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Thursday, 28 May 2009

Wishes, Hopes, Fantasies: A week remains before General Motors is reduced to lunch meat

By James Howard Kunstler

Something like a week remains before General Motors is reduced to lunch meat on industrial-capital's All-You-Can-Eat buffet spread. The wish is that its deconstructed pieces will re-organize into a "lean, mean machine" for producing "cars that Americans want to buy," and that, by extension, the American Dream of a Happy Motoring economy may be extended a while longer.

This fantasy rests on some assumptions that just don't "pencil out." One is that the broad American car-owning public can continue to buy their cars the usual way, on credit. The biggest emerging new class in America is the "former middle class." Credit kept the remnants of the middle class going for decades after their incomes stopped growing in the 1970s. Now, their incomes have stopped coming in altogether and they are sinking into swamp of entropy already occupied by the tattoo-for-lunch-bunch. Of course, this has plenty of dire sociopolitical implications.

Unfortunately, the big American banks did their biggest volume business in their biggest loans at the very time that that the middle class was on its way to becoming former. Now that the former middle class is arriving at its destination, the banks are so damaged by bad paper that they won't make loans to even the remnant of the remnant of the middle class. In other words, the entire model for financing Happy Motoring is now out-of-order, probably permanently.

Even assuming some Americans can continue buying cars one way or another, I'm not convinced that we can make the kinds we fantasize about. Notice, nobody talks about hydrogen-powered fuel cell cars anymore. Why not? Because the technicalities and logistics could not be overcome at the scale required -- i.e. at the current scale of mass highway motoring and commuting. Sure, you could build a demonstration vehicle and run it around a test track a few times, but could you build a mass production car by the tens of millions that would run for 150,000 miles without a hugely expensive fuel cell change-out? No, at least not within the time-window that the liquid hydrocarbon fuel problem presented. Or could you construct a hydrogen fuel station (and product delivery) network replacing the old gasoline stations? Fuggeddabowdit. Hydrogen, as an element, was just too hard to move and contain. It's teeny-weeny atoms leaked out of valves and gaskets remorselessly and you couldn't pack enough into a tanker truck to make the trip to its destination worthwhile. Schemes to generate hydrogen on-board all ended up in the "perpetual motion" sink.

The current wish is that the dregs of GM and Chrysler will hire low-paid elves with no pension or health benefits and pump out hybrid and/or electric cars. It's conceivable that we could "reverse-engineer" a Prius or an Insight, but considering what a lousy job American car companies did on reverse-engineering everything that Japan or Germany pumped out over the past thirty-five years, the odds are pretty high that these new products will be just lame enough to fail against the established competition. What's more, they also present logistical and technical problems. For the hybrid, gasoline is still an issue (and Jevon's Paradox comes into play: the more efficient you make a means for using a resource, the more of that resource you will use). For both the hybrid and the electric car, the issue of how to get enough lithium for the batteries obtains, at least for now, given the current state-of-the-art battery technology. Most of this rare metal now comes from one place, Bolivia, and everybody wants "a piece" of it. Electric vehicles in large numbers depend on either coal or nuclear powered electric generation, each presenting special hazards. Both hybrids and electric cars would depend on the old installment loan purchase system -- at least to work in the current mode of suburban living, long-range commuting, and interstate highway travel.

Boone Pickens's plan of last year for converting the US car fleet to natural gas was another fantasy with wide appeal. But it depended on the companion fantasy of building massive wind-farm infrastructure on the great plains to shift natural gas use from power plants to vehicles, and the financial crisis has destroyed the capital necessary to even begin planning that project -- it even destroyed a large part of Mr. Pickens own capital reserves. Anyway, I would not be so sanguine about the long-term future of the shale gas plays that this scheme was based on. The depletion rates of these wells is horrendous and the amount of steel needed to keep production up is not consistent with the realities of the available infrastructure.

All the technologies under consideration are not likely to extend the Happy Motoring era. A prayerful reflection on them can only reinforce the specialness of oil and its byproducts -- cheap oil double-specially -- as well as reinforcing the reality that the cheap energy era itself is over. And, of course, in the play of events over the past several years we can see the relationship between cheap energy and easy credit, and how our entire economy has run aground, one way or another, on resource limits.

The implications of all this in the sociopolitical and geopolitical realms are pretty daunting. As long as we maintain Happy Motoring as the normal mode of existence in this country, we are going to see an ever-growing class of very resentful citizens pissed off at being foreclosed from it. In my oft-repeated scheme-of-things, this leads very quickly to the trap of political extremism, perhaps even corn-pone Naziism, as the system becomes increasingly difficult to prop up except by force. In geopolitical terms it leads to ever more dangerous international contests over the world's remaining oil reserves.

All this leads to two conclusions.

One is to accept the fact that the Happy Motoring era is over and to devote our remaining resources to re-localization, walkable communities, and public transit. It obviously requires a very drastic revision of our current collective self-image, of what we aspire to and who we are. If the car companies have any future at all, it should be based on making the rolling stock for public transit -- and for now the most intelligent choice for us is to fix the existing passenger railroad lines instead of venturing into grandiose new transit systems requiring stupendous capital outlays. Let the car era wind down gracefully. Triage and prioritize the highway maintenance agenda -- we won't be affluent enough to keep repaving the whole existing system -- and let other nations meet the diminishing demand for cars in the USA. This would be a "best case" scenario. (Other nations may decide to go further up the Happy Motoring road at their own eventual peril.)

My second conclusion is not so appetizing, namely that the bankruptcy of General Motors may set in motion a chain of events that will accelerate the destructive unwind of the bad credit economy, the damage to our bond values, the loss of faith in our currency, and the authority and legitimacy of our leaders. This last dire outcome might be allayed if, say, President Obama directed his policy efforts to the items in the paragraph above, that is, a reality-based agenda for true change in how we live -- but who can feel confident about that happening these days? Maybe it will take a horrifying chain of events to get Mr. Obama there. And then, tragically, he may be overwhelmed by the chain of events itself. I hope not.


My 2008 novel of the post-oil future, World Made By Hand, is available in paperback at all booksellers.


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National Cyber Range: Building Attack Tools for Mass Destruction

A quintessential hallmark of an authoritarian regime, particularly one that operates within highly-militarized, though nominally democratic states such as ours, is the maintenance of a system of internal control; a seamless panopticon where dissent is equated with criminality and the rule of law derided as a luxury ill-afforded "during a time of war."

In this context, the deployment of new offensive technologies which can wreck havoc on human populations deemed expendable by the state, are always couched in a defensive rhetoric by militarist aggressors and their apologists.

While the al-Qaeda brand may no longer elicit a compelling response in terms of mobilizing the population for new imperial adventures, novel threats--and panics--are required to marshal public support for the upward transfer of wealth into the corporate trough. Today, "cyber terror" functions as the "new Osama."

And with Congress poised to pass the Cybersecurity Act of 2009, an Orwellian bill that would give the president the power to "declare a cybersecurity emergency" and shut down or limit Internet traffic in any "critical" information network "in the interest of national security" of course, the spaces left for the free flow of information--and meaningful dissent--slowly contract.

DARPA--and Cybersecurity Grifters--to the Rescue

But protecting critical infrastructure from hackers, criminals and terrorists isn't the only game in town. The Pentagon is planning to kick-start a new office, Cyber Command, armed with the capacity to launch devastating attacks against any nation or group deemed an official enemy by Washington.

As Antifascist Calling reported last year, the Defense Advanced Research Projects Agency (DARPA), the Pentagon's "geek squad," is building a National Cyber Range (NCR). As Cyber Command's research arm, the agency's Strategic Technology Office (STO) describes NCR as

DARPA's contribution to the new federal Comprehensive National Cyber Initiative (CNCI), providing a "test bed" to produce qualitative and quantitative assessments of the Nation's cyber research and development technologies. Leveraging DARPA's history of cutting-edge research, the NCR will revolutionize the state of the art for large-scale cyber testing. Ultimately, the NCR will provide a revolutionary, safe, fully automated and instrumented environment for our national cyber security research organizations to evaluate leap-ahead research, accelerate technology transition, and enable a place for experimentation of iterative and new research directions. ("National Cyber Range," Defense Advanced Research Projects Agency, Strategic Technology Office, no date)

According to a January 2009 press release, the agency announced that NCR "will accelerate government research and development in high-risk, high-return areas and work in close cooperation with private-sector partners to jump-start technical cyber transformation."

Given the Pentagon's proclivity to frame debates over defense and security-related issues as one of "dominating the adversary" and discovering vulnerabilities that can be "exploited" by war planners, one can hypothesize that NCR is a testing range for the creation of new offensive weapons.

Amongst the "private-sector partners" chosen by the agency to "develop, field, and test new 'leap ahead' concepts and capabilities" are:

BAE Systems, Information and Electronic Systems Integration Inc., Wayne, N.J. ($3,279,634); General Dynamics, Advanced Information Systems, San Antonio, Texas ($1,944,094); Johns Hopkins University Applied Physics Laboratory, Laurel Md. ($7,336,805); Lockheed Martin Corp., Simulation, Training and Support, Orlando, Fla. ($5,369,656); Northrop Grumman, Intelligence, Surveillance and Reconnaissance Systems Division, Columbia, Md. ($344,097); Science Applications International Corp., San Diego, Calif. ($2,821,725); SPARTA, Columbia, Md. ($8,603,617).

