Weekend Economists Ring in the New! New Year 2015

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Well, it's come to that point in time when we can say goodbye to all that: 2014 is OVER! And I am so Over 2014! It was a stinky year, a year of strife, disappointment, loss and fear. And not just for me--anybody in the lower 99% who stayed there is feeling the same. And of course, the 1% are never happy anyway, so they contribute to the grumble-load....




So, see if you can find anything good, promising, or funny, and post it here! This thread is active until the actual weekend.

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1. The Government is not a Household

NO, REALLY, THIS IS A GOOD THING!

http://heteconomist.com/a-household-is-not-the-government/

One of the most damaging misconceptions in the public policy debate is the likening of the government budget to that of a household. In a modern monetary system – i.e. one involving a flexible exchange-rate fiat currency – the analogy is inapplicable. Private households and firms are financially constrained. They must earn, borrow or otherwise obtain currency before they can spend it. The government, in contrast, is not financially constrained. It faces resource and political limits, but not revenue constraints other than those voluntarily self-imposed.

This point is well recognized by MMT economists. For instance, here is a good article on the topic by Randall Wray. However, the myth is a stubborn one, so I thought it might be worth reiterating the point. I was prompted to do so after reading a post on a private message forum. I think the post is interesting as an illustration of the understandable but faulty reasoning to which many succumb. On one level, it sounds so “reasonable”, yet it is false and utterly counterproductive. It is reasoning that causes many unwittingly to vote against their own interests.

We often hear the comparison of family budgets to the federal budget. When you consider the amount of private debt in this country, it seems clear to me that our government is doing on a large scale what its constituents have been doing on a smaller scale. Most of us seem to be head over heels in debt, and now the government is falling into the same trap.

There is no awareness in this comment that the dependency of the non-government sector on private debt was exacerbated by fiscal austerity in the lead up to the crisis. As a matter of accounting:

Government Deficit = Non-government Surplus

The non-government sector cannot be in surplus (earn more than it spends) unless the government is in deficit (spends more than it taxes). If the government reduces its budget deficit, non-government net saving is reduced by the same amount. For a more in-depth discussion of this accounting identity, see Budget Deficits and Net Private Saving.

When the government runs a budget surplus, the non-government sector is forced to run down its net savings dollar for dollar. In the article linked to above, Randall Wray points out that in the case of the US, every time the government has run a succession of budget surpluses, recession or depression has followed very soon after. It has happened seven times in the nation’s history.

Eventually, the fiscal austerity means that growth can only be maintained through the unsustainable accumulation of private debt. Private debt matters because private households and firms, as users of the currency, are financially constrained. Government, as the issuer of the currency, faces no financial constraint. It makes little sense to push the financially constrained non-government increasingly into debt just so the financially unconstrained government can avoid going into “debt”.

The poster continued:

My wife and I made the decision years ago to get out of the never-ending death spiral of personal debt and we’ve been quite happy with that decision ever since.

I share the feelings of the poster on this point. Others may feel differently. It is a position that is not dictated by MMT. But, to me, private debt spells dependency. However, the reason it does so is that, unlike the government, we are financially constrained. We can’t just create fiat money for ourselves out of thin air. If we could, I doubt we’d bother to pretend we were going into “debt” to pay for things.

I also think the attitude of the poster and his wife, to the extent that it involves a retreat from materialistic aspirations, is a sensible one in terms of environmental sustainability. I discussed my perspective on this issue in a previous post. Again, political choices such as this are not dictated by MMT, which is open on such matters, but personally I think that as a society we need to develop a deeper interest in environmentally sustainable activities. There is endless scope for intellectual, scientific, artistic, physical, sporting, social, spiritual, recreational, etc., activities that are more consistent with environmentally sustainable living than a narrow pursuit of material possessions. Our economic activities could be based more on such non-material pursuits.

But then the poster goes on to contrast his household’s choice to avoid dependency on private debt with what he sees as irresponsible government behavior:

I don’t think our politicians are capable of making the same decision on debt, regardless of their party affiliation.

In view of the accounting fact that the government deficit equals the non-government surplus, it would clearly be counterproductive for government to make the same decision as the poster’s household. If the government is determined to be in surplus, then in aggregate, and by definition, the rest of us have to be in deficit, whether we like it or not.

If, on the contrary, we decide in aggregate that we want to net save, and the government doesn’t fight this decision, the result will be income adjustments that put the government’s budget into deficit to the extent of our desired net saving.

And this latter approach to fiscal policy would be the appropriate one. Budget deficits are not a problem for governments in modern monetary systems when they are consistent with non-government net saving intentions at full-capacity output.

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2. WHO? Won't Get Fooled Again

https://www.youtube.com/watch?feature=player_detailpage&v=Rp6-wG5LLqE

DON'T KNOW MUCH ABOUT THIS BAND, BUT I FIGURE THEY HAVE ENOUGH MUSICAL NUMBERS TO GET US THROUGH THE HOLIDAY....

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3. Jack Lew, Tim Geithner: the treasury's new boss, same as the old boss Charles Ferguson

JACK'S HAD A YEAR IN HIS POSITION, AND HE'S KEPT A REMARKABLY LOW PROFILE...UNLIKE GEITHNER...WILL SOMEONE SHUT THAT MAN UP?

http://www.theguardian.com/commentisfree/2013/jan/13/jack-lew-tim-geithner-us-treasury-boss

Geithner helped save the banking system from collapse, but then did nothing to reform it. And Lew himself was a beneficiary...

"Meet the new boss
Same as the old boss"

Consider first Geithner's legacy, first as president of the New York Federal Reserve, then as treasury secretary. (Actually, his tendencies were evident even earlier, when he was carrying Larry Summers' water during the Asian financial crisis of the late 1990s.) As head of the New York Fed during the bubble, Geithner did – well, not much of anything: no regulation, no warnings, no protests about abuses or excesses, nada, zilch. Geithner was in the audience at Jackson Hole in 2005 when Raghuram Rajan, then the IMF's chief economist, delivered his now-famous warning about systemically dangerous incentives and risk-taking in the financial sector – a warning that Larry Summers slapped down publicly, and about which Geithner never uttered a public word, then or later.

Then came 2008, when, so far as we can determine, Geithner basically did everything that Hank Paulson told him to, and not much else. In fairness, one must concede that Paulson, Ben Bernanke, and Geithner were effective in preventing utter systemic collapse – albeit a collapse caused in large measure by their own earlier actions and inactions. Geithner continued that pattern, and then firmly established it as his legacy, after he took over at treasury.

But what, precisely, is that pattern?

In sum, it was to be intelligently pragmatic, in preventing acute systemic collapse and then returning the financial system, the political system, and the economy to their status quo. So, on the plus side, the Obama administration did not embrace the suicidal austerity path and laissez-faire preached by some, and practiced in some now-devastated European nations. Banks and financial markets were propped up by the treasury department and by Federal Reserve purchases of over $2tn in securities; the auto industry was saved (or at least General Motors was); and a second Great Depression was avoided. Not to be assumed – and worthy of serious praise.

But what wasn't done, and Geithner never even tried to do, is equally telling.

No purge of the senior managements and boards of directors of the financial sector, not even those, such as Citigroup and Bank of America, which were totally dependent on federal support for their existence (Citigroup was nearly 40% owned by Geithner's department). No curtailment of bonuses, no attempt even to tax them. No breaking up of too-big-to-fail institutions, some of which were and remain so complex that they are, as my colleague Charles Morris has said, too big to succeed. No attempt to curtail the toxic lobbying and revolving-door hiring of those same institutions – once again, including several that would not exist except for federal aid. No attempt to develop an evidentiary record to support criminal prosecution for the massive criminality that accompanied the bubble. No attempt to develop an evidentiary record for asset seizures under Rico, the law routinely used to seize the assets of criminal organizations. No serious attempt to rescue millions of homeowners facing foreclosure, or imprisoned in houses that they will never be able to sell for as much as they owe. No attempt to rein in the deeply entrenched culture and incentives that produce toxic financial "innovations" and increasingly frequent crises. A pattern of hiring truly dreadful people, ranging from Goldman Sachs lobbyists to private equity executives who worked with banks to bet against their own securities.

And so, now we have, indeed, "succeeded" in returning to something roughly like the status quo. What is that status quo?

We have an even more dangerously concentrated, politically even more powerful, still highly corrupt, unproductive financial sector; a clear message sent that even a horrific crisis caused by massive criminality yields no punishment whatsoever; insufficient, weak regulatory laws and institutions; an administration largely managed by people who were, and remain, part of the problem; a massively corrupt political system in which opaque, uncontrolled contributions yielded a $3bn presidential election; and even greater economic inequality than when Obama and Geithner took office.

Tim Geithner, upon returning to private life, will surely be rewarded in the typical ways...

And now we will have Jack Lew. What can we expect of him?... For three years before entering the Obama administration, Lew was a Citigroup executive, and for the last year he was the chief operating officer of Citigroup Alternative Investments, which made some money by betting against mortgage securities, but which lost many billions more when the crisis came. That crisis and those losses did not prevent Lew from receiving a handsome bonus, paid after he had been appointed to his first Obama administration job. But that isn't his main problem. His main problem is that he has already demonstrated that he's willing to be a typical political hack, and to give bankers what they want. In congressional testimony, he actually said, with a straight face, that deregulation had not contributed to the financial crisis.

As The Who have warned us …

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4. NO ONE KNOWS WHAT IT'S LIKE

https://www.youtube.com/watch?feature=player_detailpage&v=BfuWXRZe9yA

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5. U.S. agency gives quiet nod to light oil exports

http://www.reuters.com/article/2014/12/30/us-usa-crude-exports-exclusive-idUSKBN0K80SE20141230?feedType=RSS&feedName=businessNews

The main U.S. export authority is telling some oil companies that they should consider exporting a lightly processed form of crude oil called condensate without formal permission, according to people familiar with the discussions. In conversations that may help clear the way for more overseas sales of U.S. shale oil, the Commerce Department's Bureau of Industry and Security (BIS) has told companies seeking clarification on the legal status of so-called "processed condensate" that self-classification – whereby companies export their product without any formal authorization - could be a way forward, the people told Reuters.

THANK YOU, PENNY PRITZKER---I HOPE WHAT YOU ARE DOING IS ILLEGAL AS HELL AND THAT YOU HANG FOR IT

An official familiar with the law said the agency's discussions did not represent a change in policy since self-classification is allowed under U.S. export controls and is a routine, common practice for the majority of exports. Yet the message, though carefully couched as an informal suggestion, marks the first sign that the administration is becoming comfortable about allowing companies to work around the nation’s four-decades-old ban on exporting untreated crude oil. Last month, BHP Billiton Ltd (BHP.AX) became the first company to announce it would export lightly processed ultra-light U.S. oil without explicit permission from the government. It said it was on firm legal footing because its product was similar to what the agency had already blessed for other companies in a landmark ruling earlier this year. But until recently, the government’s attitude toward the self-classification for crude has been unclear. Officials have repeatedly declined to comment on what has become one of the year’s most contentious and controversial energy policy topics, beyond saying that it is under review due to the surprising surge in U.S. oil production.

"I would not characterize BIS’s position necessarily as one of encouragement, but BIS has made clear that companies should not overlook the option of self-classification," said Theodore Kassinger, a partner at law firm O’Melveny & Myers, who had represented oil producer Pioneer Natural Resources (PXD.N) in its dealings with the agency.

Two other sources told Reuters that the agency has said self-classification may be an expedient option for companies confident their condensate has been adequately processed...In March, the agency told mid-stream firm Enterprise Product Partners (EPD.N) and Pioneer that condensate stabilized and processed through a distillation tower met the legal criteria for exports. Refined fuels and processed oil is not subject to the ban...Texas Congressman Joe Barton earlier this month proposed a bill that would overturn the four-decade old ban and said he would continue to press the issue in the new Republican-led Congress in 2015.

