Perspective (Updated)

As in, the complete loss of same.

I wonder if there will be a report of the details of how and when Dzhokhar Tsarnaev relieves himself in his cell.  We’re now interested in the mother, who may or may not have discussed “jihad” with her obviously troubled older son before the Boston Marathon mayhem.  Soon we can justify routinely listening in to conversations between sons and mothers because such conversations might lead to bombing or shooting in the name of some fanatical cause or other, which then leads to the all-important “terrorism” appellation.

This is probably the simplest of category errors.  There are troubled people.  Dysfunctional families.  Mental illness.  We don’t deal with any of this very well, and so occasionally it blows up on us, literally.  Then when it does, we obsess about it, and saturate ourselves with our category error to make absolutely sure that we make the error, that no hint of introspection or thoughtfulness intrudes that might shift our focus.

This is about “terrorism”, we tell ourselves, over and over and over and over, so much in fact that it’s time for someone to admit it:  it must not be about terrorism or we wouldn’t be trying so hard to convince ourselves.

Or, if it is about terrorism, it’s not the way we think it is.  It’s not about the acts, or the terrorists; it’s still about us.  Fred Reed has it pegged, I think:

From the point of view of cost and benefit, terrorism is a brilliantly effective form of warfare, especially against heavily armed countries of the First World. The reasons are several. First, terrorism offers no target to the basically World War Two militaries of advanced countries. If five Saudis, two Pakis, a Russian and a disaffected American blow up a building in Chicago, against whom does the US seek revenge? Is it against Russia, Pakistan, Saudi Arabia and the United States, none of whose governments had anything to do with the attack?

Second, the return on investment is phenomenal. For example, the attack on New York cost perhaps several hundred thousand dollars. Yet it drew the US into multiple drawn-out, losing wars costing hundreds of billions of dollars, and transformed America from a reasonably free country into a rapidly deepening Orwellian gloom. A tiny input, a stunningly large effect. If terrorism were a hedge fund, it would be the hottest buy on the planet.

It is truly slick. The terrorists don’t do serious damage to the attacked country. (The casualties in New York, unusually large for a terror attack, if folded into the year’s traffic casualties would hardly have been noticed.) They stimulate the victim society to damage itself. TSA, Homeland Security, militarized police, warrantless searches in train stations, ever-tightening electronic surveillance of citizens, neutering of the Constitution and the abrogation of civil rights: bin Laden didn’t do these things. He couldn’t possibly have done them. He stimulated us to do them to ourselves. Genius.

Read the whole thing.

We need to get a grip on ourselves.  There might be a lot to say about what happened in Boston two weeks ago, but if it’s not about terrorism – and it isn’t – then there is little reason for general interest beyond our usual macabre, and thankfully fleeting fascination with plane crashes or bus accidents.  The most likely and well supported narrative here is not very sexy at all:  broken and dysfunctional family; strong-willed and capable but very troubled young man determined to do something – and if it hadn’t been motivated by “jihad” it would have been motivated by something else; and a 19 year old stoner who, probably due to immaturity and the difficulty of resisting strong-willed psychopaths who are often revered given certain relationship parameters – like for instance that it’s an older brother with seven years on you that has become a father-substitute due to the actual father’s lengthy absence.

It’s not a narrative that provides an outlet for much anger and frustration; it’s not a narrative that sells a lot of news copy.  The only virtue it has is that it’s probably much closer to the truth of the situation, at least to people who haven’t completely lost perspective.

Update:  Finally, the press turns its megaphonic attention elsewhere.  Another well worn narrative, but it’s a relief at this point.

Lawyers Strike In the UK

Over cuts to Legal Aid funding.

Now, I don’t know enough about the situation to say for sure, but it certainly sounds like business as usual:  the most politically powerless will experience “austerity” first.  The only austerity the politically powerful will feel is less body weight when they literally lose their heads.  So in the interim, at least someone is making a fuss.  And it’s good to see lawyers assuming their proper role in the whole thing.

You would think we might have learned something, in the social sense, since the 18th century, but it appears we’re going down the same road the French did.

Alibi Defense

Just a thought I’d had recently and figured I might mention to eager readers.

An alibi is traditionally regarded as a very strong defense, so strong that it puts the prosecution at risk of – *gasp* – losing.  And it might from time to time.

But it is also an extremely dangerous defense.  If it is not ironclad, which is to say completely unassailable, and the prosecution pokes even the smallest hole in it, it completely backfires.  Because if the jury rejects the alibi they are going to feel there was an attempt to mislead them by the Defendant, or his lawyer.

