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My letter to the NY Times re: The Lawless Fed – Ludwig von Mises Institute Canada
My letter to the NY Times re: The Lawless Fed – Ludwig von Mises Institute Canada.
Re: Fed’s Aid in 2008 Crisis Stretched Worldwide
Dear Sirs:
Your article about the Fed’s actions in 2008 to lend $580 billion in so-called “swap lines” to central banks internationally sounds a note of triumphalism that is completely unwarranted. The Fed had no authority to lend to these entities, despite its attempts to justify its action as lending against collateral. In any regard, if the collateral against which the Fed lent dollars was so strong and, as your article states, the American taxpayers actually made money on the deal, why did the Fed need to get involved at all? The obvious answer is that the Fed took an illegal risk that fortunately worked out. New York Fed President Timothy Geithner’s chest puffing statement that “the privilege of being the reserve currency comes with some burdens” is especially troubling in that we may assume that in the future the Fed will engage in similar risky adventures. One final note…what caused the 2008 crisis in the first place? Your article identifies it perfectly: “The root cause of the problem was this: Global banks did lots of business in dollars–buying up United States mortgaged-backed securities,…” And what initiated the massive issuance of these soon-to-be-worthless mortgaged-backed securities? Fed money printing. So, please, let’s not call the Fed a hero, when it really caused the crisis that led to its illegal actions.
Patrick Barron is a consultant to the banking industry. He teaches Austrian school economics at the University of Iowa and Bank Managemant Simulation for the Graduate School of Banking, University of Wisconsin. Visit his blog. Send him mail.
Local courts reviving ‘debtors’ prison’ for overdue fines, fees | Fox News
Local courts reviving ‘debtors’ prison’ for overdue fines, fees | Fox News.
As if out of a Charles Dickens novel, people struggling to pay overdue fines and fees associated with court costs for even the simplest traffic infractions are being thrown in jail across the United States.
Critics are calling the practice the new “debtors’ prison” — referring to the jails that flourished in the U.S. and Western Europe over 150 years ago. Before the time of bankruptcy laws and social safety nets, poor folks and ruined business owners were locked up until their debts were paid off.
Reforms eventually outlawed the practice. But groups like the Brennan Center for Justice and the American Civil Liberties Union say it’s been reborn in local courts which may not be aware it’s against the law to send indigent people to jail over unpaid fines and fees — or they just haven’t been called on it until now.
Advocates are trying to convince courts that aside from the legal questions surrounding the practice, it is disproportionately jailing poor people and doesn’t even boost government revenues — in fact, governments lose money in the process.
“It’s a waste of taxpayer resources, and it undermines the integrity of the justice system,” Carl Takei, staff attorney for the ACLU’s National Prison Project, told FoxNews.com.
“The problem is it’s not actually much of a money-making proposition … to throw people in jail for fines and fees when they can’t afford it. If counties weren’t spending the money jailing people for not paying debts, they could be spending the money in other ways.”
The Brennan Center for Justice at New York University’s School of Law released a “Tool Kit for Action” in 2012 that broke down the cost to municipalities to jail debtors in comparison with the amount of old debt it was collecting. It doesn’t look like a bargain. For example, according to the report, Mecklenburg County, N.C., collected $33,476 in debts in 2009, but spent $40,000 jailing 246 debtors — a loss of $6,524.
Fines are the court-imposed payments linked to a conviction — whether it be for a minor traffic violation like driving without a license or a small drug offense, all the way up to felony. Fees are all those extras tacked on by the court to fund administrative services. These vary from jurisdiction to jurisdiction, with some courts imposing more than others.
As states and counties grapple with shrinking budgets and yearly shortfalls, new fees are often imposed to make up the difference, though they can be quite overwhelming to individuals passing through the system — 80 percent of whom qualify as indigent (impoverished and unable to pay), according to the Brennan Center. Florida, for example, has added 20 new fees since 1996, according to the center. North Carolina imposes late fees on debt not paid and surcharges on payment plans.
More and more, courts are dragging people in for fines and fees that have ballooned due to interest imposed on the initial sums. Some owe money to the public defender’s office for the representation they received during their time in court. Others incur hundreds of dollars in fees while they’re incarcerated — for everything from toilet paper to the beds inmates sleep on.