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13. Oil ends on a low after halving in 2014 as OPEC stands aside

http://www.reuters.com/article/2014/12/31/us-markets-oil-idUSKBN0K905620141231?feedType=RSS&feedName=topNews

Oil prices fell on Wednesday to a 5-1/2-year low and ended with their second-biggest annual decline ever, down by half since June under pressure from a global glut of crude. Just before the close, Brent and U.S. oil futures bounced off session lows. But prices still settled at their lowest since May 2009. Weekly U.S. data showed crude oil stockpiles fell more than expected, but inventories at the oil hub at Cushing, Oklahoma, grew, keeping prices depressed....

U.S. crude closed with its second-largest annual decline on record. The biggest came in 2008, when prices collapsed in the wake of the financial crisis. The last round of OPEC output cuts eventually brought them off lows near $30 a barrel. In contrast, OPEC at a Nov. 27 meeting this year decided against cutting output. Despite its own forecasts of a growing surplus, the group opted to defend its market share against shale oil and other rival supply sources.

Turmoil in Libya dented OPEC supply in December to a six-month low, a Reuters survey showed, although forecasts still point to a glut. The EIA reported a weekly drawdown U.S. crude inventory, along with small increases in demand for gasoline and heating oil and a rise in stocks for gasoline and distillate.

Oil prices came under further pressure from a survey showing China's factory sector shrank in December for the first time in seven months. This should hurt energy demand in the world's No. 2 consumer.

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6. Why the Dow’s 2014 gain is kind of meh By Victor Reklaitis, MarketWatch

https://secure.marketwatch.com/story/why-the-dows-2014-gain-is-kind-of-meh-2014-12-31?siteid=YAHOOB

?uuid=ff562574-913e-11e4-82f0-5e49c916e7ef

The Dow Jones Industrial Average gained 7.5% in 2014, a showing that’s actually just “meh.”

The blue-chip gauge’s average yearly move in the last couple of decades is a 9.7% jump, according to FactSet data going back to 1988. And that includes the brutal 33.8% slide of 2008, as the financial crisis and recession took hold. Since then, however, the Dow has barely looked back, more than doubling as it has posted six straight years of gains.

The S&P 500’s climb of 11.4% in 2014, in contrast, ought to impress investors. The big-cap benchmark’s average annual move since 1988 is a gain of 9.7% — just like the Dow’s. So it delivered an above-average year in 2014. The S&P has risen for three years in a row, after edging down for the year in 2011 as investors fretted about — sound familiar? — eurozone problems.

The Dow underperformed the S&P this year, as it has in other bull-market years, in part because it tracks 30 mature, not-so-high-growth companies. It is the index, after all, that’s been called a dinosaur, or worse. On the flip side, the old-school, steadier Dow showed its resilience in 2011, when it rose 5.5%.

MORE

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7. The Who - Love reign over me

[Warpy]

14. It just demonstrates that the Dow is less reliable than the S&P 500

because the former's sample size is too small. It's just a sexier number.

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8. Detroit's 2014 homicide count on pace to be lowest since 1967 riots

OF COURSE, THE POPULATION DROPPED TO HALF SINCE THEN...

http://www.mlive.com/news/detroit/index.ssf/2014/12/detroits_2014_homicide_count_o.html

Detroit police statistics indicate the city is on pace to hit a several-decade-low homicide total by the time revelers welcome 2015. As of Dec. 7, the Detroit police had recorded 281 homicides, a pace of about .82 per day, which projects out to about 300 by year's end. Detroit police have not released a final 2014 tally, but George Hunter of the Detroit News reported that the city had recorded 298 homicides as of Dec. 23, a 6 percent decline from 318 last year.

If that pace continued through the final week of 2014, Detroit would record its lowest homicide count since there were 281 in 1967, the year of the race riots, and fewer than the second lowest total since, 308 in 2010, The Detroit News reports.

As of Dec. 7, Detroit police were reporting a 7 percent drop in all violent crime -- including an 8 percent decline in sexual assaults, a 23 percent decline in robberies and a 3 percent drop in aggravated assaults. And the property crime stats as of the last published crime data report on the city website were looking even better, reflecting a 17 percent overall decline...

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9. Fed forecasting tool calls for immediate rate hike, Plosser says

http://www.reuters.com/article/2014/12/31/us-usa-fed-plosser-policy-idUSKBN0K914X20141231?feedType=RSS&feedName=businessNews

A forecasting tool developed by the Federal Reserve recommends that U.S. interest rates should be hiked immediately to keep pace with the improving economy, according to a paper by the soon-to-retire Philadelphia Fed President Charles Plosser.

Plosser, among the minority of hawkish monetary policymakers, co-published research showing the Fed-developed model calls for rates to jump from near zero to 0.5 percent in the fourth quarter of 2014, and to rise to 1.1 percent by the second quarter of 2015.

The paper was co-authored by Philadelphia Fed director of research Michael Dotsey, who is in the running to succeed Plosser once he steps down on March 1. It recommends a more aggressive tightening cycle than that predicted by the Fed's core of officials, who generally see a mid-2015 hike and about a 1-percent federal funds rate by year end, if the economy continues to strengthen.

"We believe the economy has returned to a more normal footing and ... our benchmarking indicates that monetary policy should follow suit," Plosser and Dotsey wrote...MORE

INSANITY STRIKES IVORY TOWER....DETAILS AT ELEVEN!

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10. SYMPATHY FOR THE DEVIL

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11. Why the US economic crisis is a depression and not a recession

https://www.creditwritedowns.com/2013/01/hitting-debt-ceiling-us-economic-depression.html?utm_source=rss&utm_medium=rss&utm_campaign=hitting-debt-ceiling-us-economic-depression

...The idea here is that we are in an interregnum period similar to the 1933-1937 period that will unfortunately come to an end. I’m going to spell this out briefly because it highlights my guiding macro thesis for the past few years on the US... I wrote a post in October 2009 entitled, “The recession is over but the depression has just begun“. Here are the most salient points from that post:

When debt is the real issue underlying an economic downturn, the result is a period of stagnation and short business cycles as we have seen in Japan over the last two decades. This is what a modern-day depression looks like – a series of W’s where uneven economic growth is punctuated by fits of recession…

So where are we, then? We have left the fake recovery and are entering a new era of growth that could last as long as three or four years or could peter out very quickly in a double dip recession…

As for the recent asset-based economic reflation, be under no illusion that these measures ‘solve’ the problem. The toxic assets are still impaired and banks are still under-capitalized. But the increased asset value and the end of huge writedowns has underpinned the banks and led to a rise in the broader market in a feedback loop that has been far greater than I could have imagined at this stage in the economic cycle.

The double dip or the economic boom?

So what’s next? A lot of the economic cycle is self-reinforcing (the change in inventories is one example). So it is not completely out of the question that we see a multi-year economic boom. Higher asset prices, lower inventories, fewer writedowns all lead to higher lending capacity, higher cyclical output, more employment opportunities and greater business and consumer confidence. If employment turns up appreciably before these cyclical agents lose steam, you have the makings of a multi-year recovery. This is how every economic cycle develops. This one is no different in this regard.

However, longer-term things depend entirely on government because we are in a balance sheet recession.

Get ready because the second dip will occur. It will be nasty: unemployment will be higher and stocks will go lower than in 2009. I am convinced that it is politically unacceptable to have the government propping up the economy…

So to recap:

A depression was borne out of high levels of private sector debt, the unsustainability of which became apparent after a financial crisis.

The effects of this depression have been lessened by economic stimulus and government support.

Government intervention led to a reduction in asset price declines, which led to stock market increases, which led to asset price stabilization and more stock market increases and eventually to asset price increases. This has led to a false sense that green shoots are leading to a sustainable recovery.

In reality, the problems of high debt levels in the private sector and an undercapitalized financial system are still lurking, waiting for the government to withdraw its economic support to become realized

Because large scale government deficit spending is politically impossible, expect a second economic dip within three to four years at the latest.

...Personally, I would like to be proved wrong. I don’t want a depressionary relapse. But right now, it looks like we are headed in this direction.

About Edward Harrison

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College.

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12. Buyer Found For Dick Clark's 'Flintstones' Home

http://www.forbes.com/sites/zillow/2014/12/31/dick-clark-flintstones-home/

If you want to live like Dick Clark, you might have to live like Fred Flintstone too. Dick Clark’s unique stone cave-like home has finally found a buyer after three years on the market and for 50 percent off.

The television personality known for hosting his iconic “Dick Clark’s New Year’s Rockin’ Eve” and “American Bandstand” lived at 10124 Pacific View Rd in Malibu for many years. And Pacific views it does have, with stunning sunsets over the water and 360 degree views of the Channel Islands, Boney Mountains and the city lights. The romantic master suite is specifically designed to take advantage of the sunsets.

First listed in March 2012, about a month before Clark died, the asking price for the stone masterpiece was $3.5 million. The home not only looks stone-age from the outside, but inside as well. Nearly every inch looks like a stone cave with rough-hewn cabinets and doors, odd-shaped windows and hardly a straight line in sight.



Though small at only 1 bedroom and 1.5 bathrooms, the house is perched in the middle of 22.89 acres with direct access to trails on national parklands as well. The beach is only a few minutes away.

Living here might be an acquired taste, but one cannot argue with the uniqueness and Hollywood history of the property. The new owner picked up the so-called “Flintstones House” for $1,777,777.

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16. GIMME SHELTER!

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15. Five predictions for U.S. economy in 2015

https://secure.marketwatch.com/story/five-predictions-for-us-economy-in-2015-2014-12-31?siteid=yhoof2

Expect 3% growth for first time since 2005 and a pickup in wages... The U.S. economy finally got a big jolt of energy in 2014 after the lamest recovery since World War II. And 2015 is shaping up to be an even better year. Here are five things consumers and investors can count on (probably) in 2015:

1. The economy will grow 3% for the first time in 10 years
   
   The U.S. is set to add nearly 3 million jobs in 2014 — the biggest increase since 1999. The burst in job creation, expected to continue in 2015, is sure to fuel consumer spending. So, too, will a plunge in gasoline prices that’s given households extra cash to spare on other goods and services. The pickup in consumption in turn will entice businesses to hire and invest more to keep up with rising sales. The result: The U.S. is likely to grow more than 3% for the first time since 2005. Bernard Baumohl, chief global economist of the Economic Outlook Group, said he is even more optimistic. “The next two years could be the best two we have seen in at least a decade,” he said. “There is clearly a lot of evidence the economy is gaining a lot of momentum.”
   
   Perhaps the biggest domestic threat to the 3% growth scenario would be a surprisingly swift hike in interest rates, but from all indications a dovish Federal Reserve is unlikely to take aggressive action in 2015.
   
   
2. Wages will finally accelerate after years of stagnation
   
   One of the main shackles on the economy over the past four years has been stagnant wages. Hourly earnings have risen an average of 2% annually — just two-thirds of the long-term U.S. average. Yet that’s finally about to change. With hiring up and unemployment falling, businesses will have to go the extra mile for employees or risk losing sales to competitors because they lack enough staff to boost production.
   

   
   “Everywhere I go business owners are seeing an increase in demand,” said Gus Faucher, senior economist at PNC Financial Services. “Businesses will have to raise wages to attract or maintain workers.”

   
   
   Businesses are already responding: Job openings in November hit the second highest level in 14 years. In another telltale sign, people are quitting jobs at the fastest rate in five years. Research shows that people who quit one job for another typically do so because they are offered higher pay.
   
   
3. The sharp decline in unemployment will start to seem real
   
   The unemployment rate has plunged over the past three years to 5.8% from 8.6%, but almost nobody, including the Federal Reserve, thinks the labor market is really that healthy. Some 18.1 million people, for example, want a good full-time job but can’t find one, an unusually high number 5 1/2 years into a recovery. And despite a sharp decline in the number of people out of work six months or longer, that figure is still higher than at any time before the 2007-09 recession. The unemployment rate probably won’t fall quite as rapidly in 2015, according to economists, especially if more people enter the labor force because jobs are easier to find. Yet another large spate of hiring similar to the gain in 2014 would make the low unemployment rate more believable.
   
   

   “By the end of next year we will be at the point where the unemployment rate is between 5% and 5.5%, and it will truly feel legitimate,” Faucher said.

