IMF warns second bailout would 'threaten democracy'

The public will not bail out the financial services sector for a second time if another global crisis blows up in four or five years time, the managing-director of the International Monetary Fund warned this morning.

Dominique Strauss-Kahn told the CBI annual conference of business leaders that another huge call on public finances by the financial services sector would not be tolerated by the “man in the street” and could even threaten democracy.

"Most advanced economies will not accept any more [bailouts]...The political reaction will be very strong, putting some democracies at risk," he told delegates.

"I do believe that the financial sector needs to contribute both to the costs of the financial crisis and to reduce recourse to public funds in the future," he said.

Mr Strauss-Kahn said that imposing high capital ratio requirements on banks was one price the financial services sector must pay to prevent the threat of further multi-billion dollar bailouts.

He pointed to the debate in the US over the Troubled Asset Relief Programme and said that in many countries, including France and Germany, he doubted that politicians would secure the mandate needed to secure any further bail-outs if banks got in to trouble again, in several years' time.

Europe is in dispute over the spiralling cost of the global economic bailout, with Germany and France calling for a reduction in state support as their economies have shown signs of an upturn.

In September, George Osborne, the Shadow Chancellor, sided with Germany and France, accusing Gordon Brown of being in "complete denial" over the mounting bill of the financial rescue packages and agreed with Britain's neighbours that it was time to look for an exit strategy. Countries are recovering from recession at different rates, with Britain lagging behind.

Mr Strauss-Kahn said that while the global economy had made "remarkable" progress in exiting recession, and was on the cusp of recovery, it remained "highly vulnerable" to shocks.

He said state support for the world's battered economies must remain in place if a smooth recovery is to be achieved.

"We recommend erring on the side of caution as exiting too early is costlier than exiting too late."

Mr Strauss-Kahn is one of a series of high-profile speakers at the CBI conference, in Central London. Gordon Brown, David Cameron and Nick Clegg will all speak at the event as they seek to sway influential business leaders before a general election next year.

In his speech, Mr Strauss-Kahn also warned that the huge amounts of capital being pumped into China could fuel a pan-Asian bubble.

His comments come after warnings from economists that the economic conditions in China and the rest of Asia are such that asset prices could rip free of their fundamental values unless the bubble threat is addressed.

The Chinese banking sector is currently the scene of an unprecedented frenzy of new lending, which could reach up to 11,000 billion yuan (£97.7 billion) by the end of this year.

Mr Strauss-Khan said that the old paradigm of growth generation based on households in the US was dead. The future sources of growth and the recovery will "depend on a new balance between the US and deficit countries on one hand and emerging markets and surplus countries on the other".

Emerging markets will provide some of the growth that the US can no longer offer, however he warned that while China and other emerging Asian economies were shifting from exports to domestic demand, they still had some way to go.

http://business.timesonline.co.uk/tol/business/economics/article6928147.ece#cid=OTC-RSS&attr=1185799

Priceless: How The Federal Reserve Bought The Economics Profession

Economists main role is to certify the soundness of the status quo and justify the otherwise unjustifiable.... all that's missing is rattles and feathers, imo. The other problem is the equilibrium assumption at the heart of current numeric models, assumes that debt levels are always "rational". The profession rests on a foundation of ideology, group think and physics envy.

Thanks to WSE.

The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.

This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed's thrall, the economists missed it, too.

"The Fed has a lock on the economics world," says Joshua Rosner, a Wall Street analyst who correctly called the meltdown. "There is no room for other views, which I guess is why economists got it so wrong."

One critical way the Fed exerts control on academic economists is through its relationships with the field's gatekeepers. For instance, at the Journal of Monetary Economics, a must-publish venue for rising economists, more than half of the editorial board members are currently on the Fed payroll -- and the rest have been in the past.

The Fed failed to see the housing bubble as it happened, insisting that the rise in housing prices was normal. In 2004, after "flipping" had become a term cops and janitors were using to describe the way to get rich in real estate, then-Federal Reserve Chairman Alan Greenspan said that "a national severe price distortion [is] most unlikely." A year later, current Chairman Ben Bernanke said that the boom "largely reflect strong economic fundamentals."

The Fed also failed to sufficiently regulate major financial institutions, with Greenspan -- and the dominant economists -- believing that the banks would regulate themselves in their own self-interest.

Despite all this, Bernanke has been nominated for a second term by President Obama.

In the field of economics, the chairman remains a much-heralded figure, lauded for reaction to a crisis generated, in the first place, by the Fed itself. Congress is even considering legislation to greatly expand the powers of the Fed to systemically regulate the financial industry.
Story continues below


Paul Krugman, in Sunday's New York Times magazine, did his own autopsy of economics, asking "How Did Economists Get It So Wrong?" Krugman concludes that "[e]conomics, as a field, got in trouble because economists were seduced by the vision of a perfect, frictionless market system."

So who seduced them?

The Fed did it.

Three Decades of Domination

The Fed has been dominating the profession for about three decades. "For the economics profession that came out of the [second world] war, the Federal Reserve was not a very important place as far as they were concerned, and their views on monetary policy were not framed by a working relationship with the Federal Reserve. So I would date it to maybe the mid-1970s," says University of Texas economics professor -- and Fed critic -- James Galbraith. "The generation that I grew up under, which included both Milton Friedman on the right and Jim Tobin on the left, were independent of the Fed. They sent students to the Fed and they influenced the Fed, but there wasn't a culture of consulting, and it wasn't the same vast network of professional economists working there."

But by 1993, when former Fed Chairman Greenspan provided the House banking committee with a breakdown of the number of economists on contract or employed by the Fed, he reported that 189 worked for the board itself and another 171 for the various regional banks. Adding in statisticians, support staff and "officers" -- who are generally also economists -- the total number came to 730. And then there were the contracts. Over a three-year period ending in October 1994, the Fed awarded 305 contracts to 209 professors worth a total of $3 million.

Just how dominant is the Fed today?

The Federal Reserve's Board of Governors employs 220 PhD economists and a host of researchers and support staff, according to a Fed spokeswoman. The 12 regional banks employ scores more. (HuffPost placed calls to them but was unable to get exact numbers.) The Fed also doles out millions of dollars in contracts to economists for consulting assignments, papers, presentations, workshops, and that plum gig known as a "visiting scholarship." A Fed spokeswoman says that exact figures for the number of economists contracted with weren't available. But, she says, the Federal Reserve spent $389.2 million in 2008 on "monetary and economic policy," money spent on analysis, research, data gathering, and studies on market structure; $433 million is budgeted for 2009.

That's a lot of money for a relatively small number of economists. According to the American Economic Association, a total of only 487 economists list "monetary policy, central banking, and the supply of money and credit," as either their primary or secondary specialty; 310 list "money and interest rates"; and 244 list "macroeconomic policy formation [and] aspects of public finance and general policy." The National Association of Business Economists tells HuffPost that 611 of its roughly 2,400 members are part of their "Financial Roundtable," the closest way they can approximate a focus on monetary policy and central banking.

Robert Auerbach, a former investigator with the House banking committee, spent years looking into the workings of the Fed and published much of what he found in the 2008 book, "Deception
and Abuse at the Fed". A chapter in that book, excerpted here, provided the impetus for this investigation.

Auerbach found that in 1992, roughly 968 members of the AEA designated "domestic monetary and financial theory and institutions" as their primary field, and 717 designated it as their secondary field. Combining his numbers with the current ones from the AEA and NABE, it's fair to conclude that there are something like 1,000 to 1,500 monetary economists working across the country. Add up the 220 economist jobs at the Board of Governors along with regional bank hires and contracted economists, and the Fed employs or contracts with easily 500 economists at any given time. Add in those who have previously worked for the Fed -- or who hope to one day soon -- and you've accounted for a very significant majority of the field.

Auerbach concludes that the "problems associated with the Fed's employing or contracting with large numbers of economists" arise "when these economists testify as witnesses at legislative hearings or as experts at judicial proceedings, and when they publish their research and views on Fed policies, including in Fed publications."

Gatekeepers On The Payroll

The Fed keeps many of the influential editors of prominent academic journals on its payroll. It is common for a journal editor to review submissions dealing with Fed policy while also taking the bank's money. A HuffPost review of seven top journals found that 84 of the 190 editorial board members were affiliated with the Federal Reserve in one way or another.

"Try to publish an article critical of the Fed with an editor who works for the Fed," says Galbraith. And the journals, in turn, determine which economists get tenure and what ideas are considered respectable.

The pharmaceutical industry has similarly worked to control key medical journals, but that involves several companies. In the field of economics, it's just the Fed.

Being on the Fed payroll isn't just about the money, either. A relationship with the Fed carries prestige; invitations to Fed conferences and offers of visiting scholarships with the bank signal a rising star or an economist who has arrived.

Affiliations with the Fed have become the oxygen of academic life for monetary economists. "It's very important, if you are tenure track and don't have tenure, to show that you are valued by the Federal Reserve," says Jane D'Arista, a Fed critic and an economist with the Political Economy Research Institute at the University of Massachusetts, Amherst.

Robert King, editor in chief of the Journal of Monetary Economics and a visiting scholar at the Richmond Federal Reserve Bank, dismisses the notion that his journal was influenced by its Fed connections. "I think that the suggestion is a silly one, based on my own experience at least," he wrote in an e-mail. (His full response is at the bottom.)

Galbraith, a Fed critic, has seen the Fed's influence on academia first hand. He and co-authors Olivier Giovannoni and Ann Russo found that in the year before a presidential election, there is a significantly tighter monetary policy coming from the Fed if a Democrat is in office and a significantly looser policy if a Republican is in office. The effects are both statistically significant, allowing for controls, and economically important.