The tab for the average offender could be as low as $250 or as high as $4,000. Both the ACLU and Brennan have been targeting big states with multiple jurisdictions they say are flouting U.S. Supreme Court rulings in 1970, 1971 and 1983. Those rulings essentially say courts cannot extend or impose a jail sentence for unpaid fines and fees if individuals do not have the ability to pay.
At the very least, according to the high court, the courts must inquire and assess whether a person is indigent and might benefit from an alternative method of payment, like community service, before sentencing.
“Even though a lot of jurisdictions do have statutes on the books that allow judges to waive fines and fees, it doesn’t always happen,” explained Lauren Brooke-Eisen, counsel for the Brennan Center’s Justice Program.
Much of the time, probation or the conviction itself will hinder individuals from finding employment (Brennan estimates that some 60 percent are still unemployed a year after leaving jail). But another incarceration over debt could either ruin the job they managed to get or make it even harder to find one.
Many jurisdictions have taken to hiring private collection/probation companies to go after debtors, giving them the authority to revoke probation and incarcerate if they can’t pay. Research into the practice has found that private companies impose their own additional surcharges. Some 15 private companies have emerged to run these services in the South, including the popular Judicial Correction Services (JCS).
In 2012, Circuit Judge Hub Harrington at Harpersville Municipal Court in Alabama shut down what he called the “debtors’ prison” process there, echoing complaints that private companies are only in it for the money. He cited JCS in part for sending indigent people to jail. Calling it a “judicially sanctioned extortion racket,” Harrington said many defendants were locked up on bogus failure-to-appear warrants, and slapped with more fines and fees as a result.
Repeated calls to JCS in Alabama and Georgia were not returned.
Defenders of the collection programs say the money is owed to the state and it’s the government’s right to go after it. “When, and only when, an individual is convicted of a crime, there are required fees and court costs,” Pamela Dembe, president of the First Judicial District of Pennsylvania, which oversees Philadelphia, said in a statement to reporters in May. An earlier review by the courts found an estimated 400,000 residents owed the city money. “If the defendant doesn’t pay, law-abiding taxpayers must pay these costs.”
Meanwhile, there’s evidence that groups like the ACLU are prompting reforms.
For example, the ACLU released “The Outskirts of Hope,” on court practices in Ohio. The report told the story of one couple, John Bundren and Samantha Reed, who both had racked up court fines. Bundren’s, which traced back to underage drinking and public intoxication convictions from his teenage years, totaled $3,000. They paid her fines before his, and Bundren ended up spending 41 days in jail because he couldn’t pay his own.
The ACLU found that seven out of 11 counties they studied were operating de facto debtors’ prisons, despite clear “constitutional and legislative prohibitions.” Some were worse than others. In the second half of 2012 in Huron County, 20 percent of arrests were for failure to pay fines. The Sandusky Municipal Court in Erie County jailed 75 people in a little more than a month during the summer of 2012. The ACLU says it costs upwards of $400 in Ohio to execute a warrant and $65 a night to jail people.
As a result of the study, the Ohio State Supreme Court has begun educating judges and personnel on the statutes and constitutional restrictions of collecting fines and fees, Bret Crow, spokesman for the state court, told FoxNews.com. It is also developing a “bench card,” intended as a reference guide for county judges.
More recently in Colorado, the state ACLU completed a report on “pay or serve” programs throughout the state. In the case of Wheatridge and Northglenn counties, the penalty was one day in the clink for every $50 owed; in Westminster, every offender got an automatic 10 days in jail.
The report also found that one jail racked up more than $70,000 in costs for incarcerating 154 people over a five-month period in 2012 — and only managed to collect $40,000 in overdue fines and fees in that time.
Mark Silverstein, a staff attorney at the Colorado ACLU, claimed judges in these courts never assess the defendants’ ability to pay before sentencing them to jail, which would be unconstitutional.