   
   
   
4. Inflation (and deflation) won’t rear its ugly head
   
   Surging oil production — along with slower global growth — has caused the price of petroleum to collapse from more than $100 a barrel last summer to barely $50 a barrel at the end of 2014. The effect has been to reverse an uptick in U.S. inflation earlier in the year. Perhaps just as important, stable or falling prices will boost the inflation-adjusted pay of U.S. workers and gives them more bang for their buck. “It’s an unambiguous positive for household demand,” said Neil Dutta, head of economics at Renaissance Macro Research. “People will have more money to spend.” While oil prices may rebound in 2015, they almost certainly won’t return to $100 a barrel any time soon, barring a geopolitical crisis in a major petroleum-producing region. So the gift will keep giving this year and further feed an accelerating U.S. recovery. Faster growth should also dispel worries about another Fed bogeyman: deflation, or falling prices. “It’s impossible to have deflation in an economy growing 3%-plus and adding the most jobs since the 1990s,” Baumohl said.
   
   
5. The U.S. will perform well even if the rest of the world doesn’t

Slow growth around the world won’t hurt the U.S. all that much. American exports might flatten out or even dip, but that would be offset by lower imports of petroleum because of sinking oil prices. So the trade deficit is unlikely to get further out of whack. Although foreign trade accounts for a greater share of the economy than ever, the United States is still more insulated than virtually every major competitor in Europe and Asia. Such everyday purchases as haircuts, dry cleaning, financial advice and eating out are virtually immune from foreign competition.

The upshot: The world’s largest economy can still function as an oasis in a desert despite the claims of doomsayers that those days are over.

WELL, WE WILL JUST HAVE TO WAIT AND SEE ABOUT THAT, WON'T WE?
Jeffry Bartash is a reporter for MarketWatch in Washington.

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17. A New Mortgage Trap

http://takingnote.blogs.nytimes.com/2014/12/31/a-new-mortgage-trap/?_r=0

Attention state attorneys general: The mortgage industry may be about to make fools of you, and dupes of homebuyers whose legal rights you are supposed to protect.

In a $26 billion deal in 2012, five of the biggest banks settled with state and federal officials over allegations of widespread foreclosure abuse. The deal, along with other post-financial crisis reforms, was supposed to bring some order, fairness and transparency to the foreclosure process.

Mortgage lenders, however, may have figured out a way around all of that by changing the legal paperwork involved in buying a home.

Foreclosing on a mortgage in many states requires a lender to go to court and give the borrower a certain amount of notice. Not so with a deed of trust, which generally can be foreclosed upon without a court’s involvement or any oversight at all (with variations on that theme depending on state law). So instead of having borrowers sign mortgages when they take out home loans, some lenders are now having them sign deeds of trust.

The details of the shift are laid out by Nathalie Martin, a bankruptcy attorney and professor at the University of New Mexico School of Law, who contributes to the blog Credit Slips, a forum for bankruptcy experts.

It’s easy to see why banks and other players in the mortgage chain would want to avoid the courts in foreclosure cases and simply grab homes instead. It was the banks’ widespread violation of borrowers’ legal rights, which came to light in 2010, that led to the mortgage settlement in 2012 and subsequent reforms.

According to Professor Martin’s blog, the use of trust deeds instead of mortgages was first spotted by Karen Myers, the head of the Consumer Protection Division of the New Mexico Attorney General’s Office. When Ms. Myers investigated the new practice further, she found it had become widespread.

Lenders in New Mexico have insisted that using deeds of trust instead of mortgages will not affect borrowers’ rights in foreclosure, but the attorney general’s office in New Mexico disagrees. It has told 11 lenders in writing to stop marketing their wares as mortgages when they are actually deeds in trust. The letter calls the shift an attempt “to modify and abrogate the protections afforded a homeowner” by the courts and state consumer protection law.

Attorneys general around the country should now follow up with their own investigations.

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18. SATISFACTION

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44. States Fight Back Against MERS Mortgage Fraud

http://www.ritholtz.com/blog/2013/04/states-fight-back-against-mers-mortgage-fraud/

A prominent economist said about the 2008 financial crisis:

“At the root of the crisis we find the largest financial swindle in world history”, where “counterfeit” mortgages were “laundered” by the banks.

The Mortgage Electronic Registration Systems – MERS – was one of the main ways the swindle was done, and the main way in which counterfeit mortgages were laundered by the banks. MERS is a shell company with no employees, owned by the giant banks. MERS threw out centuries of well-established law about how real estate is transferred – and cheated governments out of many tens or hundreds of billions of dollars in recording fees.

Matt Taibbi pointed out:

MERS … is essentially an effort at systematically evading taxes … and hiding information from homeowners in ways that enabled the Countrywides of the world to defraud investors and avoid legal consequences for same.

***

MERS was at least in part dreamed up by Angelo Mozilo of Countrywide.

***

For those of you wondering why so many localities are broke, here’s one small factor in the revenue drain. Counties typically charge a small fee for mortgage registration, roughly $30. But with MERS, … you don’t need to pay the fee every time there’s an ownership transfer. Multiply that by 67 million mortgages and you’re talking about billions in lost fees for local governments (some estimates place the total at about $200 billion).

Outrageously, MERS actually marketed itself to its customers as a way to save money by avoiding the payment of legally-mandated registration fees. Check out this MERS brochure from 2007. It brags on the face page about its fee-avoiding qualities (“MINIMIZE RISK. SAVE MONEY. REDUCE PAPERWORK”) and inside the brochure, in addition to boasting about helping clients “Foreclose More Quickly,” it talks about how clients save money because MERS “eliminates the need to record assignments in the name of the Trustee.”

All of this adds up to a system that enabled the mortgage industry to avoid keeping any kind of proper paperwork on its frantic, coke-fueled selling and re-selling of mortgage-backed securities during the bubble, and to help the both the Countrywide-style subprime merchants and the big banks like Goldman and Chase pull off the mass sales of crappy loans as AAA-rated securities.

Harper’s reported:

“What’s happened,” said Christopher Peterson, a law professor at the University of Utah who has written extensively about MERS, “is that, almost overnight, we’ve switched from democracy in real-property recording to oligarchy in real-property recording.” The county clerks who established the ownership of land, who oversaw and kept the records, were democratically elected stewards of those records, said Peterson. Now a corporation headquartered outside Washington, D.C., oversaw the records. “There was no court case behind this, no statute from Congress or the state legislatures,” Peterson told me. “It was accomplished in a private corporate decision. The banks just did it.” Peterson said it was “not a coincidence” that more Americans than at any time since the Great Depression were being forced out of their homes just as records of home ownership and mortgages were transferred wholesale to a privatized database.

The Securitized Sausage Maker


MERS was also the engine which allowed securitization of mortgages. Bloomberg reported:

MERS played a key role in the bundling of mortgages into securities that reached a frenzy before the economic decline of 2008, critics including Grayson of Florida said. It allowed banks to sell and resell home loans faster, easier and cheaper, he said.

“MERS was a facilitator of securitization,” said Grayson, a Democratic member of the House Financial Services Committee.

How?

Steve Liesman explained in 2007:

How do you create a subprime derivative? …You take a bunch of mortgages… and put them into one big thing. We call it a Mortgage Backed Security. Say it’s $50 million worth… Now you take a bunch of these Mortgage Backed Securities and you put them into one very big thing… The one thing about all these guys here [in the one very big thing] is that they’re all subprime borrowers, their credit is bad or there’s something about them that doesn’t make it prime…

Watch, we’re going to make some triple A paper out of this… Now we have a $1 billion vehicle here. We’re going to slice it up into five different pieces. Call them tranches… The key is, they’re not divided by “Jane’s is here” and “Joe’s is here.” Jane is actually in all five pieces here. Because what we’re doing is, the BBB tranche, they’re going to take the first losses for whoever is in the pool, all the way up to about 8% of the losses. What we’re saying is, you’ve got losses in the thing, I’m going to take them and in return you’re going to pay me a relatively high interest rate… All the way up to triple A, where 24% of the losses are below that. Twenty-four percent have to go bad before they see any losses. Here’s the magic as far as Wall Street’s concerned. We have taken subprime paper and created GE quality paper out of it. We have a triple A tranche here.

Ellen Brown explained the significance of MERS in this process:

The top tranche is triple A because it includes the mortgages that did NOT default; but no one could know which those were until the defaults occurred, when the defaulting mortgages got assigned to the lower tranches and foreclosure went forward. That could explain why the mortgages could not be assigned to the proper group of investors immediately: the homes only fell into their designated tranches when they went into default. The clever designers of these vehicles tried to have it both ways by conveying the properties to an electronic dummy conduit called MERS (an acronym for Mortgage Electronic Registration Systems), which would hold them in the meantime. MERS would then assign them to the proper tranche as the defaults occurred. But the rating agencies required that the conduit be “bankruptcy remote,” which meant it could hold title to nothing; and courts have started to take notice of this defect.

(Gonzalo Lira made the same point.)

Indeed, the secretary and treasurer of MERS admitted this in a deposition, stating (page 32, lines 9-20):

As a requirement for mortgages that were securing loans or promissory notes that were sold to securitize trust, the rating agencies would only allow mortgages MERS — well let me step back. They required that a bankruptcy remote single purpose entity be created in order for transactions holding loans secured by MERS, by mortgages MERS served as mortgagee to be in those pools and receive a rating, an investment grade rating without any changes to the credit enhancement. They required that to be a bankruptcy remote single purpose subsidiary of MERS, of Merscorp.

Many commercial mortgages may be held by MERS as well, and for the same reason.

Harper’s points out:

MERS facilitated the buying and selling of mortgage debt at great speed and greatly reduced cost. It was a key innovation in expediting the packaging of mortgage-backed securities. Soon after the registry launched, in 1999, the Wall Street ratings agencies pronounced the system sound. “The legal mechanism set up to put creditors on notice of a mortgage is valid,” as was “the ability to foreclose,” assured Moody’s. That same year, Lehman Brothers issued the first AAA-rated mortgage-backed security built out of MERS mortgages. By the end of 2002, MERS was registering itself as the owner of 21,000 loans every day. Five years later, at the peak of the housing bubble, MERS registered some two thirds of all home loans in the United States.

Without the efficiencies of MERS there probably would never have been a mortgage-finance bubble.

(In addition, the same mortgage was sometimes pledged to numerous buyers at the same time. This wouldn’t have been possible without the vaporware title given by MERS. And some – like foreclosure attorney Neil Garfield – think that the ability to pledge the same mortgage multiple times is a feature, rather than a bug, of MERS. )

Relief Must Come at the State Level

Property recording laws are state laws, and the states have always been the bedrock for property rights. Given that the head of the U.S. Department of Justice used to represent MERS – and that the D.C. politicians are (with a few exceptions) lackeys for the big banks which own MERS – the only hope is at the state level. Some state courts have, in fact, declared MERS illegal … or at least without power to foreclose on property.

Harper’s notes:

After the housing market collapsed, however, MERS found itself under attack in courts across the country. MERS had singlehandedly unraveled centuries of precedent in property titling and mortgage recordation, and judges in state appellate and federal bankruptcy courts in more than a dozen jurisdictions—the primary venues where real estate cases are decided— determined that the company did not have the right to foreclose on the mortgages it held.

In 2009, Kansas became one of the first states to have its supreme court rule against MERS. In Landmark National Bank v. Boyd A. Kesler, the court concluded that MERS failed to follow Kansas statute: the company had not publicly recorded the chain of title with the relevant registers of deeds in counties across the state. A mortgage contract, the justices wrote, consists of two documents: the deed of trust, which secures the house as collateral on a loan, and the promissory note, which indebts the borrower to the lender. The two documents were sometimes literally inseparable: under the rules of the paper recording system at county court-houses, they were tied together with a ribbon or seal to be undone only once the note had been paid off. “In the event that a mortgage loan somehow separates interests of the note and the deed of trust, with the deed of trust lying with some independent entity,” said the Kansas court, “the mortgage may become unenforceable.”