And that, of course, is fatal.

And the prosecution doesn’t have to do much to poke a hole in it, either.  He’s got credibility advantage, remember.

Be careful out there.

Theme Of The Day (Updated)

This is true terror:  being right when everyone else is wrong, and not only wrong but invested in being wrong.

Echoing Voltaire, Szasz recalled the doctor’s tragic life in an autobiographical sketch in 2004:

“It taught me, at an early age, the lesson that it can be dangerous to be wrong, but, to be right, when society regards the majority’s falsehood as truth, could be fatal. This principle is especially true with respect to false truths that form an important part of an entire society’s belief system. In the past, such basic false truths were religious in nature. In the modern world, they are medical and political in nature.”

In related news, somehow an Illinois man surived thirteen years in prison after having been convicted of a murder he did not commit.  Note the compensation he’ll get from Illinois:  $175,000.

About $13,000 per year.

Also disturbing:  it’s a pretty minor news story.  Can anyone explain to me why the Boston bombing of a week ago was so incredibly huge and this story, while covered, is so minor by comparison?  It’s not that I think they should be equally prominent, but doesn’t the actual disparity seem wildly disproportionate?

Update:  43 years. Jesus

Anybody Want To Strike?

So, it’s the Bronx.  And in the courtrooms of the Bronx, unlike almost everywhere else in New York State including Manhattan, regular people – not just celebrities – are acquitted of crimes and awarded substantial damages in personal injury actions with some regularity.  Seems to be something about the jury pool.

But there’s no jury at the Appellate Division, First Department, to which the losing party can appeal.

So this jury in the Bronx awards some guy over $2 million on an excessive force claim because the police tased him when he was having a seizure, and it’s pretty lucky under those circumstances the guy wasn’t killed.  And on the appeal the Appellate Division reverses, throws out the entire jury award and directs that the case be dismissed. (h/t Scott Greenfield)

Their rationale for doing this was, basically, they took exception to the jury’s reasoning.

Now as I have noted many times in earnest (most recently here and here) – and as one of my colleagues has better illustrated through his/her customary satire – when it comes to jury verdicts there appears to be a rather pronounced double standard in the intermediate appellate courts:

In Part I, I trace the origin and history of courts’ purported deference to jury credibility determinations. I say “purported” because, when it comes to important matters like money settlements, courts have no hesitation about setting aside jury verdicts. See Behemoth Leviathan RR Co. vs. The Widow Jukes (1920). It’s only in criminal matters that the jury’s sense impressions become sacrosanct.

To call it a “double standard” is, of course, putting it mildly.  It’s as if when a jury finds a criminal defendant guilty we wax poetic about the sanctity of the jury; but when a jury awards “too much” to some regular schmuck we’re practically delighted to second guess them.

Consider just this one aspect of such a ruling:  even if it is the Bronx, getting a jury exercised enough to award $2 million or more for a regular person takes a lot of doing by the attorney.  A lot.  No one who hasn’t done it could possibly understand what’s involved in any tangible way, and “no one” assuredly includes every member of the Appellate Division’s panel.

So one effect of the ruling is to generate discouragement and even despair among the Plaintiff’s bar.

And here’s another thing.  Just because a jury awarded $2 million doesn’t mean the Plaintiff can collect it, even if the appellate court doesn’t fuck with the verdict.  There might not be insurance available to cover it, for example.  Although in this case there probably was coverage, which is why the AD took such an interest and reversed, whereas in almost every other case where the favored litigant wins and the disfavored litigant loses the AD just mindlessly affirms.

That, too, lends itself to satire.

How does this go on in the appellate courts?  A very big part of the answer to that question is that the power differential between favored litigants (government, bank, insurance company) and disfavored litigant (non-famous, non-wealthy regular individual) is huge and there’s no way to bridge it.  No conventional way, that is.

Anonymous satire is all well and good, and we need to keep our sense of humor, but ultimately this is a classically corrupt court decision – and make no mistake that gross favoritism to the powerful is corruption, whether it’s conscious or not – that calls for a lawyers’ strike by the members of the disfavored litigants’ bar; that is, the criminal defense guys and the PI Plaintiff guys.

Unless and until the judges on the Appellate Divisions and elsewhere pay some price for their outrageous partisanship and toadying for the more powerful against the weaker there is no reason for it to stop.  Surely that decision deserves at least a one-day work stoppage and protest in the First Department.

