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Thursday, August 28, 2014

Merkel Slams US Hegemony? "America Can't Solve All The World's Problems Anymore" | Zero Hedge

Merkel Slams US Hegemony? "America Can't Solve All The World's Problems Anymore" | Zero Hedge

First Russia and China, then UAE, Egypt, and Turkey... and now it appears Germany (following a phone call with Putin) is pulling the rug out from under US hegemony - just as Obama's warmongery ramps up...
  • *MERKEL SAYS U.S. CAN'T SOLVE ALL THE WORLD'S PROBLEMS ANYMORE
Which is odd because just yesterday, President Obama (who never lies) stated "The United States is and will remain the one indispensable nation in the world..." adding that "no other nation can do what we do." Perhaps he is wrong?
“Even a superpower can’t solve all of the problems alone anymore,” German Chancellor Angela Merkel says.
Merkel did not stop there...
  • *PUTIN, MERKEL URGE DE-ESCALATION IN UKRAINE, KREMLIN SAYS
  • *PUTIN, MERKEL DISCUSSED GAS TRANSIT VIA UKRAINE, KREMLIN SAYS
  • *PUTIN INFORMED MERKEL OF NEW EAST UKRAINE AID PLAN: KREMLIN
  • *MERKEL URGES HOLLANDE TO CONTINUE REFORMS IN FRANCE
  • *MERKEL SAYS HOLLANDE HAS CHANCE TO REVIVE FRENCH ECONOMIC POWER
Seems like she is returning to the offensive from the defensive...

Wednesday, August 27, 2014

Astronauts find living organisms clinging to the International Space Station, and aren’t sure how they got there | ExtremeTech

Astronauts find living organisms clinging to the International Space Station, and aren’t sure how they got there | ExtremeTech

The Nail In The Petrodollar Coffin: Gazprom Begins Accepting Payment For Oil In Ruble, Yuan | Zero Hedge

The Nail In The Petrodollar Coffin: Gazprom Begins Accepting Payment For Oil In Ruble, Yuan | Zero Hedge


Several months ago, when Russia announced the much anticipated "Holy Grail" energy deal with China, some were disappointed that despite this symbolic agreement meant to break the petrodollar's stranglehold on the rest of the world, neither Russia nor China announced payment terms to be in anything but dollars. In doing so they admitted that while both nations are eager to move away from a US Dollar reserve currency, neither is yet able to provide an alternative.
This changed in late June when first Gazprom's CFO announced the gas giant was ready to settle China contracts in Yuan or Rubles, and at the same time the People's Bank of China announced that its Assistant Governor Jin Qi and Russian central bank Deputy Chairman Dmitry Skobelkin held a meeting in which they discussed cooperating on project and trade financing using local currencies. The meeting discussed cooperation in bank card, insurance and financial supervision sectors.
And yet, while both sides declared their operational readiness and eagerness to bypass the dollar entirely, such plans remained purely in the arena of monetary foreplay and the long awaited first shot across the Petrodollar bow was absent.
Until now.
According to Russia's RIA Novosti, citing business daily Kommersant, Gazprom Neft has agreed to export 80,000 tons of oil from Novoportovskoye field in the Arctic; it will accept payment in rubles, and will also deliver oil via the Eastern Siberia-Pacific Ocean pipeline (ESPO), accepting payment in Chinese yuan for the transfersMeaning Russia will export energy to either Europe or China, and receive payment in either Rubles or Yuan, in effect making the two currencies equivalent as far as the Eurasian axis is conerned, but most importantly, transact completely away from the US dollar thus, finally putin'(sic) in action the move for a Petrodollar-free world.
More on this long awaited first nail in the petrodollar coffin from RIA:
The Russian government and several of the country’s largest exporters have widely discussed the possibility of accepting payments in rubles for oil exports. Last week, Russia began to ship oil from the Novoportovskoye field to Europe by sea. Two oil tankers are expected to arrive in Europe in September.

According to Kommersant, the payment for these shipments will be received in rubles.

Gazprom Neft will not only accept payments in rubles; subsequent transfers via the ESPO may be paid for in yuan, the newspaper reported.

According to the newspaper, the change in currency was made because of the Western sanctions against Russia.

As a protective measure, Russia decided to avoid making its payments in US dollars, which can be tracked and controlled by the United States government, Kommersant reported.
"Protective measure" meaning that it was the US which managed to Plaxico itself by pushing Russia to transact away from the US Dollar, in the process showing the world it can be done, and slamming the first nail in the petrodollar's coffin.
This is not surprising to anyone who has been following our forecast of the next steps in the transition from the Petrodollar to the Gas-O-Yuan. Recall from April:
The New New Normal flow of funds:
  1. Gazprom delivering gas to China.
  2. China Gazprom paying in Yuan (convertible into Rubles)
  3. Gazprom funding itself increasingly in Yuan.
  4. Russia buying Chinese goods and services in Yuan (convertible into Rubles)
And all of this with the US banker cartel completely disintermediated courtesy of the glaring absence of the USD in any of the above listed steps, or as some may call it: from the Petrodollar to the Gas-o-yuan (something 40 central banks have already figured out... just not the Fed).
Still confused? Then read "90% Of Gazprom Clients Have "De-Dollarized", Will Transact In Euro & Renminbi" for just how Gazprom set the stage for the day it finally would push the button to skip the dollar entirely. Which it just did.
In conclusion we will merely say what we have said previously, and it touches on what will be the most remarkable aspect of Obama's legacy, because while the hypocrite "progressive" president who even his own people have accused of being a "brown-faced Clinton" after selling out to Wall Street and totally  wrecking US foreign policy abroad, is already the worst president in a century of US history according to public polls, the fitting epitaph will come when the president's policies put an end to dollar hegemony and end the reserve currency status of the dollar once and for all, thereby starting the rapid, and uncontrolled, collapse of the US empire. To wit:
In retrospect it will be very fitting that the crowning legacy of Obama's disastrous reign, both domestically and certainly internationally, will be to force the world's key ascendent superpowers (we certainly don't envision broke, insolvent Europe among them) to drop the Petrodollar and end the reserve status of the US currency.
As of this moment, both Russia and China have shown not on that it can be done, but it isdone. Expect everyone to jump onboard the new superpower axis bandwagon soon enough.

