatment and diagnoses, when it comes to information in the health field, librarians are key resources,” he told DeSmog Canada by phone a day after learning of the Health Canada main library’s closure.

“I was shocked to hear that the Health Canada library had been closed because we thought it was safe as an organization,” says Mason.

In a field as specialized as medical research, having a librarian who is familiar with the material is integral to success.

“Unless you really know what you’re doing and spend all day everyday searching for information, these databases, or the internet, can be impossible,” Mason says. “Unless you spend all your times with your hands in it, you can’t really ever be sure that you’ve found everything that’s out there.”

A librarian’s relationship to a collection makes them able to help researchers and physicians alike find necessary information with speed and efficiency. They can aid researchers in formulating questions and narrowing fields of inquiry, streamlining the process of both digital and hard copy searches. “We tell our clients in our hospital if they spent more than 10 minutes looking for something, then they should have come to us,” he says.

With budget cuts and library closures, collections are being shunted to academic libraries that are simply not capable of maintaining the level of service of the original institutions.

“They’re short-staffed and they don’t have enough funds to do what they’re supposed to do,” says Mason. “Now they’re being contacted by government researchers and not-for-profits that used to get their information through the government of Canada.”

Head of collections David Sharp and gift specialist Colin Harness from Carleton University have released a stunning graphic detailing their institution’s efforts to “rescue” collections.

Carleton University library rescue efforts

In 2012 and 2013 Carleton University engaged with 21 different government libraries. They were able to help fourteen libraries, finding homes for 500 rare items from Fisheries and Oceans Canada only, either by taking in their collections or connecting them with resources. Eight of those collections were either dispersed elsewhere or have an unknown status. One collection, from Human Resources and Skills Development Canada, was declined because of “staff and space resource concerns.”

But even if the materials find a safe home either on a physical shelf or in a database, librarians, Mason believes, are still “integral to sound science and sound policy.”

Their loss is “really devastating to the state of science and knowledge in our country.”

The January report by the CLA corroborates Mason’s opinion. “Research libraries are essential institutions in developing and managing data repositories,” it reads. “Libraries and librarians have the expertise in resource description, storage, and access.”

Image Credit: Wikimedia
Image Credit: Colin Harness and David Sharp via dysartjones.com

Hong Kong Media Becomes Propaganda Battlefield for Beijing » The Epoch Times

Hong Kong Media Becomes Propaganda Battlefield for Beijing » The Epoch Times.

HONG KONG—Those in Hong Kong who favor increasing democracy are worried that the city’s freedom of the press is in jeopardy, as a faction in the Chinese Communist Party (CCP) has increasingly been using Hong Kong’s media outlets to spread propaganda.

Pan-democrats—the legislators of different parties united in their goal of bringing democracy to Hong Kong—raised a motion in the Legislative Council on Jan. 22 to defend the freedom of the press in Hong Kong, and it passed by 35 votes.

Civic Party head Alan Leung, who initiated the motion, said that a recent spate of events in Hong Kong show that the freedom of the press is threatened.

Leung said that it started with Hong Kong newspaper South China Morning Post, which began supporting the CCP when Wang Xiangwei from the China Daily paper was appointed first as the Post’s deputy editor, and then as its editor-in-chief.

This was followed in September 2011 by the unusual assignment of Hong Kong Administrative Officer Roy Tang Yun-kwong, who had no previous experience in broadcasting, to oversee the operation of Radio Television Hong Kong (RTHK).

After that, in May 2012 Hong Kong Chief Executive Leung Chun-ying sent a legal letter threatening the Hong Kong Economic Journal. In November 2013 Commercial Radio Hong Kong’s outspoken host Lee Wai-ling was forcefully transferred, and then this January Ming Pao’s chief editor was replaced with a known CCP supporter.

Neo Democrats Party member Gary Fan said that Hong Kong media have mostly turned “red.” For example, ATV World, Sing Pao, South China Morning Post, and Sing Tao have been enlisted to support the CCP through commercial or political interests, Fan said.