MERS purported to be the independent entity holding the deed of trust. The note of indebtedness, however, was sold within the MERS system, or “assigned” among various lenders. This was in keeping with MERS’s policy: it was not a bank, made no loans, had no money to lend, and did not collect loan payments. It had no interest in the loan, only in the deed of trust. The company—along with the lenders that had used it to assign ownership of notes—had thus entered into a vexing legal bind. “There is no evidence of record that establishes that MERS either held the promissory note or was given the authority [to] assign the note,” the Kansas court found, quoting a decision from a district court in California. Not only did MERS fail to legally assign the notes, the company presented “no evidence as to who owns the note.”

Similar cases were brought before courts in Idaho, Massachusetts, Missouri, Nevada, New York, Oregon, Utah, and other states. “It appears that every MERS mortgage,” a New York State Supreme Court judge recently told me, “is defective, a piece of crap.” The language in the judgments against MERS became increasingly denunciatory. MERS’s arguments for standing in foreclosure were described as “absurd,” forcing courts to move through “a syntactical fog into an impassable swamp.”

The next key battle is taking place right now in Rhode Island. Specifically, the Rhode Island Attorney General and state legislators are trying to slay the MERS dragon within their state:

Citing the irregularities with the recording of mortgages and assignments that negatively impact municipalities and consumers, Attorney General Peter F. Kilmartin filed legislation to require that all transfers of a mortgage interest on residential property be recorded to provide a clean chain of title. The legislation, S0547 sponsored by Senator William Conley (District 18, East Providence, Pawtucket) and H5512 sponsored by Representative Brian Kennedy (District 38, Hopkinton, Westerly), is scheduled to be heard before both the Senate Committee on Judiciary and House Corporations Committee on Tuesday, March 26, 2013.

The legislation makes it easier for borrowers and regulators to determine who owns loans secured by mortgages on Rhode Island property. Borrowers facing foreclosure will be able to more easily discover who owns their loans before it is too late, and municipalities will be able to identify lenders who are responsible for abandoned homes. The legislation will stop the practice of having the vast majority of mortgages held in the name of a private registry with no interest in the loans known as … “MERS.”

Since 1997 the banking industry has been using MERS, which lenders claim has minimized their administrative and financial burdens of the recording process. However, this practice has basically privatized the local land recording process, thereby undermining the accuracy of public records and leading to negative consequences for consumers and municipalities.

“The changing of servicing and subservicing rights within the lending history often leaves the borrower confused regarding which entity they are supposed to be dealing with on a monthly basis and why,” said Attorney General Kilmartin. “The legislation is designed to give borrowers a public record of who ultimately owns their loans, increasing the ability of homeowners to negotiate with their lenders and their ability to have full knowledge of their rights, counterclaims and defenses if they are faced with litigation.”

“Rhode Island has experienced a record number of foreclosure and short sales since the mortgage crisis,” said Representative Kennedy, “This legislation will assist homeowners in knowing who maintains the note on their property while also ensuring that local cities and towns will know the potential owner of a property after a forced sale has occurred, to ensure that municipalities have the proper information available on the documentation for taxation and municipal recording fees.”

“With this legislation, we are taking another step toward easing the pain of the housing and mortgage foreclosure crisis, which has affected both the state’s municipalities and individual consumers,” Sen. William J. Conley Jr. said. “It is common sense to record these transfers and take out the unnecessary middle man. Rhode Islanders need to know exactly who they are dealing with and how they can protect themselves. The foreclosure process is tough enough already without adding the frustration of MERS.”

By having a nominee entity listed as the mortgagee, the banking industry has privatized Rhode Island’s mortgage recording system, and left the accuracy of public land records at the mercy of a private company’s database. Federal banking authorities have already concluded that the private mortgage system contains numerous inaccuracies and has not been accessible to homeowners. Moreover, the nominee frequently has no contractual relationship with the actual noteowner, despite the contention in the mortgage documents of a nominee relationship.

Not only has this private system deprived cities and towns the recording fees that they are owed for over 15 years, it has also hampered the ability of municipalities to adequately address abandoned property and nuisance issues because the mortgagee liable for these issues is not clear from the chain of title.

Consumers are adversely impacted due to the fact that their mortgage loans change hands multiple times through the life of the loan without proper recording. The lack of a contemporaneous public record hampers their ability to deal directly with their lenders and enforce their legal rights.

The banking industry’s practice of using a nominee entity process for recording deeds has become a highly litigated issue by consumers, municipalities and counties throughout the country. This very issue is currently being litigated in Rhode Island with private citizens and municipalities calling into question the legality of using the nominee process to record mortgage interests. The multitude of legal issues surrounding the nominee process has caused confusion and delay in foreclosure proceedings in our State, and has raised the critical issue of whether a nominee entity can enforce the power of sale. High Courts in other States, including Massachusetts and Washington, have already ruled that a nominee cannot utilize the power of sale i.e. MERS cannot foreclose on property. This legislation resolves this issue in Rhode Island by simply eliminating the nominee recording process and restoring accuracy and transparency to the public land records: i.e. killing MERS.

[Eugene]

19. Ambac sues Bank of America over Countrywide mortgage bonds

Source: Reuters

Ambac sues Bank of America over Countrywide mortgage bonds

BY JONATHAN STEMPEL
NEW YORK Wed Dec 31, 2014 2:13pm EST

(Reuters) - Ambac Assurance Corp sued Bank of America Corp to recoup hundreds of millions of dollars of losses from insuring roughly $1.68 billion of securities backed at least in part by risky mortgages from the bank's Countrywide Home Loans unit.

In a complaint filed on Tuesday in a New York state court in Manhattan, Ambac accused Countrywide of lying about how well it underwrote so-called "pay option adjustable-rate mortgage negative amortization" loans that backed the securities.

The securities were issued in eight transactions between 2005 and 2007, Ambac said.

Ambac said it faced potential claims exceeding $600 million as of Oct. 31, and that pools of loans supporting its insured certificates had suffered $3.07 billion of losses by Nov. 30. It also said it would have never guaranteed payments had it known of Countrywide's deception.

[font size=1]-snip-[/font]

Read more: http://www.reuters.com/article/2014/12/31/us-bankofamerica-ambac-lawsuit-idUSKBN0K90YO20141231

[Demeter]

20. Guess Which Loan-Sharking Enterprise Helped the 1% Loot Europe After the Global Economic Crisis

http://www.alternet.org/world/how-imf-helped-1-loot-europe-after-global-economic-crisis?akid=12639.227380.M30cpM&rd=1&src=newsletter1029578&t=25

The International Monetary Fund is probably the world’s greatest loan sharking enterprise. People in the developing world have known this for decades. As Naomi Klein noted in a 2002 article for the Globe and Mail, the IMF swooped in during Argentina’s financial crisis and forced the country to sell off most of its financial assets, enact deep cuts in public services and drastically reduce its social safety nets. The IMF’s policies transferred much of the country’s wealth to private investors while Argentineans saw their wages and living standards plummet.

The IMF reacted no differently to the Euro crises, which in many ways were caused by reckless investment practices that caused a collapse of the global economy. The IMF, supported by northern European countries like Germany, forced deep austerity measures in Spain, Greece, Portugal and Italy, allowing wealthy hedge funds and investment banks to buy up Europe’s debt and infrastructure at rock-bottom prices.

The austerity measures cut the welfare programs that would have benefited the poor. Meanwhile, the IMF encouraged European central banks to engage in one of the greatest “welfare” programs in history: bank bailouts. They flooded the financial markets with money by loaning at record-low interest rates and purchasing toxic debt.

Recently, the IMF admitted that it was a mistake to recommend austerity at the height of the European crisis. A report issued by the Independent Evaluation Office (IEO), the IMF’s research division, concluded that the IMF’s “advocacy of fiscal consolidation proved to be premature for major advanced economies, as growth projections turned out to be optimistic.”

MORE

[Demeter]

21. Usury Laws Are Dead. Long Live the New Usury Law. The CFPB's Ability to Repay Mortgage Rule

http://www.creditslips.org/creditslips/2013/01/usury-laws-are-dead-long-live-the-new-usury-law-the-cfpbs-ability-to-repay-mortgage-rule.html#more

The CFPB has come out with its long awaited qualified mortgage (QM) rulemaking under Title XIV of the Dodd-Frank Act. The QM rulemaking is by far the most important CFPB action to date and will play a crucial role in determining the shape of the US housing finance market going forward. The QM rulemaking also represents a return in a new guise of the traditional form of consumer credit regulation—usury—and a move away from the 20th century’s very mixed experiment with disclosure.

QM Rulemaking Overview

The Dodd-Frank Act requires that mortgages be underwritten based on the borrower's ability to repay. Failure to do so is an absolute defense against foreclosure. There is an execption allowed, however, for Qualified Mortgages. The CFPB rulemaking defined the term Qualified Morgage. Oversimplifying (but only slightly), a QM is defined as a mortgage that meets the following six criteria

regular payments that are substantially equal (ARMs and step-rate mortgages excepted) and always positively amortizing
term ≤30 years
limited fees/points (caps vary with mortgage size)
underwritten using the maximum interest rate in the first five years to ensure repayment
income verified
backend DTI ≤43% (including simultaneous loans)

Requirements 4-6 are considered satisfied if the loan is eligible for GSE purchase/guarantee or insurance by FHA/VA/USDA/RHS. GSE purchase/guarantee will cease to meet requirements 4-6 as of January 10, 2021, unless there is a receivership for imposed. FHA/VA/USDA/RHS insurance/guarantee will cease to meet requirements 4-6 when those agencies exercise their power to define QM for the mortgages they insure/guarantee. (Note that they may define QM differently than the CFPB.)

Significantly, the CFPB rulemaking distinguishes between regular QMs and high-cost QMs (150 bps over prime for first liens, 350 bps over prime for junior liens). Thus, the mortgage world is now like Gaul, divided into three parts: non-QM, high-cost QM, and regular QM. Non-QMs lack a safe harbor for ability to repay. High-cost QMs have a rebuttable safe harbor for ability to repay. And regular QM have an irrebuttable safe harbor for ability to repay. The result of all of this is to increase the risk of making non-QMs or high-cost QMs relative to the situation that exists today. That means there is no change in the law for regular QMs, as failure to ensure ability to repay has not previously been a defense to foreclosure.

Much of the commentary to date has been about the scope of the safe harbor, which is wider than consumer groups had wanted/banks had feared. I think it all kind of misses the point, as the QM rulemaking represents a significant expansion of lender liability and is a major step forward in creating a fair and stable housing finance market.

QM as a Usury Law

What I find interesting about the QM rulemaking is that it represents a return to the traditional mode of consumer credit regulation—usury, and eschews the 20th century’s disclosure-based regimes, including its behavioral economic tweaks. Indeed, the influence of behavioral economics is virtually undetectable in the rulemaking with one very small exception....MORE

FROM LAST JANUARY, AND STILL INCOMPREHENSIBLE

[Demeter]

26. Why Getting Rid of Loan Officers Hurt Banks and the Economy

http://www.nakedcapitalism.com/2014/12/why-bother-with-loan-officers.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

Yves here. Economists seldom take note of the fact that the degradation of skills at major banks has had serious macroeconomic effects. One issue has been described by Andrew Haldane: that as banks have become deregulated, they all have come to use very similar methods for making loans and taking other risks. This is particularly true in retail and small business lending, where individual and often character-based decisions made by loan officers have now been superceded by FICO-based models. The heavy reliance on FICO means that too many banks make similar lending decisions, exacerbating the tendency of banks to run lemming-like off cliffs all together. Haldane used a biological metaphor: that previously specialized types of financial firms and more autonomy in branch lending decisions led to more diversity in an ecological sense, which produced a more stable system. Less biological diversity, and less diversity among firms, increases systemic risk.

A second issue is that the abandonment of training of credit officers means that banks have effectively abandoned the small business lending market. Mind you, that does not mean that small businesses can’t get credit, but the sources consist of small credit lines associated with business accounts, credit cards, and secured lending (equipment lending, borrowing against real estate owned by the enterprise). The dearth of bona-fide small business lending is one of the big reasons why the Fed’s super low interest rates didn’t lead to much in the way of increased lending to smaller companies (note that the biggest reason was still lack of loan demand. Businesses don’t borrow unless they see a good use of funds).