James Foley Swiss Jesuit Connection of Marquette Elite for Next Crusade ...

 



10 SWISS CHRISTIAN ARMY OFFICERS ALREADY FIGHTING IN SYRIA FOR THE CHRISTIAN CRUSADE; and with that pope being a Jesuit too, that sounds altogether a brilliant idea for a new crusade with an all christian extended Swiss Guard and save Jerusalem. It sounds like that Swiss-Vatican gang all over once again.
http://en.wikipedia.org/wiki/James_Fo...)
http://en.wikipedia.org/wiki/Marquett...
http://en.wikipedia.org/wiki/John_Henni
http://lsaruminations.edublogs.org/
http://articles.chicagotribune.com/20...
http://www.blick.ch/news/ausland/chri...
http://mu-warrior.blogspot.ch/2011/06...
http://mashable.com/2014/08/19/islami...

PressTV - 1,400 Rotherham children sexually abused in 16 years: Report

PressTV - 1,400 Rotherham children sexually abused in 16 years: Report

An investigation reveals that at least 1,400 children as young as 11 years of age were subjected to “appalling” sexual exploitation in England’s town of Rotherham during a 16-year time period.
According to an independent probe by Professor Alexis Jay, the children were victims of gang rape and other forms of abuse from 1997 to 2013.

"No one knows the true scale of child sexual exploitation in Rotherham over the years. Our conservative estimate is that approximately 1,400 children were sexually exploited over the full inquiry period, from 1997 to 2013," Jay said.
"They were raped by multiple perpetrators, trafficked to other towns and cities in the north of England, abducted, beaten and intimidated," Jay added.
Some of the children were reportedly “doused in petrol and threatened with being set alight, threatened with guns, made to witness brutally violent rapes and threatened they would be next if they told anyone."

The report also shows that in more than one third of the cases, the children were already known to child protection agencies.

The failures of the Rotherham Borough Council's leadership in this regard had occurred despite the fact that there had also been three previous inquiries.
Jay said the first of the three reports had been “effectively suppressed” simply because officials did not believe the data, while the other two inquiries were ignored.
Following strong criticism, Rotherham Borough Council leader Roger Stone, who has held the post since 2003, announced his resignation over the matter.
"Having considered the report, I believe it is only right that I, as leader, take responsibility on behalf of the council for the historic failings that are described so clearly in the report and it is my intention to do so.”

This comes just days after a report released by police under the Freedom of Information Act, suggests that at least 2,865 sex-crime reports were recorded in British schools between 2011 and 2013, showing a 40-percent rise in such cases over the three past years. 

The DSKing Of Christine Lagarde: IMF Head Formally Charged In Fraud Probe | Zero Hedge

The DSKing Of Christine Lagarde: IMF Head Formally Charged In Fraud Probe | Zero Hedge


Ah, the perils of European power politics.
A day after France revealed its new government, the person who so eagerly stepped in after DSK's infamous and choreographed fall from grace and the IMF presidency (not to mention his derailed French presidential ambitions, greenlighting Hollande as what would become the worst French president ever), Christine Lagarde is about to be DSKed herself after "someone" clearly has set their sights on the former French finance minister.
Several hours ago the news hit that a French court has put Christine Lagarde, head of the International Monetary Fund, under a formal probe for negligence in a corruption investigation dating back to her days as finance minister.  To be sure, this development is hardly a shock: recall that it was over a year ago when "IMF's Lagarde Flat Raided Over French 'Payout' Probe" with her ascent to the head of the IMF also riddled with numerous allegations of impropriety involving the Tapie matter. However, until now, such outside interventions were below the radar, and certainly never escalated to anything formal or official. Alas, it now appears that Madame's time has come, even if Lagarde hasn't grasped it just yet.
Ms. Lagarde confirmed the decision in a statement but said it was "without basis," adding she would challenge it with a higher court. She said she was heading back to Washington Wednesday and would brief the IMF board about the latest development.

The investigation is part of a complex, drawn-out probe into the alleged misuse of state funds. The case stems from a decision in the 2008 to use arbitration to settle a dispute with business tycoon Bernard Tapie. The arbitration panel awarded €420 million to Mr. Tapie.

"The magistrates of the court of justice of the Republic have decided to place me under formal investigation," Ms. Lagarde said in statement. "After three years of procedure, the sole surviving allegation is that through inadvertence or inattention I may have failed to intervene to block the arbitration that brought to an end the longstanding Tapie litigation," she added.
Bloomberg adds:
IMF issues statement after Managing Director Christine Lagarde put under formal investigation for her role in an arbitration case during her time as French finance minister.

IMF spokesman Gerry Rice: “She is now on her way back to Washington and will, of course, brief the board as soon as possible. Until then, we have no further comment”
Regardless of the spin, at this point it's all over for the first female president of the IMF, whose departure has come with the same facility as her ascent.
The only question is who and why was angered by her policies over the past three years, and who will be her replacement. And most importantly, is the imminent shift at the top of the IMF indicative of what the CFR pitched yesterday when it proposed that the time has come for Bernanke's money paradrop. After all, one would need an even more obedient puppet at the head of the monetary fund if such an idiotic plan is to even be able to take off the ground, so to speak.
As for Lagarde, we are confident she and Angelo Mozillo will have enough fake tanning tips to exchange during their long and worry-free retirement.
And with that, Bill was finally Killed.

