Sunday, June 21, 2015

A Reckoning for Greek Brinkmanship

from wsj.com



For months, Greece has been attempting to change the eurozone through brinkmanship


Greek Prime Minister Alexis Tsipras speaking at an economic forum in St. Petersburg, Russia, on June 19.ENLARGE
Greek Prime Minister Alexis Tsipras speaking at an economic forum in St. Petersburg, Russia, on June 19. PHOTO: ALEXANDER ZEMLIANICHENKO/ASSOCIATED PRESS
For five months, the Greek government has been attempting to change the nature of the eurozone through brinkmanship. Prime Minister Alexis Tsipras was elected on a promise that he could keep Greece in the eurozone while embarking on a major expansion of public spending. The only way he could hope to fulfill this promise was by forcing the rest of the eurozone to abandon its rules-based approach to bailouts and instead cough up the cash to fund his giveaways with minimal conditions.
Officials charged by Greece’s creditors with working through the complex technical details necessary to satisfy taxpayers—not only in the eurozone but also among many of the poorest countries in the world that stand behind the International Monetary Fund—that their money was not being wasted, say that from the start, he refused to engage seriously with them.
Normally, loans involving billions of euros of aid would be backed up by bulging files covering everything from implementation plans to draft legislation. Yet remarkably, these officials say that even on the eve of a crisis summit that could set in train events that could lead to Greece’s eurozone exit, little of this preparatory work has been done on even some of the least contentious reforms.
Instead, Athens has gambled that eurozone governments would ultimately be forced into a panicky “political” deal under the twin pressures of a market meltdown and overwhelming domestic sympathy for Greece from austerity-weary eurozone electorates.
It is now clear that Athens miscalculated. The markets have refused to melt down, thanks partly to the European Central Bank’s well-timed January decision to launch a large-scale major government bond-buying program; even as anxious Greeks removed about €1 billion ($1.13 billion) from their bank accounts on Friday, Portuguese government bond yields fell.
Meanwhile, eurozone governments are under no domestic political pressure to yield to Athens. The most vocal international support for Mr. Tsipras’s Syriza party has come from a curious alliance of American Keynesian economists and British euroskeptics with no skin in the game and many with axes to grind.
Among eurozone policy makers, sympathy for the real hardships suffered by many Greeks is tempered by the knowledge that other peripheral countries that stuck with their bailout programs are now among the eurozone’s fastest growing; indeed, last year Greece’s program appeared to be working too. The economy grew in 2014, unemployment fell, the government ran a budget surplus before interest payments and investors poured billions into Greek government bonds and bank equity. Greece’s Finance Minister Yanis Varoufakis recently claimed the crisis would only be over when Greece regained access to financial markets. On that score, Greece’s crisis was over in 2014.
Besides, Greece’s creditors do not believe they are making impossible demands. They have already reduced Greece’s medium-term budget surplus target before interest costs to 3.5% of gross domestic product and given Athens an extra two years to hit it. The fiscal targets now being demanded by Greece’s creditors are similar to those proposed by Mr. Varoufakis in January.
They also believe that reforms to the pension system which have proved the key sticking point in the negotiations are essential to enable Greece to hit this target.
The problem is not just that the system is unsustainable, requiring the state to make good an annual deficit equivalent to 10% of GDP which must be funded by crippling taxes on the productive economy and damaging cuts to public services; the bigger problem is that in many schemes, contribution rates bear no relation to payouts and that the system is full of perverse incentives. A poorly-designed top-up payment encourages low-paid workers to cease contributions after 15 years. Without reform, the pension system will continue to place an intolerable burden on the productive economy and younger generations.
Of course, there are different ways of addressing these anomalies and Greece’s creditors don’t necessarily agree on the best way forward. Some European Commission officials would be happy to see reforms to the controversial supplementary payments to low-paid pensioners delayed as part of a comprehensive welfare reform, while the IMF believes it should be tackled immediately.
The creditors have also told Athens that many of the proposed pension savings could be achieved via increased contribution rates and higher charges for other services such as health insurance rather than nominal pension cuts. Yet the creditors have now been waiting in vain for five months for Athens to deliver its own alternative proposals as to how to fill the funding gap, leading some officials to conclude that Athens isn’t serious about reform.
Now the time has run out. At Monday’s meeting of eurozone leaders, Mr. Tsipras will be confronted by a take it or leave it deal, based largely on the one proposed by creditors two weeks ago. The best that he can expect is a more explicit commitment to restructure Greece’s debt burden than the one he has already been given in private.
But this carrot of future debt relief sufficient to satisfy the International Monetary Fund’s debt sustainability rules will be accompanied by the implicit stick of restrictions on the Greek banking system’s access to emergency central bank liquidity facilities, which in turn will lead inevitably to the imposition of capital controls. While some eurozone policy makers believe that even at this point a deal may be possible, others believe it would lead to a euro exit.
Yet the irony is that Mr. Tsipras’s campaign to force the eurozone to change may yet be successful. At a second summit on Thursday, eurozone leaders will discuss a long-awaited report by the European Union’s top officials on how to deepen the eurozone’s integration and stabilize the currency union to ensure both that individual countries are better able to absorb shocks and that the cost of shocks is spread more evenly.
The report, drafted by European Commission President Jean-Claude Juncker in collaboration with the Presidents of the European Council, ECB, European Parliament and Eurogroup will call for the creation of a common bank deposit guarantee fund by the end of 2017 and a common eurozone Treasury by the end of 2025. It’s an undoubtedly ambitious plan that Mr. Tsipras may have unwittingly given the eurozone the political impetus to embrace.
Out of the ashes of the Greek crisis, a more robust eurozone may yet emerge. The question for Mr. Tsipras: will Greece be part of it?
Write to Simon Nixon at simon.nixon@wsj.com