While little-known outside the defense and intelligence establishment, SPARTA describes its "core business areas" as "strategic defense and offense systems, tactical weapons systems, space systems." Its security and intelligence brief includes "intelligence production, computer network operations, and information assurance."

Investigative journalist James Bamford wrote in The Shadow Factory that SPARTA "hired Maureen Baginski, the NSA's powerful signals intelligence director, in October 2006, as president of its National Security Systems Sector." According to Bamford, the firm, like others in the netherworld of corporate spying are always on the prowl for intelligence analysts "to pursue access and exploitation of targets of interest."

Given their spooky résumé, information on SPARTA's contracts are hard to come by. Indeed, the firm claims that under Section 508 of the Rehabilitation Act they are exempt from providing the public with information because their products involve "the operation, or use of... intelligence activities... related to national security, command and control of military forces, equipment that is an integral part of a weapon or weapons system, or systems which are critical to the direct fulfillment of military or intelligence missions." How's that for openness and transparency! One can only hazard a guess as to the firm's role in devising DARPA's "leap-ahead" National Cyber Range.

While the initial outlay of defense funds for NCR may appear to be a substantial amount of boodle for enterprising contractors, it is merely a down payment on Phase I of the project. Melissa Hathaway, the Obama administration's director of the Joint Interagency Cyber Task Force said, "I don't believe that this is a single-year or even a multi-year investment--it's a multi-decade approach." Hathaway, a former consultant at the spooky Booz Allen Hamilton corporation, told the Intelligence and National Security Alliance (INSA) in April,

Building toward the architecture of the future requires research and development that focuses on game-changing technologies that could enhance the security, reliability, resilience and trustworthiness of our digital infrastructure. We need to be mindful of how we, government and industry together, can optimize our collective research and development dollars and work together to improve market incentives for secure and resilient hardware and software products, new security innovation, and secure managed services. ("Remarks by Melissa E. Hathaway, Acting Senior Director for Cyberspace for the National Security and Homeland Security Councils," INSA, April 30, 2009)

That Hathaway chose INSA as a forum is hardly surprising. Describing itself as a "non-profit professional association created to improve our nation's security through an alliance of intelligence and national security leaders in the private and public sectors," INSA was created by and for contractors in the heavily-outsourced shadow world of U.S. intelligence. Founded by BAE Systems, Booz Allen Hamilton, Computer Sciences Corporation, General Dynamics, Hewlett-Packard, Lockheed Martin, ManTech International, Microsoft, the Potomac Institute and Science Applications International Corporation, The Washington Post characterized INSA as "a gathering place for spies and their business associates."

"Partners" who benefit directly from the launch of DARPA's National Cyber Range. No doubt, Hathaway's remarks are music to the ears of "beltway bandits" who reap hundreds of billions annually to fund taxpayer-fueled "national security priorities." That the Pentagon is richly rewarding INSA-connected firms with documented track records of "misconduct such as contract fraud and environmental, ethics, and labor violations," according to the Project on Government Oversight's (POGO) Federal Contractor Misconduct Database (FCMD) hardly elicits a yawn from Congress.

Among the corporations selected by the agency to construct the National Cyber Range, Lockheed Martin leads the pack in "Misconduct $ since 1995" according to POGO, having been fined $577.2 million (No. 1); Northrop Grumman, $790.4 million (No. 3); General Dynamics, $63.2 million (No. 4); BAE Systems, $1.3 million (No. 6); Science Applications International Corporation (SAIC), $14.5 million (No. 9); Johns Hopkins University, $4.6 million, (No. 81)

But as disturbing as these figures are, representing corporate grifting on a massive scale, equally troubling is the nature of the project itself. As Aviation Week reports, "Devices to launch and control cyber, electronic and information attacks are being tested and refined by the U.S. military and industry in preparation for moving out of the laboratory and into the warfighter's backpack."

High-Tech Tools for Aggressive War

The American defense establishment is devising tools that can wreck havoc with a keystroke. DARPA is currently designing "future attack devices" that can be deployed across the imperialist "battlespace" by the "non-expert," that is by America's army of robosoldiers. According to Aviation Week, one such device "combines cybersleuthing, technology analysis and tracking of information flow. It then offers suggestions to the operator on how best to mount an attack and, finally, reports on success of the effort."

The heart of this attack device is its ability to tap into satellite communications, voice over Internet, proprietary Scada networks--virtually any wireless network. Scada (supervisory control and data acquisition) is of particular interest since it is used to automatically control processes at high-value targets for terrorists such as nuclear facilities, power grids, waterworks, chemical plants and pipelines. The cyberattack device would test these supposedly inviolate networks for vulnerabilities to wireless penetration. (David A. Fulghum, "Network Attack Weapons Emerge," Aviation Week, May 21, 2009)

As can be expected, the Pentagon's rhetorical mise-en-scène is always a purely "defensive" response to future depredations by nefarious and shadowy forces threatening the heimat. In fact, the United States has systematically employed battlefield tactics that target civilian infrastructure as a means of breaking the enemy's will to fight. Stretching across the decades, from Southeast Asia to Iraq to Yugoslavia, imperialist strategists have committed war crimes by targeting the electrical grid, water supply and transportation- and manufacturing infrastructure of their adversaries.

The NCR will potentially serve as a new and improved means to bring America's rivals to their knees. Imagine the capacity for death and destruction implicit in a tool that can, for example, at the push of a button cause an adversary's chemical plant to suddenly release methyl isocynate (the Bhopal effect) on a sleeping city, or a nuclear power plant to go supercritical, releasing tens of billions of curies of radioactive death into the atmosphere?

During NATO's 1999 "liberation" of the narco-state Kosovo from the former Yugoslavia, American warplanes dropped what was described as a graphite "blackout bomb," the BLU-114/B "soft bomb" on Belgrade and other Serbian cities during its war of aggression. As the World Socialist Web Site reported at the time,

A particularly dangerous consequence of the long-term power blackout is the damage to the water systems in many Yugoslav cities, which are dependent on pumping stations run by electrical power. Novi Sad, a city of 300,000 which is the capital of the Vojvodina province of Serbia, has been without running water for eight days, according to residents. Families have been compelled to get water from the Danube river to wash and operate the toilet, and a handful of wells to provide drinking water.

Sewage treatment plants have also been shut down, with the result that raw, untreated sewage has begun to flow into the network of rivers that feed into the Danube, central Europe's most important waterway. (Marty McLaughlin, "Wall Street celebrates stepped-up bombing of Serbia," World Socialist Web Site, May 5, 1999)

With technological advances courtesy of DARPA's National Cyber Range and their "private-sector partners," the potential for utterly devastating societies ripe for resource extraction by American corporatist war criminals will increase exponentially. As Wired reported,

Comparisons between nuclear and cyberweapons might seem strained, but there's at least one commonality. Scholars exploring the ethics of wielding logic bombs, Trojan horses, worms and bots in wartime often find themselves treading on ground tilled by an earlier generation of Cold War nuclear gamesmen.

"There are lots of unknowns with a cyberattack," says Neil Rowe, a professor at the Center for Information Security Research at the U.S. Naval Postgraduate School, who rejects cyberattacks as a legitimate tool of war. "The potential for collateral damage is worse than nuclear technology.... With cyber, it can spread through the civilian infrastructure and affect far more civilians." (Marty Graham, "Welcome to Cyberwar Country, USA," Wired, February 11, 2008)

Initiatives such as the National Cyber Range are fully theorized as one facet of "network-centric warfare," the Rumsfeldian "Revolution in Military Affairs." Durham University geographer Stephen Graham describes the Pentagon notion that dominance can be achieved through "increasingly omnipotent surveillance and 'situational awareness', devastating and precisely-targeted aerial firepower, and the suppression and degradation of the communications and fighting ability of any opposing forces."

Indeed, these are integrated approaches that draw from corporate management theory to create "continuous, always-on support for military operations in urban terrain," an imperialist battlespace where Wal-Mart seamlessly morphs into The Terminator.

According to Aviation Week, the device currently being field tested will "capture expert knowledge but keep humans in the loop." As a battlefield weapon, simplicity and ease of operation is the key to successfully deploying this monstrous suite of tools. And Pentagon "experts" are designing a console that will "quantify results so that the operator can put a number against a choice," "enhance execution by creating a tool for the nonexpert that puts material together and keeps track of it" and finally, "create great visuals so missions can be executed more intuitively."

A touch-screen dashboard beneath the network schematic display looks like the sound mixing console at a recording studio. The left side lists cyberattack mission attributes such as speed, covertness, attribution and collateral damage. Next to each attribute is the image of a sliding lever on a long scale. These can be moved, for example, to increase the speed of attack or decrease collateral damage. (Aviation Week, op. cit.)

A tunable device for increased destructive capabilities; what are these if not a prescription for mass murder on a post-industrial scale?