The Pentagon’s Strategy for World Domination: Full Spectrum Dominance, from Asia to Africa | Libya 360°

The Pentagon’s Strategy for World Domination: Full Spectrum Dominance, from Asia to Africa | Libya 360°



http://www.pipr.co.uk/wp-content/uploads/2014/08/Missile-Defense-How-it-would-work.jpg
Current US military space policy is primarily geared toward two countries, China and Russia.
In May 2000 the Washington Post published an article called “For Pentagon, Asia Moving to Forefront.” The article stated that, “The Pentagon is looking at Asia as the most likely arena for future military conflict, or at least competition.” The article said the US would double its military presence in the region and essentially attempt to manage China.
The Pentagon has become the primary resource extraction service for corporate capital. Whether it is Caspian Sea oil and natural gas, rare earth minerals found in Africa, Libya’s oil deposits, or Venezuelan oil, the US’s increasingly high-tech military is on the case.
President Obama’s former National Security Adviser, Gen. James Jones had previously served as the Supreme Allied Commander of NATO. In 2006, Gen. Jones told the media, “NATO is developing a special plan to safeguard oil and gas fields in the [Caspian Sea] region…. Our strategic goal is to expand to Eastern Europe and Africa.”
In a past quadrennial National Intelligence Strategy report, former U.S. Director of National Intelligence Dennis Blair claimed that Russia “may continue to seek avenues for reasserting power and influence in ways that complicate U.S. interests…[and] China competes for the same resources the United States needs, and is in the process of rapidly modernizing its military.”
Using NATO as a military tool, the US is now surrounding Russia and easily dragged the supposedly European-based alliance into the Afghanistan war and Libya attack. The US is turning NATO into a global military alliance, even to be used in the Asian-Pacific region.
ENERGY & MISSILE OFFENSE
In mid-March of 2009 the Pentagon’s Missile Defense Agency (MDA) held a conference in Washington. At that meeting Sen. Carl Levin (D-MI) stated, “Missile defense is an important element of our nation’s defense. For example, it is a high priority to field effective defenses for our forward-deployed forces against the many hundreds of existing short- and medium-range missiles.”
The Obama administration is currently deploying “missile defense” (MD) systems in Turkey, Romania, Poland and on Navy destroyers entering the Black Sea. The NATO military noose is tightening around Russia.
Russia has the world’s largest deposits of natural gas and significant supplies of oil. The US has recently built military bases in Romania and Bulgaria and will soon be adding more in Albania. NATO has expanded eastward into Latvia, Lithuania and Estonia, right on Russia’s border. Georgia, Ukraine, Sweden and Finland are also on the list to become members of the cancerous NATO.
An Indian journalist observes,
“The arc of encirclement of Russia gets strengthened. NATO ties facilitate the [eventual] deployment of the US missile defense system in Georgia. The US aims to have a chain of countries tied to ‘partnerships’ with NATO brought into its missile defense system – stretching from its allies in the Baltic to those in Central Europe. The ultimate objective of this is to neutralize the strategic capability of Russia and China and to establish its nuclear superiority. The National Defense Strategy document, issued by the Pentagon on July 31, 2008, portrays Washington’s perception of a resurgent Russia and a rising China as potential adversaries.”
Just as we have seen the balkanization of Yugoslavia, Libya, and Iraq by US-NATO it appears that the same strategy has been developed for Russia. With NATO’s continuing military encirclement of Russia the plan appears to be to draw Moscow into a military quagmire in Ukraine that will weaken that nation. The Rand Corporation has studies that call for the break-up of Russia into many smaller pieces thus giving western corporations better access to the vast resource base available there.
The recent announcement by BRICS (Brazil, Russia, India, China, South Africa) that they have created a $100 billion international development bank to rival the IMF and World Bank has angered western corporate controlled governments who don’t want any challenge to their management of the global economy. Directly after the BRICS announcement we witnessed an escalation of the US-NATO funded and directed civil war in Ukraine.
The Harper government is now recommending that Canada join the US missile defense program. Canadian military corporations are itching to open the flood gates to the national treasury – the profits from a junior partnership with the US in an arms race in space are too much to pass up. But first more cuts must be made to the Canadian national health care program and other valuable social welfare programs. In the US the military industrial complex has targeted the “entitlement programs” – Social Security, Medicare, Medicaid and what is left of “welfare” for defunding to help pay for the expensive military space technology agenda.
Canada has also undertaken the construction of “armed combat vessels” at the Irving Shipyard in Halifax. This $25 billion program, the largest military appropriation in Canadian history, was supported by every political party in the country. Why does Canada need such a monumental war ship building program?
THE NAVY’S EXPANDING ROLE
As ice melts in the Arctic, the US Navy anticipates that it will have to increase its presence in the region to “protect shipping”. Over the past 25 years, the Arctic has seen a 40% reduction in ice as a result of global warming. Maine’s Independent Senator Angus King recently wrote “gas and oil reserves that were previously inaccessible” will soon be available for extraction. Last spring Sen. King took a ride on a US nuclear submarine under the Arctic ice. Also along for the ride was Admiral Jonathan Greenert, the chief of naval operations, who told the New York Times: “We need to be sure that our sensors, weapons and people are proficient in this part of the world,” so that we can “own the undersea domain and get anywhere there.”
A new Navy report called “US Navy Arctic Roadmap: 2014-2030” states: “Ice in the Arctic has been receding faster than we previously thought…and offers an increase in activity.” The Arctic region holds a plethora of undiscovered fossil fuels and natural resources, including an estimated 90 billion barrels of oil, 1,669 trillion cubic feet of natural gas and 44 billion barrels of natural gas liquids, the roadmap says.
The report warns that the Navy will face serious logistical challenges and will need to examine ways to distribute fuel in the region to “air and surface platforms”. Operating bases will be needed to host deployed military personnel. Partnerships with nations that border the Arctic and more warships will be needed to ensure that the undersea resources are kept in the hands of US-NATO and away from competitors like Russia.
US Secretary of War Chuck Hagel stated in late 2013 that, “By taking advantage of multilateral training opportunities with partners in the region, we will enhance our cold-weather operational experience, and strengthen our military-to-military ties with other Arctic nations.”
SCUPPERING PEACE
President Obama has in the past called for the abolition of nuclear weapons. The Russians, watching an advancing NATO and MD deployments near their borders, are telling the world that any real hopes for serious nuclear weapons reductions are in jeopardy.
Former Soviet president Mikhail Gorbachev delivered the opening address at the “Overcoming Nuclear Dangers” conference in Rome on April 16, 2009. He noted, “Unless we address the need to demilitarize international relations, reduce military budgets, put an end to the creation of new kinds of weapons and prevent weaponization of outer space, all talk about a nuclear-weapon-free world will be just inconsequential rhetoric.”
The entire US military empire is tied together using space technology. With military satellites in space the US can see virtually everything on the Earth, can intercept all communications on the planet, and can target virtually any place at any time. Russia and China understand that the US military goal is to achieve “full spectrum dominance” on behalf of corporate capital.
Using new space technologies to coordinate and direct modern warfare also enables the military industrial complex to reap massive profits as it constructs the architecture for what the aerospace industry claims will be the “largest industrial project” in Earth history.
TARGET: ASIA
The deployment of Navy Aegis destroyers in the Asian-Pacific region, with MD interceptors on-board, ostensibly to protect against North Korean missile launches, gives the US greater ability to launch preemptive first-strike attacks on China.
The US now has 30 ground-based MD interceptors deployed in South Korea. Many peace activists there maintain that the ultimate target of these systems is not North Korea, but China and Russia.