You – we – have to make them pay.  We have a simple, easily accomplished, traditional and non-violent way to do that.  If we refuse to even try then the “system’s” continuing dysfunction is not just the Appellate Division’s fault.

Low Interest Rates And Austerity (Updated)

I have said this a number of times.  It’s unarguable, and is a significant piece of the ‘financial crisis’ puzzle, but no one seems to take it into consideration, unlike everything else I write on this blog about the financial crisis which is immedately picked up by prestigious academic journals on its way to becoming the new orthodoxy.

Wait, did I say that?

Anyway, the problem is that even very bright and economics-knowledgeable people, when they discuss the seemingly perpetual low interest rate environment, see the situation in terms of “easing” and “easy money” and how “lax” and “accomodating” the Fed is being by keeping rates low, not to mention promising to keep rates low basically forever.  And the truth is that although you might argue this, I think the better argument is precisely the opposite:  the low interest rate environment is not about stimulating the economy and easing economic burdens, it is about preserving the status quo and keeping burdens where they are:  keep the rabble in debt and servitude to the creditors.

And now you don’t have to take my word for it, because someone else with an actual pedigree has actually acknowledged this idea.  Not the implications of it, you can still find that only here on this blog, but the basic economic fact of low interest rates and their impact on existing debt:

Also, the price of debt fluctuates with interest rates. Debt issued at low interest rates can be repurchased at steep discounts when interest rates rise. This means that if debt-to-GDP ratios are what matters, we will have a great opportunity to quickly reduce this ratio when interest rates rise later in the decade as is widely predicted.

It’s a fundamental truth that drives the bond market:  a rising interest rate environment is terrible for bonds; a declining interest rate environment is great for bonds.  Because, as the quote above rightly points out, the face value of the bond rises or falls accordingly.  If I have a $100K bond paying 2% interest and market interest rates are 8%, who’s going to pay $100K for my bond?  If I want to sell it, I have to “discount” the price, you know, a lot.  Maybe my $100K bond would only sell for $25K.  But if the situation is the reverse, and I have a $100K bond paying 8% and market interest rates are 2%, well then so many people want my $100K bond that I can prally sell it for $150K, because where else are they going to get an 8% yield?

This is not rocket science, as they say.

But here is where my take on this situation has been what you might call unique.  At least I haven’t seen it anywhere else.  Apply this unarguable, basic principle to the economic situation as a whole, where you have a highly indebted populace, whether in Greece, or the EU or Japan or God help us all the United States of America.  Who benefits from the low interest rate environment?

Why, creditors of course.  They are the bond holders.  And that this is actually the same word root as “bondage” is not a coincidence.

Thus low interest rates are a mechanism to keep debtors in bondage to their creditors.  To keep people in thrall to the banks.  This is so clearly the result of the low interest rate environment that it’s hard to believe it isn’t the intended result.  And if it’s the intended result then all the talk about “easing” and “accomodating” and so forth is not only wrong but deceptive.

But they let the cat out of the bag when they start talking about “austerity”.  Forget that the whole idea – this “austerity” thing – is the product of paternalistic bankster ideology coupled with elementary errors in data collection and interpretation that any hard-partying grad student can figure out, because what else could you possibly expect from anointed Harvard economics professors like Rogoff and Reinhart?  I mean, that’s why they’re anointed in the first place.

They’re very reliable, I mean.  That’s how you get anointed.

No, what I would like you to focus on here is that no one, anywhere, not nohow, not no way, has ever suggested that the most oppressive “austerity” you can think of is in any way incompatible with a low interest rate environment.  All I have done is take that very unexceptionable consistency a step further and declared that, in truth, artificially low interest rates are a fully intended feature of austerity, not the “accomodation” to borrowers that is so often portrayed.

The social science of economics in a “managed” economy is about obfuscating, not illuminating.  If you’re running the economy and you’re too clear about what you are doing and why, people might change their behavior accordingly and that ruins the experiment.

And, oh, you have to keep this in mind:  the experiment is more important than you are.  They’re not being gratuitously cruel, it’s just that any real fix for the situation that doesn’t involve further oppressing you would break all the models.  So you’re going to be oppressed some more, but not too much, at least not in the near term, and at least not so much as you and the other rubes will notice or if you do at least you won’t be able to discern who your oppressors are.

In other words, it’s coming to a theater near you – “austerity”, that is – but eventually it will be called something less inflammatory.

And less truthful too, of course.

Update:  Another feature of “austerity”:  20% of households on food stamps.  Gotta keep them fed or they’ll riot.