Thursday, June 18, 2015

ECB not sure if Greek banks would open on Monday- officials

from reuters


BRUSSELS, JUNE 18


The European Central Bank told a meeting of euro zone finance ministers on Thursday that it was not sure if Greek banks, which have been suffering large daily deposit outflows, would be able to open on Monday, officials with knowledge of the talks said.
The officials said that during the closed-door meeting of the ministers on Greece, the chairman of the meeting Jeroen Dijsselbloem asked European Central Bank Executive Board member Benoit Coeure if Greek banks would be able to open tomorrow.
Coeure answered: "Tomorrow, yes. Monday, I don't know"

Banking sources said on Thursday that between Monday and Wednesday, Greeks have withdrawn around 2 billion euros from their bank accounts. (Reporting By Robin Emmott)


Thursday, June 11, 2015

Berko: Quantitative easing swelled banks, not economy

from columbian.com



By Malcolm Berko, Columbian business columnist
Published: 
Dear Mr. Berko: In simple, noneconomics terms, could you tell me why the Federal Reserve's three rounds of quantitative easing either failed to work or are taking too long to work? Some five or six years ago, you wrote an article about how a town in Arkansas had solved its debt problem. It made such good sense, and I'd like to see it again.
— LD, Jonesboro, Ark.
Dear LD: Give me a couple of weeks and I'll write it again.
Congress and the Federal Reserve believed that a trickle-down approach — giving money to big banks, which in return would lend the money to consumers — would solve the nation's economic problems. The Fed believed that consumers with pockets of cash would buy stuff and stimulate demand for goods and services, which would improve economic activity and put millions of Americans to work. Now, that sounds like good economic theory, but the problem is, it's only theory. The approach didn't work, because banks that were supposed to trickle down kept most of the "trickle" for themselves.
QE1, QE2 and QE3 failed to adequately stimulate economic activity because quantitative easing was a political solution to an economic problem rather than an economic solution to an economic problem. To effectively goose the economy, the QEs should have provided immediate infrastructure jobs for millions of Americans. Those shovel-ready jobs are needed to rebuild thousands of bridges, clean our rivers, enlarge our deep-water ports, improve our electrical grid, strengthen our dams, rebuild our highways, modernize our airports, etc. In this manner, millions of Americans would receive paychecks for supercharging our economic infrastructure, which is responsible for creating new jobs and maintaining most current ones. In this process, millions of Americans' paychecks would be deposited in the nation's 90,000 branch banks every week from coast to coast. Certainly, an improved rail system, modern airports, a more effective highway system, larger deep-water ports, etc., would create a perpetually moving job machine, virtually funneling trillions of "Q-wages" from consumers' pockets into the banking system.
New Q-wages would quickly generate higher demand for goods and services, quickly creating new jobs and new demand needed to support a healthy, growing gross domestic product.