Navy pulls protesting nurse from Guantanamo | Navy Times | navytimes.com

Navy pulls protesting nurse from Guantanamo | Navy Times | navytimes.com

MIAMI — A Navy nurse who was the first, and apparently only, member of the medical staff at Guantanamo to refuse to take part in the feeding of hunger striking prisoners has had his assignment cut short at the U.S. base in Cuba, officials said Tuesday.
The nurse, a lieutenant whose name has not been released, was recently sent back early to his parent command, Naval Health Clinic New England, Navy officials said.
An investigation has been conducted into his conduct while stationed at Guantanamo but it has not yet been determined if he will face any discipline, said Navy Capt. Maureen Pennington, his commander at the network of clinics. The nurse is now on leave and military officials declined to provide details about him or any allegations he may face.
“An investigation was done and it’s currently under review,” Pennington said in a phone interview from Newport, Rhode Island.
The early cancellation of his six-month assignment was first reported by The Miami Herald, which said that the nurse was facing court martial after being administratively separated from Joint Task Force-Guantanamo, the military unit that runs the detention center. Pennington, however, said the nurse’s fate remains unresolved.
“There’s not been a determination of what’s going to be done at this point,” she said. “There’s a process and depending how everything goes, it will determine what avenue this will take, if it takes any avenue.”
Lawyers for prisoners who have taken part in the long-running hunger strike at Guantanamo have praised the nurse for refusing to take part in what they consider an unnecessarily harsh form of force-feeding of the men who refuse to eat in protest of their indefinite confinement. They have expressed dismay that the officer might be disciplined.

Kate Of Gaia & Nala On Scot Free Radio - Tame Elf - Jane Doe-755, A Gift To Humanity

 



Kate Of Gaia, & Nala On Scot Free Radio recorded on August 21, 2014
Guest: Tame Elf
Jane Doe-755, A Gift To Humanity

Scot Free Radio
"Revel in Free Speech, Join in the Banter, Relax with the Music."
http://myradiostream.com/scotfreeradio
Show Broadcasts on Thursdays at 4 PM EST

Bundesregierung will Streikrecht in Deutschland einschränken | DEUTSCHE WIRTSCHAFTS NACHRICHTEN

Bundesregierung will Streikrecht in Deutschland einschränken | DEUTSCHE WIRTSCHAFTS NACHRICHTEN

Die Bundesregierung plant die Wiedereinführung der Tarifeinheit. Diese besagt, dass es nur noch einen Tarifvertrag pro Betrieb geben darf. Doch die Einführung der Tarifeinheit würde auch automatisch zur Einschränkung des Streikrechts führen. Das widerspricht dem deutschen Grundgesetz.
Die Bundesregierung will das Streikrecht gesetzlich einschränken. Doch die einzelnen Berufsstände protestieren gegen dieses Vorhaben. (Foto: dpa)
Die Bundesregierung will das Streikrecht gesetzlich einschränken. Doch die einzelnen Berufsstände protestieren gegen dieses Vorhaben. (Foto: dpa)
Die Piloten der Lufthansa planen einen Streik. Doch das könnte vorerst der letzte Arbeitskampf der Piloten-Vereinigung Cockpit werden. Denn die Bundesregierung plant die Wiedereinführung der Tarifeinheit. Arbeitsministerin Andrea Nahles will noch im aktuellen Jahr einen entsprechenden Gesetzesentwurf vorlegen.
Danach soll in einem Unternehmen mit mehreren Gewerkschaften lediglich der Tarifvertrag der Gewerkschaft mit der höchsten Mitgliederzahl gelten. Alle anderen Mitglieder kleinerer Gewerkschaften müssen dem Tarifvertrag der größten Gewerkschaft Folge leisten. Es wird dann nur einen Tarifvertrag pro Unternehmen geben.
Der Vorstoß der Regierung ist rechtlich umstritten und widerspricht offenbar dem deutschen Grundgesetz. Denn die kleineren Gewerkschaften würden mit der Tarifeinheit das Streikrecht verlieren.
Doch Streikrecht und die Koalitionsfreiheit sind im Grundgesetz verankert (Artikel 9 Absatz 3 GG) und jeder legale Streik muss von einer Gewerkschaft getragen werden. Im Deutschen Gewerkschaftsbund (DGB) ist es aufgrund der hohen Mitgliederzahl schwieriger einen Arbeitskampf durchzusetzen als innerhalb der kleineren Gewerkschaften. Die Bundesregierung würde somit das Streik-Risiko minimieren.
Unter dem „Deckmantel der Tarifeinheit verstecke sich ein „fundamentaler Angriff auf Streikrecht und Verfassung“, meldet der Vorsitzende der LINKEN, Bernd Riexinger, in einer Mitteilung.
Die kleineren Gewerkschaften drohen damit, vor das Bundesverfassungs-Gericht zu ziehen, wenn es zur Wiedereinführung der Tarifeinheit kommt. Zu den potentiellen Klägern gehören unter anderem die Ärzte-Gewerkschaft Marburger Bund, die Unabhängigen Flugbegleiter-Organisation (UFO), die Vereinigung Cockpit und die Gewerkschaft der Lokomotivführer.
Die Tarifeinheit wurde 2010 vom Bundesarbeitsgericht abgeschafft. Dem Urteil zufolge gebe es keinen übergeordneten Grundsatz, dass für verschiedene Arbeitsverhältnisse derselben Art in einem Betrieb nur einheitliche Tarifregelungen zur Anwendung kommen könnten.