They submitted a paper with their findings to the Review of Economics and Statistics in 2008, but the paper was rejected. "The editor assigned to it turned out to be a fellow at the Fed and that was after I requested that it not be assigned to someone affiliated with the Fed," Galbraith says.

Publishing in top journals is, like in any discipline, the key to getting tenure. Indeed, pursuing tenure ironically requires a kind of fealty to the dominant economic ideology that is the precise opposite of the purpose of tenure, which is to protect academics who present oppositional perspectives.

And while most academic disciplines and top-tier journals are controlled by some defining paradigm, in an academic field like poetry, that situation can do no harm other than to, perhaps, a forest of trees. Economics, unfortunately, collides with reality -- as it did with the Fed's incorrect reading of the housing bubble and failure to regulate financial institutions. Neither was a matter of incompetence, but both resulted from the Fed's unchallenged assumptions about the way the market worked.

Even the late Milton Friedman, whose monetary economic theories heavily influenced Greenspan, was concerned about the stifled nature of the debate. Friedman, in a 1993 letter to Auerbach that the author quotes in his book, argued that the Fed practice was harming objectivity: "I cannot disagree with you that having something like 500 economists is extremely unhealthy. As you say, it is not conducive to independent, objective research. You and I know there has been censorship of the material published. Equally important, the location of the economists in the Federal Reserve has had a significant influence on the kind of research they do, biasing that research toward noncontroversial technical papers on method as opposed to substantive papers on policy and results," Friedman wrote.

Greenspan told Congress in October 2008 that he was in a state of "shocked disbelief" and that the "whole intellectual edifice" had "collapsed." House Committee on Oversight and Government Reform Chairman Henry Waxman (D-Calif.) followed up: "In other words, you found that your view of the world, your ideology, was not right, it was not working."

"Absolutely, precisely," Greenspan replied. "You know, that's precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well."

But, if the intellectual edifice has collapsed, the intellectual infrastructure remains in place. The same economists who provided Greenspan his "very considerable evidence" are still running the journals and still analyzing the world using the same models that were incapable of seeing the credit boom and the coming collapse.

Rosner, the Wall Street analyst who foresaw the crash, says that the Fed's ideological dominance of the journals hampered his attempt to warn his colleagues about what was to come. Rosner wrote a strikingly prescient paper in 2001 arguing that relaxed lending standards and other factors would lead to a boom in housing prices over the next several years, but that the growth would be highly susceptible to an economic disruption because it was fundamentally unsound.

He expanded on those ideas over the next few years, connecting the dots and concluding that the coming housing collapse would wreak havoc on the collateralized debt obligation (CDO) and mortgage backed securities (MBS) markets, which would have a ripple effect on the rest of the economy. That, of course, is exactly what happened and it took the Fed and the economics field completely by surprise.

"What you're doing is, actually, in order to get published, having to whittle down or narrow what might otherwise be oppositional or expansionary views," says Rosner. "The only way you can actually get in a journal is by subscribing to the views of one of the journals."

When Rosner was casting his paper on CDOs and MBSs about, he knew he needed an academic economist to co-author the paper for a journal to consider it. Seven economists turned him down.

"You don't believe that markets are efficient?" he says they asked, telling him the paper was "outside the bounds" of what could be published. "I would say 'Markets are efficient when there's equal access to information, but that doesn't exist,'" he recalls.

The CDO and MBS markets froze because, as the housing market crashed, buyers didn't trust that they had reliable information about them -- precisely the case Rosner had been making.

He eventually found a co-author, Joseph Mason, an associate Professor of Finance at Drexel University LeBow College of Business, a senior fellow at the Wharton School, and a visiting scholar at the Federal Deposit Insurance Corporation. But the pair could only land their papers with the conservative Hudson Institute. In February 2007, they published a paper called "How Resilient Are Mortgage Backed Securities to Collateralized Debt Obligation Market Disruptions?" and in May posted another, "How Misapplied Bond Ratings Cause Mortgage Backed Securities and Collateralized Debt Obligation Market Disruptions."

Together, the two papers offer a better analysis of what led to the crash than the economic journals have managed to put together - and they were published by a non-PhD before the crisis.

Not As Simple As A Pay-Off

Economist Rob Johnson serves on the UN Commission of Experts on Finance and International Monetary Reform and was a top economist on the Senate banking committee under both a Democratic and Republican chairman. He says that the consulting gigs shouldn't be looked at "like it's a payoff, like money. I think it's more being one of, part of, a club -- being respected, invited to the conferences, have a hearing with the chairman, having all the prestige dimensions, as much as a paycheck."

The Fed's hiring of so many economists can be looked at in several ways, Johnson says, because the institution does, of course, need talented analysts. "You can look at it from a telescope, either direction. One, you can say well they're reaching out, they've got a big budget and what they're doing, I'd say, is canvassing as broad a range of talent," he says. "You might call that the 'healthy hypothesis.'"

The other hypothesis, he says, "is that they're essentially using taxpayer money to wrap their arms around everybody that's a critic and therefore muffle or silence the debate. And I would say that probably both dimensions are operative, in reality."

To get a mainstream take, HuffPost called monetary economists at random from the list as members of the AEA. "I think there is a pretty good number of professors of economics who want a very limited use of monetary policy and I don't think that that necessarily has a negative impact on their careers," said Ahmed Ehsan, reached at the economics department at James Madison University. "It's quite possible that if they have some new ideas, that might be attractive to the Federal Reserve."

Ehsan, reflecting on his own career and those of his students, allowed that there is, in fact, something to what the Fed critics are saying. "I don't think [the Fed has too much influence], but then my area is monetary economics and I know my own professors, who were really well known when I was at Michigan State, my adviser, he ended up at the St. Louis Fed," he recalls. "He did lots of work. He was a product of the time...so there is some evidence, but it's not an overwhelming thing."

There's definitely prestige in spending a few years at the Fed that can give a boost to an academic career, he added. "It's one of the better career moves for lots of undergraduate students. It's very competitive."

Press officers for the Federal Reserve's board of governors provided some background information for this article, but declined to make anyone available to comment on its substance.

The Fed's Intolerance For Dissent

When dissent has arisen, the Fed has dealt with it like any other institution that cherishes homogeneity.

Take the case of Alan Blinder. Though he's squarely within the mainstream and considered one of the great economic minds of his generation, he lasted a mere year and a half as vice chairman of the Fed, leaving in January 1996.

Rob Johnson, who watched the Blinder ordeal, says Blinder made the mistake of behaving as if the Fed was a place where competing ideas and assumptions were debated. "Sociologically, what was happening was the Fed staff was really afraid of Blinder. At some level, as an applied empirical economist, Alan Blinder is really brilliant," says Johnson.

In closed-door meetings, Blinder did what so few do: challenged assumptions. "The Fed staff would come out and their ritual is: Greenspan has kind of told them what to conclude and they produce studies in which they conclude this. And Blinder treated it more like an open academic debate when he first got there and he'd come out and say, 'Well, that's not true. If you change this assumption and change this assumption and use this kind of assumption you get a completely different result.' And it just created a stir inside--it was sort of like the whole pipeline of Greenspan-arriving-at-decisions was
disrupted."

It didn't sit well with Greenspan or his staff. "A lot of senior staff...were pissed off about Blinder -- how should we say? -- not playing by the customs that they were accustomed to," Johnson says.

And celebrity is no shield against Fed excommunication. Paul Krugman, in fact, has gotten rough treatment. "I've been blackballed from the Fed summer conference at Jackson Hole, which I used to be a regular at, ever since I criticized him," Krugman said of Greenspan in a 2007 interview with Pacifica Radio's Democracy Now! "Nobody really wants to cross him."

An invitation to the annual conference, or some other blessing from the Fed, is a signal to the economic profession that you're a certified member of the club. Even Krugman seems a bit burned by the slight. "And two years ago," he said in 2007, "the conference was devoted to a field, new economic geography, that I invented, and I wasn't invited."

Three years after the conference, Krugman won a Nobel Prize in 2008 for his work in economic geography.

One Journal, In Detail

The Huffington Post reviewed the mastheads of the American Journal of Economics, the Journal of Economic Perspectives, Journal of Economic Literature, the American Economic Journal: Applied Economics, American Economic Journal: Economic Policy, the Journal of Political Economy and the Journal of Monetary Economics.

HuffPost interns Googled around looking for resumes and otherwise searched for Fed connections for the 190 people on those mastheads. Of the 84 that were affiliated with the Federal Reserve at one point in their careers, 21 were on the Fed payroll even as they served as gatekeepers at prominent journals.

At the Journal of Monetary Economics, every single member of the editorial board is or has been affiliated with the Fed and 14 of the 26 board members are presently on the Fed payroll.

After the top editor, King, comes senior associate editor Marianne Baxter, who has written papers for the Chicago and Minneapolis banks and was a visiting scholar at the Minneapolis bank in '84, '85, at the Richmond bank in '97, and at the board itself in '87. She was an advisor to the president of the New York bank from '02-'05. Tim Geithner, now the Treasury Secretary, became president of the New York bank in '03.

The senior associate editors: Janice C Eberly was a Fed visiting-scholar at Philadelphia ('94), Minneapolis ('97) and the board ('97). Martin Eichenbaum has written several papers for the Fed and is a consultant to the Chicago and Atlanta banks. Sergio Rebelo has written for and was previously a consultant to the board. Stephen Williamson has written for the Cleveland, Minneapolis and Richmond banks, he worked in the Minneapolis bank's research department from '85-'87, he's on the editorial board of the Federal Reserve Bank of St. Louis Review, is the co-organizer of the '09 St. Louis Federal Reserve Bank annual economic policy conference and the co-organizer of the same bank's '08 conference on Money, Credit, and Policy, and has been a visiting scholar at the Richmond bank ever since '98.