SCOTUS’ True Leanings

It is the common thread that ties all of the otherwise seemingly diverse rulings and ideologies together:  contempt for, or maybe fear of, freedom and equality before the law for what might be termed “ordinary” folk.  This was on display in a unanimous ruling issued earlier this week in the case of Kiobel v. Royal Dutch Petroleum.

The statute at issue, 28 U.S.C. 1350 (known as the Alien Torts Statute) is a model of elegant clarity and simplicity from an earlier era, namely the era right around our nation’s founding:

The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.

The one line statute gets clubbed to death in 35 pages of “statutory interpretation“, and eventually of course it winds up not meaning what it obviously says at all; indeed it more or less means nothing after the SCOTUS is through with it.  Sort of like 42 U.S.C. 1983, which ostensibly deals with an entirely different sort of wrong but to the SCOTUS it’s the same issue:  how to keep down the rabble in fly-over country and their ilk anywhere else in the world with the temerity to come into a federal court – a federal court! – making outrageous demands.  Remember the scene from the Wizard of Oz when they finally get in to see the Wizard?

Bad Wizard, SCOTUS!

https://www.youtube.com/watch?v=NZR64EF3OpA

Technically, the issue in the Kiobel case is whether the statute can be applied to conduct occurring outside the United States.  The obvious answer to that question is that this is precisely what the statute is for, and indeed it has no other intelligible purpose.  How the SCOTUS winds up deciding the opposite is illustrative.

First, let’s stipulate to the legion of cases dealing with questions of statutory interpretation wherein it is said that if the statute has a plain meaning, no further interpretation should be done.  The “plain meaning” thing is a favorite of conservatives in other contexts, such as when it makes a criminal defendant or a personal injury plaintiff or any other litigant who’s an individual going up against some institution lose; this time, however, the plain meaning of the statute favors the little against the big and so suddenly we don’t like “plain meaning” anymore.  Now we get to “interpret” the statute, which means we can rationalize throwing the little guy out of court, which is what we want to do in the first place because: a) little people are messy and unappealing; and b) if we open the courthouse doors to them they’ll clog up our dockets with their silly little concerns – like in this case, oh, genocide – when we have important criminal cases brought by the government that we have to address.

So how is this “interpreting” done so that it doesn’t seem to be the thought process I just described even though that’s what it really is?

Well, they start with this “presumption” on the first page of the opinion:

“[w]hen a statute gives no clear indication of an extraterritorial application, it has none,”

One might think that it’s a pretty clear indication that a statute has “extraterritorial application” if, without it, it’s unintelligible and without purpose – and of course you are never supposed to interpret a statute out of existence, that’s another rule of “interpretation” -but never mind that for now.

As support for this “presumption” the SCOTUS can go all the way back to 1932 and a case called Blackmer v. United States, but since the linguistic formulation of the presumption in Blackmer isn’t quite good enough for our purposes here – which is to screw the little guy – we’ve changed it in our oh-so-clever SCOTUS fashion.  See, Blackmer in referring to this presumption says: “… the legislation of the Congress, unless the contrary intent appears, is construed to apply only within the territorial jurisdiction of the United States…” and if you read that in context it’s not clear that the 1932 SCOTUS is setting up any kind of formal “presumption” at all; it’s probably just stating the obvious matter of factly.

But again, never mind.  We have an agenda – remember?  – screw the little guy.

So we go up to 1949 and now the off handed musings of the 1932 SCOTUS are formalized into a rule of interpretation, but of course intellectual honesty was more common then so they didn’t change the wording:

The canon of construction which teaches that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States, Blackmer v. United States, supra, at 437, is a valid approach whereby unexpressed congressional intent may be ascertained.

That case is Foley Bros. v. Filardo.

Then we bring ourselves up to 1957 and the case of Benz v. Compania Naviera Hidalgo, and the language of the “canon of construction” has not been altered, but the 1957 SCOTUS adds by way of explaining itself further:

And so here such a “sweeping provision” as to foreign applicability was not specified in the Act.^[7] The seamen agreed in Germany to work on the foreign ship under British articles. We cannot read into the Labor Management Relations Act an intent to change the contractual 147*147 provisions made by these parties. For us to run interference in such a delicate field of international relations there must be present the affirmative intention of the Congress clearly expressed.