Additionally, DARPA sorcerers are combining "digital tools that even an inexperienced operator can bring into play. In the unclassified arena there are algorithms dubbed Mad WiFi, Air Crack and Beach. For classified work, industry developers also have a toolbox of proprietary cyberexploitation algorithms."

What has been dubbed "Air Crack" deploys "open source tools to crack the encryption key for a wireless network." Cryptoattacks on the other hand, "use more sophisticated techniques to cut through the password hash."

One means to "penetrate" an adversary's protective cyber locks is referred to as a "de-authorization capability." According to Aviation Week, the attack operator "can kick all the nodes off a network temporarily so that the attack system can watch them reconnect. This provides information needed to quickly penetrate the network." As The Register reported in January when the ink on the DARPA contracts had barely dried,

Thus the planned Cyber Range must be able to simulate not just large computer networks teeming with nodes, but also the people operating and using these interlocked networks. These software sim-people--users, sysadmins, innocent network bystanders and passers-by--are referred to in the Range plans as "replicants". It seems clear that they won't know that they are merely simulated pawns in a virtual network wargame designed to test the efficiency of America's new cyber arsenal. They will merely have to live in a terrible Groundhog Day electronic armageddon, where the weapons and players change but destruction and suffering remain eternal. (Lewis Page, "Deals inked on DARPA's Matrix cyber VR," The Register, January 5, 2009)

Rance Walleston, the head of BAE's cyber warfare division told Aviation Week in late 2008, "We want to change cyber attack from an art to a science." And as The Register averred, the Pentagon's "simulated cyber warzone" should be up and running next year, "ready to pass under the harrow of BAE's new electronic pestilences, digital megabombs and tailored computer plagues."

Is it any wonder then, that the Russian revolutionary Lenin wrote nearly a century ago that "the civilized nations have driven themselves into the position of barbarians"?

Tom Burghardt is a researcher and activist based in the San Francisco Bay Area. In addition to publishing in Covert Action Quarterly and Global Research, an independent research and media group of writers, scholars, journalists and activists based in Montreal, his articles can be read on Dissident Voice, The Intelligence Daily, Pacific Free Press and the whistleblowing website Wikileaks. He is the editor of Police State America: U.S. Military "Civil Disturbance" Planning, distributed by AK Press.



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Financial Collapse and Energy - Something Other than a NINJA Problem

When the economy started to fade last year, many attributed the cause to subprime lending.

Others put together very successful, hilarious stories, explaining that the ultimate reason for this financial crisis was the NINJA policies of banks (credits granted to people with No Jobs, No Income and No Assets). Many of these stories were uploaded to Youtube.

Neither subprime lending, nor NINJA policies, nor any financial media is able to explain why banks around the world, which had been for decades very cautious in granting a credit without solid collateral, suddenly started to grant loans to insolvent people; or why the strict financial regulatory and supervisory entities started to look the other way.

This is an attempt to offer a different perspective.

Barter/Countertrade

In the beginning, the world used barter or countertrade. Countertrade was based on equivalent human effort (labor), which, in fact, corresponded to easily measurable equivalent energy expenses.

For example, if a chair maker needed six working hours to make one chair and a farmer, producing eggs to fill a basket, also needed six hours of work, then a chair could be reasonably be exchanged for a basket of of eggs. This approach was immediate, rational, and simple. But the procedure limited the exchange in goods and measurable services, especially those involving large volumes, complex transactions or distant operations.

Gold as a Mediation Device

Gold was introduced to solve the problems of the earlier systems. Its natural scarcity represented many hours of human equivalent effort in piece that was small in weight and volume.

It was ductile and malleable; it could be coined; it was difficult to alter, easily divisible and transportable. Gold very much eased the paths of commerce.

However, gold still represented, in principle, a measurable form of condensed human equivalent effort (energy) in the commercial exchanges.

Paper Money

Marco Polo took paper money from China, where it was invented, to Europe and then to the world.

It represented, with an authoritative signature, a given amount of gold deposited by a bearer, in a well known and secure deposit, that the faithful depositary was obliged to immediately return to the bearer upon presentation of the paper money.

And this gold, in its turn, continued to represent goods or measurable services, in human equivalent effort (embedded energy, in a sense). And it proved for many centuries to be more effective than gold.

Despite the early existence of paper money, the physical and monetary world still had a close relationship. This was the case in spite of specific abuses and partial system bankruptcies due to regional wars or collapses.

Nixon unilaterally broke the Bretton Woods agreement in 1971.

Bretton Woods was the last global attempt to fix gold as the standard for exchange of goods and of measurable services. The agreement was reached late in 1944, after some developed countries had abused the printing of money without the necessary physical backing or equivalent reserves.

In 1971, the US$ became the world reference for valuing all human activities.

It was at this point that a real growing divorce between the physical world, represented by equivalent human effort (energy, in the final analysis), concentrated in gold in the reserves of each country. It gave way to a new form of paper money, where the authoritative signature committing an amount did not necessarily correspond to equivalent real goods or measurable services.

We should ask ourselves why this growing drift between the physical goods and measurable services has been working until now.

Professor Albert Bartlett summarized the reason very well: “The greatest shortcoming of the human race is our inability to understand the exponential function."

A Mathematical Model

Let us represent mathematically two different types of growth. If we assume, for instance, that goods and measurable, physical-related services grow at 3% per year through a given period of time (i.e. 50 years) and financial services grow at 8.5% per year, we have the following graph:


Graph 1. Mathematical models of growth

Interest Paid by Banks: a Religious Touch

The so-called “religions of the Book” originally were opposed to lending money with interest. This opposition represented clear recognition that interest based on credit is the main agent forcing the world toward continuous growth, faster than natural trends.

The official position of the Catholic Church until end of the 18th century could be summarized in the phrase enunciated by Thomas Aquinas: Pecunia pecuniam parere non potest.-–Money cannot give birth to money. One of the sins severely punished by the Inquisition was usury--and in those days, they considered usury what today would be considered a very low interest rate.

About 800,000 Jews were expelled from Spain in 1492. Inasmuch as they could not become owners of property, they specialized in trade and banking services. Some of them were in control of lending and were therefore tolerated-–after all, they were not Christians, and sometimes having somebody to ask for money to advance a payment for a given enterprise was initially useful. According to the Torah, Jews can lend money with interest to gentiles, but without interest to other Jews. They also understood the impact of the debtor of having to pay interest.

For Muslims, bank interest is theoretically forbidden by the Koran, although some of them-–especially those called by the Western countries “conservative Muslims” and clearly not the “radical” or “fundamentalist” Muslims--have also managed, in the new globalized world, to evade from the norm with artful financial devices.

However, even the Catholics finally managed to get away from this doctrine and even dared to make subtle changes in the 2,000 years old prayer, so that they moved from the traditional Our Father, asking Him to forgive their own debts and those of others, by praying:

Pater noster, qui es in caelis:
….
et dimitte nobis debita nostra,
Sicut et nos dimittimus debitoribus nostris;
..

Instead of that wording, there was much more flexibility for operating in the financial markets without remorse with the following wording:

Our Father, Who art in heaven,

And forgive us our trespasses,
as we forgive those who trespass against us.

A Euclidean Model for Diverging Worlds

Equivalences between rectangle triangles have been understood for thousands of years. A clay cuneiform tablet found at Tell Harmal, close to Baghdad (Iraq), from the Old Babylonian period (1,800 BCE) depicted a theorem, similar to one of Euclid, but 1,500 years earlier, on rectangle triangles equivalences.

Figure 1. Treasures of the Iraq Museum. Dr. Farah Basmachi. Ministry of Information. Directorate General of Antiquities. Iraq. Baghdad Museum (at least in 1980)

Therefore, if credit is the amount of money, or equivalent, that somebody takes from and owes to a physical person or legal entity, the creditor has the right to get it back (with interest-–more money--) in a given period. And if interest is the obligation, deferred in time, to return more money-–i.e. equivalent goods and/or measurable services--that is human equivalent effort--than those originally taken, the Euclidean model suggests that financial money needs more time, every time, in order for the financial model to match the physical reality that it should theoretically correspond to.

Graph 2. Diverging growth rates as values change through time. (Y axis uses log values)

Therefore, amortization periods necessarily need to get longer over time, starting from a given base. As the physical world is finite, the financial representation of money or monetary values cannot, at a given moment, match physical goods--nor even at a reasonable future moment, deferring the relationship in time. Neither can they match reasonable human effort, or energy efforts translated into equivalent physical goods at the disposal of the holder of the paper money.

Myopic Visions of the World

Even if GDP is an inaccurate measure of the goods which have been produced and services which have been rendered (the bomb business or an increase in traffic accidents is good for GDP, for example), it is still a tool of neoclassic economists that is theoretically an index related to the production of tangible goods and measurable services. And it shows that the divergence between physical and financial growth is becoming more and more evident over time.

I cannot accurately quote Noam Chomsky here, but I recall him saying something like, "Probably nine out of each ten circulating $ in financial markets does not correspond to the physical exchange of goods or the measurable trade of services."

In the next chart, we can see the effects of the diverging financial and physical worlds over time.

Graph 3. World GDP and Dow Jones Index for the period 1970-2007.