Banksters' sticky fingers

However, the Fed gave those trillions to the nation's biggest banksters. The banksters were supposed to lend those huge piles of excess cash, in small amounts, to Bobby Brown, Judy Lane or Alphonse Miller to finance and expand new business opportunities.
And this is where the Fed and Congress made a huge political mistake. Every fool knows that you can't trust a starving dog that smells red meat. Nor can you trust a bankster who smells money. In the years between QE1 and QE3, the economy limped forward like a ruptured duck. Wages and disposable income fell; interest rates crashed; GDP growth was anemic; inflation was tired; corporations were purging employees to reduce costs; and consumer debt grew to record numbers.
However, the big banks were having profit orgies with those trillions. They gobbled up stocks and bonds; the stock market more than doubled; and banksters made billions. The rich became terribly richer and, with their Q-money, bought garbage by de Kooning, Pollock and Klimt from Christie's for hundreds of millions of dollars. Multimillion-dollar museum homes were being built by traders and hedge-fund owners. Investment banksters at JPMorgan Chase, Goldman Sachs, Citigroup, Bank of America, Morgan Stanley et al. used those trillions to corner the world markets in airline fuel, nickel, aluminum, cooper, wheat, oil, etc. Then they directed hundreds of billions of dollars' worth of commodity profits into personal and corporate balance sheets, handed out unlimited political contributions and enjoyed frequent soirees aboard their gleaming mega-yachts.
And while record numbers of Americans defaulted on their mortgages, millions of other Americans were having trouble remaining current on their revolving loans.
Meanwhile, the American Society of Civil Engineers has given our infrastructure a D-plus. Frankly, it's probably worse than that. And some cynical observers believe that Congress is saving infrastructure repair for the next recession.

Malcolm Berko addresses questions about stocks. Reach him at P.O. Box 8303, Largo, FL 33775 ormjberko@yahoo.com

Wednesday, June 10, 2015

Jamie Dimon Says He's Unsure If Elizabeth Warren Understands Global Banking System

from bloomberg

by Kim Chipman


Updated on 


Jamie Dimon, CEO of JP Morgan Chase & Co.
 

Photographer: Jason Alden/Bloomberg



JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon took aim at U.S. Senator Elizabeth Warren, a critic of large banks, as he expressed broad concerns about leadership in Washington.
“I don’t know if she fully understands the global banking system,” Dimon, speaking Wednesday at an event in Chicago, said of the Massachusetts Democrat. Still, he said he agrees with some of her concerns about risks.
Warren, a Senate Banking Committee member, has won popular support and gained influence in her party by openly challenging the size of large lenders and their political power. She has said it was a mistake for the U.S. government to refrain from breaking up big banks, such as Citigroup Inc., after the 2008 financial crisis. Last month, as firms including JPMorgan pleaded guilty to resolve probes into market-rigging, she criticized regulators for granting waivers that let the companies continue operating certain businesses.
Dimon, who runs the largest U.S. bank by assets, said he would meet with Warren any time she wants. A spokeswoman for the lawmaker declined to comment. In an April speech, Warren, a former professor, chided “finance guys” who assert she and others can’t grasp their business.
“The finance guys argue that if you’re never in the club, you can’t understand it, but I think they have it backward,” she said. “Not being in the club means not drinking the Kool-Aid.”