This language was dicta, summarizing the Court’s rationale not modifying the rule, but it sure came in handy as the Rehnquist SCOTUS began to come into its own in the 1990’s, with its barely disguised hostility to any ordinary-individual-initiated litigation, which apparently all belongs in small claims court, or maybe on Judge Judy, where the rabble can go and obtain whatever piddling relief they might deem themselves entitled to.  I mean, who cares, right?  We’ll let them sue each other.  Gives them something to do.

But again, we can’t come right out and say things like that, so we do a little mixing and matching:

In applying this rule of construction, we look to see whether “language in the [relevant Act] gives any indication of a congressional purpose to extend its coverage beyond places over which the United States has sovereignty or has some measure of legislative control.” Foley Bros., supra, at 285. We assume that Congress legislates against the backdrop of the presumption against extraterritoriality. Therefore, unless there is “the affirmative intention of the Congress clearly expressed,” Benz, supra, at 147, we must presume it “is primarily concerned with domestic conditions.” Foley Bros., supra, at 285.

The dicta of Benz gets combined with the rule of Foley Bros, and presto!  The “presumption” has acquired that draconian strictness pressed mercilessly down upon the rabble for which the Rehnquist court, Lloyd Blankfein and Jamie Dimon have become so widely admired.

It was 1991 and the case was EEOC v. ARAMCO.  That case dealt with the extraterritorial application of Title VII civil rights claims, a claim that would have failed under the older, less draconian formulation of the presumption anyway, but this is the Rehnquist SCOTUS and we’re really getting fond of applying really strict rules even when we don’t have to, as long as it permits us to tell the little guy ‘no’.

So now we’ve gone from 1932 musings, to a “rule of construction” and “presumption” by 1949 providing that “…unless a contrary intention appears…” US statutes do not apply extraterritorially to a tentative “..unless there is the affirmative intention of the Congress clearly expressed…” US statutes do not apply extraterritorially in 1991.  And this becomes how we do things.

And then by 2010 some poor slob is trying to sue an Australian bank in the wake of all that bankster perfidy, and of course we can’t have the rabble suing banks because we have our “policies” doncha know that this will all be handled by some “Troika” or other, and by this time we have our rationale “well settled” even though it’s a pretty major deviation from the original idea in 1932, but anyway it’s really handy and ladies and gentlemen I give you Morrison v. National Autrailian Bank.  And all the verbiage doesn’t really matter because the bottom line is, as it has been for so long now, that the bank wins and the little guy loses.

And so finally – and it had to come to this – the question becomes are we going to extend our illegitimate “presumption” so far that we will toss the rabble out of court even when the issue is human rights abuses under international law, which would seem to be specifically contemplated by the Alien Tort Statute when it mentions the “laws of nations”.  Of course this means, and the Plaintiffs in Kiobel alleged, things like extrajudicial killings, crimes against humanity, torture, arbitrary arrest and detention, and so forth.  The idea is that the international companies doing business (and having copious assets) both in Nigeria, where these things allegedly occurred, and the United States – to which the Plaintiffs fled and were in fact granted asylum – had a hand in these atrocities and by being forced to compensate the victims maybe they would think better of participating in such things and maybe even take some affirmative steps to ameliorate them, what with all the financial pressure of having to compensate victims and all.

In other words, this would be litigation having the salutary effects of compensating victims of human rights abuses and providing economic incentives to human rights abusers to stop being, well, human rights abusers.  And we have lots of lawyers in this country that need good paying work and maybe this would be good paying work for them so you kill two birds with one stone.

But this is the SCOTUS, and so obviously such litigation cannot be permitted.  This kind of thing is all handled by the State Department, just like financial institution corruption and wrongdoing is all handled by the Securities and Exchange Commission.  That way everything truly ‘important’ gets run through Washington, important referring to any sizable amount of money changing hands, or anything coming within arguable range of some DC determined “policy” or other which increasingly means pretty much anything, period.  Because Washington apparatchiks and wonks like Ilya Shapiro are really smart and they should run everything, along with the morons prestigious economists at the Federal Reserve.

And I’ll just throw in that the SCOTUS is obviously wrong here.  The Alien Tort Statute’s only discernible purpose is to authorize just the kind of lawsuit the Petitioners in Kiobel brought, that is, a tort occurring outside the US.  Torts occurring inside the US are obviously cognizable in some state or federal court anyway, so the way they’re reading it the statute is purposeless nonsense.  And, are they going to apply that same “presumption” the same way when the USG wants a criminal statute to have extraterritorial application?

Ugh.