As we wrote in 2013:

The comment above discusses the lack of small business demand for loans. Although that is the primary driver, there is a second one I’ve been remiss in not mentioning: banks are pretty much not in that business any more, and why the Fed ignores that and pretends to act as if putting money on sale will lead to more small business lending is beyond me.

The barrier to small business lending isn’t the economics; it’s that most banks no longer have that skill. I’m not making that up. In the stone ages of my youth, all the big banks (and the industry was less concentrated, so there were more “big banks” back then) had two year credit officer training programs. Those credit officers would do the analysis and make recommendations on big corporate loans. Some would eventually become branch managers, and way back then, branch managers would have the authority to approve loans up to a certain level. They used not only their formal analytical skills, but also local information about the health of the economy, the reputation and stability of important local businesses. If the local hardware store owner came in looking for a loan to expand, the branch manager would have an informed view on whether his estimates of how much and how fast his top line would increase after his build-out. He’d even probably know if his cost assumptions were realistic based on prior experience.

That capability has been abandoned in large banks. Branches are just retail stores; lending is productized and based on whether the borrower meets certain criteria set at much higher levels in the bank. You might still find the old-fashioned case-by-case type of small business lending in small banks, but it’s as dead as a dinosaur in the big ones, and the big ones dominate the industry.

This VoxEU article looks at whether loan officers are worth what they cost. It finds that they do in China and provides a framework for looking at that issue in other markets.

By James Wang, PhD candidate in Economics, University of Michigan. Originally published at VoxEU

Many lenders hire loan officers to screen soft information that may otherwise be ignored by credit scoring. However, in addition to their compensation costs, loan officers may have characteristics, such as being overly cautious, that could distort their decisions. This column documents the performance of loan officers using data from a Chinese lender. Despite the distortions, the loan officers contribute three times their pay in annual profits above what the lender could have earned by itself, even with the benefit of hindsight.

With the success of peer-to-peer lenders like Lending Club and Prosper, many lenders have experimented with alternative mechanisms beyond credit scoring.1 One such alternative is the increased reliance on soft information, which is subjective data that is difficult to interpret without loan officers. Loan officers, however, are not just costly in terms of compensation. Their characteristics – such as being cautious or having low ability – could distort their loan decisions to the detriment of the lender.

I consider the value of these loan officers using loan and repayment data from 2010–2013 for approximately 32,000 borrowers from a Chinese lender. This large lender specialises in unsecured, cash loans to households and small businesses. Loan officers view the borrower’s entire file including financial statements, references, notes, credit scores, and even photographs before choosing an approved loan amount.2

My job market paper calculates the value of hiring these loan officers by comparing them to an alternative where the lender only uses hard information such as income and credit scores (Wang 2014). It is important to note that this is not measuring the value of credit scoring. Risk-based pricing has been extensively used since at least the early 1990s (Johnson 1992) and their effectiveness is not in doubt. Einav et al. (2013) and Edelberg (2006) both provide compelling evidence of the strength of credit scoring versus exclusively subjective underwriting. My paper compares loan officers operating in conjunction with credit scoring versus credit scoring alone.

Despite the fact that loan applications are randomly assigned,3 there are differences across loan officers. Figure 1 shows the average approved loan amount plotted against credit quality. Notice that loan officer A approves a higher loan amount than loan officer B at every level. There are also differences in the variance of loan sizes as well as loan performance. To explain this, I lay out an empirical framework in the paper that can explain their behaviour, accounting for differences in risk attitudes, ability, and even overconfidence.

Figure 1. Average loan amount by credit quality


Notes: The graph displays the average approved loan amounts for 282 loans made by loan officers in June 2012 for a 48% APR, 24 month loan. Borrowers apply for a loan amount with a pre-set APR and payment length, and loan officers decide on an approved loan amount. Over 90% of borrowers are given loans much smaller than the amount applied. Credit quality is the lender’s internal proprietary measure of borrower risk. Higher values indicate safer borrowers.

Using the insights from the empirical framework, I calibrate an algorithm that takes into account only the borrower’s hard information, and then I compare to the loan officers’ actual performance. Figure 2 shows the additional profit per loan in dollars that each loan officer contributed above and beyond this alternative. While some loan officers are not profitable, the main result of the paper is that the average loan officer contributes three times his pay in additional annual profits.4 This implies that these loan officers are much more profitable than the lender operating by itself.....

............................................
Conclusion

I have argued here that these loan officers are valuable. This is despite their biases and an automated lending model with access to extensive amounts of hard information and repayment data. More broadly, my job market paper provides an empirical framework for evaluating the contributions of subjective expertise that can be applied in other contexts such as asset managers or even admissions counsellors. While experts have been beaten in many fields such as chess and mutual fund management (Gruber 1996), this is one area where man can still beat the machines.

[Demeter]

22. Ukraine PM says he is sure IMF will continue funding, expects no private investment

http://itar-tass.com/en/economy/770066

Ukrainian Prime Minister Arseniy Yatsenyuk said on Tuesday the IMF mission, which will arrive in Kiev on January 8, will continue to provide funding to the country.

“I’m sure that there will be a new program with the IMF. Its purpose is to stabilize state finances and to support the trade balance,” he said.

“We had previous programs with the IMF because we followed up on our words and carried out reforms,” Yatsenyuk said.

This year the government has received $9 billion external aid and paid $14 billion, he said. “I don’t know what would happen if we did not pay our debts. But if we hadn't not fulfilled our obligations, there would be no aid,” Yatsenyuk said.

In 2015 Ukraine does not expect private investors. The country only expects international financial organizations to provide support, he said. Ukraine received the first tranche ($3.2 billion) in May. The second tranche ($1.4 billion) was provided in early September. Deputy head of the Ukrainian National Bank Alexander Pisaruk said the National Bank expected a new program with the IMF to be approved till the end of February.

“If all is as we see, we’ll be able to increase funding to Ukraine with the IMF. The sum of $15 billion is mentioned. We hope that it will be possible till the end of February,” Pisaruk said.

In early December, Yatsenyuk said Ukraine has paid $14 billion on its foreign debts. He said Ukraine simultaneously received various types of foreign financial assistance worth $9 billion. Ukraine’s foreign debt currently stands at $72.9 billion, he said.

[Demeter]

33. No military solution to Ukraine conflict, country's president concedes

I GOT NEWS FOR YOU, POROSHENKO, AIN'T NO POLITICAL SOLUTION, NEITHER. AND NEITHER THE EU, NOR RUSSIA, NOR NATO, NOR EVEN UNCLE SUCKER IS GOING TO PROVIDE AN ECONOMIC SOLUTION. CONGRATULATIONS YOU WIN THE COUNTRY FROM HELL. ALL YOU NEED IS EBOLA, AND YOU WILL HIT ABSOLUTE BOTTOM.

http://www.latimes.com/world/europe/la-fg-ukraine-russia-no-military-solution-20141229-story.html

Ukrainian President Petro Poroshenko conceded Monday that his forces are unable to militarily defeat separatists backed by Russian mercenaries and armaments, and he called for a new attempt at negotiating an end to the fighting at an international summit on Jan. 15.

The meeting to be held in the Kazakhstan capital, Astana, will include Russian President Vladimir Putin, whom Poroshenko and his Western allies accuse of instigating the rebellion in eastern Ukraine, and the leaders of France and Germany.

President Obama has also been asked to join in the negotiations, Poroshenko said, referring to the meeting as under the "Normandy format" established on June 6, when the newly elected Ukrainian president met informally with Putin, Obama, German Chancellor Angela Merkel and French President Francois Hollande on the sidelines of the 70th anniversary commemoration of the D-Day invasion.

Though Poroshenko's tone at a news conference in Kiev, the capital, sounded conciliatory, he reiterated that his government demands recovery of all Ukrainian territory occupied by the separatists as well as the Crimean peninsula, which Russia annexed in March.

The former chocolate magnate, who has been in office for six months, also signed into law a measure passed by the Western-oriented parliament last week renouncing Ukraine's nonaligned status....

WHAT AN INNOCENT! I WONDER IF HE'D LIKE TO BUY THE BROOKLYN BRIDGE, WHILE HE'S AT IT?

[Demeter]

34. Ukraine in ‘full-blown financial crisis’ – National Bank head

http://rt.com/business/218735-ukraine-crisis-central-bank/

Ukraine’s GDP shrank by 7.5 percent from January till November 2014, as foreign exchange reserves fell to their lowest level since 2009, and inflation jumped to 21 percent by November, admits the head of the Ukraine’s National Bank, Valeriya Gontareva. The country’s foreign exchange reserves shrank to $9.9 billion, as Kiev gave Naftogaz an estimated $8.6 billion to buy gas and settle state guaranteed Eurobonds. $3.1 billion went to settle the debt with Russia’s Gazprom, Gontareva explained.

The conflict over Russia’s reunification with Crimea has killed more than 4,700 people has also killed the economy.

“There is a full-blown financial crisis,” Gontareva told reporters Tuesday. “We can only overcome it if we implement quick and even extreme reforms.”

Ukraine’s national currency, the hryvnia, has lost half of its value by November.

“…. There’s almost 100 percent devaluation in the country. From the economic territory, it’s called a 50 percent devaluation,” Gontareva said.

She said it is impossible to keep the hryvnia stable.

“This is simply an unrealistic task, because it’s not fixed in any constitution.”

Earlier in the week, after the unprecedented 10–hour session the Ukrainian parliament adopted the 2015 budget that sees a number of drastic cuts and import duty raised to 10 percent, which should give way to new IMF funds. The last IMF estimate showed that Ukraine needs another $15 billion, on top of the $17 billion the Fund had already agreed to allocate.


I AM AFRAID IT'S TOO LATE TO ASK FOR A DO-OVER...UKRAINE IS WELL AND TRULY SCREWED.

[Demeter]

35. Ukrainian minister admits country is ‘bankrupt’

http://rt.com/business/213375-ukraine-bankrupt-minister-economy/

Ukraine is ‘in fact bankrupt’ says the new Minister of Economic Development and Trade Aivaras Abromavichus. He advises that the government shouldn’t interfere in how businesses are run if it wants to get the economy out of trouble.

"Businessmen ask for one thing - they do not ask the government for help, they ask it not to interfere,” Abromavichus said at an economic policy committee meeting Wednesday as quoted by RBC Ukraine.

“By and large, the state is bankrupt, so it’s unreasonable to expect that we will create real, not declarative incentive programs," he added saying business has to handle everything itself.

A possible way out of this critical economic situation could come from additional assistance from the IMF. On Wednesday, The Financial Times reported that the IMF estimated Ukraine needs an additional $15 billion in financial assistance. Extra funding is needed because of a 7 percent fall in the country’s GDP, and a decline in exports to Russia. This has caused an outflow of capital and a reduction in foreign exchange reserves which lost more than 20 percent ($10 billion) in November. The IMF believes that without the help Kiev will have to cut its budget or go into default on its bond repayments. At the same time the allocation of $15 billion was supported only by a few IMF lenders. A $17 billion credit line to Ukraine available until 2016 has already been approved by the IMF. An IMF representative says a decision could be made within a week if all the parties agree terms.

In recent months, the IMF and the EU have provided Ukraine with more than €4 billion. Kiev was promised €30 billion in total.

Abromavichus also plans to pull Ukraine into the top 50 countries in the ‘Doing Business ratings’ within two years. Ukraine will try to achieve this through abolition of controls and licensing, as well as through the establishment of equal rights for businesses, regardless of scale.

The new Economic Development Minister used to be a businessman in Lithuania. He received Ukrainian citizenship right before being appointed minister on December 2.

SO UKRAINE IS THE PROPERTY OF THE ECONOMIC HITMEN...WHO DON'T MAKE GOOD OWNERS.

[Demeter]

36. $300,000 in gold missing from Ukraine Central Bank after swapped for lead bricks

THIS INCIDENT HAS THE POTENTIAL TO BECOME A BLOCK-BUSTER HOODUNIT, IN EITHER REAL OR FICTIONAL FORM...MY PERSONAL FAVORITE OF STORIES FROM THE WHOLE BLOODY MESS.

http://rt.com/business/216687-gold-missing-ukraine-bank/

Cunning fraudsters have conned the Ukraine Central Bank branch in Odessa into buying $300,000 worth of gold which turned out to be lead daubed with gold paint.