Sources: http://images.google.es/imgres?imgurl=http://photos.mongabay.com/07/SPM0...
for the world GDP growth and http://www.nyse.tv/dow-jones-industrial-average-history-djia.htm for the Dow _Jones Index

Now, let us add some other variables starting in 1970, such as the world oil production and trends in total primary energy production, and trends in wold GDP in Purchasing Power Parity, setting 1970 production equal to a base value of 100:

Graph 4. World GDP, Dow Jones Index, primary energy consumption and world oil production in the period 1970-2007 and projections of world oil production until 2030. Sources: Ibid and ASPO data base November 2008. Base = 100 at 1970

So, everyone was happy believing in the spiral of infinite growth. However, if money is to represent an equivalence to physical reality, we have been lying to ourselves for quite a number of years.

Then, why has the growing gap between the monetary world and the physical world apparently worked so well during the last several decades of robust growth? There are probably several reasons: Faith in infinite growth; the progressive lengthening of amortization periods for principal and interest; and the charging of the future to the wasteful present.

Therefore, the system works as long as owners of paper money (courtesans and gregarious people in the kingdom) are made to believe by the swindler tailors of the Emperor’s New Clothes of Hans Christian Andersen, that the looking-glass clothes, light as a cobweb, were magnificent; they are made to believe that their accumulated financial wealth as per the red line of the above graphs may be exchanged any time by the blue line of physical goods or services.

The system also works when the owners of financial assets see financial models indicating that they will recover physical world equivalent assets some years later, as long as material goods also keep growing, even if the material goods are growing at a lower rate and the recovery periods keep extending.

And it also works well, if all the community bearing financial or monetary values, as per the red line do not SIMULTANEOUSLY attempt to “materialize” all this money, at a given moment, into physical goods or measurable services, resulting in a need for goods and services beyond the level that actually exists as per the blue line at a given point in time.

Gregarious Behaviour

But the system may collapse if somebody, spontaneously, shouts for the first time, as the child did with the Emperor: "But he has nothing on!“, and then all run at the same time to “materialize” the red line financial values with the blue line physical goods and measurable services at a given moment, as we have recently seen in our world.

That is why the swindler tailors, most of the leaders and financial advisors, specialists and experts, working for the real financial powers, keep asking for the people to trust and believe in the system. Perhaps there is only a need to make some small adjustments in re-weaving the clothes, but the fabric is as beautiful as the ever-growing free market is not negotiable.

That is why these courtesans always address the herd and tell them the same thing that Don Vito Corleone said to his protégées: this perfect market system works based on trust and belief.

But the child has already shouted. And we know that the king and his whole court will walk, anyway, with still greater dignity in the middle of the financial and industrial production chaos, until they end the procession, as if the king were properly dressed.

And they leave us diving head first for a hard landing, from the heights of the red financial line, to the bumpy slope, slide or cliff blue landing strip, paved by and always directly linked to declining energy production.

Pedro Prieto is from Madrid, Spain. He is the head of ASPO-Spain and organized the ASPO 7 conference in Barcelona last year.

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World Economy Is Yet to Bottom, People’s Bank of China Says

The world economy hasn’t bottomed out yet, adding to “great uncertainties” about where commodity prices are heading, China’s central bank said.

The “external economy has yet to bottom out or establish a trend towards a recovery,” the People’s Bank of China said in regional reports posted on its Web site today. “The global financial crisis is still spreading and the impact on China is deepening.”

The central bank’s view contrasts with speculation that the worst of the global recession may be over, after consumer confidence jumped in the U.S. The Reuters/Jefferies CRB Index of 19 raw materials, including oil and copper, is down about 43 percent from a year ago.

China faces challenges including faltering demand, overcapacity in some industries, falling government revenue and rising unemployment, the central bank said. Economic growth slumped to 6.1 percent, the least in almost a decade, in the first quarter after global trade collapsed.

China’s producer prices fell last month by a record, flagging the risk that entrenched deflation will smother growth in the world’s third-biggest economy. While extra investment within China will help to “stabilize” those prices, the global economy isn’t likely to make a similar contribution, the central bank said.

“There are still great uncertainties on the future trend of commodity prices,” the People’s Bank of China said.

To contact the reporter on this story: Paul Panckhurst in Beijing at ppanckhurst@bloomberg.net



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Democracy Now Transcript - Obama Nominee Sonia Sotomayor Poised to Become First Hispanic Supreme Court Justice

Guests:

Cesar Perales, President and general counsel of Latino Justice PRLDEF, formerly known as the Puerto Rican Legal Defense and Education Fund. Sotomayor served for many years on the group’s board.

Juan Manuel Garcia-Passalacqua, independent political analyst in Puerto Rico. He publishes a weekly political analysis column for El Vocero. He is a graduate of Harvard Law School and a former professor at Yale University.

Tom Goldstein, an attorney, he founded the SCOTUS Blog that is devoted to the Supreme Court.

Marjorie Cohn, president of the National Lawyers Guild and a professor at Thomas Jefferson School of Law.



JUAN GONZALEZ: President Obama has nominated federal appeals court judge Sonia Sotomayor to the Supreme Court, putting her in line to become the country’s first Hispanic justice.

The fifty-four-year-old Sotomayor is the daughter of Puerto Rican parents who was raised in a public housing project in the Bronx. A graduate of Princeton and Yale, she served as a prosecutor, corporate litigator and federal district judge before joining the United States Court of Appeals for the Second Circuit in New York in 1998. If confirmed to the Supreme Court, she would become the nation’s 111th justice and the third woman to hold a seat on the court.

President Obama introduced her in the East Room of the White House yesterday morning and hailed her compelling life story and her experience on the bench.

PRESIDENT BARACK OBAMA: Over a distinguished career that spans three decades, Judge Sotomayor has worked at almost every level of our judicial system, providing her with a depth of experience and a breadth of perspective that will be invaluable as a Supreme Court justice. It’s a measure of her qualities and her qualifications that Judge Sotomayor was nominated to the US District Court by a Republican president, George H.W. Bush, and promoted to the Federal Court of Appeals by a Democrat, Bill Clinton. Walking in the door, she would bring more experience on the bench and more varied experience on the bench than anyone currently serving on the United States Supreme Court had when they were appointed.


JUAN GONZALEZ: Judge Sotomayor thanked the President for what she called “the most humbling honor of my life” and went on to speak about her background and experience.

JUDGE SONIA SOTOMAYOR: Although I grew up in very modest and challenging circumstances, I consider my life to be immeasurably rich. I was raised in a Bronx public housing project but studied at two of the nation’s finest universities. I did work as an assistant district attorney, prosecuting violent crimes that devastate our communities. But then I joined a private law firm and worked with international corporations doing business in the United States. I have had the privilege of serving as a federal district court trial judge and am now serving as a federal appellate circuit court judge.

This wealth of experiences, personal and professional, have helped me appreciate the variety of perspectives that present themselves in every case that I hear. It has helped me to understand, respect and respond to the concerns and arguments of all litigants who appear before me, as well as to the views of my colleagues on the bench. I strive never to forget the real world consequences of my decisions on individuals, businesses and government.


JUAN GONZALEZ: If confirmed, Judge Sotomayor would replace Justice David Souter, who was considered a reliable member of the court’s liberal wing.

Senate Minority Leader Mitch McConnell said Tuesday the Senate would not be a “rubber stamp” to confirm Sotomayor and said Republicans would, quote, “examine her record to ensure she understands that the role of a jurist in our democracy is to apply the law even-handedly, despite their own feelings or personal or political preferences.”

President Obama tapped New York Senator Chuck Schumer to lead the confirmation effort. White House officials told the Washington Post they hope to confirm Sotomayor by August 7th.

AMY GOODMAN: To discuss Sotomayor’s nomination, we’re joined by a roundtable panel of guests.

Marjorie Cohn is the president of the National Lawyers Guild, a professor at Thomas Jefferson School of Law. She joins us from San Diego.

On the phone from Washington, DC, Tom Goldstein, an attorney who founded the popular SCOTUS Blog that’s devoted to the Supreme Court.

Joining us here in our firehouse studio is Cesar Perales, president and general counsel of Latino Justice, formerly known as the Puerto Rican Legal Defense and Education Fund. Sonia Sotomayor served for many years on the group’s board.

And on the phone with us from Puerto Rico is Juan Manuel Garcia-Passalacqua, an independent political analyst who publishes a weekly political analysis column for El Vocero. He is a graduate of Harvard Law School, a former professor at Yale University. He knows Judge Sotomayor personally. And according to Juan, who just discovered her Yale Review piece, he is extensively quoted in her piece in the Yale Law Review.

JUAN GONZALEZ: Yes, and welcome to all of you. I’d like to start with Juan Manuel Garcia-Passalacqua. Your reaction to the nomination by President Obama?

JUAN MANUEL GARCIA-PASSALACQUA: Hi. My hair stands. My hair stands, because I have been, as you know, attentive to the relationship between Puerto Rico and the United States for years—fifty years, to be exact—and I never expected—never expected—that the diaspora would produce the first Hispanic Puerto Rican judge in the Supreme Court of the United States.