John Stipech, Municipal Court judge in Westminster, Colo., told FoxNews.com he agreed with the tenets of the ACLU investigation, but added that the practice of the automatic 10-day jail sentence was already scrapped by Westminster in December 2012. “It was because we had jail space problems and beds needed to be limited to actual criminals,” he said.
He complained that local coverage of the ACLU report “makes it sound like we’re putting everyone in jail.” He said he asks everyone who comes before him if they have the ability to pay. He acknowledged, however, that his court is working with the ACLU and will be instituting formal “show cause” hearings to determine indigence.
“Maybe the ACLU did some good, they brought it to my attention. Maybe they just should have done it in a better way,” Stipech said.
Brooke-Eisen said the reform movement is proceeding, albeit slowly in tough fiscal times.
Marijuana legal in Uruguay as President Mujica signs law – World – CBC News
Marijuana legal in Uruguay as President Mujica signs law – World – CBC News.

Uruguay’s President Jose Mujica has quietly signed into law the government’s plan to create a regulated, legal market for marijuana, his spokesman says.
Presidential secretary Diego Canepa told The Associated Press on Tuesday that Mujica signed the legislation Monday night. That was the last formal step for the law to take effect.
- Uruguay becomes 1st nation to legalize marijuana trade
- Uruguay’s pot legalization could be ‘tipping point’ in war on drugs
Bureaucrats now have until April 9 to write the fine print for regulating every aspect of the marijuana market, from growing to selling in a network of pharmacies.
They hope to have the whole system in place by the middle of next year. But as of Tuesday, growing pot at home is legal in Uruguay, up to six plants per family and an annual harvest of 480 grams.
Detroit’s bankruptcy shows even pensions aren’t safe – World – CBC News
Detroit’s bankruptcy shows even pensions aren’t safe – World – CBC News.

About The Author
Neil Macdonald
Senior Washington Correspondent
Neil Macdonald is the senior Washington correspondent for CBC News, which he joined in 1988 following 12 years in newspapers. Before taking up this post in 2003, Macdonald reported from the Middle East for five years. He speaks English and French fluently, and some Arabic.
America’s rugged individualists have argued for many years that governments can’t be trusted. Turns out they were right. More so than they probably ever realized.
Municipalities, utilities and states across the U.S., faced with debts and liabilities piled up by irresponsible elected officials over the years, now want to renege.
Cities are seeking, and obtaining, permission to walk away from their commitments. State governments are simply giving themselves that permission.
And U.S. conservatives, who preach financial accountability (Bush-era Republicans saw to it, for example, that credit card debt collectors can follow ordinary Americans all the way to the grave), are not just cheering those faithless governments, but demanding that they go even further.
The shrunken city of Detroit is the latest and biggest example.
It just secured a judge’s permission to declare bankruptcy, and will now begin imposing “haircuts” on its creditors, who it appears will end up shaven nearly bald.
The most vulnerable of them are Detroit’s 23,000 retired municipal pensioners.
People like Gwendolyn Beasley, a 67-year-old who worked as a Detroit library clerk for 34 years and now collects $13,085 a year.
“I am very angry,” she tells reporters, futilely.
Michigan’s constitution, she points out, explicitly protects government pensions.
Tough luck, ruled the judge. Beasely’s pension is now in the barber’s chair.
Nothing’s safe
In America’s Hunger Games economy, nothing is protected anymore.
(Except, of course, the banks and big corporations like Chrysler and General Motors that had to be rescued with tax dollars when everything crashed five years ago.)
In the state of Illinois, the legislature just passed a legislative “fix” for the $100-billion hole in its workers’ pension plan, which actually won’t come anywhere near to fixing it.
At least, though, Illinois is trying to respect the pension deals it already signed, and is focusing the financial pain on younger workers, who still have the option of finding work elsewhere and retaking control of their futures.

Illinois has also raised taxes to pay for its pensions, provoking the fury of conservatives.
The Wall Street Journal’s editorial page, scourge of taxation everywhere, blames the whole mess on greedy unions and cowardly politicians.
And in one respect, at least, the Journal is right: Of course unions are greedy, just as businessmen are greedy. Greed, otherwise known as acting in your own economic interest, is what makes the U.S. economy work.