“A criminal case has been opened and we are now carrying out an investigation to identify those involved in the crime,” a spokesman for the Odessa police force is quoted by Vesti.

The news was first reported by Odessa’s State Ministry of Internal Affairs. A preliminary investigation suggests the gang had someone working for them inside the bank that forged the necessary paperwork to allow the sale of the fake gold bullion. It’s also been discovered that bank staff were not regularly checked when entering or exiting the premises. Since the discovery, the National Bank no longer buys precious metal over the counter, as it cannot be sure of its authenticity, says the First Deputy Head of the National Bank of Ukraine, Aleksandr Pisaruk. The National Bank of Ukraine (NBU) has confirmed the theft of several kilograms of gold in the Odessa region. The cashier involved has apparently fled to Crimea, Vesti Ukraine reports. Criminal proceedings began on November 18, even though the scam apparently took place between August and October.

In November, the Central Bank reportedly lost $12.6 billion in gold reserves, putting the total stockpile at just over $120 million.

LOST? HOW CAN ONE LOSE 500 TONS OF GOLD (MORE OR LESS)??

However, the Central Bank reports that foreign currency and gold reserves stood at $9.97 billion at the end of November.

[Demeter]

23. Lithuania losing its litas to adopt the euro currency

http://www.euronews.com/2014/12/29/lithuania-losing-its-litas-to-adopt-the-euro-currency/

VIDEO REPORT AT LINK

On January 1, 2015 Lithuania will be the last Baltic nation to join the growing number of EU states to have adopted the euro. Like Estonia and Latvia, Lithuania is hoping for more investment and lower borrowing. The switch coincides with steps towards greater energy independence and requests for more NATO troops in Lithuania, marking a new shift away from Moscow. But half those polled in this state of three million do not welcome the euro.

“It is all a horror movie,” elderly Laima Krecikiene said outside a supermarket by the border. “Don’t you understand? Can you imagine how little money people in the villages have? Just look at the prices, they shot up in anticipation of the euro.”

Market reforms and wider economic crisis have been tough for Lithuanians, driving many to emigrate. But few oppose its shift towards the West. Russia’s move into Ukraine has awoken fears the Baltics could be next. NATO has scrambled its jets over 150 times this year after Russian sorties, three times more than last year. Moscow held surprise military exercises in neighbouring Kaliningrad in December with 9,000 troops and 55 ships. Russian sanctions have hit Lithuania’s transport sector, which employs around 100,000, as well as its dairy industry. While the aim may be to bring the country back into Moscow’s orbit, analysts say it is having the opposite effect, focusing business minds on the west and emerging markets like Asia.

“I think Russians are trying to educate us how to behave,” said Gitanas Nauseda, chief economist as SEB bank in Lithuania. “But among executives the mentality of having Russia in your strategic plan is disappearing.”

With Russia still accounting for some 20 percent of exports compared with 60 percent going elsewhere in the European Union, the government, which has been among the most vocal in Europe in denouncing Russia, says there is some way to go. Prime Minister Algirdas Butkevicius said some businesses still did not appreciate the risks of dealing with Russia.

“It’s better to work with less risky markets, make use of having a stable currency like the euro in Lithuania, have lower profits but long-term stability in business,” he told Reuters news agency.

A big step came in October when “Independence”, a floating liquefied natural gas import terminal, arrived under heavy guard in Lithuania, marking the end of the Baltic state’s reliance on Russian gas by allowing it to import from countries like Norway as well.

While a Russian crisis could upset forecasts, the central bank says euro zone membership could add 1.3 percent to GDP in the long term. The economy is expected to grow 2.9 percent this year. Massive public spending cuts coupled with an economic crisis saw Lithuania’s GDP shrink by 15 percent in 2009, a drop that took until 2014 to recover. Around a tenth of the population has emigrated, half since the crisis. Now Lithuania seems healthier than many EU economies, but central bank head Vitas Vasiliauskas said it could not relax. “The euro gives you a lot of opportunities. At the same time you must move forward with reforms,” he said in an interview. Deeper problems include creaking education and health systems and the brain drain, and even businesspeople are sceptical about the benefits of joining the euro. Visvaldas Matijosaitis, CEO of Viciunai Group, producer of frozen products that exports to 56 countries and employs 7,500 people, complained of a shortage of skilled labour – his company is forced to bus in workers from 100 km away.

“Productivity is not what it is in the West,” Matijosaitis said, as lines of women filleted fish by hand nearby. “A lot of investment would be needed to raise productivity.”

Asked if the euro would help, he did not hesitate.

“It changes nothing,” he said.

When Lithuania adopts the euro, it will leave just 11 different currencies in the EU: Bulgaria’s lev, Britain’s pound, Croatia’s kuna, the Czech koruana, Denmark’s krone, Hungary’s forint, the Polish złoty, Romania’s leu, the Swedish krona and Swiss franc.

[Demeter]

24. Commodities Head for Record Losing Run on Oil to Dollar

http://www.businessweek.com/news/2014-12-30/commodities-head-for-record-losing-run-on-oil-s-rout-dollar

Commodities headed for the biggest annual loss since the global financial crisis in 2008, retreating for a record fourth year, as a global glut spurred a rout in oil prices and a stronger dollar cut the allure of raw materials.

The Bloomberg Commodity Index (BCOM), which tracks 22 products from crude to copper, fell 0.9 percent to 105.1845 points at 8:53 a.m. in New York, after dropping to the lowest level since March 2009 earlier today. It’s lost 16 percent this year, with crude, gasoline and heating oil the biggest decliners. A fourth year of losses would be the longest since at least 1991.

Energy prices retreated in 2014 as a jump in U.S. drilling sparked a surge in output and price war with OPEC, which chose to maintain supplies to try to retain market share. The dollar climbed to the highest level in more than five years as a U.S. recovery spurred speculation that the Federal Reserve will start to raise borrowing costs next year. Commodities are set for a volatile year in 2015, with crude oil poised to extend its slump, according to Australia and New Zealand Banking Group Ltd.

“What we’re seeing is that supplies from North America have really outpaced worldwide demand growth and as a result, we have a supply glut,” Andy Lipow, president of Lipow Oil Associates LLC in Houston, said by phone. “And that of course has put pressure on prices over the last several months. And as a result, it’s dragging down commodities indexes as well.” MORE

[Demeter]

25. China factory activity contracts in December as slowdown deepens

http://www.reuters.com/article/2014/12/31/us-china-economy-pmi-idUSKBN0K902920141231

Activity in China's factory sector shrank for the first time in seven months in December, a private survey showed on Wednesday, highlighting the urgency behind a series of surprise easing moves by Beijing in the past two months.

The weak performance will add to the debate over whether Beijing needs to roll out more support measures to avert a sharper economic slowdown or fast-track market reforms to stimulate demand - or both.

The report puts a final sluggish stamp on what has been a surprisingly grim fourth quarter for the world's second-largest economy, which is expected to grow at its slowest pace this year in nearly a quarter of a century.

"Domestic demand led the slowdown as new orders contracted for the first time since April 2014. Price contraction deepened," said Qu Hongbin, chief economist for China at HSBC.

"We believe that weaker economic activity and stronger disinflationary pressures warrant further monetary easing."

MORE

[xchrom]

27. Potential 2016 Contender Jeb Bush Just Quit All His Board Posts

http://www.businessinsider.com/r-jeb-bush-quits-board-posts-ahead-of-possible-white-house-run-washington-post-2015-1

(Reuters) - Potential U.S. Republican presidential candidate Jeb Bush has resigned from all of his corporate and non-profit board member positions, the Washington Post reported on Wednesday, as the former Florida governor explores a run for the White House.

The Post, citing a statement emailed to the paper by one of Bush's aides late on New Year's Eve, said he even stepped down from the board of his education foundation.

The statement added that he was still evaluating next steps for businesses for which he serves as an owner or principal partner, including consulting firm Jeb Bush & Associates, the Post reported.

Reuters could not independently verify the report. Representatives for Bush were not immediately available.



Read more: http://www.businessinsider.com/r-jeb-bush-quits-board-posts-ahead-of-possible-white-house-run-washington-post-2015-1#ixzz3NZavUoEj

[Demeter]

32. AND A LOT OF PEOPLE ARE BREATHING EASIER

I wonder if this idea of running for President is what put Poppy in the hospital...

[xchrom]

28. TROUBLED EU HOPING THE ONLY WAY IS UP IN 2015

http://hosted.ap.org/dynamic/stories/E/EU_EUROPES_NEW_YEAR_?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2015-01-01-07-45-05

BRUSSELS (AP) -- Beset by critics and buffeted by economic woes, European Union chiefs might have been forgiven for thinking that at least Pope Francis would apply some balm for the New Year in his address to the EU parliament.

Not so. Even the pontiff spoke of a continent that was "elderly and haggard" facing a world which "regards it with aloofness, mistrust and even, at times, suspicion."

Little wonder that many in Europe hope that 2015 is the year the fortunes of the 28-nation bloc bottom out and things finally look up again.

Certainly, the EU has the zest and energy brought by a new team, headed by the no-nonsense Donald Tusk, once an activist in the Solidarity movement before becoming democratic Poland's longest-serving prime minister. He is expected to add visibility to the EU presidency as he takes over from the colorless Herman Van Rompuy.

[xchrom]

29. NEW YEAR MAY BRING MORE SMALL BUSINESS HELP FROM WASHINGTON

http://hosted.ap.org/dynamic/stories/U/US_SMALLBIZ_SMALL_TALK?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2014-12-31-13-04-29

NEW YORK (AP) -- Small business owners may get more help from Washington in 2015.

Gridlock in Washington in recent years has stalled tax bills and other legislation aimed at helping small companies, but such proposals are expected to be on the agenda in the Republican-led Congress. Democrats have opposed some proposals because of concerns about the impact of those tax breaks on the federal budget.

Parts of the health care law are likely to be debated. And lawmakers and the Small Business Administration hope to make it easier for companies to borrow.

"Small businesses are looking for government to function and get a lot more done," says John Arensmeyer, CEO of the advocacy group Small Business Majority.

[xchrom]

30. GENERAL MOTORS SPENDS $3.9B TO REDEEM PREFERRED STOCK

http://hosted.ap.org/dynamic/stories/U/US_GENERAL_MOTORS_SHARES?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2014-12-31-18-47-18

DETROIT (AP) -- General Motors Co. says it has completed the planned $3.9 billion purchase of 156.1 million shares of preferred stock.

The Detroit-based automaker sold cheaper debt to pay for the purchase. GM spokesman Tom Henderson said Wednesday that the deal improves the company's cost structure.

GM has now redeemed all Series A preferred stock from the UAW Retiree Medical Benefits Trust and Canada Gen Investment Corp. The trust provides health benefits to retired autoworkers and the investment corporation manages the Canadian government's investment in GM.

The trust got the shares after GM emerged from bankruptcy to help pay the company's retiree health care costs. GM bought back some preferred stock last year.

GM will take an $800 million charge in the fourth quarter for buying back the preferred stock.

[Demeter]

31. The age of loneliness is killing us George Monbiot

http://www.theguardian.com/commentisfree/2014/oct/14/age-of-loneliness-killing-us?CMP=ema_565

What do we call this time? It’s not the information age: the collapse of popular education movements left a void filled by marketing and conspiracy theories. Like the stone age, iron age and space age, the digital age says plenty about our artefacts but little about society. The anthropocene, in which humans exert a major impact on the biosphere, fails to distinguish this century from the previous 20. What clear social change marks out our time from those that precede it? To me it’s obvious. This is the Age of Loneliness. When Thomas Hobbes claimed that in the state of nature, before authority arose to keep us in check, we were engaged in a war “of every man against every man”, he could not have been more wrong. We were social creatures from the start, mammalian bees, who depended entirely on each other. The hominins of east Africa could not have survived one night alone. We are shaped, to a greater extent than almost any other species, by contact with others. The age we are entering, in which we exist apart, is unlike any that has gone before. Three months ago we read that loneliness has become an epidemic among young adults. Now we learn that it is just as great an affliction of older people. A study by Independent Age shows that severe loneliness in England blights the lives of 700,000 men and 1.1m women over 50, and is rising with astonishing speed.