What to me is the crucial element of what we are today celebrating is that, for the first time, the census issued last summer said that there were more Puerto Ricans in the United States than in Puerto Rico. Now, the diaspora has produced a Supreme Court judge of the United States of America. And now, a bill has been filed in Congress by ninety members of the House of Representatives, finally solving the relationship between Puerto Rico and the United States and providing the opportunity of rejecting colonialism in the ballot next year.

So, again, I must confess that it is one of those days in one of those years in which the whole relationship between Puerto Rico and the United States is being transformed before our own eyes.

AMY GOODMAN: How did you come to know Judge Sotomayor, Juan Manuel Garcia-Passalacqua?

JUAN MANUEL GARCIA-PASSALACQUA: Well, it’s fascinating, that story, because we have been friends in the judiciary, because, again, I have been part of the political analysis of the relationship, and the judiciary is part of the relationship. And both Judge Sotomayor and Judge Jose Cabranes, who are the two Puerto Ricans that, since ten years ago, have been seen as the potential candidates, the potential Puerto Rican candidates to the Supreme Court of the United States—so, it was in that sense that our relationship developed, and it was in that sense that, I guess, you have discovered I’m being quoted by her in some instances.

JUAN GONZALEZ: I’d also like to bring in Cesar Perales, who also knows Judge Sotomayor personally. And interestingly, Cesar, in the long biography today of Judge Sotomayor that was published by the New York Times, one of the things that they do not mention is that for eleven years she served on the board of directors of the Puerto Rican Legal Defense and Education Fund, from 1980 until 1991, when the first President Bush named her to the federal bench. You were the director at the time. Could you talk about your experiences with her as your boss, in effect, at the Puerto Rican Legal Defense and Education Fund?

CESAR PERALES: Well, the one thing one immediately learns about Sonia Sotomayor is that she is very smart. She joined the board when she was about—I think about twenty-six, twenty-seven years old. She was the youngest member we had. We brought her on because she was very interested in getting young Latinos to enter the legal profession, and that’s one of our mission, part of our mission. But Sonia immediately impressed all of us, has certainly held her own against the older members on the board. She is very smart. She’s insightful.

And to me, who was the guy that had to carry out the wishes of the board, she was very practical in her approach to issues. I can’t cite particular anecdotes, which I’m continually asked about, but I can just tell you that my own sense, when I was at board meetings, was that Sonia was going to be on my side, because she’d know that—the effects of what her decisions would be and that she was very careful about that.

And I think these are attributes that are going to make a big difference on the Supreme Court. This is a woman that, while we spend a great deal of time talking about her intellect and about her youth and everything she’s overcome, but she is very much a practical person. And I think that makes a big difference, when you’ve got the Supreme Court making decisions that affect the lives of everybody in this country.

AMY GOODMAN: Your reaction when you heard that President Obama had nominated her to the Supreme Court?

CESAR PERALES: I was ecstatic. And I can tell you, hearing and watching the ceremony, tears welled up in my eyes. As a macho Latino, I shouldn’t admit this, but there were many of us standing around this television set in our little kitchen in our office, and there were people bawling. I mean, people who knew her. She’s just a regular person. And to see her there and to see her mother, to see the reaction of everybody in that room, I said to myself, “Barack Obama likes to make history; he’s doing it again today.”

This is the most important appointment ever made to a Hispanic in this country. And we are very, very pleased. And I think it’s going to—you will see that during the confirmation process, because I think if she gets a particularly hard time, people are going—in our community are going to react very negatively.

AMY GOODMAN: We’re going to go to break. Then we’re going to come back to this discussion about the nomination of Judge Sonia Sotomayor to the Supreme Court. We’ll also talk about the confirmation hearing, what is expected. But we also want to look at her record, what has been her record, the cases that she has presided over.

This is Democracy Now! We’ll be back in a minute.

[break]

AMY GOODMAN: We’re talking about the nomination of Judge Sonia Sotomayor to the Supreme Court, confirmation hearings to follow. If confirmed, she will be the first Latino justice, the third woman on the Supreme Court.

Our guests are Cesar Perales, president and general counsel of Latino Justice, formerly known as the Puerto Rican Legal Defense and Education Fund; Juan Manuel Garcia-Passalacqua joins us from Puerto Rico, an independent political analyst, knows Sonia Sotomayor well. In a moment, we’re going to be going to Marjorie Cohn, president of the National Lawyers Guild, professor at Thomas Jefferson School of Law in San Diego.

But we want to look right now at Judge Sotomayor’s record. Tom Goldstein, you founded the SCOTUS Blog, Supreme Court of the United States, devoted to the Supreme Court, and you’ve summarized her cases. Can you go through what you feel are the most important ones and how she’s ruled?

TOM GOLDSTEIN: Well, the thing about a judge like Sonia Sotomayor, who’s been on the court of appeals for more than a decade and then was a trial judge for a long time, is that she has an unbelievable body of work. You can—there are literally hundreds of opinions. And we could talk about particular ones, but I think the sort of the overarching point for your listeners is that she is on the left, but far from the radical left.

You’ll hear a lot of complaints about conservatives that she is an ideologue and a judicial activist. And I think there’s really no evidence at all that that’s correct. She seems to take each case as it comes to her, and she sometimes rules for plaintiffs, sometimes for defendants, sometimes for the government, sometimes for companies. And you get a sense that she’s just very thorough and very balanced. And it’s been said, and is obvious from how well she did academically, she’s very smart.

AMY GOODMAN: And go through what you think are some of the principal cases.

TOM GOLDSTEIN: Well, I think that one case that—maybe we could talk about cases that will receive a lot of attention, so that your listeners, as they hear more about Judge Sotomayor, will know what it is that—a little bit more about what people are talking about.

There is—the case that’s talked about the most is the so-called New Haven firefighters case. This is a case out of New Haven, Connecticut, where the city had a promotional exam of four firefighters, and after the exam was administered, it turned out that white firefighters did much better than black and Hispanic firefighters, particularly black firefighters, and that promotions in the city, as a consequence, would be skewed. And the city decided not to use the results of that test, but to find another promotional exam. And Judge Sotomayor was part of a three-judge panel that said that the white firefighters didn’t have a legal claim against New Haven. So, this is a very difficult case about the balance between trying to have diversity in the workforce versus not discriminating against the white firefighters. And that case is now in front of the Supreme Court right now.

Another case that tells you a little bit about where Judge Sotomayor stands versus the rest of the Supreme Court, that is an issue in front of the justices right now, the justices have a case involving a strip search of a young girl at school, because the school had some concern that maybe she had aspirin or some other drugs on her body. And it looks like the Supreme Court is going to rule for the school that that kind of search is OK. Judge Sotomayor had a case in the Second Circuit where she said, no, that’s far too intrusive for this poor little girl. And both Judge Sotomayor and Justice Ginsburg in the Supreme Court seem much more attentive, from their own personal experiences, to what that kind of search would be like for a young child, for a young girl.

On the other hand, people shouldn’t get the impression that she’s, you know, always on the left or radical, as I say. She had a case involving accidental mistakes by the police, where she said that those don’t justify suppressing the results of a search by the police. And the Supreme Court came out the same way this year in a case called Herring. So, she’s dealt with a huge number of issues, seems to be quite balanced in them, and her decisions are very thorough.

JUAN GONZALEZ: Tom Goldstein, didn’t she also have a case, a key case, on environmental issues, on the—whether the—how the EPA could use cost-benefit analyses in determining limits on pollution?

TOM GOLDSTEIN: Yes. This is the Riverkeeper’s case. She said that when the EPA was making determinations about what kind of equipment should be used in plans, it shouldn’t be evaluating sort of whether this way of protecting the environment was too expensive, that Congress hadn’t told the EPA to do that. And so, her decision was more pro-environmental.

The Supreme Court reversed that decision. So she has been in front of the Supreme Court in opinions that she has written five times. That’s not that many over a very long career. You’re talking about somebody who’s been in the court of appeals for eleven years. And that’s a decision that was reviewed that was reversed.

JUAN GONZALEZ: And you also write, Tom, about the cottage industry that has developed around Supreme Court nominations and how sides, from both the left and the right, gear up for these nominations. Could you talk about that a little bit?

TOM GOLDSTEIN: Sure. It’s as with Chief Justice Roberts and Justice Alito, who are really smart people. They are more conservative than me, to be sure, but they have a lot of integrity. They are, you know, good judges. And when they were nominated by President Bush, they were attacked mercilessly by the, you know, folks on the left. And same with Judge Sotomayor, a person of incredible integrity, great intelligence, and now attacked from the far right.

And the cottage industry point is that these groups gear up now, and this is their principal fundraising mechanism, to say, “The President now is trying to either destroy the Supreme Court or save the Supreme Court. You need to support us.” And that’s not to say that those groups don’t have really good-faith disagreements about the law. There are incredibly important debates. But what happens, unfortunately, is that we lose sight of the debate, and these individuals, who are public servants—Sonia Sotomayor started as a prosecutor. She has been a trial judge and then a court of appeals judge for decades now. She doesn’t have two dimes to her name. She could have made so much money. And they get attacked mercilessly and personally, rather than having the big debates over how the Constitution should be interpreted.