And then there are the associate editors. Klaus Adam is a visiting scholar at the San Francisco bank. Yongsung Chang is a research associate at the Cleveland bank and has been working with the Fed in one position or another since '01. Mario Crucini was a visiting scholar at the Federal Reserve Bank of New York in '08 and has been a senior fellow at the Dallas bank since that year. Huberto Ennis is a senior economist at the Federal Reserve Bank of Richmond, a position he's held since '00. Jonathan Heathcote is a senior economist at the Minneapolis bank and has been a visiting scholar three times dating back to '01.

Ricardo Lagos is a visiting scholar at the New York bank, a former senior economist for the Minneapolis bank and a visiting scholar at that bank and Cleveland's. In fact, he was a visiting scholar at both the Cleveland and New York banks in '07 and '08. Edward Nelson was the assistant vice president of the St Louis bank from '03-'09.

Esteban Rossi-Hansberg was a visiting scholar at the Philadelphia bank from '05-'09 and similarly served at the Richmond, Minneapolis and New York banks.

Pierre-Daniel Sarte is a senior economist at the Richmond bank, a position he's held since '96. Frank Schorfheide has been a visiting scholar at the Philadelphia bank since '03 and at the New York bank since '07. He's done four such stints at the Atlanta bank and scholared for the board in '03. Alexander Wolman has been a senior economist at the Richmond bank since 1989.

Here is the complete response from King, the journal's editor in chief: "I think that the suggestion is a silly one, based on my own experience at least. In a 1988 article for AEI later republished in the Federal Reserve Bank of Richmond Review, Marvin Goodfriend (then at FRB Richmond and now at Carnegie Mellon) and I argued that it was very important for the Fed to separate monetary policy decisions (setting of interest rates) and banking policy decisions (loans to banks, via the discount window and otherwise). We argued further that there was little positive case for the Fed to be involved in the latter: broadbased liquidity could always be provided by the former. We also argued that moral hazard was a cost of banking intervention.

"Ben Bernanke understands this distinction well: he and other members of the FOMC have read my perspective and sometimes use exactly this distinction between monetary and banking policies. In difficult times, Bernanke and his fellow FOMC members have chosen to involve the Fed in major financial market interventions, well beyond the traditional banking area, a position that attracts plenty of criticism and support. JME and other economics major journals would certainly publish exciting articles that fell between these two distinct perspectives: no intervention and extensive intervention. An upcoming Carnegie-Rochester conference, with its proceeding published in JME, will host a debate on 'The Future of Central Banking'.

"You may use only the entire quotation above or no quotation at all."

Auerbach, shown King's e-mail, says it's just this simple: "If you're on the Fed payroll there's a conflict of interest."

Elyse Siegel, Julian Hattem, Jeff Muskus and Jenna Staul contributed to this report

Ryan Grim is the author of This Is Your Country On Drugs: The Secret History of Getting High in America

http://www.huffingtonpost.com/2009/09/07/priceless-how-the-federal_n_278805.html

The sex lives of public officials ~ Ellis

The goons at the Tele or the NSW Government, which is worse. Give me incompetence over their endless slimey and self interested confected outrage any day of the week. But thats just me....


Bob Ellis writes:


Billy Snedden, John Gorton, Harold Holt and Robert Menzies were adulterers, yet none of them resigned because of it, nor did any newspaper suggest an early election because of it. Sir James Killen committed adultery with a fellow minister, Bob Hawke with his biographer Blanche d 'Alpuget, Ben Chifley with his secretary, John Curtin with his landlady if we are to believe David Day. Sir Henry Parkes was a notorious fondler and swiver. Don Dunstan’s multiple homos-xual affairs were known at the time.

It is hard to think of a leader, state or federal, who has not strayed from the marital bed. Joh Bjelke Petersen kept his girlfriend Beryl. Jack Lang had children by another woman, known to the neighbourhood.

Yet no one seems to mind much. It seems to be regarded by many Australians as part of the package of energetic leadership. And by many Americans too, whose Presidents Bill Clinton, George Bush senior, Ronald Reagan, Lyndon Johnson, John Kennedy, Dwight Eisenhower, FD Roosevelt, Warren Harding, Woodrow Wilson, Grover Cleveland, Abraham Lincoln (who caught syphilis and gave it to his wife) and Thomas Jefferson (who sired several bastard sons on his black slave) were known to be adulterers at the time, as was the wise hero and founding father Benjamin Franklin.

And many English too, who fondly forgave the "Welsh Ram" David Lloyd George, the bisexual Hugh Gaitskell, the cuckolded bisexual Harold Macmillan (whose wife bore, it is said, Lord Boothby’s child), the quietly promiscuous Harold Wilson, the blatantly homos-xual Ted Heath, the genial John Major who had an affair with fellow minister Edwina Curry, the haughty Margaret Thatcher who displaced a previous Margaret Thatcher in her eventual husband’s bed. Queen Victoria’s favourite Prime Minister Lord Melbourne shared his wife with Lord Byron, Benjamin Disraeli his mistress with several flat-mates, and Henry VIII, of course, who gave syphilis to his six wives and beheaded two of them.

And the French don’t mind it either, but that goes without saying.

Yet The Daily Telegraph finds John Della Bosca’s affair with a young scriptwriter shocking, and a reason for the Governor to overturn the constitution and sack Nathan Rees as her predecessor did Jack Lang. Della took a holiday from his famously stroppy wife and then went back to her. Shocking.
The government must fall.

Can it be The Daily Telegraph has a double standard? Or a boss who is frantic to bring down Nathan Rees, as he did Gough Whitlam with a constitutional coup d’etat? Or is it just a coincidence that splenetic puritans cluster in that newspaper and nowhere else?

What is really distressing is how the Australian public has copped all this. They don’t themselves feel affronted by what Della did. Yet they don’t mind seeing him ruined by a targeted campaign from whoever it is who wants Labor out in New South Wales bloody soon and don’t care how they achieve this unconstitutional goal.

How pathetic we have all become, putty it would seem.

What a sorrow and a pity. What a shame.

[ends]

John Kenneth Galbraith: Listen to a great US liberal, you might learn something new

Phillip Adams is in conversation with Canadian born American economist, author, adviser and presidential confidant John Kenneth Galbraith.


Galbraith, who died in 2006 at the age of 97, was a Keynesian economist and a leading proponent of American liberalism and progressivism. He wrote around 40 books in his lifetime but arguably his most famous works were the trilogy on economics: American Capitalism, The Affluent Society and The New Industrial State.


This interview was conducted at Galbraith's home on the grounds of Harvard University in Cambridge, Massachusetts, when he was 90. Galbraith talks about Keyensian economics, his relationship with past presidents (Franklin D. Roosevelt, Harry S. Truman, Dwight D. Eisenhower, John Kennedy and Lyndon Baines Johnson) about his work as director of the US Strategic Bombing Survey after WWII, the military strategy of the Nazis, and about his break-up with LBJ over the Vietnam War.

Download to listen.

News Snippets ~ UK , predictions, silver, Mitch's desert planet boomtown.. Ag/Au on the up..

Britain better put the IMF on speed dial.....

As the UK's public borrowings reach record levels, Britain's credit outlook has been lowered from stable to negative by the ratings agency Standard & Poor's. The agency cited government debt and political uncertainty with an election looming for its decision. It is the first time that Britain has been on negative outlook since S & P introduced outlooks in the 1980s. The move could eventually lead to a cut in the UK's Triple A rating and leave the Government in a position where it would have to pay more to borrow on financial markets. Official data released overnight also shows British public borrowing hit a record high for the month of April. The pound tumbled sharply and shares also fell in response to the Standard & Poor's decision..
................

On the qualification of predictions...

The late JK Galbraith, one of the twentieth century's most prominent economists, observed wryly that the purpose of economic forecasting is to make astrology look respectable. The American baseball star Yogi Berra, famous for his malapropisms, said: "It's tough to make predictions, especially about the future."

Recent history bears that out. Just about every official forecaster around the world underestimated the impacts of the global financial crisis. Over the past year the International Monetary Fund has revised down its forecasts for the global economy month after month. Just ten months ago, it was predicting that the global economy would expand by more than 4 per cent over the year to the end of 2009. Now it sees global growth going backwards by 1.3 per cent.

The Reserve Bank and the Treasury, too, have been consistently wrong during the course of the crisis - or, to put it more kindly, their forecasts have been overtaken by events. Within weeks of being issued in February, the updated economic and financial outlook from Treasury predicting that Australia would avoid recession looked heroic, bordering on ludicrous. Of course, it's almost certain that these forecasts were based on assumptions chosen to accentuate the positive. The last thing the central bankers or the econocrats want to do is undermine public confidence by predicting a recession until it would be utterly implausible not to.

Silver breaks out...



Mitch Hooke is a boso spruiker not to be taken seriously... the hyperbolic dimple will say anything,imo
The mining industry has released modelling saying 23,500 jobs will be lost by 2020 under the Federal Government's emissions trading scheme.
Around half the job losses are forecast to be in Queensland's coal industry, and Minerals Council head Mitch Hooke says those figures will multiply in the future, with job losses doubling by 2030."New South Wales would be the second highest level of job losses - a bit over 4,000 direct jobs [lost]," he said."Put a multiplier on that and you can see these figures really start to become quite significant."

He says one of the fundamental failures of Australia's emissions trading scheme is that its targets are far ahead of other countries. (Liar, liar, pants on fire Mitch...)

Hey Mitch, how many job losses in agriculture and tourism under this senario.....