Ebola is unlikely ever to kill as many people as this disease strikes down. Social isolation is as potent a cause of early death as smoking 15 cigarettes a day; loneliness, research suggests, is twice as deadly as obesity. Dementia, high blood pressure, alcoholism and accidents – all these, like depression, paranoia, anxiety and suicide, become more prevalent when connections are cut. We cannot cope alone. Yes, factories have closed, people travel by car instead of buses, use YouTube rather than the cinema. But these shifts alone fail to explain the speed of our social collapse. These structural changes have been accompanied by a life-denying ideology, which enforces and celebrates our social isolation. The war of every man against every man – competition and individualism, in other words – is the religion of our time, justified by a mythology of lone rangers, sole traders, self-starters, self-made men and women, going it alone. For the most social of creatures, who cannot prosper without love, there is no such thing as society, only heroic individualism. What counts is to win. The rest is collateral damage.

British children no longer aspire to be train drivers or nurses – more than a fifth say they “just want to be rich”: wealth and fame are the sole ambitions of 40% of those surveyed. A government study in June revealed that Britain is the loneliness capital of Europe. We are less likely than other Europeans to have close friends or to know our neighbours. Who can be surprised, when everywhere we are urged to fight like stray dogs over a dustbin? We have changed our language to reflect this shift. Our most cutting insult is loser. We no longer talk about people. Now we call them individuals. So pervasive has this alienating, atomising term become that even the charities fighting loneliness use it to describe the bipedal entities formerly known as human beings. We can scarcely complete a sentence without getting personal. Personally speaking (to distinguish myself from a ventriloquist’s dummy), I prefer personal friends to the impersonal variety and personal belongings to the kind that don’t belong to me. Though that’s just my personal preference, otherwise known as my preference.

One of the tragic outcomes of loneliness is that people turn to their televisions for consolation: two-fifths of older people report that the one-eyed god is their principal company. This self-medication aggravates the disease. Research by economists at the University of Milan suggests that television helps to drive competitive aspiration. It strongly reinforces the income-happiness paradox: the fact that, as national incomes rise, happiness does not rise with them. Aspiration, which increases with income, ensures that the point of arrival, of sustained satisfaction, retreats before us. The researchers found that those who watch a lot of TV derive less satisfaction from a given level of income than those who watch only a little. TV speeds up the hedonic treadmill, forcing us to strive even harder to sustain the same level of satisfaction. You have only to think of the wall-to-wall auctions on daytime TV, Dragon’s Den, the Apprentice and the myriad forms of career-making competition the medium celebrates, the generalised obsession with fame and wealth, the pervasive sense, in watching it, that life is somewhere other than where you are, to see why this might be.

So what’s the point? What do we gain from this war of all against all? Competition drives growth, but growth no longer makes us wealthier. Figures published this week show that, while the income of company directors has risen by more than a fifth, wages for the workforce as a whole have fallen in real terms over the past year. The bosses earn – sorry, I mean take – 120 times more than the average full-time worker. (In 2000, it was 47 times). And even if competition did make us richer, it would make us no happier, as the satisfaction derived from a rise in income would be undermined by the aspirational impacts of competition.

The top 1% own 48% of global wealth, but even they aren’t happy. A survey by Boston College of people with an average net worth of $78m found that they too were assailed by anxiety, dissatisfaction and loneliness. Many of them reported feeling financially insecure: to reach safe ground, they believed, they would need, on average, about 25% more money. (And if they got it? They’d doubtless need another 25%). One respondent said he wouldn’t get there until he had $1bn in the bank. For this, we have ripped the natural world apart, degraded our conditions of life, surrendered our freedoms and prospects of contentment to a compulsive, atomising, joyless hedonism, in which, having consumed all else, we start to prey upon ourselves. For this, we have destroyed the essence of humanity: our connectedness....


Hobbes’s pre-social condition was a myth. But we are entering a post-social condition our ancestors would have believed impossible. Our lives are becoming nasty, brutish and long.


WELL, THERE'S A CHEERFUL OP-ED FOR A HANGOVER, TO BE SURE.

[bread_and_roses]

40. and all too true, alas

.... and part of this is replacing community with "family" - we apotheosize "family" as if any family can function in a vacuum apart from the culture and community .... as if spouses and children were possessions .... as if anyone can make a go of it alone.

I am meandering a bit with this but it is something I think a lot about - how unnatural the nuclear family seems to me .... how much more sane some sort of communal parenting would be - after all, the "family" proves again and again to be one of the most dangerous places in the world for children. And no surprise, with parents alone tasked with all the care and responsibility and called on to somehow make up for the gross inequalities in our society.

[Demeter]

41. Family dies--

which is what has happened to mine. My parents stuck to family, because there was a lot of it, and they were essentially isolates, and by lack of opportunity, so were we kids.

Now we are reduced to 2 siblings, 4 descendants, distant cousins....I am trying to build community in the condos, but it's like pulling teeth. paranoia has replaced community. A nation of strangers, unsettled, unattached. No gift of sociability.

[bread_and_roses]

42. That it does

My parents came from families of six & eight children; they had seven. Out of those seven, they had three grandchildren and (so far) two great-grandchildren - and we are scattered. It's easy to predict our branch dying out in a few generations - if we had a few generations, which I don't think we do.

Building community in our atomized culture is very hard and maybe impossible - I applaud your efforts.

[Demeter]

37. The Imperial Collapse Playbook By Dmitry Orlov

http://www.informationclearinghouse.info/article40585.htm

Some people enjoy having the Big Picture laid out in front of them—the biggest possible—on what is happening in the world at large, and I am happy to oblige. The largest development of 2014 is, very broadly, this: the Anglo-imperialists are finally being forced out of Eurasia. How can we tell? Well, here is the Big Picture—the biggest I could find. I found it thanks to Nikolai Starikov and a recent article of his.

Now, let's first define our terms. By Anglo-imperialists I mean the combination of Britain and the United States. The latter took over for the former as it failed, turning it into a protectorate. Now the latter is failing too, and there are no new up-and-coming Anglo-imperialists to take over for it. But throughout this process their common playbook had remained the same: pseudoliberal pseudocapitalism for the insiders and military domination and economic exploitation for everyone else. Much more specifically, their playbook always called for a certain strategem to be executed whenever their plans to dominate and exploit any given country finally fail. On their way out, they do what they can to compromise and weaken the entity they leave behind, by inflicting a permanently oozing and festering political wound. “Poison all the wells” is the last thing on their pre-departure checklist.

• When the British got tossed out of their American Colonies, they did all they could, using a combination of import preferences and British “soft power,” to bolster the plantation economy of the American South, helping set it up as a sort of anti-United States, and the eventual result was the American Civil War.

• When the British got tossed out of Ireland, they set up Belfast as a sort of anti-Ireland, with much blood shed as a result.

• When the British got tossed out of India, they set up Pakistan, as a sort of anti-India, precipitating a nasty hot war, followed by a frozen conflict over Kashmir.

• When the US lost China to the Communists, they evacuated the Nationalists to Taiwan, and set it up as a sort of anti-China, and even gave it China's seat at the United Nations.

The goal is always the same: if they can't have the run of the place, they make sure that nobody else can either, by setting up a conflict scenario that nobody there can ever hope to resolve. And so if you see Anglo-imperialists going out of their way and spending lots of money to poison the political well somewhere in the world, you can be sure that they are on their way out. Simply put, they don't spend lots of money to set up intractable problems for themselves to solve—it's always done for the benefit of others.

Fast-forward to 2014, and what we saw was the Anglo-imperialist attempt to set up Ukraine as a sort of anti-Russia. They took a Slavic, mostly Russian-speaking country and spent billions (that's with a “b”) of dollars corrupting its politics to make the Ukrainians hate the Russians. For a good while an average Ukrainian could earn a month's salary simply by turning up for an anti-Russian demonstration in Kiev, and it was said that nobody in Ukraine goes to protests free of charge; it's all paid for by the US State Department and associated American NGOs. The result was what we saw this year: a bloody coup, and a civil war marked by numerous atrocities. Ukraine is in the midst of economic collapse with power plants out of coal and lights going off everywhere, while at the same time the Ukrainians are being drafted into the army and indoctrinated to want to go fight against “the Muscovites.”

But, if you notice, things didn't go quite as planned. First, Russia succeeded in making a nice little example of self-determination in the form of Crimea: if it worked for Kosovo, why can't it work for Crimea? Oh, the Anglo-imperialist establishment wishes to handle these things on a case-by-case basis, and in this case it doesn't approve? Well, that would be a double-standard, wouldn't it? World, please take note: when the West talks about justice and human rights, that's just noise.

Next, the Russians provided some amount of support, including weapons, volunteers and humanitarian aid, to Ukraine's eastern provinces of Donetsk and Lugansk, which declared themselves People's Republics and successfully fought Ukraine's so-called “anti-terrorist operation” to a stalemate and an imperfect, precarious cease-fire. Very significantly, Russia absolutely refused to get involved militarily, has withheld official recognition of these republics, has refused to consider breaking up Ukraine, and continues to insist on national dialogue and a peace process even as the bullets fly. According to Putin, Ukraine must be maintained as “a contiguous political space.” Thus, the Russians have responded to the Anglo-imperialists' setting up of an anti-Russia in the form of Ukraine by setting up an anti-Ukraine in the form of DPR and LPR, thereby shunting the Anglo-imperialist attempt to provoke a war between Ukraine and Russia into a civil war within Ukraine.

You might also notice that the Anglo-imperialists have been getting very, very angry. They have been doing everything they can to vilify Russia, comparing Putin to Hitler and so on. This is because for them it's all about the money, and they didn't get what they paid for. What the Anglo-imperialists were paying for in corrupting Ukraine's politics was a ring-side seat at a fight between Ukraine and Russia. And what they got instead is a two-legged stool at a bar-room brawl between Eastern and Western Ukraine. Eastern Ukraine accounts for a quarter of the Ukrainian economy, produces most of the coal that had formerly kept the lights on in the rest of the country, and contains most of the industry that had made Ukraine an industrialized nation. Western Ukraine is centered on the unhappy little rump of Galicia, where the political soil is so fertile for growing neo-Nazis. So, paying billions to watch a bunch of Ukrainians fight each other inconclusively while Russia gets to play peacemaker is not what the Anglo-imperialists wanted, and they are absolutely livid about it. If they don't get the war they paid for PDQ, they will simply cut their losses, pack up and leave, and then do what they always do, which is pretend that the country in question doesn't exist, which, the way things are going in the Ukraine, it barely will.

Note that leaving, and then pretending that a place doesn't exist, is something the Anglo-imperialists have been doing a lot lately. When they left Iraq, they did succeed in setting up a sort of anti-Iraq in the form of Iraqi Kurdistan, but that all blew up in their face. Their attempts to set up an anti-Syria or an anti-Libya died in their infancy, and they don't seem to have any plan at all with regard to Afghanistan, unless it is to repeat every single blunder the Soviets made there as carefully and completely as possible.

What's more, it's starting to look like they are about to get kicked out of Eurasia altogether. Most of the major Eurasian players—China, Russia, India, Iran, much of Central Asia—are cementing their ties around the Shanghai Cooperation Organization, to which the United States isn't even admitted as an observer. As for the European Union, the current crop of EU politicians is very much bought and will be paid for upon retirement by the Anglo-imperialists, but the only reason they are still in power is that there are lots of older voters in Western Europe, and older people tend to cling to what they know even after it stops working—for them or, especially, for their kids. If it was up to the young people, the Anglo-imperialists would face open rebellion. In fact, the trends in voting patterns show that their departure from the region is a matter of time.