The real villains are the politicians who agreed to labour deals they likely knew were unsustainable.
A ‘fraud’ on the public
“These jurisdictions didn’t face up to how much money they would need to put in to meet the commitments they made,” says Chester Spatt, a professor at Carnegie Mellon University and the former chief economist for the Securities Exchange Commission.
“Frankly, in other contexts, one calls that fraud.”
Politicians, who usually want to be re-elected, have a long record of incurring big debts, then walking away and leaving the mess to successors, who, if they can, then pull the same stunt.
And their pension plan advisers, anxious to please, play along.
Even now, pension funds across the U.S. are assuming “ridiculous” returns of seven and eight per cent to try to show how solvent they are, says Spatt: “It’s stunningly irresponsible.”
But as the bills arrive, politicians, especially Republicans, are choosing to demonize the victims, and it is easy to see why.
Campaigning against the rapacious clerks, teachers, librarians, police and firefighters who had the nerve to accept these pension deals has become a surefire political win.
Many voters don’t have pensions at all. Why, they ask, should government workers?
Indeed, some public servants do enjoy pensions and benefits that look shockingly generous and would be difficult to sustain without imposing higher taxes, which is definitely not a vote-getter.
The point, though, is that these workers signed deals to which governments agreed, in many cases accepting lower salaries than they would have earned in the private sector.
And they held up their end. Whatever you might think of the value of their services, they supplied them, as contracted.
More questionable debt
A deal is supposed to be a deal. But in post-crash, jobless-recovery America, what is supposed to be is not what is.
Spatt calculates the total unfunded liability of government pensions in the U.S. is probably in the trillions of dollars.
But the problem goes further than that. In fact, the vast majority of Americans, whether they realize it or not, will be looking to collect from government someday, and chances are the money won’t be there.
The Social Security system, America’s biggest pension plan, is basically broke. Successive governments have raided the Social Security fund, and shied away from increasing premiums. By some calculations, it owes $20 trillion more over the long term than it can pay.
Detroit’s bondholders – a lot of them senior citizens who purchased municipal bonds as a form of substitute pension – have now learned that not all government debt is safe.
They, along with the city’s pensioners, have reportedly been offered pennies on what they are owed.
Federal and state debt is less risky, but only because those levels of government can borrow more easily and Washington can print money. (Which, of course, has lowered interest rates and further put the screws to retirees who are getting miserable returns on their savings.)
In Detroit’s case, there is no talk of Washington stepping in, and Spatt, for one, says that is a good thing.
Not only would federal involvement set off an endless chain of government-to-government bailouts (the city of Chicago’s pension hole is $20 billion), Spatt says it would ultimately do nothing to stop irresponsible politicians from creating the same situation again.
Ultimately, says Spatt, workers must understand that pensions are risky benefits, and investors must understand that “the full faith and credit of government doesn’t mean what it used to mean.”
I would never, of course, suggest any of this would apply in Canada.
Canada, as we are all constantly told, is far more prudent and better managed, and Canadians trust their governments more.
Still, it might not hurt to take note.
Detroit’s Bankruptcy Postmortem: The Worms Keep Slithering Out | CYNICONOMICS
Detroit’s Bankruptcy Postmortem: The Worms Keep Slithering Out | CYNICONOMICS.
Related articles
- Detroit Spent Billions Extra on Pensions (kampconsultingblog.com)
- Detroit hits back against opposition to its bankruptcy (scooprocket.com)
- Detroit bankruptcy item of note – Detroit routinely raided its pension funds to award extra cash – including bonuses dubbed “the 13th check” – to both retirees and active employees. These payments were far in excess of the city’s negotiated obligations a (fredw-catharsisours.blogspot.com)
- Detroit Union Seeks to Revive `13th’ Pension Check Policy (bloomberg.com)
- Detroit files response to bankruptcy objections (news.yahoo.com)
How Marineland Is Using the Law to Silence Protestors | Cara Faith Zwibel
How Marineland Is Using the Law to Silence Protestors | Cara Faith Zwibel.
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Harper’s Lax Environmental Laws Set Canada To Become Pollution Haven, B.C. Watchdog Warns
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