Now, the MIT study has been published in a peer-reviewed journal -- The American Meteorological Society's Journal of Climate (subs. req'd) -- which obviously it makes it much more credible and high-profile. Reuters has a good story on it, "Global warming could be twice as bad as forecast." The study concludes:
The MIT Integrated Global System Model is used to make probabilistic projections of climate change from 1861 to 2100. Since the model's first projections were published in 2003 substantial improvements have been made to the model and improved estimates of the probability distributions of uncertain input parameters have become available. The new projections are considerably warmer than the 2003 projections, e.g., the median surface warming in 2091 to 2100 is 5.2°C compared to 2.4°C in the earlier study. Many changes contribute to the stronger warming; among the more important ones are taking into account the cooling in the second half of the 20th century due to volcanic eruptions for input parameter estimation and a more sophisticated method for projecting GDP growth which eliminated many low emission scenarios.

[Note: That rise is compared to 1981-2000 temperature levels. So you can add at least 0.5 °C and 1.0 °F for comparison with pre-industrial temperatures, which I did in the headline -- see "A (Hopefully) Clarifying Note on Temperature."]

The MIT press release calls for "rapid and massive" action to avoid this. Study co-author Ronald Prinn, the co-director of the Joint Program and director of MIT's Center for Global Change Science, says, it is important "to base our opinions and policies on the peer-reviewed science... There's no way the world can or should take these risks." Duh!

Global warming will hit us so quickly and dramatically going forward that idiots like Mitch will carry the shame of their denial for the rest of their lives round their necks like a dead albatros...

Standard Chartered say buy Gold Silver...

Standard Chartered is including gold and silver as one of four main recommendations to its private banking clients, according to a presentation by chief investment strategist, Lim Say Boon, in Dubai today.

The UK’s second largest bank by market capitalization has been winning clients in a flight to quality from its crashing rivals, and this global trend has also been evident in the Middle East.

Clients are being recommended to purchase gold and silver on price pull backs as the precious metals have a low correlation to traditional asset classes. The bank will recommend on different ways to invest in the metals.

The Iraq war and economic collapse ~ CEO

JPMorgan Chairman and CEO Jamie Dimon, in a letter to shareholders, touched on a theme that critics of the Iraq war were highlighting more than a year ago: That spending on the war was damaging to the economy.

Dimon cited "an expensive war in Iraq" as one of the possible triggers of the economic collapse. Spending on the war ballooned the deficit and crowded out investment in domestic priorities. Meanwhile, the trade deficit soared.

"I suspect when analysts and economists study the fundamental causes of this crisis, they will point to the enormous U.S. trade deficit as one of the main underlying culprits. Over an eight-year period, the United Sates ran a trade deficit of $3 trillion. This means that Americans bought $3 trillion more than they sold overseas. Dollars were used to pay for the goods. Foreign countries took these dollars and purchased, for the most part, U.S. Treasuries and mortgage-backed securities. It also is likely that this process kept U.S. interest rates very low, even beyond Federal Reserve policy, for an extended period of time."

Those depressed interest rates, in turn, pushed air into the housing bubble until it popped.

Dimon also cites the 2008 energy crisis as a shock to the economy that played a part in bringing it down. The energy crisis may still have occurred without the instability in the Middle East caused by the U.S. invasion, but with Iraq's oil supply knocked off-line for years, it didn't help.

Dimon also places some of the blame for the crisis on greed for ever-higher profits, which he refers to as "irrational pressure...to show increasingly better returns." The system he's referring to -- which pressures companies to steadily increase returns due to the cost of capital -- is called capitalism.

"Many other factors may have added to this storm -- an expensive war in Iraq, short-selling, high energy prices, and irrational pressure on corporations, money managers and hedge funds to show increasingly better returns," offered Dimon.

"The modern financial world has had its first major financial crisis. So far, many major actors are gone: many of the mortgage brokers, numerous hedge funds, Wachovia, WaMu, Bear Stearns, Lehman and many others. Some of the survivors are struggling, particularly as we face a truly global, massive recession -- and it still is not over," he wrote.

http://www.huffingtonpost.com/2009/04/20/dimon-iraq-war-greed-cont_n_189149.html

Minsky and the current crisis ~ Yellen

One of the critical features of Minsky’s world view is that borrowers, lenders, and regulators are lulled into complacency as asset prices rise. 3 It was not so long ago—though it seems like a lifetime—that many of us were trying to figure out why investors were demanding so little compensation for risk. For example, long-term interest rates were well below what appeared consistent with the expected future path of short-term rates. This phenomenon, which ended abruptly in mid-2007, was famously characterized by then-Chairman Greenspan as a “conundrum.” 4 Credit spreads too were razor thin. But for Minsky, this behavior of interest rates and loan pricing might not have been so puzzling. He might have pointed out that such a sense of safety on the part of investors is characteristic of financial booms. The incaution that reigned by the middle of this decade had been fed by roughly twenty years of the so-called “great moderation,” when most industrialized economies experienced steady growth and low and stable inflation. Moreover, the world economy had shaken off the effects of the bursting of an earlier asset price bubble—the technology stock boom—with comparatively little damage.

Chairman Bernanke has argued that other factors besides complacency were responsible for low interest rates in this period. 5 A glut of foreign saving mainly generated in developing countries such as China and India fueled demand for dollar-denominated assets. This ample supply of foreign savings combined with a low U.S. personal saving rate, large U.S. government deficits, and high productivity gains to produce a huge current account deficit. As a result, vast quantities of funds began “sloshing around” in our economy seeking investment projects.

Fed monetary policy may also have contributed to the U.S. credit boom and the associated house price bubble by maintaining a highly accommodative stance from 2002 to 2004. 6 This accommodative stance was motivated by what Greenspan called “risk management policy,” in which, to reduce the possibility of deflation, the funds rate was held below the level that would otherwise have been chosen to promote a return to full employment. 7 In effect, the Fed took a calculated risk. It took out some insurance to lower the chances of a potentially devastating deflationary episode. The cost of that insurance was an increased possibility of overheating the economy. These policy actions arguably played some role in our house price bubble. But they clearly were not the only factor, since such bubbles appeared in many countries that did not have highly accommodative monetary policies.

As Minsky’s financial instability hypothesis suggests, when optimism is high and ample funds are available for investment, investors tend to migrate from the safe hedge end of the Minsky spectrum to the risky speculative and Ponzi end. Indeed, in the current episode, investors tried to raise returns by increasing leverage and sacrificing liquidity through short-term—sometimes overnight—debt financing. Simultaneously, new and fancy methods of financial engineering allowed widespread and complex securitization of many types of assets, most famously in subprime lending. In addition, exotic derivatives, such as credit default swaps, were thought to dilute risk by spreading it widely. These new financial products provided the basis for an illusion of low risk, a misconception that was amplified by the inaccurate analyses of the rating agencies. This created a new wrinkle that even Minsky may not have imagined. Some of the investors who put money into highly risky assets were blithely unaware of how far out on a limb they had gone. Many of those who thought they were in the hedge category were shocked to discover that, in fact, they were speculative or Ponzi units.....

I would not advocate making it a regular practice to use monetary policy to lean against asset price bubbles. However recent experience has made me more open to action. I can now imagine circumstances that would justify leaning against a bubble with tighter monetary policy. Clearly further research may help clarify these issues.

http://www.frbsf.org/news/speeches/2009/0416.html

America: a superpower no more ~ CSM

Oakton, Va. - Two American icons, General Electric and Berkshire Hathaway, lost their triple-A credit ratings. Then China, America's largest creditor, called for a new global currency to replace the dollar just weeks after it demanded Washington guarantee the safety of Beijing's nearly $1 trillion debt holdings. And that was just in March.

These events are the latest warnings that our world is changing far more rapidly and profoundly than we – or our politicians – will admit. America's own triple-A rating, its superpower status, is being downgraded as rapidly as its economy.

President Obama's recent acknowledgement that the US is not winning in Afghanistan is but the most obvious recognition of this jarring new reality. What was the president telling Americans? As Milton Bearden, a former top CIA analyst on Afghanistan, recently put it, "If you aren't winning, you're losing."

http://www.csmonitor.com/2009/0408/p09s01-coop.html

The global landscape is littered with evidence that America's superpower status is fraying.

Nuclear-armed Pakistan – arguably the world's most dangerous country – is falling apart, despite billions in US aid and support.

In Iraq, despite efforts in Washington to make "the surge" appear to be a stunning US victory, analysts most familiar with the region have already declared Iran the strategic winner of the Bush administration's war against Saddam Hussein. The Iraq war has greatly empowered Iran, nurturing a new regional superpower that now seems likely to be the major architect of the new Iraq.

Sadly, what was forgotten amid the Bush-era hubris was that America's edge always has been as much moral and economic as military. Officially sanctioned torture, the Abu Ghraib scandal, US invasion of a sovereign country without provocation, along with foolishly allowing radical Islamists to successfully portray the US as the enemy of the world's 1.5 billion Muslims, shattered whatever moral edge America enjoyed before 2003.

Washington's uncritical support of Israel at the expense of Palestinians is perceived by much of the world as egregiously hypocritical. Consequently, America's collision course with Islam may be irreversible. Muslims believe Islam never lost the moral high ground – and they won't readily relinquish it for Western secularism.

Even politically conservative journals such as The National Interest recognize something has gone wrong. In a recent issue, Robert Pape opined: "The self-inflicted wounds of the Iraq war, growing government debt, increasingly negative current-accounts balance, and other economic weaknesses have cost the United States real power in today's world.… If present trends continue, we will look back at the Bush administration's years as the death knell of American hegemony."

Now, as a massive retrenchment of the US economy is under way, it is time to shake the mental shackles of the superpower legacy and embrace a more peripheralist agenda. That need not mean isolationism or retreat. It would still require maintaining substantial armed forces with a qualitative edge, but using them only when there is an affordable and persuasive American national interest. Iraq never fitted that description.