‘Finance Guys’

Such bankers are smart, but no smarter than people in many other professions, she said. When their mistakes led to the financial crisis, they “took care of themselves and their bonuses while millions of people lost everything.”
Warren led the congressional oversight panel for the Treasury Department’s 2008 bailout of the financial system. She also proposed the creation of what eventually became the Consumer Financial Protection Bureau to help shield Americans from predatory financial products after the crisis.
“The problem was never that I didn’t understand what the finance guys were doing,” she said in April. “The problem was that I understood exactly what the finance guys were doing. I knew it, and they knew it.”
Dimon and Warren have crossed paths before. In a new afterword for the paperback version of her book, “A Fighting Chance,” she recounted a visit by the CEO to her office shortly after she was sworn in. She said their conversation heated up after Dimon complained of stiffening regulation, and that she warned him CFPB rules might take effect that would spell trouble for the bank.

Quoting Warren

Warren said Dimon “leaned back and slowly smiled,” and then replied, “So hit me with a fine. We can afford it.”
A bank spokesman denied in April that Dimon made the remark.
On Wednesday, Dimon recalled meeting with Warren during the CFPB’s founding to discuss credit cards. He quoted her during the encounter as complimenting the bank’s product: “By the way I have your credit card, and I love it.”
Later on Wednesday, when asked about his biggest worries, Dimon voiced concern that the U.S. eventually may be hurt by ideological decisions made in Washington. While the 59-year-old said he won’t run for office, he repeatedly returned to politics in his remarks, calling for immigration and tax reform and improvements to inner-city education.
Warren’s tactics have been a growing topic of debate in the U.S. this year. Last month, President Barack Obama accused her and other fellow Democrats who opposed his trade agenda of playing politics and misleading the public. Billionaire Warren Buffett, who profited from investing in banks while faulting the industry’s lapses, said in March that her approach to Wall Street is too confrontational.
“She would do better if she was less angry and demonized less,” Buffett, who leads Berkshire Hathaway Inc., told CNBC at the time. “I believe in ‘hate the sin, and love the sinner.’”



The super-rich are taking us for a ride: The obscene concentration of wealth at the top

from salon


A nauseating new IRS report reveals just how much money the top one-thousandth of the 1 percent is hoarding




The super-rich are taking us for a ride: The obscene concentration of wealth at the topJustin Theroux in "American Psycho"
This article originally appeared on AlterNet.
AlterNetWhy are our seniors paying higher taxes on their social security benefits than billionaires pay on stocks?
The IRS released a new report that reveals the staggering amount of money that the top one-thousandth of the 1% in the US is hoarding.
While the top earners in the bottom 50 percent of Americans only make 36,000 dollars a year – the bottom earners in the top one-thousandth of the 1% “only make” more than 62 million dollars a year.
Sixty-two million dollars per year is what it takes to be a top one-thousandth one percenter – and those are the poorest of the richest households – on average the top earners make more than 160 million dollars a year.
That’s 160 times richer than the average one percenter who only makes about 1.5 million dollars.
That’s an obscene concentration of wealth – but that’s not the most outrageous part of the story, because those top earners are paying a lower tax rate than working class Americans and retirees.
The highest tax rate on income taxes in 2014 was 39.6 percent for households earning more than 439,000 dollars – and the majority of US households paid an income tax rate of between 15 percent and 28 percent.
Those are households of plumbers, bus drivers, doctors and engineers – the average working Americans who create real wealth for the economy.
Meanwhile the banksters and vulture capitalists – the billionaires who make most of their income by moving money back and forth – pay a maximum rate of 20 percent of their earnings from the stock market.
How does this happen? Why did Mitt Romney pay a lower effective tax rate in 2011 than a waitress earning $2.13 an hour?
It started with the memo that Lewis Powell wrote in 1971 – just a few months before Nixon nominated him to the Supreme Court.