James Corbett - We Are Headed for Global War, Fukushima Update and More!

 



James Corbett of The CorbettReport.com says it looks like we are headed towards global war. Corbett says, “It is only a matter of what shape and what form that war will take place. We are seeing the battle lines being drawn. . . . I think this is very much going to be an economic conflict, or at least one that is fundamentally centered on economics. . . . They are constructing an alternative system, and we are truly moving out of the unipolar world, U.S. hegemony towards a multipolar world. There is no doubt that is taking place right now, and there is no doubt that can’t happen without some conflict happening. That conflict is on the way.”

On the ongoing enormous problems with the nuclear meltdown for Fukushima, Corbett who lives in western Japan, says, “There are three to four hundred tons of radioactive water spilling out every day from the Fukushima plant. Join Greg Hunter as he goes One-on-One with journalist James Corbett -http://usawatchdog.com/federal-reserv...

Tuesday, August 26, 2014

It Begins: Council On Foreign Relations Proposes That "Central Banks Should Hand Consumers Cash Directly" | Zero Hedge

It Begins: Council On Foreign Relations Proposes That "Central Banks Should Hand Consumers Cash Directly" | Zero Hedge


... A broad-based tax cut, for example, accommodated by a program of open-market purchases to alleviate any tendency for interest rates to increase, would almost certainly be an effective stimulant to consumption and hence to prices. Even if households decided not to increase consumption but instead re-balanced their portfolios by using their extra cash to acquire real and financial assets, the resulting increase in asset values would lower the cost of capital and improve the balance sheet positions of potential borrowers. A money-financed tax cut is essentially equivalent to Milton Friedman's famous "helicopter drop" of money
      - Ben Bernanke, Deflation: Making Sure "It" Doesn't Happen Here, November 21, 2002
A year ago, when it became abundantly clear that all of the Fed's attempts to boost the economy have failed, leading instead to a record divergence between the "1%" who were benefiting from the Fed's aritficial inflation of financial assets, and everyone else (a topic that would become one of the most discussed issues of 2014) and with no help coming from a hopelessly broken Congress (who can forget the infamous plea by a desperate Wall Street lobby-funding recipient "Get to work Mr. Chariman"), we wrote that "Bernanke's Helicopter Is Warming Up."
The reasoning was very simple: in a country (and world) drowning with debt, there are only two options to extinguish said debt: inflate it away or default. Anything else is kicking the can while making the problem even worse. Because while the Fed has been successful at recreating the world's biggest asset bubble (in history), it has failed to stimulate broad, "benign" demand-pull inflation as the trickle down effects of its "wealth effect" have failed to materialize 6 years after the launch of the Fed's unconventional monetary policies.
In other words, a world stuck in the last phase before complete Keynesian collapse, had no choice but to gamble "all in" with the last and only bluff it had left before admitting the economic system it had labored under, one which has borrowed so extensively from the future to fund the present that there is no future left, has failed.
The only question left was when would the trial balloons for such monetary paradrops start to emerge.
We now know the answer, and it is today.
Moments ago a stunning article appearing in the "Foreign Affaird" publication of the influential and policy-setting Council of Foreign Relations, titled "Print Less but Transfer More: Why Central Banks Should Give Money Directly to the People." 
In it we read the now conventional admission of failure by Keynesians, who however, unwilling to actually admit they have been wrong, urge the even more conventional solution: do more of the same that has lead to the current financial cataclysm, only in this case the authors advocate no longer pretending that the traditional monetary channels work but to, literally, paradrop money. To wit:
To some extent, low inflation reflects intense competition in an increasingly globalized economy. But it also occurs when people and businesses are too hesitant to spend their money, which keeps unemployment high and wage growth low. In the eurozone, inflation has recently dropped perilously close to zero. And some countries, such as Portugal and Spain, may already be experiencing deflation. At best, the current policies are not working; at worst, they will lead to further instability and prolonged stagnation.