Golden Conspiracy Theories

Conspiracy theories are very popular among the gold bug set.  They are especially popular after the dollar price of gold takes a beating for some reason.  Thus you have articles like this, which I would recommend not because I necessarily agree with it but because it does have information, such as details concerning how the “physical” gold market operates, that you probably won’t see elsewhere.

Here’s something to consider, though.  The dollar price of gold really doesn’t matter at all except to three groups:  a) gold bugs who are holding gold as an investment; and b) monetary authorities (central bankers) and their high priests (economists) and other followers, who are very hostile to gold as a matter of preserving their job security, prestige and power; and c) those who oppose (b) for ideological, political or moral reasons.

In other words, more than other economic data the price of gold is a heavily political thing.  And very polarized, very difficult to compromise.  You go one way or the other on it and it doesn’t just change one thing, it changes everything.

Which is kind of scary, when you think about it.

Required Viewing – The “Central Park Five”

Apparently to be aired on the PBS network tonight.

Maybe they won’t pull any punches here, which would be good because this is an important story.  The degree and extent of our system’s failure here is not, unfortunately, so much shocking as it is instructive.  I don’t know all the details.  It would be interesting to learn how anyone ever got to the bottom of it, after the system achieved its beloved “finality” and the jailhouse doors had been closed, locked and the key long since discarded.

Of course the kids were innocent.  Vulnerable.  And innocent.

I hope it turns out to be a parable.  About them, of course.  But especially about us.  I don’t imagine it’s going to be too flattering.  From everything I know, it shouldn’t be.

What’s Up With Cyprus? (Updated)

Maybe cozying up to Russia is not such a good idea if you’re a member of the EU :

Emergency loan (2012)

Since January 2012, Cyprus has been relying on a €2.5bn (US$3.236 billion) emergency loan from Russia to cover its budget deficit and re-finance maturing debt. The loan has an interest rate of 4.5% and it is valid for 4.5 years.^[19][20] It was originally expected that Cyprus would be able to fund itself again by the first quarter of 2013.^[20]

…………….

On 13 March 2012, Moody’s slashed Cyprus’s credit rating to Junk status, warning that the Cyprus government would have to inject more fresh capital into its banks to cover losses incurred through Greece’s debt swap. On 25 June 2012, the day when Fitch downgraded bonds issued by Cyprus to BB+, which disqualified them from being accepted as collateral by the European Central Bank, the Cypriot government requested a bailout from the European Financial Stability Facility or the European Stability Mechanism.^[16]

So Moody’s, which is at this point little more than an enforcement arm of the Fed, the ECB and the IMF, upgrading and downgrading pretty much as they see fit, tightens the screws on Cyprus and fucks up their relationship with Russia, whereupon the Cyprus government inexplicably begs its tormentors, those same internationalist bullies – amazingly operating under the foreboding handle of the “Troika” – for “help”.  The Troika then steals from depositors in Cypriot banks and confiscates the country’s gold.

Nice.

Power and money seem so closely connected some days.

Meanwhile, even as the Troika seems desperate to get its hands on some gold, the price of gold plunges amid much breathless fanfare and media coverage.  Perhaps the Troika’s impressive show of force in the Cyprus fiasco has people thinking that the banksters are firmly in control for the foreseeable future.

Update:  Meanwhile, Greece has been such a good, good little boy that there’s even some debt relief dessert on the table! Yay!

A Glimpse… (Updated)(x2)

…inside the mind of a central banker.  Very interesting stuff.

Let’s go step by step through this important interview.

SPIEGEL: Ms. Reinhart, central banks around the world are flooding the markets with cheap money in order to spur economies and support governments. Are these institutions losing their independence?

And here we come to our first objection:  the premise of the question is wrong.  Central banks are not “flooding the markets” with cheap money; what they have done so far is to shore up failed financial institutions through injection of reserves, which for the most part are just sitting there.  Very important to understand this.

Anyway, her answer to the misleading question begins:

No central bank will admit it is keeping rates low to help governments out of their debt crises. But in fact they are bending over backwards to help governments to finance their deficits.

This is not puposely untruthful.  Certainly, a primary beneficiary of a low interest environment is the borrower of last resort, which is the government, which when it swings into action in that role is a thing to behold.  I mean look at US deficits over the last few years.  But what is inadvertently revealing here is that in Carmen’s mind the government and the central bank are separate, and the central bank “helps” the government out of its “debt crisis”.  Yet the central bank is a creature of government, created by statute.  And it answers to the government.  And it would not exist unless that were true.  Carmen suffers from cognitive dissonance, at least a little, because in this whole area you have to get used to people talking out of both sides of their mouths.  Especially central bankers.