The price tag for the wars in Iraq and Afghanistan wars is in the trillions. Sun Tzu, the ancient Chinese military commentator, prophetically observed 2,500 years ago, "When the army marches abroad, the treasury will be emptied at home."

It remains a lingering American myth that US troops and warships can go anywhere and pay any price. Not so. The modern Chinese have discovered a better way. The Washington Post reports that the Chinese went on a shopping spree recently, taking advantage of fire-sale prices to lock up global supplies of oil, minerals, and other strategic resources for their economy. That amounts to a major economic conquest – without using a single soldier. By contrast, American efforts to secure oil have looked clumsy.

Iran also is achieving serious regional hegemony, without armadas, using proxy guerrilla armies to dominate its near neighbors. Its rebuffs to President Obama's recent outreach speaks to Tehran's growing confidence in its ability to manipulate its home-field advantage – stage-managing events from Afghanistan to Lebanon, all the while thumbing its nose at both the American and Israeli "superpowers."

Last August's Russian invasion of Georgia was a painful reminder that Russia has what its leadership calls "privileged interests" on its periphery. Yesterday's superpowers have been replaced by regional hegemons, as the globe is being carved up into more-defensible spheres of interest.

Americans need to acknowledge that war, like politics, is the art of the possible, and both have their limits. The Bush administration was unable to deliver its promised democratic remake of the Muslim Middle East.

Thus, another unpleasant truth: The Western democratic model has no appeal to much of the Arab world. Nor is democracy an attractive model for huge swaths of the rest of the world, such as Russia and China.

It's time to lower our geopolitical sights and end America's unrealistic crusade. We shouldn't expect "them" to want to be like "us."

It took years for the US to recover its moral authority after Vietnam. It will be an even harder comeback this time.

Walter Rodgers is a former senior international correspondent for CNN.

Politics of the bailout ~ Deepcaster

Simon Johnson, former Chief Economist at the IMF and current professor at MIT’s Sloan School of Management identifies The Root Cause:

“The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government…recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.” (emphasis added)

There is a Strategy which enables Investors to Prevail in their struggles for Protection and Profit, notwithstanding the endless stream of Outrages.

But in order to fully appreciate that Strategy it is important to understand key characteristics common to many of the Outrages. So lets consider certain recent ones.

Frank Rich in the New York Times writes:

“Lawrence Summers, the president’s chief economic adviser, made $5.2 million in 2008 from a hedge fund, D. E. Shaw, for a one-day-a-week job. He also earned $2.7 million in speaking fees from the likes of Citigroup and Goldman Sachs.

Those institutions are not merely the beneficiaries of taxpayers’ bailouts since the crash. They also benefited during the boom from government favors: the Wall Street deregulation that both Summers and Robert Rubin, his mentor and predecessor as Treasury secretary, championed in the Clinton administration.”
[http://www.nytimes.com2009412opinion12rich.html?_r=2&th&emc=th]

And as Chris Martenson in his superb article “America is Being Looted” quotes and notes:

“Rahm Emanuel, the current White House Chief of Staff, comes similarly burdened:

…the banking industry recently paid Rahm Emanuel $16 million for about two years of work. That investment was recently paid back when, as President Obama's chief of staff, Emanuel led the January campaign to release another $350 billion in bank bailout funds.”
[http://http:/www.sfgates.com/cgi-bin/article.cgi?f=/c/a/2009/04/09/ED2F1700DD.DTL]

But it goes deeper than that. Rahm Emanuel also took what I consider to be a lot of money serving on the board of Freddie Mac, a company that is certain to cost taxpayers hundreds of billions of dollars.

Before its portfolio of bad loans helped trigger the current housing crisis, mortgage giant Freddie Mac was the focus of a major accounting scandal that led to a management shake-up, huge fines and scalding condemnation of passive directors by a top federal regulator.

One of those allegedly asleep-at-the-switch board members was Chicago's Rahm Emanuel—now chief of staff to President Barack Obama—who made at least $320,000 for a 14-month stint at Freddie Mac that required little effort.”
[http://www.chicagotribune.com/news/politics/Obama/chi-rahm-emanuel-profit-26-mar26,0,5682373.story]

[http://www.chrismartenson.com/blog/america-being-looted/16444]
Chris Martenson, April 14, 2009

The fundamental cause of the ongoing Financial and Economic crises is the policies of the private for-profit U.S. Federal Reserve

http://www.financialsense.com/fsu/editorials/deepcaster/2009/0417.html

Can Obama suceed? It's a question of generational dynamics in a waiting world

Our own Awakening (about 1965-84) was very liberal socially, but politically it marked the shift from the Democratic majority created by FDR to the new Republican one created by Nixon and solidified by Reagan. There has been no serious effort to reform the economy on behalf of the less well off since the 1960s in the United States. And as a result, President Obama, whose instincts seem to be very good, is relying upon an economic team led by Tim Geithner and Larry Summers, each of whom is deeply implicated in the economic changes of the last fifteen years or so, and neither of whom has shown much interest in fundamental reform. I am deeply troubled that the maverick economists that have kept older traditions alive--the Paul Krugmans, Joseph Stiglitzes, and James K. Galbraiths--unanimously feel that the Administration's rescue plans have not found the right path.

No President can move faster than history is ready for, and it may be, sadly, that further disasters will be necessary to discredit what has become the conventional wisdom. Both FDR and Lincoln frequently disappointed their more radical supporters in their first years in office. But sadly, the diseases of the last thity years have infected nearly our entire leadership class. The public is ready for a new one. The problem is to provide it.

History unfolding

"I think that this is a truly fascinating aspect of the world's geopolitical situation, but I disagree with Kissinger that this is the first time in history that it's happened. As I described last year in "The gathering storm in the Caucasus," it's precisely what happened in the leadup to World War I. During "La Belle Époque," the period before 1914, the world was at peace, international trade was at a peak, and life was great - at least for the élite.

It was a time in history where "every major power had simultaneously an interest in maintaining more or less the status quo," to use Henry Kissinger's words.

There were two major factors destroying the status quo:

The "interest in maintaining the status quo" may have been held by the leaders of every major power, but it was not the desire of the younger generations in these countries. World War I was triggered by a Serb high school student who, along with his friends, decided to assassinate Austrian Archduke Franz Ferdinand.


The war might have remained restricted to Eastern Europe, but it spread to other countries because of a mass of interlocking treaties that forced one country after another into the war, including Germany's invasion of France.


Both of these factors prevail today. Young, disaffected Islamist terrorists flew a plane into the World Trade Center, blew up London's subways, and are responsible for suicide bombings in countries around the world. Kids in Mexican drug cartels are killing and kidnapping thousands of people with reckless abandon. Young people in Taiwan increasingly want independence from China, but are held back by the threat of war from Beijing. Young Palestinians are ready to heed Iran's leadership to push Israel into the sea.

Today there are huge numbers of interlocking treaties. America alone has signed a large number of mutual defense treaties with other countries. These include agreements with Japan, South Korea, Israel, Taiwan, the ANZUS agreement with Australia and New Zealand, and the NATO agreement with all of Europe.

The worldwide fear of disturbing the status quo essentially means that nothing can get done, because anything non-trivial might disturb the status quo and trigger a war.

A waiting world

That's why this is a world waiting for something to happen. People anxiously grasp onto any straw of hope, wanting things to return to the Unraveling era of the 1990s, but not daring to disturb the equilibrium anywhere.

If Henry Kissinger understood generational theory, he would know that the current status quo cannot be maintained, and that sooner or later some crisis will irretrievably end the status quo.

That almost happened several times in the last year, with crises at Bear Stearns, Royal Bank of Scotland, Lehman Brothers, AIG, and others. In each case, officials rushed to restore the status quo. But the crises have been getting worse, and one of these times a crisis will be too large to patch up."

http://www.generationaldynamics.com/cgi-bin/D.PL?d=ww2010.weblog&i=e090405#e090405

What's wrong with this paradigm?

An Argentine opinion on the Global Financial Crisis, describing the whole Global Financial System as one vast Ponzi Scheme. Like a pyramid, it has four sides and is a predictable model. The four sides are: (1) Artificially control the supply of public State-issued Currency, (2) Artificially impose Banking Money as the primary source of funding in the economy, (3) Promote doing everything by Debt and (4) Erect complex channels that allow privatizing profits when the Model is in expansion mode and socialize losses when the model goes into contraction mode.

Its hard to escape the politics in economics. The premise that finance works when it supports the economy and not when it is central to it seems inescapable.

Europe breaking with US over stimulus

Clearly the US wants to push the nuclear MAD stimulus lets destroy the worlds currencies together and do the pigeon drop on our creditors and leave them with old newspaper instead of banknotes and are annoyed even the euro socialists are not that keen.

The Anglo world clearly want to discredit the Euro and do deals with Asia hence all the emphasis on the Eastern Europe debt problem ahead of the G20, have they cut a deal with the Chinese at the expense of europe vis a vis IMF representation.

Why else are Brown, Rudd and Obama so keen to praise each others efforts....

Something's happening here, what it is ain't exactly clear......

"European Union President Blasts U.S. Economic Stimulus
By STEPHEN CASTLE and DAN BILEFSKY

BRUSSELS — Transatlantic tension over the handling of the global economic crisis intensified on Wednesday when the prime minister of the Czech Republic, which holds the European Union presidency, described the U. S. stimulus measures as the “way to hell.”

Addressing the European Parliament in Strasbourg, France, Prime Minister Mirek Topolanek argued that the Obama administration’s fiscal package and financial bailout “will undermine the stability of the global financial market.”

Mr. Topolanek’s comments, only a day after he offered his government’s resignation following a no confidence vote, took European officials by surprise.

The rotating E.U. presidency lasts for six months and the country that holds it is supposed to speak on behalf of the entire 27-nation bloc.