Governments must do better. Rather than trying to spur private-sector spending through asset purchases or interest-rate changes, central banks, such as the Fed, should hand consumers cash directly. In practice, this policy could take the form of giving central banks the ability to hand their countries’ tax-paying households a certain amount of money. The government could distribute cash equally to all households or, even better, aim for the bottom 80 percent of households in terms of income.Targeting those who earn the least would have two primary benefits. For one thing, lower-income households are more prone to consume, so they would provide a greater boost to spending. For another, the policy would offset rising income inequality.
A third, and most important outcome, would be the one we have forecast from the beginning of this ridiculous central bank experiment: "hyperinflation" (which is not simply runaway inflation as it is often incorrectly designated -  it is outright evisceration of the prevailing monetary system), which has been avoided for now, but which is inevitable in a world in which only the wholesale destruction of the fiat reserve currency is the one option left to inflate away the debt overhang.
So without further ado, here is the first official trial balloon - the article that one day soon will be seen as the canary in the paradropmine, and the piece that will finally get the rotor of Bernanke's, now Yellen's infamous helicopter finally spinning. Highlights ours:
Print Less but Transfer More: Why Central Banks Should Give Money Directly to the People
From Foreign Affairsby Mark Blyth and Eric Lonergan
In the decades following World War II, Japan’s economy grew so quickly and for so long that experts came to describe it as nothing short of miraculous. During the country’s last big boom, between 1986 and 1991, its economy expanded by nearly $1 trillion. But then, in a story with clear parallels for today, Japan’s asset bubble burst, and its markets went into a deep dive. Government debt ballooned, and annual growth slowed to less than one percent. By 1998, the economy was shrinking.
That December, a Princeton economics professor named Ben Bernanke argued that central bankers could still turn the country around. Japan was essentially suffering from a deficiency of demand: interest rates were already low, but consumers were not buying, firms were not borrowing, and investors were not betting. It was a self-fulfilling prophesy: pessimism about the economy was preventing a recovery. Bernanke argued that the Bank of Japan needed to act more aggressively and suggested it consider an unconventional approach: give Japanese households cash directly. Consumers could use the new windfalls to spend their way out of the recession, driving up demand and raising prices.
As Bernanke made clear, the concept was not new: in the 1930s, the British economist John Maynard Keynes proposed burying bottles of bank notes in old coal mines; once unearthed (like gold), the cash would create new wealth and spur spending. The conservative economist Milton Friedman also saw the appeal of direct money transfers, which he likened to dropping cash out of a helicopter. Japan never tried using them, however, and the country’s economy has never fully recovered. Between 1993 and 2003, Japan’s annual growth rates averaged less than one percent.
Today, most economists agree that like Japan in the late 1990s, the global economy is suffering from insufficient spending, a problem that stems from a larger failure of governance. Central banks, including the U.S. Federal Reserve, have taken aggressive action, consistently lowering interest rates such that today they hover near zero. They have also pumped trillions of dollars’ worth of new money into the financial system. Yet such policies have only fed a damaging cycle of booms and busts, warping incentives and distorting asset prices, and now economic growth is stagnating while inequality gets worseIt’s well past time, then, for U.S. policymakers -- as well as their counterparts in other developed countries -- to consider a version of Friedman’s helicopter drops. In the short term, such cash transfers could jump-start the economy. Over the long term, they could reduce dependence on the banking system for growth and reverse the trend of rising inequality. The transfers wouldn’t cause damaging inflation, and few doubt that they would work. The only real question is why no government has tried them.
EASY MONEY
In theory, governments can boost spending in two ways: through fiscal policies (such as lowering taxes or increasing government spending) or through monetary policies (such as reducing interest rates or increasing the money supply). But over the past few decades, policymakers in many countries have come to rely almost exclusively on the latter. The shift has occurred for a number of reasons. Particularly in the United States, partisan divides over fiscal policy have grown too wide to bridge, as the left and the right have waged bitter fights over whether to increase government spending or cut tax rates. More generally, tax rebates and stimulus packages tend to face greater political hurdles than monetary policy shifts. Presidents and prime ministers need approval from their legislatures to pass a budget; that takes time, and the resulting tax breaks and government investments often benefit powerful constituencies rather than the economy as a whole. Many central banks, by contrast, are politically independent and can cut interest rates with a single conference call. Moreover, there is simply no real consensus about how to use taxes or spending to efficiently stimulate the economy.
Steady growth from the late 1980s to the early years of this century seemed to vindicate this emphasis on monetary policy. The approach presented major drawbacks, however. Unlike fiscal policy, which directly affects spending, monetary policy operates in an indirect fashion. Low interest rates reduce the cost of borrowing and drive up the prices of stocks, bonds, and homes. But stimulating the economy in this way is expensive and inefficient, and can create dangerous bubbles -- in real estate, for example -- and encourage companies and households to take on dangerous levels of debt.
That is precisely what happened during Alan Greenspan’s tenure as Fed chair, from 1997 to 2006: Washington relied too heavily on monetary policy to increase spending. Commentators often blame Greenspan for sowing the seeds of the 2008 financial crisis by keeping interest rates too low during the early years of this century. But Greenspan’s approach was merely a reaction to Congress’ unwillingness to use its fiscal tools.Moreover, Greenspan was completely honest about what he was doing. In testimony to Congress in 2002, he explained how Fed policy was affecting ordinary Americans:
"Particularly important in buoying spending [are] the very low levels of mortgage interest rates, which [encourage] households to purchase homes, refinance debt and lower debt service burdens, and extract equity from homes to finance expenditures. Fixed mortgage rates remain at historically low levels and thus should continue to fuel reasonably strong housing demand and, through equity extraction, to support consumer spending as well."
Of course, Greenspan’s model crashed and burned spectacularly when the housing market imploded in 2008. Yet nothing has really changed since then. The United States merely patched its financial sector back together and resumed the same policies that created 30 years of financial bubbles. Consider what Bernanke, who came out of the academy to serve as Greenspan’s successor, did with his policy of “quantitative easing,” through which the Fed increased the money supply by purchasing billions of dollars’ worth of mortgage-backed securities and government bonds. Bernanke aimed to boost stock and bond prices in the same way that Greenspan had lifted home values. Their ends were ultimately the same: to increase consumer spending.