So, even though it’s certain that Judge Sotomayor is going to be confirmed, absolutely certain, absent some totally unexpected ethical transgression, she is going to go through the wringer now, so that these groups are able to fundraise.

AMY GOODMAN: Marjorie Cohn, you’re president of the National Lawyers Guild. Your response to the nomination of the first Latina justice, of Judge Sotomayor, to the Supreme Court?

MARJORIE COHN: Well, Amy, I think it’s very significant that she would be the first Latino on the Supreme Court, and she certainly would bring the number of women on the Supreme Court to two, and that’s also very significant. She will not appreciably change the political balance on the court. She will probably be a reliable liberal, very much in the vein of David Souter.

Cases about executive privilege will invariably come before her, such as interrogation policies, preventive detention, state secrets, and her views are largely unknown on issues of executive privilege.

She is a mixed bag. I would not call her a left liberal. She will not be a William Brennan or a Thurgood Marshall or an Earl Warren. Yes, she has ruled in the ways that Tom said on the firefighters case, on the environmental case, but she is a career prosecutor. She was a career prosecutor. And I’m hoping that she has empathy for criminal defendants and their constitutional rights. She ruled in two significant cases to uphold searches where the search warrants were unlawful. She ruled—she upheld the Bush global gag rule that made it harder for women to get abortions. She ruled against plaintiff correctional officers who were retaliated against for making complaints. And she also has a significant background as a corporate lawyer. She dissented in a 2-to-1 decision, ruling against the families of victims of the TWA plane crash in New York. So I think she will be a mixed bag. She will probably be more on the liberal side, but I would not call her an unabashed liberal.

Now, I think that it’s important for us to respond to this whole issue of activist judges and judicial activism, because this is what the right wing is bringing up all over the media waves and throwing at her, that she’ll be a judicial activist. All judges are judicial activists. I mean, the quintessential judicial activism was Bush v. Gore, where a conservative majority of the Supreme Court handed the election to George W. Bush. That was judicial activism. On the other hand, if it weren’t for judicial activism, the civil rights movement would not have achieved the gains that it achieves—that it achieved. So judicial activism is a red herring. Certainly, when a Justice Scalia interprets the Second Amendment or Justice Roberts rules in an abortion case, they are being judicial activists. And although nominated justices come before the Senate Judiciary Committee and the Senate and swear that their views on abortion and the death penalty and gun rights will not affect how they rule, they don’t rule in an ivory tower, and judges do make policy, and, yes, they interpret the law, but they interpret it through their own political lenses. So I think that’s important.

AMY GOODMAN: Let’s go to that clip that is being played everywhere of Judge Sotomayor speaking at a conference in 2005. It’s available on YouTube. It’s been played repeatedly on the networks in the last day. In it, Judge Sotomayor says, quote, “a court of appeals is where policy is made.” Well, she is now coming under criticism from some Republican lawmakers for the comment. Well, I want to play a slighter longer version of what she had to say. She was at Duke University, where she goes on to clarify this statement.

JUDGE SONIA SOTOMAYOR: All of the legal defense funds out there, they’re looking for people with court of appeals experience, because it is—court of appeals is where policy is made. And I know, and I know this is on tape, and I should never say that, because we don’t make law, I know. OK, I know, I know. I’m not promoting it, and I’m not advocating it. I’m—you know.

OK, having said that, the court of appeals is where, before the Supreme Court makes the final decision, the law is percolating, its interpretation, its application. And Judge Lucero is right. I often explain to people, when you’re on the district court, you’re looking to do justice in the individual case. So you are looking much more to the facts of the case than you are to the application of the law, because the application of the law is non-precedential, so the facts control. On the court of appeals, you are looking to how the law is developing, so that it will then be applied to a broad class of cases. And so, you’re always thinking about the ramifications of this ruling on the next step in the development of the law. You can make a choice and say, “I don’t care about the next step,” and sometimes we do. Or sometimes we say, “We’ll worry about that when we get to it.” Look at what the Supreme Court just did. But the point is that that’s the differences.


AMY GOODMAN: Judge Sotomayor. Tom Goldstein, your reaction?

TOM GOLDSTEIN: I do think that this quote, this one sentence, has been really played far too much out of context. I’m glad you’ve given the broader context. It’s an indication that those who are attacking her have not much to work with. They focus on this one sentence in a panel where she’s kind of making a light joke about, you know, something that’s absolutely realistic, as your other guest said, that on some level, there are so many holes in the law and ambiguities in the law that you can’t ignore the fact that there is some policymaking made at the court of appeals level. And then there is this one sentence from a law review article that’s taken from a speech she did out at Berkeley. And, you know, when you have somebody who has a career of eleven years, I don’t think the public is going to think much of, you know, what she said in these one individual sentences.

JUAN GONZALEZ: I’d like to bring back Juan Manuel Garcia-Passalacqua on both this issue of judicial activism in the federal courts, as well as, again, going back to Judge Sotomayor’s own history. I mentioned in my column in the Daily News today the particular irony of Judge Sotomayor being named to the Supreme Court, because it was the Supreme Court that, in effect, legalized the holding of colonies by the United States government back in the early twentieth century in what’s been known as the Insular Cases—

JUAN MANUEL GARCIA-PASSALACQUA: Fascinating.

JUAN GONZALEZ: —most Americans are not aware of, but now you have the daughter of colonial subjects, in effect, her parents, now being named to that very court. Could you go over some of those—what those Insular Cases represented, in terms of judicial activism by the Supreme Court itself?

JUAN MANUEL GARCIA-PASSALACQUA: Juan, this is the crucial issue that I think the United States should address, through your program, from today on. Judge Sotomayor is not a daughter of the American Revolution, OK? Judge Sotomayor was a member of the board of directors of the Puerto Rican Legal Defense Fund, which meant three things: number one, that she was an ethnic national, a Puerto Rican; number two, that she felt that ethnic Puerto Rican deserved and needed a defense; and third, that she dedicated twelve years of her life to that defense, the defense of the Puerto Rican ethnicity within the United States of America.

So, in that sense, you are absolutely correct in your column today: this is a child of colonialism. This is a woman that is a member of the Supreme Court of the United States because the United States invaded her country—invaded her country—and, as a matter of fact, took her parent to war, but that’s another issue. The issue is—as you posit, the issue is, the irony of it all, that deserves to be discussed, is how the daughter of the Bronx gets to be a Supreme Court justice in a colonial relationship between her country and the United States of America. It’s going to be a long dialogue, let me tell you. I think we’re going to be talking about this for years.

JUAN GONZALEZ: But those Supreme Court Insular Cases, could you summarize for our listeners and viewers what they involved?

JUAN MANUEL GARCIA-PASSALACQUA: OK, I’m sorry. The Insular Cases, decided in 1917, the United States Congress granted American citizenship to all those persons born in Puerto Rico. And the Supreme Court in 1922 decided that granting American citizenship to Puerto Ricans did not incorporate Puerto Rico into the American union on the way to statehood and created something called the unincorporated territory, which is what Puerto Rico is now, according to the Insular Cases, precisely Balzac v. Porto Rico that was decided in 1922.

The fascinating thing is that, again, an entity, an island, eight million people—four million in Puerto Rico, four million in the United States, let’s call it a people—eight million people are part of an unincorporated relationship to the United States at a moment in which the President of the United States appoints justice of the Supreme Court of the United States one of those people. One of those people of their unincorporated territory has been appointed Supreme Court justice. Fascinating.

I assure you, Juan, that your book about the consequences of imperialism will have to be reissued after the discussions around the nomination of Sonia Sotomayor go around the block, as they are going to go around the block for months.

JUAN GONZALEZ: I’d also like to ask Cesar Perales, one of the early cases that the Puerto Rican Legal Defense and Education Fund took up when Sotomayor was on your board was the famous Gerena-Valentin v. Koch case. I think it was 1981, when a series of lawsuits over the elections, local elections in New York City, led to a federal court decision to cancel the New York City elections or postpone the New York City election. Could you talk about that?

CESAR PERALES: It’s fascinating what happened at that time. It was the post-1980 census period in which the districts were being reapportioned in New York City and elsewhere in the country based on that census. And there had been a dramatic growth in the Latino community in New York, but the members of the city council drew lines that made it impossible for any new members to be elected. In other words, it was a protection of incumbency, but with clear racial impact.

And the board wholeheartedly supported my efforts to challenge those lines. And we devoted a great deal of time to it. We won a decision at the district court level, went to the court of appeals, and finally the city tried to get us to the Supreme Court. And the Supreme Court ultimately, the day before the New York City elections in 1981, which included a mayoral election, issued an order and said they would not intervene. And that, in essence, stopped the election that year. That was a shot heard around the world in terms of voting rights.

And I think it speaks to her own commitment to—she supported that action. She obviously is against racial gerrymandering. Now, who isn’t? But she very clearly was in a situation in which she encouraged the program, in which she served as a board of directors, to challenge the government to ensure that the voting rights of Puerto Ricans were maintained. And it was not just Puerto Ricans; I guess there were a number of other minorities involved in the race, including African Americans.