The statement came just a week before al meeting of the Group of 20 leaders of the world’s biggest economies in London which aims to forge an international consensus on the economic crisis. His comments also underlined potential ideological strains between Washington and Europe as President Barack Obama prepares to travel to Prague in less than two weeks for a summit intended to bolster transatlantic relations and show that the United States and Europe are united over economic policy.

Only five days ago, E.U. leaders had apparently buried their differences and agree on a common policy ahead of the London meeting. At last Friday’s E.U. summit, they pledged an additional 75 billion euros to finance loans by the International Monetary Fund and to double a credit line for its struggling eastern economies.

European countries, including Germany, have resisted calls to increase the scale of their fiscal stimulus arguing, that the G-20 should concentrate on tightening financial regulation.

One E.U. official, speaking on condition of anonymity because of the sensitivity of the issue, said the comments reflected that, unlike other East European countries such as Hungary, the Czech economy has proved relatively resilient.

“He is sitting in the Czech Republic,” the official said “where growth is holding up relatively well and a fiscal stimulus makes no sense.”

“He has never been in favor of a big fiscal stimulus — though he did not argue against it at the E.U. summit.”

Analysts in Prague said that Mr. Topolanek was eager to show Europe that he was still politically relevant despite the collapse of the government. They noted that his railing against interventionism was consistent with the liberal economic ideology of his center-right Civic Democratic party.

In recent months he has sparred with opposition Social Democrats over their calls for increased spending during the economic downturn.

While Mr. Obama in recent weeks has pleaded with European partners to stimulate the economy, countries including the Czech Republic that endured decades of Communism are deeply suspicion of state intervention.

The Czech’s comments were likely to come as an embarrassment Gordon Brown, the British prime minister, who was visiting the United States on Wednesday as part of the preparations for hosting the G-20 meeting.

Martin Schulz, leader of the socialist group in the European Parliament, said that the description of the Obama recovery plans as “the road to hell” was “not the level on which the E.U. ought to be operating with the United States.”

“You have not understood what the task of the E.U. presidency is,” Mr. Schulz told the Czech prime minister.

Stephen Castle reported from Brussels, and Dan Bilefsky reported from Prague."

I'm not sure whats cooking....but somethings up..

The Big Takeover The global economic crisis isn't about money - it's about power. Rolling Stone

It's over — we're officially, royally fucked. no empire can survive being rendered a permanent laughingstock, which is what happened as of a few weeks ago, when the buffoons who have been running things in this country finally went one step too far. It happened when Treasury Secretary Timothy Geithner was forced to admit that he was once again going to have to stuff billions of taxpayer dollars into a dying insurance giant called AIG, itself a profound symbol of our national decline — a corporation that got rich insuring the concrete and steel of American industry in the country's heyday, only to destroy itself chasing phantom fortunes at the Wall Street card tables, like a dissolute nobleman gambling away the family estate in the waning days of the British Empire.

The latest bailout came as AIG admitted to having just posted the largest quarterly loss in American corporate history — some $61.7 billion. In the final three months of last year, the company lost more than $27 million every hour. That's $465,000 a minute, a yearly income for a median American household every six seconds, roughly $7,750 a second. And all this happened at the end of eight straight years that America devoted to frantically chasing the shadow of a terrorist threat to no avail, eight years spent stopping every citizen at every airport to search every purse, bag, crotch and briefcase for juice boxes and explosive tubes of toothpaste. Yet in the end, our government had no mechanism for searching the balance sheets of companies that held life-or-death power over our society and was unable to spot holes in the national economy the size of Libya (whose entire GDP last year was smaller than AIG's 2008 losses).

So it's time to admit it: We're fools, protagonists in a kind of gruesome comedy about the marriage of greed and stupidity. And the worst part about it is that we're still in denial — we still think this is some kind of unfortunate accident, not something that was created by the group of psychopaths on Wall Street whom we allowed to gang-rape the American Dream. When Geithner announced the new $30 billion bailout, the party line was that poor AIG was just a victim of a lot of shitty luck — bad year for business, you know, what with the financial crisis and all. Edward Liddy, the company's CEO, actually compared it to catching a cold: "The marketplace is a pretty crummy place to be right now," he said. "When the world catches pneumonia, we get it too." In a pathetic attempt at name-dropping, he even whined that AIG was being "consumed by the same issues that are driving house prices down and 401K statements down and Warren Buffet's investment portfolio down."

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Liddy made AIG sound like an orphan begging in a soup line, hungry and sick from being left out in someone else's financial weather. He conveniently forgot to mention that AIG had spent more than a decade systematically scheming to evade U.S. and international regulators, or that one of the causes of its "pneumonia" was making colossal, world-sinking $500 billion bets with money it didn't have, in a toxic and completely unregulated derivatives market.

Nor did anyone mention that when AIG finally got up from its seat at the Wall Street casino, broke and busted in the afterdawn light, it owed money all over town — and that a huge chunk of your taxpayer dollars in this particular bailout scam will be going to pay off the other high rollers at its table. Or that this was a casino unique among all casinos, one where middle-class taxpayers cover the bets of billionaires.

People are pissed off about this financial crisis, and about this bailout, but they're not pissed off enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.

The crisis was the coup de grâce: Given virtually free rein over the economy, these same insiders first wrecked the financial world, then cunningly granted themselves nearly unlimited emergency powers to clean up their own mess. And so the gambling-addict leaders of companies like AIG end up not penniless and in jail, but with an Alien-style death grip on the Treasury and the Federal Reserve — "our partners in the government," as Liddy put it with a shockingly casual matter-of-factness after the most recent bailout.

The mistake most people make in looking at the financial crisis is thinking of it in terms of money, a habit that might lead you to look at the unfolding mess as a huge bonus-killing downer for the Wall Street class. But if you look at it in purely Machiavellian terms, what you see is a colossal power grab that threatens to turn the federal government into a kind of giant Enron — a huge, impenetrable black box filled with self-dealing insiders whose scheme is the securing of individual profits at the expense of an ocean of unwitting involuntary shareholders, previously known as taxpayers.

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The (Israeli) Lobby Falters

Kontent News decries antisemetism. Kontent News also beleives that branding all material critical of Israeli actions in the west Bank and Gaza and its policy towards Iran as antisemetic is a folly. Kontent News supports the loyal opposition of the peace movement.

John Mearsheimer

Many people in Washington were surprised when the Obama administration tapped Charles Freeman to chair the National Intelligence Council, the body that oversees the production of National Intelligence Estimates: Freeman had a distinguished 30-year career as a diplomat and Defense Department official, but he has publicly criticised Israeli policy and America’s special relationship with Israel, saying, for example, in a speech in 2005, that ‘as long as the United States continues unconditionally to provide the subsidies and political protection that make the Israeli occupation and the high-handed and self-defeating policies it engenders possible, there is little, if any, reason to hope that anything resembling the former peace process can be resurrected.’ Words like these are rarely spoken in public in Washington, and anyone who does use them is almost certain not to get a high-level government position. But Admiral Dennis Blair, the new director of national intelligence, greatly admires Freeman: just the sort of person, he thought, to revitalise the intelligence community, which had been very politicised in the Bush years.

Predictably alarmed, the Israel lobby launched a smear campaign against Freeman, hoping that he would either quit or be fired by Obama. The opening salvo came in a blog posting by Steven Rosen, a former official of Aipac, the American Israel Public Affairs Committee, now under indictment for passing secrets to Israel. Freeman’s views of the Middle East, he said, ‘are what you would expect in the Saudi Foreign Ministry, with which he maintains an extremely close relationship’. Prominent pro-Israel journalists such as Jonathan Chait and Martin Peretz of the New Republic, and Jeffrey Goldberg of the Atlantic, quickly joined the fray and Freeman was hammered in publications that consistently defend Israel, such as the National Review, the Wall Street Journal and the Weekly Standard.

The real heat, however, came from Congress, where Aipac (which describes itself as ‘America’s Pro-Israel Lobby’) wields enormous power. All the Republican members of the Senate Intelligence Committee came out against Freeman, as did key Senate Democrats such as Joseph Lieberman and Charles Schumer. ‘I repeatedly urged the White House to reject him,’ Schumer said, ‘and I am glad they did the right thing.’ It was the same story in the House, where the charge was led by Republican Mark Kirk and Democrat Steve Israel, who pushed Blair to initiate a formal investigation of Freeman’s finances. In the end, the Speaker of the House, Nancy Pelosi, declared the Freeman appointment ‘beyond the pale’. Freeman might have survived this onslaught had the White House stood by him. But Barack Obama’s pandering to the Israel lobby during the campaign and his silence during the Gaza War show that this is one opponent he is not willing to challenge. True to form, he remained silent and Freeman had little choice but to withdraw.

The lobby has since gone to great lengths to deny its role in Freeman’s resignation. The Aipac spokesman Josh Block said his organisation ‘took no position on this matter and did not lobby the Hill on it’. The Washington Post, whose editorial page is run by Fred Hiatt, a man staunchly committed to the special relationship, ran an editorial which claimed that blaming the lobby for Freeman’s resignation was something dreamed up by ‘Mr Freeman and like-minded conspiracy theorists’.

In fact, there is abundant evidence that Aipac and other hardline supporters of Israel were deeply involved in the campaign. Block admitted that he had spoken to reporters and bloggers about Freeman and provided them with information, always on the understanding that his comments would not be attributed to him or to Aipac. Jonathan Chait, who denied that Israel was at the root of the controversy before Freeman was toppled, wrote afterwards: ‘Of course I recognise that the Israel lobby is powerful and was a key element in the pushback against Freeman, and that it is not always a force for good.’ Daniel Pipes, who runs the Middle East Forum, where Steven Rosen now works, quickly sent out an email newsletter boasting about Rosen’s role in bringing Freeman down.