And this particular central banker is perhaps more candid than she should be for her own good:

You have to deal with the debt overhang one way or the other because the high debt levels are an impediment to growth, they paralyze the financial system and the credit process. One way to cope with this is to write off part of the debt.

Discussion of debt write offs is off the table.  Except around here.

Moving on, then:

But we are in an environment where politicians are very reluctant to do write-offs. So what happens is that money is transferred from savers to borrowers via negative interest rates.

She’s not even part right.  It isn’t “money” that’s being transferred; it’s income.  To a central banker the two are almost synonymous.  That is a category error, I think.  In any case, keeping interest rates artificially low might be bad for a lender’s income in theory, but generally isn’t in practice.  Because as interest rates descend into the zero bound range “spreads” tend to increase in percentage terms.  To illustrate, at 20% interest rates for savings I might be able to get away with lending at 25% or even 30%, making the spread between what is saved and what is lent 20-50%.  But at 1% interest for savings I can still get away with lending at, say, 4% making the spread between what is saved and what is lent 300%.

See?  A low interest rate environment might be terrible for savers, but it’s great for lenders.

Continuing, then:

SPIEGEL: Do you think it is wrong for Europe to focus on austerity measures with inflation at such a low level?

Reinhart: No. Restructuring, inflation und financial repression are not substitutes for austerity. All these measures reduce your existing stock of debt. Unless you do austerity you keep adding to the debt. There is no either-or. You need a combination of both to bring down debt to a sustainable level.

I think she’s misspeaking a bit here, but the core idea she is expressing is that “austerity” reduces the rate at which you add to the debt.  I mean, it isn’t as if any sane person, and especially a central banker, would advocate an out and out reduction of debt, even by the government.  That would be disastrous.

She’s a little clearer here:

SPIEGEL: So what should be done?

Reinhart: The best way of dealing with a debt overhang is to never get into one. Once you have one, what can you do? You can pray for higher growth, but good luck! Historically it doesn’t happen — you seldom just grow yourself out of debt. You need a combination of austerity, so that you don’t add further to the pile of debt, and higher inflation, which is effectively a subtle form of taxation …

There’s the prescription:  Austerity plus “higher inflation”.  Higher growth is impossible, she thinks.  But of course she is egregiously wrong about that, although it would take another fairly long post to explain why.

But in any case, here’s the problem.  “Austerity” means the government cuts back its spending; but to achieve “inflation”, there has to be new circulating money; and the central bank can essentially only funnel new money into the economy at this point through loans to the government, because private borrowers are tapped out and the government is effectively the only borrower left.  And as regular readers over here should know by now, new money can only be borrowed into existence.  There is (as a practical matter) no other way, the system does not permit any other way, and the “helicopter drop” allusion was meant as a joke precisely because the audience knew that new money can only be borrowed into existence, not dropped from helicopters.

So here is what the central bankers are doing about the “crisis”.  They began by recapitalizing and further consolidating the “banking sector”, which had pretty much already become a creaking socialist boondoggle and now was transformed into a complete zombie 20th century artifact:  not “failing” (dying) anymore since it is being propped up through literally trillions of dollars of “loans” – like keeping a dead person twitching with copious shots of adrenaline or something – but all that money just sits there because there’s no one to loan to.

This effort has failed and the central bankers know it.  Nevertheless, the second phase of their “rescue” is to buy up huge amounts of government debt, the only rational purpose of which is for the government to spend the money into the economy so that we might see some”inflation”; but at the same time admonishing the government that it must not spend the money into the economy because unless we have “austerity” we’ll just keep “adding to the debt”.

This is incoherent, although it may have this one virtue:  to stave off collapse of the financial system and governments for a little while longer than it would otherwise occur.

But here’s an interesting thought I had about all this.  At least it’s interesting to me.  The central bank is just a debt machine, and “debt” of course shares etymology with “death”.  And having essentially given us a zombie banking system they are now proposing to give us zombie governments.

Somehow this – transforming our governing institutions into the collectivist equivalent of the undead – doesn’t seem like much of a solution to me.  But this is where the economists are taking us.  You heard it right from the horse’s mouth.

Update:  One thing we can do, apparently, is steal seize the gold from the relevant government when we’re not sure if the “austerity-inflation” prescription is working.  Hmm.  One question arising from this development is the degree to which the Eurocrats will resort to this option faster than the Fed, which after all still has “reserve currency” privileges.  Not to mention, ultimately, the biggest stick.