AMY GOODMAN: Judge Sotomayor’s view on statehood or independence or commonwealth for Puerto Rico, do you know it, Cesar Perales?

CESAR PERALES: I don’t know it. It’s something that we avoided discussing on our board, because there are so many facets and it’s so volatile that we’ve tried to stay away from that. And I have absolutely no idea what Judge Sotomayor’s position is on the status of Puerto Rico.

AMY GOODMAN: Juan Manuel, do you know?

JUAN MANUEL GARCIA-PASSALACQUA: About it either, but I have an indicia that I think the people of Puerto Rico should recognize at this point. In other words, her career, her whole judicial career and legal career, has been in defense of the rights of Puerto Ricans, of the eight million, the four million there and the four million here. So, there is no doubt whatsoever that on what we call the status issue, we don’t know what her position is, but what we know about the rights of Puerto Ricans, of all Puerto Ricans, those living here and those living there, she is adamantly, as the name of the organization itself defines, the Puerto Rican Legal Defense Fund, so her effort is to defend the rights of Puerto Ricans. Whatever the status of Puerto Rico may be—a republic, a monarchy, statehood, whatever the right—the status of Puerto Rico, she is going to be on the right side of the rights, as defined by the Constitution of the United States.

JUAN GONZALEZ: I’d like to ask Tom Goldstein, on the issue of the most famous case that’s often cited—President Obama cited it, as well—the baseball case, what exactly did Judge Sotomayor do there?

TOM GOLDSTEIN: Judge Sotomayor called a halt to the strike that threatened to disrupt or seriously wound baseball. This is when she was a trial judge, before she was a court of appeals judge. And she forced baseball to begin its operations again, rather than keeping the players off the field. And so, it’s really regarded as, you know, a crucial bit of baseball history, because the game was in jeopardy.

JUAN GONZALEZ: But when you say a strike, as a former labor activist, it was actually an owners’ lockout, wasn’t it?

TOM GOLDSTEIN: Yes. Right, exactly, exactly.

JUAN GONZALEZ: —of the ballplayers?

TOM GOLDSTEIN: Right.

JUAN GONZALEZ: So she was actually stopping the owners from locking out the ballplayers.

TOM GOLDSTEIN: Exactly.

AMY GOODMAN: And also significant that she grew up right in the shadow of Yankee Stadium. She grew up in the public housing project. I just want to also mention her parents came from Puerto Rico to New York, but her father died at the age of nine, so she was raised by her mother, something that she brought up yesterday, honoring her mother in the White House when she was nominated.

Marjorie Cohn, the New York Times quotes a lecture she gave in 2001 called “A Latina Judge’s Voice,” where she said, “My hope is [that] I will take the good from my experiences and extrapolate them further into areas with which I am unfamiliar. I simply do not know exactly what that difference will be in my judging. But I accept there will be some based on my gender and my Latina heritage.”

Can you wrap up for us?

MARJORIE COHN: Yes. Judges certainly make decisions through the lens of their experience and of their background. And the fact that she is a woman, the fact that she is a Latina, is going to invariably figure into her decision making and make her, I think, perhaps more sensitive than she might have been otherwise.

AMY GOODMAN: And in terms of the composition of the court, you sound somewhat disappointed.

MARJORIE COHN: Well, I’m thrilled that there will be the first Latina on the Supreme Court and that there will be another woman. But I really would have liked to have seen a real progressive counterweight to radical rightists on the court, such as Scalia, Thomas, Roberts and—Scalia, Thomas, Roberts and—why am I blanking? Scalia, Thomas, Alito and Roberts, four of them, yes.

I would have liked to have seen an Erwin Chemerinsky, for example, or a Harold Koh, even though they’re not women—Erwin Chemerinsky is a white male—but real giants in the area of constitutional rights, civil rights, human rights. I am very supportive of her nomination, and she should be defended, and she should be confirmed, but she is not going to be another Thurgood Marshall. She will not leave an indelible mark on the court, ultimately, the way Earl Warren did or Oliver Wendell Holmes. I could be wrong about that. I think that perhaps Obama missed an opportunity here, aside from all of the incredible qualities that she brings with her, but hopefully—or, hopefully, I guess one would say—he will have more opportunities to appoint justices.

AMY GOODMAN: Well, we want to thank you all for being with us. Marjorie Cohn, president of the National Lawyers Guild, a professor at Thomas Jefferson Law School in San Diego. I want to thank Juan Manuel Garcia-Passalacqua, independent political analyst in Puerto Rico, knows Judge Sotomayor well, publishes a weekly column, is on radio, as well. Tom Goldstein, attorney, founded the SCOTUS Blog, devoted to the Supreme Court. And thanks so much, Cesar Perales, president and general counsel of Latino Justice, formerly known as the Puerto Rican Legal Defense and Education Fund.

This is Democracy Now!, democracynow.org, the War and Peace Report. We’d like to know your views, as well. You can email us. Just go to our website. Also there, you can follow us on Twitter, and you can make suggestions for stories at stories(at)democracynow.org.

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Wednesday, 27 May 2009

Ending Today's Economic Crisis Simply and Easily, in America and Globally

Ending Today's Economic Crisis Simply and Easily, in America and Globally - by Stephen Lendman

Some of the best ideas are often the simplest. When applied to the global economic crisis, the solution is easier than imagined. What's hard, in fact a Gordian Knot, is the political will to embrace it. But even matters that great can be solved by a bold stoke, and according to legend, Alexander the Great's "Alexandrian solution" was achieved with one stroke of his sword, cutting the Knot in half. Applied to the global economic crisis, it means addressing it with effective policies, not ones wrecking America and other troubled nations worldwide.

Economist Michael Hudson explains that "debt leveraging is what caused our economic collapse," so piling on more ("The Recovery Plan from Hell" he calls it) makes things worse, especially the way it's done:

-- in America, by a private banking cartel Federal Reserve bailing out its members to enrich them - the key giant ones referred to as Wall Street; and

-- the US Treasury doing the same thing; it let the federal debt skyrocket to stratospheric levels and affirmed Adam Smith's dictum in The Wealth of Nations that no country ever repaid its debts, surely not huge ones in a private banking cartel run state, and therein lies the problem - easily solved with a bold stroke, thus far not taken nor will it without mass public action demanding it.

Which is why this article is written, inspired by the work of others. Economist Michael Hudson for one. Global Research.ca editor Michel Chossudovsky another, and noted author and writer Ellen Brown for her extraordinary book titled "Web of Debt" and her explanation of how "Cash-Starved States Need to Play the Banking Game" the same way as North Dakota.

If done at state and federal levels, it can save the economy from Wall Street's predation - by removing the debt overhang through debt write-downs as well as funding sustainable, inflation-free prosperity. It's not a pipe dream. It's real. It happened before and can again. Short of that, according to Hudson:

"debt service will (keep) crowd(ing) out spending on goods and services and there will be no recovery. Debt deflation will drag the economy down while assets are transferred further into the hands of the wealthiest 10% of the population (mainly the top 1%), operating via the financial sector."

Eventually the economy will collapse, but Wall Street will profit hugely - aided and abetted by corrupted public officials allied with the private parasitic Federal Reserve turning America into what Hudson calls a "zombie economy" and banana republic.

What Works for North Dakota Can Work for the Other States, America, and Everywhere

On March 2, Brown explained North Dakota's "Banking Game" and asked:

"What does the State of North Dakota have that other states don't....its own bank" - and therein lies its uniqueness and strength. When only four of the 50 states are solvent, North Dakota runs surpluses, and according to the Center on Budget and Policy Priorities, it's expected to have them in FY 2009 and 2010.

In his January 2009 State of the State address, governor John Hoeven explained:

"Since 2000, the State of North Dakota has gained jobs, and now we are gaining population, as well.

Personal income has grown by 43 percent - nearly 15 percent faster than the national average. In fact, our per capita income has moved up 12 places, from 38th to 26th among all the states (despite a tiny 641,481 population, according to 2008 US Census Bureau figures).

Wages have grown 34 percent, compared to just 26 percent for the rest of the country.

Our gross state product since 2000 has grown by nearly $10 billion, from $17.7 billion to more than $27 billion last year - a 56 percent increase - again, faster than the nation.

And our foreign exports have grown by 225 percent since 2000, breaking the $2 billion mark for the first time in North Dakota history.

Furthermore, our economic growth and diversification, along with the good financial stewardship, has enabled us to build a surplus and a solid financial reserve for the future....the state of our state is strong (at a time) our nation's economy is in a down-cycle...."

On May 23, The Bismark Tribune and other state papers reported that North Dakota has the nation's lowest unemployment rate at 4%. Clearly, it has a leg up on the other states, something all their governors and legislators should note along with federal officials in Washington. What works for North Dakota can work everywhere.

The Bank of North Dakota is the only state-owned bank in the nation - established in 1919 by its legislature "to free farmers and small businessmen from the clutches of out-of-state bankers and railroad men," according to Brown quoting management consultant Charles Fleetham in a February 2009 article published in his home state, Michigan. Brown continues:

"Three elected officials oversee the bank: the governor, the attorney general, and the commissioner of agriculture. The bank's mission is to deliver sound financial services that promote agriculture, commerce and industry (and operate) as a bankers' bank, partnering with private banks to loan money to farmers, real estate developers, schools and small businesses." Also to students and private individuals in the state at low affordable rates.