On 12 March, the day the Washington Post ran its editorial railing against anyone who suggested that the Israel lobby had helped topple Freeman, the paper also published a front-page story describing the central role that the lobby had played in the affair. There was also a comment piece by the veteran journalist David Broder, which opened with the words: ‘The Obama administration has just suffered an embarrassing defeat at the hands of the lobbyists the president vowed to keep in their place.’

Freeman’s critics maintain that his views on Israel were not his only problem. He is said to have especially close – maybe even improper – ties to Saudi Arabia, where he previously served as American ambassador. The charge hasn’t stuck, however, because there is no evidence for it. Israel’s supporters also said that he had made insensitive remarks about what happened to the Chinese protesters at Tiananmen Square, but that charge, which his defenders contest, only came up because Freeman’s pro-Israel critics were looking for any argument they could muster to damage his reputation.

Why does the lobby care so much about one appointment to an important, but not top leadership position? Here’s one reason: Freeman would have been responsible for the production of National Intelligence Estimates. Israel and its American supporters were outraged when the National Intelligence Council concluded in November 2007 that Iran was not building nuclear weapons, and they have worked assiduously to undermine that report ever since. The lobby wants to make sure that the next estimate of Iran’s nuclear capabilities reaches the opposite conclusion, and that would have been much less likely to happen with Freeman in charge. Better to have someone vetted by Aipac running the show.

An even more important reason for the lobby to drive Freeman out of his job is the weakness of the case for America’s present policy towards Israel, which makes it imperative to silence or marginalise anyone who criticises the special relationship. If Freeman hadn’t been punished, others would see that one could talk critically about Israel and still have a successful career in Washington. And once you get an open and free-wheeling discussion about Israel, the special relationship will be in serious trouble.

One of the most remarkable aspects of the Freeman affair was that the mainstream media paid it little attention – the New York Times, for example, did not run a single story dealing with Freeman until the day after he stepped down – while a fierce battle over the appointment took place in the blogosphere. Freeman’s opponents used the internet to their advantage; that is where Rosen launched the campaign. But something happened there that would never have happened in the mainstream media: the lobby faced real opposition. Indeed, a vigorous, well-informed and highly regarded array of bloggers defended Freeman at every turn and would probably have carried the day had Congress not tipped the scales against them. In short, the internet enabled a serious debate in the United States about an issue involving Israel. The lobby has never had much trouble keeping the New York Times and the Washington Post in line, but it has few ways to silence critics on the internet.

When pro-Israel forces clashed with a major political figure in the past, that person usually backed off. Jimmy Carter, who was smeared by the lobby after he published Palestine: Peace Not Apartheid, was the first prominent American to stand his ground and fight back. The lobby has been unable to silence him, and it is not for lack of trying. Freeman is following in Carter’s footsteps, but with sharper elbows. After stepping down, he issued a blistering denunciation of ‘unscrupulous people with a passionate attachment to the views of a political faction in a foreign country’ whose aim is ‘to prevent any view other than its own from being aired’. ‘There is,’ he continued, ‘a special irony in having been accused of improper regard for the opinions of foreign governments and societies by a group so clearly intent on enforcing adherence to the policies of a foreign government.’

Freeman’s remarkable statement has shot all around the world and been read by countless individuals. This isn’t good for the lobby, which would have preferred to kill Freeman’s appointment without leaving any fingerprints. But Freeman will continue to speak out about Israel and the lobby, and maybe some of his natural allies inside the Beltway will eventually join him. Slowly but steadily, space is being opened up in the United States to talk honestly about Israel.

John Mearsheimer is the R. Wendell Harrison Distinguished Service Professor of Political Science at the University of Chicago.

James Galbraith: No Return to Normal

James Galbraith has written a very good analysis of the crisis and why the policies being followed in the USA (and, by implication, here) will not work.

I reproduce some extracts here to give you a flavour of the article, but I recommend a read of the full paper in the Washington Monthly–thanks to blog member Warren Raftshol for bringing it to my attention. The emphasis added to some points is mine.
No Return to Normal. Why the economic crisis, and its solution, are bigger than you think.

The deepest belief of the modern economist is that the economy is a self-stabilizing system. This means that, even if nothing is done, normal rates of employment and production will someday return. Practically all modern economists believe this, often without thinking much about it. (Federal Reserve Chairman Ben Bernanke said it reflexively in a major speech in London in January: “The global economy will recover.” He did not say how he knew.) The difference between conservatives and liberals is over whether policy can usefully speed things up. Conservatives say no, liberals say yes, and on this point Obama’s economists lean left. Hence the priority they gave, in their first days, to the stimulus package.

But did they get the scale right? Was the plan big enough? Policies are based on models; in a slump, plans for spending depend on a forecast of how deep and long the slump would otherwise be. The program will only be correctly sized if the forecast is accurate. And the forecast depends on the underlying belief. If recovery is not built into the genes of the system, then the forecast will be too optimistic, and the stimulus based on it will be too small…

Why did the CBO reach this conclusion? On depth, CBO’s model is based on the postwar experience, and such models cannot predict outcomes more serious than anything already seen. If we are facing a downturn worse than 1982, our computers won’t tell us; we will be surprised. And if the slump is destined to drag on, the computers won’t tell us that either. Baked into the CBO model we find a “natural rate of unemployment” of 4.8 percent; the model moves the economy back toward that value no matter what. In the real world, however, there is no reason to believe this will happen. Some alternative forecasts, freed of the mystical return to “normal,” now project a GDP gap twice as large as the CBO model predicts, and with no near-term recovery at all…

Three further considerations limited the plan. There was, to begin with, the desire for political consensus; President Obama chose to start his administration with a bill that might win bipartisan support and pass in Congress by wide margins. (He was, of course, spurned by the Republicans.) Second, the new team also sought consensus of another type. Christina Romer polled a bipartisan group of professional economists, and Larry Summers told Meet the Press that the final package reflected a “balance” of their views. This procedure guarantees a result near the middle of the professional mind-set. The method would be useful if the errors of economists were unsystematic. But they are not. Economists are a cautious group, and in any extreme situation the midpoint of professional opinion is bound to be wrong.

The most likely scenario, should the Geithner plan go through, is a combination of looting, fraud, and a renewed speculation in volatile commodity markets such as oil. Ultimately the losses fall on the public anyway, since deposits are largely insured. There is no chance that the banks will simply resume normal long-term lending. To whom would they lend? For what? Against what collateral? And if banks are recapitalized without changing their management, why should we expect them to change the behavior that caused the insolvency in the first place?…

In other words, Roosevelt employed Americans on a vast scale, bringing the unemployment rates down to levels that were tolerable, even before the war—from 25 percent in 1933 to below 10 percent in 1936, if you count those employed by the government as employed, which they surely were. In 1937, Roosevelt tried to balance the budget, the economy relapsed again, and in 1938 the New Deal was relaunched. This again brought unemployment down to about 10 percent, still before the war…

The New Deal rebuilt America physically, providing a foundation (the TVA’s power plants, for example) from which the mobilization of World War II could be launched. But it also saved the country politically and morally, providing jobs, hope, and confidence that in the end democracy was worth preserving. There were many, in the 1930s, who did not think so.

What did not recover, under Roosevelt, was the private banking system. Borrowing and lending—mortgages and home construction—contributed far less to the growth of output in the 1930s and ’40s than they had in the 1920s or would come to do after the war. If they had savings at all, people stayed in Treasuries, and despite huge deficits interest rates for federal debt remained near zero. The liquidity trap wasn’t overcome until the war ended.

It was the war, and only the war, that restored (or, more accurately, created for the first time) the financial wealth of the American middle class. During the 1930s public spending was large, but the incomes earned were spent. And while that spending increased consumption, it did not jumpstart a cycle of investment and growth, because the idle factories left over from the 1920s were quite sufficient to meet the demand for new output. Only after 1940 did total demand outstrip the economy’s capacity to produce civilian private goods—in part because private incomes soared, in part because the government ordered the production of some products, like cars, to halt…

Third, in the debt deflation, liquidity trap, and global crisis we are in, there is no risk of even a massive program generating inflation or higher long-term interest rates. That much is obvious from current financial conditions: interest rates on long-maturity Treasury bonds are amazingly low. Those rates also tell you that the markets are not worried about financing Social Security or Medicare. They are more worried, as I am, that the larger economic outlook will remain very bleak for a long time…

A paradox of the long view is that the time to embrace it is right now. We need to start down that path before disastrous policy errors, including fatal banker bailouts and cuts in Social Security and Medicare, are put into effect. It is therefore especially important that thought and learning move quickly. Does the Geithner team, forged and trained in normal times, have the range and the flexibility required? If not, everything finally will depend, as it did with Roosevelt, on the imagination and character of President Obama.

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Turnbull's a pouncy high school debater and XSTRATA are hardarses

~ They deserve the karma of being angry at each other.

XSTRATA executives are angry over the federal Opposition's decision to reveal that the global mining giant has threatened to fire 1000 coal miners if emissions trading is implemented.

Two sources in the coal industry have told Fairfax Media that Xstrata executives did not give permission for the data to be released publicly, saying it is market-sensitive information given in confidence.

Neither Xstrata nor Opposition Leader Malcolm Turnbull's office would comment directly on the issue yesterday.

In Monday's question time in Federal Parliament, Mr Turnbull asked Prime Minister Kevin Rudd about a presentation Xstrata made that claimed it would fire 1000 people, close four mines and stop $7 billion in investment creating 4000 jobs if the Government's trading scheme was implemented.

Xstrata has found a backer in Premier Anna Bligh, who yesterday expressed support for a coal industry campaign to win further concessions under the Government's trading scheme.