Some semi-official mainland Chinese television channels such as Phoenix Television and One TV have set up branches in Hong Kong, Fan added. Local media have been depleted, and the days of Hong Kong’s freedom of the press are numbered, he said.

Civic Party and Legislative Council member Kwok Ka-ki described the situation as someone behind the scenes “buying up the Hong Kong media one by one, then burning them out one by one.”

China specialist Chen Zhong pointed out that when the CCP used advertising to exert pressure on am730 and Apple Daily, this showed that it is very difficult nowadays for conventional Hong Kong media to survive without funds from the CCP.

These Hong Kong media must follow the directives of the CCP on critical issues and impose self-censorship in reportage, and the terms they use are increasingly in line with the CCP’s official media, Chen said.

Factional Struggle

Chen Zhong told the Epoch Times that currently the Jiang Zemin-Bo Xilai faction of the CCP is heavily involved in running Hong Kong’s media. Jiang Zemin is a former head of the CCP and had intended for Bo Xilai to assure his faction’s continued predominance in the Party, until CCP head Hu Jintao managed to take down Bo.

The Jiang faction has lost its high-profile media platform in mainland China, where the only mouthpiece remaining to them is the Global Times. Therefore they use the Hong Kong media they bought earlier to discharge propaganda and create confusion.

For instance, he said, many Hong Kong media reported on the recent New York press conference held by Chen Guangbiao, a Chinese billionaire supported by the Jiang faction. In the conference, Chen Guangbiao attempted to reignite the Tiananmen “self-immolation” hoax created by the Jiang faction in 2001 to justify its persecute of practitioners of the spiritual discipline Falun Gong.

Chen Zhong said that the truth about this hoax has become common knowledge in China, and mainland Chinese media chose not to report on the press conference. However, one-sided coverage of the event was reported in the Jiang faction’s favor by several Hong Kong media, including Sing Tao, The Standard, Ming Pao, Oriental Daily, Sing Pao, Apple Daily, and RTHK. Chen Zhong said this reporting showed the media had lost their conscience.

Jimmy Lai, the boss of Apple Daily, told RTHK that Ming Pao’s former chief editor, Kevin Lau Chun-to, was already very “cooperative” with the CCP. However, Lau was still removed, which Jimmy Lai found puzzling.

According to Chen Zhong’s analysis, Lau was a victim of the duel between factions. Chen said that Lau is a Hong Kong local who does not understand the complexity of the CCP’s politics and the frictions between different factions. This caused him to shift grounds recently in Ming Pao’s reporting, which led to the Jiang faction being dissatisfied.

Under Kevin Lau, Ming Pao supported the Leung government of Hong Kong, legislator Raymond Wong Yuk-man said in the Legislative Council on Jan. 22. Those who do not comply with the requirements of the CCP cannot survive the purge, even if they help with minor criticisms, Wong said.

The media at Hong Kong, Wong added, has become the propaganda department of Beijing.

International media such as the Washington Times have reported on the relationship between Ming Pao owner Tiong Hiew King and the CCP. When Bo Xilai was in power, the city of Chongqing pumped an annual investment of tens of millions into a newspaper under Tiong’s control, the Singapore-based, Chinese-language United Morning Paper.

United Morning Paper runs a special column dedicated to drumming up support for Bo. Asia Weekly, another media outlet controlled by Tiong, was the first to propose the Bo Xilai-supported “Chongqing model,” criticized Bo’s rival Wang Yang, ridiculed former CCP head Hu Jintao, and opposed current CCP head Xi Jinping, who heads the faction that opposes Jiang and Bo.

The liaison between Bo Xilai and the United Morning Paper was reportedly facilitated by Chong Tien-siong, who is now the new editor candidate of Ming Pao.

Translated by Y.K. Lu. Written in English by Sally Appert.

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