Key though is how it operates and stays solvent when so many of the nation's banks are financially strapped and face bankruptcy. As Brown explains:

"Certified, card-carrying bankers are allowed to do something nobody else can do....create 'credit' with accounting entries on their books." It turns money into credit by what's called "fractional reserve banking" that multiplies each dollar deposited magically into about 10 in the form of loans or computer-generated funds. It's literally money created out of thin air so that banks can re-lend it many times over, and the more deposits, the greater the amount of lending.

At issue is whether credit should be private or public, and as Brown wrote in a December 29 article titled "Borrowing from Peter to Pay Paul: The Wall Street Ponzi Scheme called Fractional Reserve Banking:"

"Readily available credit has made America 'the land of opportunity' ever since the days of the American colonists," with more on that below. "What has transformed this credit system into a Ponzi scheme that must continually be propped up with bailout money is that the credit power has been turned over to private bankers who always require more money back than they create" because they charge high interest rates to make a profit. When governments lend their own money, profit isn't at issue so rates can be low and affordable to businesses, farmers, and private individuals, and for their own and municipality needs, it's interest-free.

Brown and others have explained that "fractional reserve banking" dates from the 17th century, done then mainly in gold and silver coins. Early bankers soon realized it was simpler to use deposit receipts (called notes) as a means of payment. They then began creating money by making loans through promises to pay, and more could be issued than the amount of coins on hand as only enough were needed to service redemptions - today's idea of a reserve requirement.

What began earlier as notes, today are accounting entries that literally create money out of thin air. And it works the same for government as for privately-owned banks, except for the following.

As publicly-run institutions, their mandate is entirely different:

-- they don't have to earn profits;

-- they're not beholden to Wall Street or shareholders; and

-- only the state's creditworthiness matters, and so far, in over 230 years, no state ever went out of business and virtually none ever default on their debt, even when poorly governed.

Further, they can lend to themselves and municipalities interest-free, and to businesses, farmers, and individuals at low affordable rates to create internal growth and sustainable prosperity. And the more often loans are rolled over, the more debt-free money is created - without fear of inflation.

As long as new money produces goods and services, inflation can't occur. Only imbalances cause problems - "when 'demand' (money) exceeds 'supply' (goods and services)." Price stability is assured when both increase proportionally, and that's exactly how it worked in colonial America and under Lincoln during the Civil War as Brown explained in "Web of Debt."

In 1691, Massachusetts became "the first local government to issue its own paper money...." called scrip. Other colonies followed, Pennsylvania most effectively by issuing new money without inflation or need for taxes. For over 25 years, it collected none, and at the same time, its population grew and commerce prospered. The "secret was in not issuing too much (credit), and in recycling the money back to the government in the form of principal and interest on government-issued loans."

In other words, keeping everything proportionally in balance and not having to pay interest to predatory private lenders - the very system wrecking America today and other economies run by private central banks.

Lincoln did the same thing in spite of assassination threats before his inauguration as well as "treason, insurrection, and national bankruptcy" during his first year in office. Considering what he faced, his accomplishments were remarkable, including:

-- building the world's largest army;

-- defeating the South;

-- turning the country into the world's "greatest industrial giant;"

-- launching the steel industry, a continental railroad system, and a new era of farm machinery and cheap tools;

-- establishing free higher education;

-- giving settler ownership rights and encouraging land development through the Homestead Act;

-- having government support all branches of science;

-- standardizing methods of mass production;

-- increasing labor productivity by 50 - 75%; and

-- still more "with a Treasury that was completely broke and a Congress that hadn't been paid."

He did it by nationalizing control over banking so government could print its own money - interest free without paying usurious rates that private bankers demanded, from 24 - 36%. As a result, "the economy was jump-started with a 600 percent increase in government spending and cheap credit directed at production" - done with government-issued Greenbacks. They financed the war, paid the troops, and spurred the nation's growth - free from the system wrecking the country today to let parasitic private banks prosper.

In "Web of Debt," Brown explained that early 20th century Australia operated under a publicly-run bank as well - its Commonwealth Bank that created money, made loans, and collected interest at a fraction of what private bankers charge. It worked well enough for the country to have one of the highest living standards in the world at the time. Once private bankers took over, Australia became heavily indebted, and its living standard fell to a 23rd place ranking - clearly showing the destructive power of private bank-created money and overwhelming benefits possible when governments print their own.

America today can have the same advantages instituted by:

-- its colonists;

-- Lincoln;

-- early 20th century Australia;

-- the Middle Ages, falsely portrayed as a backward and impoverishing era only saved by industrial capitalism; in fact, under its banker-free tally system, it prospered for hundreds of years; and

-- China for thousands of years before the era of private banking, and today because Beijing directs The People's Bank of China (its semi-independent central bank) to grow the nation's economy and create millions of jobs for its burgeoning population.

America and world economies can be just as prosperous but only with determined effort enough to replace their corrupted systems with one that's fairest and works best .

A publicly-run banking system benefits everyone by using deposits for sustainable internal growth and government needs - at the state and local levels. And for the federal government, by printing its own money interest-free for the same purpose.

This writer and Brown believe that credit should be a public utility under a nationalized banking system, creating its own money at the federal level and with deposits into state-run banks - to serve people, not predator bankers. It would be the most equitable, sustainable, efficient and democratic system, free from parasitic lenders, and it would work equally well at the federal, state and community levels with local branches of government banks serving municipalities, their businesses, and residents at affordable costs.

Under the privately-run Federal Reserve and parasitic giant banking system, corporate monopolies run America and use "their affiliated banking trusts to generate unlimited funds to buy up competitors, the media, and the government itself, forcing truly independent private enterprise out" - the very system classical economists abhorred.

Private banks hold nations hostage by making them pay interest on their own money as well as "advanc(ing) massive loans to their affiliated cartels and hedge funds, which use the money to raid competitors and manipulate markets."

In America, it's an extreme form of Darwinism with the federal government and 46 of the 50 states insolvent - and small businesses and ordinary people faring worst. Another way is essential to keep the nation, individual states, local communities, and most people from becoming "zombies" and America transformed into Guatemala.

With federal, state, and community banks made a public utility under a nationalized banking system, consider the benefits:

-- personal and payroll taxes could be eliminated;

-- stable, sustainable economic growth could be generated;

-- America's manufacturing base could be rebuilt;

-- vital infrastructure projects could be undertaken on a scale never before imagined, including cleaning up the environment and developing alternate, sustainable, clean, safe, and affordable energy sources;

-- many millions of new good-paying jobs could be created, putting an end to unemployment for everyone willing and able work; and for those willing but unable, aid could be provided;

-- home foreclosures would end, and the dream of home ownership would be in reach for everyone because mortgages would be plentiful, cheap, and not designed to scam the unwary;

-- inflation could be ended;

-- booms and busts would be a thing of the past;

-- destructive currency devaluations and economic warfare for private gain would no longer be a threat;

-- private pensions, savings, and investments would be secure; and

-- federal, state, and local debt could be eliminated.

Imagine the following:

Weeks back, Bloomberg and others reported that from $12 - 14 trillion in bailouts and stimulus have been allocated or spent, while the Fed can't account for $9 trillion in off-balance sheet transactions. Why? Because of unprecedented willful fraud given a wink and nod by the highest officials in Washington partnered with criminal bankers to loot the Treasury and fleece the public.

Now imagine if $1 trillion of the total looted went to publicly-run banks for productive purposes. "Fractional reserve" magic would create $10 trillion. If around half of it went there (remember already allocated or spent), an astonishing $70 trillion could be used productively, not wasted, used to buy damaged assets cheap for greater consolidation, or for speculation at the risk of a severe future inflation. Then envision a new future:

-- the federal debt could be eliminated;

-- all unfunded liabilities, including Social Security, Medicare, and Medicaid would be secure in perpetuity;

-- the nation and all 50 states would become solvent and on their way to comfortable surpluses; and

-- a sustainable, inflation-free, prosperous future would result with essential social benefits for everyone, including affordable or perhaps free health care, education, and the end of poverty because a guaranteed minimum income could be assured.

Overall, it would be nothing short of a revolutionary new America, only rhetorically addressed up to now, with all winners and no losers - except the private predator banks and their corrupted public sector partners.

And remember, newly created money isn't inflationary as long as imbalances are avoided and it's productively used for new goods and services.

That's the kind of America to work for and not quit until achieved. If not now, when? If we don't do it, who will? If not done soon enough, it may be too late. If that's not incentive enough, what is?

Stephen Lendman is a Research Associate of the Centre for Research on Globalization. He lives in Chicago and can be reached at lendmanstephen@sbcglobal.net.

Also visit his blog site at sjlendman.blogspot.com and listen to The Global Research News Hour on RepublicBroadcasting.org Monday - Friday at 10AM US Central time for cutting-edge discussions with distinguished guests on world and national issues. All programs are archived for easy listening.

http://www.globalresearch.ca/index.php?context=va&aid=13720

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