But a former industry lobbyist and Liberal Party insider has dismissed Xstrata's claims and said it appeared the company was preparing to blame the Government for job losses caused by a recent huge drop in demand and the plummeting coal price.

Guy Pearse, a consultant who left the Howard government to write an expose of its environment policy, said the proposed emissions trading scheme would have barely any impact on Xstrata.

"Eighty per cent of our coal is sent offshore and the emissions count offshore, not in Australia, so they have almost no carbon liability to worry about," Dr Pearse said.

"It probably helps Xstrata to be able to pin job losses on the Government rather than say they have misread the economic environment and are having to mothball some projects that are no longer viable."

Xstrata's coal operations do not qualify for free permits under the Government's proposal. But Dr Pearse said the only emissions Xstrata had to worry about were methane released in the mining process.

"In the scheme of things, it would be tiny," he said.

Rage at AIG grows ~ washington Post

A tidal wave of public outrage over bonus payments swamped American International Group yesterday. Hired guards stood watch outside the suburban Connecticut offices of AIG Financial Products, the division whose exotic derivatives brought the insurance giant to the brink of collapse last year. Inside, death threats and angry letters flooded e-mail inboxes. Irate callers lit up the phone lines. Senior managers submitted their resignations. Some employees didn't show up at all.

"It's a mob effect," one senior executive said. "It's putting people's lives in danger."

Politicians and the public spent yesterday demanding that AIG rescind payouts that they said rewarded recklessness and greed at a company being bailed out with $170 billion in taxpayer funds. But company officials contend that the uproar is scaring away the very employees who understand AIG Financial Products' complex trades and who are trying to dismantle the division before it further endangers the world's economy.

"It's going to blow up," said a senior Financial Products manager, who spoke on condition of anonymity because he was not authorized to speak for the company. "I have a horrible, horrible, horrible feeling that this is going to end badly."

President Obama yesterday vowed to "pursue every legal avenue to block these bonuses." But that pledge might have come too late. About $165 million in retention payments started to go out Friday to employees at Financial Products, after numerous discussions with the Treasury Department and the Federal Reserve.

Attorneys working for the Fed had been examining the matter for months and determined that the retention payments couldn't be touched because AIG would face costly lawsuits and be subject to penalties from states and foreign governments. Administration officials said over the weekend that they agreed with that assessment.

AIG disclosed its retention-payment program more than a year ago, and the amount of the bonuses -- more than $400 million for Financial Products alone -- had been widely reported. But as the payments were coming due in recent days, the White House began to express its indignation.

Pressure on the 370-person Financial Products unit, based primarily in Connecticut and London, grew even more intense yesterday when New York Attorney General Andrew M. Cuomo threatened to issue subpoenas if the company failed to provide details about recipients of the retention payments.

The payments represent only the most contentious of a larger group of bonuses being paid throughout AIG. The company's top seven officials, including chief executive Edward M. Liddy, agreed in November to forgo bonuses through this year.

After a Wednesday call between Liddy and Treasury Secretary Timothy F. Geithner, AIG agreed to restructure payments for the next 43 highest-ranking officers at the company, who are to receive half of their bonuses -- which total $9.6 million -- immediately, one-quarter July 15 and the rest Sept. 15. The last two payments would depend on whether the company makes progress in restructuring its business and paying back taxpayers. In addition, the company is set to pay another $600 million in retention awards to about 4,700 people throughout its global insurance units.

But each dollar remains in question after the president's reprimand yesterday and the deluge of rage from legislators and the American public. Government leaders already say they plan to recoup some of the bonus and retention pay while restructuring the company. In addition, administration officials said that the Treasury is planning to try to recover some of the bonus money by adding provisions to the additional $30 billion it gave AIG access to earlier this month.

The payment plan had been no secret.

Beginning in the first quarter of 2008, AIG disclosed the plan to offer retention awards at Financial Products. The unit had already begun to hemorrhage money, a problem that would later grow exponentially. The unit's executives, fearing they might lose valuable employees in the tumultuous months to come, successfully negotiated more than $400 million for their workers, to be paid this month and again next year.

At the Federal Reserve Bank of New York, which has directly overseen AIG since its federal takeover in September, officials have studied the possibility of rescinding or delaying the bonuses. They even brought in outside lawyers for advice. The conclusion: If the bonuses weren't paid, the AIG staffers would be able to sue the company and probably would win, not just what they were owed but also punitive damages that would make the ultimate cost perhaps two to three times as high as the bonuses themselves.

Moreover, Fed officials also hope to keep current employees with the company. The senior executives whose decisions caused the company's collapse are long gone. Most of those left behind are trying to unwind complicated derivative contracts. Completing that process correctly is essential to preserving as much value as possible for taxpayers, officials at both the government and AIG have argued. If it is mishandled, it could expose taxpayers to billions of dollars in additional losses.

Law professors agreed with the Fed's assessment but said AIG employees could still agree to reduce their own bonuses.

And the outrage expressed by the president and lawmakers was designed to put pressure on these officers to do just that, the legal experts said.

Jonathan Macey, a professor at Yale Law School, said it was unlikely that any AIG employees would end up suing the company for changing compensation contracts, mainly because their names would be revealed publicly in a lawsuit and they would then be excoriated.

Macey added that the government is caught in a difficult position, squeezed between public outrage over the bonuses and the need to keep AIG Financial Products going so the company can restructure and the government can recoup some of its money.

"What's good for AIG is definitely not good for the country," Macey said. "But now that the government is invested, it may have to do what's good for AIG."

Liddy is scheduled to appear tomorrow in front of a House financial services subcommittee.

http://www.washingtonpost.com/wp-dyn/content/article/2009/03/16/AR2009031602961_pf.html

Right-Wing 'Tea Party' Movement Was Planned Months Ago by GOP Billionaires

Populist revolt against the U.S. government is all the rage in the Republican Party, these days. As they tell the story, the public is so outraged by the recovery and reinvestment efforts of the Obama administration that Americans everywhere are turning out to overthrow the tyrannical king of the federal government by re-enacting the Boston Tea Party.
Funny thing, though: it turns out this whole "populist" movement was a planned PR stunt funded by big-money right-wing backers of the GOP who specialize in faking grassroots movements to drum up opposition to Barack Obama.

Everything about this so called "Tea Party" movement was pre-planned--from the supposedly "spontaneous rant" of CNBC stock market reporter, Rick Santelli, to the presumed ground-level organizing of protests all over the country. Fake, fake, fake--like a product launch staged covertly to look like a spontaneous trend.

Playboy bloggers Mark Ames and Yasha Levine pulled together all the pieces of this puzzle in an incredible expose (Exposing The Rightwing PR Machine):


What hasn’t been reported until now is evidence linking Santelli’s “tea party” rant with some very familiar names in the Republican rightwing machine, from PR operatives who specialize in imitation-grassroots PR campaigns (called “astroturfing”) to bigwig politicians and notorious billionaire funders. As veteran Russia reporters, both of us spent years watching the Kremlin use fake grassroots movements to influence and control the political landscape. To us, the uncanny speed and direction the movement took and the players involved in promoting it had a strangely forced quality to it. If it seemed scripted, that's because it was.

What we discovered is that Santelli’s “rant” was not at all spontaneous as his alleged fans claim, but rather it was a carefully-planned trigger for the anti-Obama campaign. In PR terms, his February 19th call for a “Chicago Tea Party” was the launch event of a carefully organized and sophisticated PR campaign, one in which Santelli served as a frontman, using the CNBC airwaves for publicity, for the some of the craziest and sleaziest rightwing oligarch clans this country has ever produced. Namely, the Koch family, the multibilllionaire owners of the largest private corporation in America, and funders of scores of rightwing thinktanks and advocacy groups, from the Cato Institute and Reason Magazine to FreedomWorks. The scion of the Koch family, Fred Koch, was a co-founder of the notorious extremist-rightwing John Birch Society.

It helps, in other words, to have field experience ferreting out Soviet propaganda to understand how Rick Santelli suddenly became the figurehead of a right-wing "grassroots" revolt against the United States government. It is worth reading the entire post.

The next time you hear that the Tea Party Republican revolt is "grassroots," "spontaneous," and "populist," just swap out those PR keywords for the more accurate terms: "planned," "scripted," "billionaire bigwigs."

All of this makes sense, of course. Santelli's philippic had all the hallmarks of a rehearsed piece of political theater--the pre-planned message launched of a viral marketing campaign.

Not that any of this comes as a surprise, but...my goodness.

Even though the curtain has been pulled back on this astroturf marketing by GOP megabucks elite backers, it is important to keep in mind what the larger stakes are and how to respond.

Scripted or not--this Tea Party revolt needs to be treated as politically real. People engaged in this agitation will not acknowledge ever that it is scripted, because these folks sincerely think they are engaged in some kind of revolution against their own government. They really want the country to evaluate whether or not an elected President and Congress are the same as a tyrannical king and whether a tax by fiat from the 18c is the same as a legislature approved public investment program from the 21c. Those folks just want to make noise--lots of noise--to throw the debate off its tracks.

The big story to defend and advance, in other words, is a president advancing real solutions aimed at helping millions of Americans in serious economic trouble. The agitation against it, whether it is scripted or not, is designed to stop those solutions from being discussed seriously, from unfolding, and then to weaken the president making them happen. That is a basic confrontation between pragmatic action and ideological politics--between investment in people and inaction in the name of dogma.

In the end, then, we need to make themselves aware of the massive resources the right is spending to block any effort by the American people to work together to repair the damage to our economy and restore our national confidence. And after we have made ourselves aware of how far the opposition is willing to go, we need to get back to work making sure the debate states focused on the real issue at hand here: millions and millions families who need help right now, and the greatness of a nation that stands together in times of need to overcome seemingly impossible obstacles.

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