Update 2:  Here’s one potential consequence of the government becoming over-indebted:  you have to start turning real estate over on the cheap to the daughters of foreign billionaires, just to keep the lights on.  On the bright side, it will go well with their Easter bonnets.

Foreclosure Nation – Redux

This is, of course, entirely predictable.  If you’ve been paying attention.

After all, why did people’s homes go into foreclosure in the first place?  Because for whatever reason they weren’t paying their monthly bankster tribute.  Usually this is because they are unable to, or feel they are.  And “usually” is to understate pretty dramatically.

What, if anything, has changed such that people who a couple of years ago could not (or felt they could not) pay their monthly nut now feel differently and are flush with cash?

Nothing.

So the “forebearance” has run its course and the relentless “process” resumes, making people homeless.  Including children.  And people are up in arms over all this because they have seen countless news stories – in print, and on the nation’s airwaves – showing this devastating humanitarian crisis afflicting their neighbors.

Okay, that’s not true.  Nobody’s up in arms over it and the media such as they are don’t report it, if they’re even aware of it, which they probably aren’t because they are busy with all the toadying.  But just because a disaster doesn’t make “news” doesn’t mean we don’t have a disaster on our hands.

It wasn’t long after I started this blog, way back in 2010, that I tossed off some thoughts about the whole foreclosure thing.  I noted how weird things were getting and how there was no end, and no solution, in sight.  I’ve come back to the issue.  Often.  Really often.

Of course, it’s hard to get above the ambient noise.

Troubling

Read some of the comments to this article, if you dare.

The story is about a 17 year old Canadian girl who hung herself.  She claimed to have been gang-raped when she was 15, but no charges were ever brought and apparently she was harrassed on social media and elsewhere.  People calling her a “slut”, among other things.

What a horrible story.  How it engenders anything in a reader other than profound sadness I don’t know, but people seem to have a lot of opinions, and quite remarkably lots of people appear to have little sympathy for the girl and blame her, at 15, for “putting herself in a situation” where she could be raped.

At 15.

I’m trying to fathom these opinions.  I can’t.  The idea that bad things happen to you only because you have brought them on yourself has run away with many peoples’ minds to such an extent that they can read an incredibly tragic story featuring a dead teenager and consider that an occasion to direct criticism at the teenager for alleged mistakes she made as a child that led to her suffering and death.

This is not reasoning of any discernible kind.  The closest thing to an explanation of it I can find is that our society has become mired in a “positivity cult” fostered by snake-oil salesmen/guru types, taking root in a warped and ill-defined Protestantism.  It has grotesque “victim blaming” as an intellectual corollary, although of course I use the term “intellectual” advisedly.  This is evidently what is on display in the comments to that CNN article.

This is utterly pathological.  Primitive and superstitious, akin to magical thinking.  In rational terms it completely misconstrues cause and effect.  In human and moral terms it bespeaks a shocking “empathy deficit”, as Barbara Ehrenreich notes here.

Sometimes you just feel like despairing.  Sigh.

SS United States

This is a worthy cause.  Other things trump it, of course.  But it’s one of the things that reminds me of how much money is thrown down the rat hole of the Wall Street – Washington – financial class while far better uses go begging.

It’s been in Philly for a long time (too long, from the looks of it in the photo gallery), but for all the years I was on active duty the ship was in Norfolk.  Kind of a fixture on the skyline north of the city between downtown and the enormous naval base.  It would catch your eye every once in a while and you’d wonder:  what are they going to do with it?

Well, unless somebody does something pretty soon what they’re going to do with it is turn it over to the scrap yard.  I agree with the designer’s grand-daughter:  that would be a shame.  I realize more than most people that preserving a large ship, even to keep it tied up to a pier, is a very expensive and labor intensive undertaking.  But that ship is a singular artifact of American history.  I mean, if the Titanic had ever been raised, would anyone dream of scrapping it, no matter how expensive it was to maintain it?

Different league as far as artifacts go.  I know that.  But it’s the same idea.

Jodi Arias = Snow White?

I haven’t followed this trial at all, but I have to wonder where the prosecutor thinks he’s going with this seemingly endless Snow White analogy.  Unless he just thinks he’s scoring points by repeatedly bringing the subject up because he thinks it discredits the witness all by itself.

If anyone has any other ideas about what that lawyer is doing I’d be glad to hear them.  To me it doesn’t look like it’s working at all, whatever it is he’s trying to do.