The overall effects of Bernanke’s policies have also been similar to those of Greenspan’s. Higher asset prices have encouraged a modest recovery in spending, but at great risk to the financial system and at a huge cost to taxpayers. Yet other governments have still followed Bernanke’s lead. Japan’s central bank, for example, has tried to use its own policy of quantitative easing to lift its stock market. So far, however, Tokyo’s efforts have failed to counteract the country’s chronic underconsumption. In the eurozone, the European Central Bank has attempted to increase incentives for spending by making its interest rates negative, charging commercial banks 0.1 percent to deposit cash. But there is little evidence that this policy has increased spending.
China is already struggling to cope with the consequences of similar policies, which it adopted in the wake of the 2008 financial crisis. To keep the country’s economy afloat, Beijing aggressively cut interest rates and gave banks the green light to hand out an unprecedented number of loans. The results were a dramatic rise in asset prices and substantial new borrowing by individuals and financial firms, which led to dangerous instability. Chinese policymakers are now trying to sustain overall spending while reducing debt and making prices more stable. Like other governments, Beijing seems short on ideas about just how to do this. It doesn’t want to keep loosening monetary policy. But it hasn’t yet found a different way forward.
The broader global economy, meanwhile, may have already entered a bond bubble and could soon witness a stock bubble. Housing markets around the world, from Tel Aviv to Toronto, have overheated. Many in the private sector don’t want to take out any more loans; they believe their debt levels are already too high. That’s especially bad news for central bankers: when households and businesses refuse to rapidly increase their borrowing, monetary policy can’t do much to increase their spending. Over the past 15 years, the world’s major central banks have expanded their balance sheets by around $6 trillion, primarily through quantitative easing and other so-called liquidity operations. Yet in much of the developed world, inflation has barely budged.
To some extent, low inflation reflects intense competition in an increasingly globalized economy. But it also occurs when people and businesses are too hesitant to spend their money, which keeps unemployment high and wage growth low. In the eurozone, inflation has recently dropped perilously close to zero. And some countries, such as Portugal and Spain, may already be experiencing deflation. At best, the current policies are not working; at worst, they will lead to further instability and prolonged stagnation.
MAKE IT RAIN
Governments must do better. Rather than trying to spur private-sector spending through asset purchases or interest-rate changes, central banks, such as the Fed, should hand consumers cash directly. In practice, this policy could take the form of giving central banks the ability to hand their countries’ tax-paying households a certain amount of money. The government could distribute cash equally to all households or, even better, aim for the bottom 80 percent of households in terms of income. Targeting those who earn the least would have two primary benefits. For one thing, lower-income households are more prone to consume, so they would provide a greater boost to spending. For another, the policy would offset rising income inequality.
Such an approach would represent the first significant innovation in monetary policy since the inception of central banking, yet it would not be a radical departure from the status quo. Most citizens already trust their central banks to manipulate interest rates. And rate changes are just as redistributive as cash transfers. When interest rates go down, for example, those borrowing at adjustable rates end up benefiting, whereas those who save -- and thus depend more on interest income -- lose out.
Most economists agree that cash transfers from a central bank would stimulate demand. But policymakers nonetheless continue to resist the notion. In a 2012 speech, Mervyn King, then governor of the Bank of England, argued that transfers technically counted as fiscal policy, which falls outside the purview of central bankers, a view that his Japanese counterpart, Haruhiko Kuroda, echoed this past March. Such arguments, however, are merely semantic. Distinctions between monetary and fiscal policies are a function of what governments ask their central banks to do. In other words, cash transfers would become a tool of monetary policy as soon as the banks began using them.
Other critics warn that such helicopter drops could cause inflation. The transfers, however, would be a flexible tool. Central bankers could ramp them up whenever they saw fit and raise interest rates to offset any inflationary effects, although they probably wouldn’t have to do the latter: in recent years, low inflation rates have proved remarkably resilient, even following round after round of quantitative easing. Three trends explain why. First, technological innovation has driven down consumer prices and globalization has kept wages from rising. Second, the recurring financial panics of the past few decades have encouraged many lower-income economies to increase savings -- in the form of currency reserves -- as a form of insurance. That means they have been spending far less than they could, starving their economies of investments in such areas as infrastructure and defense, which would provide employment and drive up prices. Finally, throughout the developed world, increased life expectancies have led some private citizens to focus on saving for the longer term (think Japan). As a result, middle-aged adults and the elderly have started spending less on goods and services. These structural roots of today’s low inflation will only strengthen in the coming years, as global competition intensifies, fears of financial crises persist, and populations in Europe and the United States continue to age. If anything, policymakers should be more worried about deflation, which is already troubling the eurozone.
There is no need, then, for central banks to abandon their traditional focus on keeping demand high and inflation on target. Cash transfers stand a better chance of achieving those goals than do interest-rate shifts and quantitative easing, and at a much lower cost.Because they are more efficient, helicopter drops would require the banks to print much less money. By depositing the funds directly into millions of individual accounts -- spurring spending immediately -- central bankers wouldn’t need to print quantities of money equivalent to 20 percent of GDP.
The transfers’ overall impact would depend on their so-called fiscal multiplier, which measures how much GDP would rise for every $100 transferred. In the United States, the tax rebates provided by the Economic Stimulus Act of 2008, which amounted to roughly one percent of GDP, can serve as a useful guide: they are estimated to have had a multiplier of around 1.3. That means that an infusion of cash equivalent to two percent of GDP would likely grow the economy by about 2.6 percent. Transfers on that scale -- less than five percent of GDP -- would probably suffice to generate economic growth.
LET THEM HAVE CASH
Using cash transfers, central banks could boost spending without assuming the risks of keeping interest rates low. But transfers would only marginally address growing income inequality, another major threat to economic growth over the long term. In the past three decades, the wages of the bottom 40 percent of earners in developed countries have stagnated, while the very top earners have seen their incomes soar. The Bank of England estimates that the richest five percent of British households now own 40 percent of the total wealth of the United Kingdom -- a phenomenon now common across the developed world.