Friday, June 5, 2015

Who Pays Taxes in the US? Everyone but the Super-Rich

from truth-out.org


Friday, 05 June 2015 11:01By The Daily Take TeamThe Thom Hartmann Program | Op-Ed


Why are our seniors paying higher taxes on their social security benefits than billionaires pay on stocks?
The IRS released a new report that reveals the staggering amount of money that the top one-thousandth of the 1% in the US is hoarding.
While the top earners in the bottom 50 percent of Americans only make 36,000 dollars a year - the bottom earners in the top one-thousandth of the 1% "only make" more than 62 million dollars a year.
Sixty-two million dollars per year is what it takes to be a top one-thousandth one percenter - and those are the poorest of the richest households - on average the top earners make more than 160 million dollars a year.
That's 160 times richer than the average one percenter who only makes about 1.5 million dollars.
That's an obscene concentration of wealth - but that's not the most outrageous part of the story, because those top earners are paying a lower tax rate than working class Americans and retirees.
The highest tax rate on income taxes in 2014 was 39.6 percent for households earning more than 439,000 dollars - and the majority of US households paid an income tax rate of between 15 percent and 28 percent.
Those are households of plumbers, bus drivers, doctors and engineers - the average working Americans who create real wealth for the economy.
Meanwhile the banksters and vulture capitalists - the billionaires who make most of their income by moving money back and forth - pay a maximum rate of 20 percent of their earnings from the stock market.
How does this happen? Why did Mitt Romney pay a lower effective tax rate in 2011 than a waitress earning $2.13 an hour?
It started with the memo that Lewis Powell wrote in 1971 - just a few months before Nixon nominated him to the Supreme Court.
In no unclear terms - Powell wrote: "Business must learn the lesson, long ago learned by labor and other self-interest groups. This is the lesson that political power is necessary; that such power must be cultivated; and that when necessary, it must be used aggressively and with determination - without embarrassment and without the reluctance which has been so characteristic of American business."
And for the last 40 years - business has followed Powell's advice to a "T": by taking over our education system; purchasing the nation's newspapers, TV and radio stations; filling the courts with activist judges; and filling Washington with lobbyists and corporate-owned lawmakers.
And what have they done with that power?
They've rigged the system against the average American and in favor of themselves.
They've punched holes in our tax system so that seniors and working Americans can pay a higher tax rate than vulture capitalists and bankers.
Vice President Henry Wallace, in 1944 in the New York Times, warned about how corporatists might try to undermine US Democracy: "They claim to be super-patriots, but they would destroy every liberty guaranteed by the Constitution. They demand free enterprise, but are the spokesmen for monopoly and vested interest. Their final objective toward which all their deceit is directed is to capture political power so that, using the power of the state and the power of the market simultaneously, they may keep the common man in eternal subjection."
And this IRS report shows that Wallace was prescient - that's exactly what's happened.
The vulture capitalists and bankers make money without creating wealth.
Adam Smith, back in 1776 in Wealth of Nations, said that real wealth is created for a nation by manufacturing. His simple example was a person adding labor to raw materials to create a new object with greater value - he used the example of a person taking a valueless tree branch and using their skill and labor to carve it into a valuable axe handle that then becomes part of the wealth of the nation for years.
That's what working Americans do every day - building cars; making consumer products; an engineer designing a bridge.
But the top earners in the United States? The Wall Street executives and vultures?
They don't make anything - they don't create wealth - and they actually can increase their profits - but not the wealth of our nation - by gutting a company, slashing employee benefits and decimating the workforce.
But after 40 years of corporate America infiltrating and subverting our democracy - they've grabbed so much power and influence over our politics that they've essentially written themselves out of our tax code.
So now - only the regular working people in the US - the doctors, plumbers, servers and small business owners - pay taxes in the US.
Regular people - like the seniors who have paid into social security all their lives only to have their benefits taxed at a higher rate than Mitt Romney's capital gains.
And that needs to change - we need to get money out of politics so that billionaires can't buy elected officials and get special tax rules written just for themselves.
We need to stop the superrich from punching more holes in our tax code and get them to pay their fair share.
If we want the US to be a strong and truly wealthy nation, we need to tax the people who strip money out of companies without creating wealth at least at the same rate as that of bus drivers and doctors.
This article was first published on Truthout and any reprint or reproduction on any other website must acknowledge Truthout as the original site of publication.