To reduce the gap between rich and poor, the French economist Thomas Piketty and others have proposed a global tax on wealth. But such a policy would be impractical. For one thing, the wealthy would probably use their political influence and financial resources to oppose the tax or avoid paying it. Around $29 trillion in offshore assets already lies beyond the reach of state treasuries, and the new tax would only add to that pile. In addition, the majority of the people who would likely have to pay -- the top ten percent of earners -- are not all that rich. Typically, the majority of households in the highest income tax brackets are upper-middle class, not superwealthy. Further burdening this group would be a hard sell politically and, as France’s recent budget problems demonstrate, would yield little financial benefit. Finally, taxes on capital would discourage private investment and innovation.
There is another way: instead of trying to drag down the top, governments could boost the bottom. Central banks could issue debt and use the proceeds to invest in a global equity index, a bundle of diverse investments with a value that rises and falls with the market, which they could hold in sovereign wealth funds. The Bank of England, the European Central Bank, and the Federal Reserve already own assets in excess of 20 percent of their countries’ GDPs, so there is no reason why they could not invest those assets in global equities on behalf of their citizens. After around 15 years, the funds could distribute their equity holdings to the lowest-earning 80 percent of taxpayers. The payments could be made to tax-exempt individual savings accounts, and governments could place simple constraints on how the capital could be used.
For example, beneficiaries could be required to retain the funds as savings or to use them to finance their education, pay off debts, start a business, or invest in a home. Such restrictions would encourage the recipients to think of the transfers as investments in the future rather than as lottery winnings. The goal, moreover, would be to increase wealth at the bottom end of the income distribution over the long run, which would do much to lower inequality.
Best of all, the system would be self-financing. Most governments can now issue debt at a real interest rate of close to zero. If they raised capital that way or liquidated the assets they currently possess, they could enjoy a five percent real rate of return -- a conservative estimate, given historical returns and current valuations. Thanks to the effect of compound interest, the profits from these funds could amount to around a 100 percent capital gain after just 15 years. Say a government issued debt equivalent to 20 percent of GDP at a real interest rate of zero and then invested the capital in an index of global equities. After 15 years, it could repay the debt generated and also transfer the excess capital to households. This is not alchemy. It’s a policy that would make the so-called equity risk premium -- the excess return that investors receive in exchange for putting their capital at risk -- work for everyone.
MO' MONEY, FEWER PROBLEMS
As things currently stand, the prevailing monetary policies have gone almost completely unchallenged, with the exception of proposals by Keynesian economists such as Lawrence Summers and Paul Krugman, who have called for government-financed spending on infrastructure and research. Such investments, the reasoning goes, would create jobs while making the United States more competitive. And now seems like the perfect time to raise the funds to pay for such work: governments can borrow for ten years at real interest rates of close to zero.
The problem with these proposals is that infrastructure spending takes too long to revive an ailing economy. In the United Kingdom, for example, policymakers have taken years to reach an agreement on building the high-speed rail project known as HS2 and an equally long time to settle on a plan to add a third runway at London’s Heathrow Airport. Such large, long-term investments are needed. But they shouldn’t be rushed. Just ask Berliners about the unnecessary new airport that the German government is building for over $5 billion, and which is now some five years behind schedule. Governments should thus continue to invest in infrastructure and research, but when facing insufficient demand, they should tackle the spending problem quickly and directly.
If cash transfers represent such a sure thing, then why has no one tried them? The answer, in part, comes down to an accident of history: central banks were not designed to manage spending. The first central banks, many of which were founded in the late nineteenth century, were designed to carry out a few basic functions: issue currency, provide liquidity to the government bond market, and mitigate banking panics. They mainly engaged in so-called open-market operations -- essentially, the purchase and sale of government bonds -- which provided banks with liquidity and determined the rate of interest in money markets. Quantitative easing, the latest variant of that bond-buying function, proved capable of stabilizing money markets in 2009, but at too high a cost considering what little growth it achieved.
A second factor explaining the persistence of the old way of doing business involves central banks’ balance sheets. Conventional accounting treats money -- bank notes and reserves -- as a liability. So if one of these banks were to issue cash transfers in excess of its assets, it could technically have a negative net worth. Yet it makes no sense to worry about the solvency of central banks: after all, they can always print  more money.
The most powerful sources of resistance to cash transfers are political and ideological. In the United States, for example, the Fed is extremely resistant to legislative changes affecting monetary policy for fear of congressional actions that would limit its freedom of action in a future crisis (such as preventing it from bailing out foreign banks). Moreover, many American conservatives consider cash transfers to be socialist handouts. In Europe, which one might think would provide more fertile ground for such transfers, the German fear of inflation that led the European Central Bank to hike rates in 2011, in the middle of the greatest recession since the 1930s, suggests that ideological resistance can be found there, too.
Those who don’t like the idea of cash giveaways, however, should imagine that poor households received an unanticipated inheritance or tax rebate. An inheritance is a wealth transfer that has not been earned by the recipient, and its timing and amount lie outside the beneficiary’s control. Although the gift may come from a family member, in financial terms, it’s the same as a direct money transfer from the government. Poor people, of course, rarely have rich relatives and so rarely get inheritances -- but under the plan being proposed here, they would, every time it looked as though their country was at risk of entering a recession.
Unless one subscribes to the view that recessions are either therapeutic or deserved, there is no reason governments should not try to end them if they can, and cash transfers are a uniquely effective way of doing so. For one thing, they would quickly increase spending, and central banks could implement them instantaneously, unlike infrastructure spending or changes to the tax code, which typically require legislation. And in contrast to interest-rate cuts, cash transfers would affect demand directly, without the side effects of distorting financial markets and asset prices. They would also would help address inequality -- without skinning the rich.
Ideology aside, the main barriers to implementing this policy are surmountable. And the time is long past for this kind of innovation. Central banks are now trying to run twenty-first-century economies with a set of policy tools invented over a century ago. By relying too heavily on those tactics, they have ended up embracing policies with perverse consequences and poor payoffs. All it will take to change course is the courage, brains, and leadership to try something new.