Here is a preview of possible coming attractions. On their way out, the Anglo-imperialists will of course try to set up an anti-Europe, and the obvious choice for that is Britain. Of all the European nations, it is the most heavily manipulated by their Anglo cousins from across the pond. It would take minimal effort for them to hurt Britain economically, then launch a propaganda campaign to redirect the blame for the bad economy toward the continent. They wouldn't even have to hire translators for their propaganda—a simple “spelling-chequer” (or whatever) would suffice. And so, to make sure that their efforts to provoke a large-scale, hugely destructive, festering conflict between Britain and Europe fail, Europe would do well to set up an anti-Britain within Britain.

And the obvious choice for an anti-Britain is of course Scotland, where the recent independence referendum failed because of... the recalcitrance of older voters. A dividing line between the Anglo empire and Eurasia running through the English Channel/La Manche would be a disaster for Europe and moving it somewhere west of Bermuda would pose a formidable challenge. On the other hand, suppose that line ran along Hadrian's Wall, with the traditionally combative and ornery Scots, armed with the remnants of North Sea oil and gas, aligning themselves with the Continent, while England remains an ever-so-obedient vassal of the Anglo-imperialists? That would reduce the intercontinental conflict to what Americans like to call a “pissing contest”: not worth the high price of admission. Yes, there would be some strong words between the two sides, and some shoving and shouting outside of pubs, and even some black eyes and loose teeth should diplomacy fail, but that should be the extent of the damage. That I see as the best-case outcome.

So that's the big picture I see heading into 2015, which I am sure will be a most tumultuous year. Not to make a prediction as to timing (don't worry, you won't ever get one out of me!) but 2015 could be the year the Anglo-imperialist franchise finally starts shutting down in obvious ways. We know it will have to shut down eventually, because failing all the time is not conducive to its survival. The bonus question is, what sort of anti-America will these parasites set up inside America before they abandon their host and scatter to their fortified compounds in undisclosed locations around the world? Or will they not even bother, and just provoke a war of all against all?

I would think that they would at least try to leverage their expensively engineered red/blue divide within the United States. This fake cultural/political divide, with all the pseudoliberal/pseudoconservative indoctrination and university- and church-based brainwashing that put it in place, cost them a pretty penny. It was engineered to produce the appearance of choice at election-time while making sure that there isn't any. But could it not be pressed into service in some more extreme manner? How about leveraging it to organize some sort of rabidly homophobic racist fundamentalist separatist enclave somewhere down south? Or perhaps one somewhere in the north, where zoophilia is de rigeur while heterosexual intercourse requires a special permit from a committee stocked with graduates in women's studies? Now, fight, you idiots! Don't you see how well that could work in practice? Would they waste such a nice opportunity to set up a system of controlled mayhem? I think not!

I leave all of that up to you to imagine.

Happy New Year!

Dmitry Orlov is a Russian-American engineer and a writer on subjects related to "potential economic, ecological and political decline and collapse in the United States," something he has called “permanent crisis”. http://cluborlov.blogspot.com

[Demeter]

38. Ilargi: The Year 2014 in 5 Narratives

http://www.nakedcapitalism.com/2015/01/ilargi-year-2014-5-narratives.html

IT'S A WHOLE BOOK IN ITSELF! GO READ AND SAVOR

[Demeter]

39. iT'S A COLD, CLEAR DAY--brightly sunny

I'm spending the day dining with friends...well, a girl's gotta eat once in a while...

This weekend will be devoted to 12th Night, the epiphany, and a general mop-up of the holiday season.

My resolution is to make no resolutions. Enough said.

[bread_and_roses]

43. Alternatives To How We Live Now: Le Guin Blasts Fear, Greed and the Profit Motive

I cannot recommend Ursula K. Le Guin highly enough. The two novels mentioned here are mind-bending while being accessible and readable to a general audience, not just sci-fi aficionados. Of particular note for this group in "The Dispossessed" - a fascinating meditation on individualism/communalism, capitalism/communism, and human nature under any system all wrapped in a good story.

http://www.commondreams.org/further/2014/12/30/alternatives-how-we-live-now-le-guin-blasts-fear-greed-and-profit-motive

Alternatives To How We Live Now: Le Guin Blasts Fear, Greed and the Profit Motive

Amidst the best-of-2014 lists seeking to burnish a pretty dark year, we should find a place for the barn-burning speech by 85-year-old novelist Ursula Le Guin at the National Book Awards, where she accepted a Medal for Distinguished Contribution to American Letters for her decades of Marxist, feminist, gender-bending, capitalism-smashing science fiction - most notably The Left Hand of Darkness and The Dispossessed

... "Books, you know, they’re not just commodities. The profit motive often is in conflict with the aims of art. We live in capitalism. Its power seems inescapable. So did the divine right of kings. Any human power can be resisted and changed by human beings.

[bread_and_roses]

45. "It should be obvious ... voters’ lives get better, or they don’t."

Flashback - because it's still pertinent (see election 2014) and it still hurts.

I don't know why this was two year old article was listed at bottom of nakedcapitalism article Demeter posted .... but I maschoistically re-read it: re-read and weep ...

http://www.nakedcapitalism.com/2012/06/wisconsin-recap-thanks-to-obama-american-left-lies-in-smoldering-wreckage.html

Wisconsin Recap: Thanks to Obama, American Left Lies in Smoldering Wreckage
Posted on June 6, 2012 by Matt Stoller

And the deeper you look into the race, the worse it looks. By calling for a recall instead of a general strike after Walker stripped collective bargaining rights and cut benefits for workers, labor and Democratic leadership in the state diverted and then subverted populist energy, channeling it into an electoral process (at least one union, one very active in the occupation of the Capitol, stood apart from the electoral stupidity). Then, Barrett, an anti-labor centrist, won the Democratic primary by crushing his labor-backed opponent, Kathleen Falk. Finally, Barrett himself was destroyed by Scott Walker, who outspent Barrett 7-1 with corporate money. In other words, first, liberals lost a policy battle, then they failed to strike, then they lost a primary election, then they lost a general election to the most high-profile effective reactionary policy-maker in the country. The conservative beat the moderate who beat the liberal. And had Barrett won, he wouldn’t even have rolled back Walker’s agenda. Somehow, in a no-win electoral situation, Democrats and labor managed to lose as badly as they possibly could.

What happened?

It should be obvious that if you foreclose on your voters, cut their pay, and legalize theft of their wealth by Wall Street oligarchs, they won’t be your voters anymore. Somehow, Democratic activists continue to operate as if policy doesn’t matter to voters, or that policy evaluation is a Chinese menu of different stuff, some of which you like and some of which you don’t, as in “Oh I’ll take a pro-choice moderate, with a bailout, and gay rights. And a Pepsi”. But that’s not how it works – voters’ lives get better, or they don’t.

(emphasis added)

And we all know that whatever the punditry in the Beltway proclaim, things have not gotten better out here in on Main Street.

[Demeter]

46. I think things are gonna change by 2016

Mostly because I do not think they can continue as they have these past 8 years.

We were taken and thrown away. Not gonna get taken any more.

[Demeter]

47. Ever since last winter's brutal weather--DEMETER RANTS--PART OF FESTIVUS

I find I will not go out in the cold and dark without a life-threatening reason. Even the cold and sunny needs a damn good reason to go out in zero windchills.

It's not that I have to stand on a corner, waiting for a bus (goddess save those poor unfortunates). It's not that I cannot eat or dress for the weather. It's that whatever it is, the activity had better be worth the struggle to put all those layers on, and then take them off, and drag them around, and clean and maintain, etc. etc. And most things in my life aren't worth it, literally.

So maybe I'm reverting to a time when people stayed home when the weather was foul, or they were sick, and made their own entertainment. It may be bad for commerce, but it's much less stressful.

It's not the cold so much as the inconsiderateness. Society is too cold for the weather.

I also think Michigan should start constructing skywalks, like Minneapolis did, and accommodate the people, shelter them from the weather. This city is so hell-bent on bicycle paths, when decent bicycle weather isn't even 50% of the year....and the bus stops don't even have windbreaks! Do they think we are in Miami, or something? Or do they believe that Miami will migrate 1200 miles north in the near future?

[Demeter]

48. AIG Bailout Trial:M. Stanley Told Geithner it Would File for Bankruptcy the Weekend it Became a Bank

http://www.nakedcapitalism.com/2014/11/aig-bailout-trial-revelation-morgan-stanley-told-geithner-file-bankruptcy-weekend-became-bank.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

IF YOU WANT TO KNOW WHAT REALLY WAS GOING ON WHEN WE ALL GOT SHAKEN DOWN TO SUPPORT THE BANKSTERS IN THE MANNER TO WHICH THEY WERE ACCUSTOMED, YVES SMITH IS DIGGING UP THE DIRT. READ IT ALL, COMMENTS, TOO!

TRY NOT TO GRIND YOUR TEETH, THOUGH.

[Demeter]

49. Japan's Police Suspect 99% of Mt. Gox Bitcoins Missing from Fraud, Not Transaction Malleability Hack

https://www.cryptocoinsnews.com/japanese-police-suspect-99-of-mt-gox-bitcoins-missing-due-to-fraud-not-transaction-malleability-hack/

The joint Japanese and American government investigation into the whereabouts of supposedly stolen Mt. Gox bitcoins has announced a key discovery. The Japan News, Japan’s largest English language newspaper, is reporting that fraud is the cause of the “disappearance of 99% of Mt. Gox bitcoins.” According to sources in the Metropolitan Police Department (MPD), only about 7,000 Gox bitcoins were lost due to cyber-attacks.

The remaining 99% of the missing 650,000 bitcoins is “highly suspected” of disappearing during a period when Mt. Gox was being fraudulently run by an unknown party.

The Enigma of the “Stolen” Mt. Gox Bitcoins

The total amount of missing bitcoins, and the associated damage to Mt. Gox’s former users, has not changed. Rather, the community is a little bit closer to closure in the case of Mt. Gox, the centralized Bitcoin exchange that helped Bitcoin rise then damaged it so much with its implosion. Since the downfall of Mt. Gox, the Bitcoin community has continually speculated that fraud, not theft, was the reason for the fall of the company. Mt. Gox originally stated that it had lost 850,000 bitcoins as a result of transaction malleability related “leaks” to their cold wallet storage. The same cold wallet storage that Mark Karpeles has stated he could not reliably access. Shortly after the initial announcement, Karpeles and Gox “found” 200,000 bitcoins. Mark Karpeles broke this news weeks after the Bitcoin community had already noticed large chunks of bitcoins moving that could only have been under the control of Mt. Gox.

According to the lawyer, they found them on the 7th of this month by searching through a storage on the internet called a “wallet” which was being used by MtGox up until June 2011.

Across the world, former users of Mt. Gox have banded together to seek legal action against the Japanese company in hopes of getting some of the recovered Gox bitcoins...

[Demeter]

50. 'Shadow banking' set for breakout year in 2015

https://finance.yahoo.com/news/shadow-banking-set-breakout-2015-184732837.html

As traditional banks face tighter restrictions and the demand for credit grows, a clear winner is beginning to emerge.

Recovering from the black eye it received during the dark days of the financial crisis, the unregulated shadow banking system continues to gather both assets and attention, the latter from industry insiders who believe the climate is right for strong growth ahead.

A recent report from the Financial Stability Board put assets for nonbank lending institutions at $75 trillion after growing more than 7 percent in 2013.

While the FSB has been pushing hard for new rules governing shadow banks, most focus on reporting requirements so regulators can get a better understanding of how much risk is posed to the broader banking system. The board believes it's important, though, to maintain a healthy industry

"The current regulatory reform agenda, led by the FSB, has yielded important progress. However, many of the agreed principles have not yet been implemented nationally," the board wrote in its Global Financial Stability Report. "The challenge for policymakers is to strike the right balance between containing systemic vulnerabilities related to shadow banking risks and preserving the benefits of shadow banks."

Shadow banking came under a negative light during the crisis for helping to spur low-quality loans as well as the securitization process that sold bundles of those debt products to investors craving the higher yields they provided. But as more Dodd-Frank-related banking regulations come on line, bank analysts believe it will drive flow to the nonbank part of the lending framework...

WHAT'S THAT SAYING? FOOL ME ONCE...

[Demeter]

51. Thomas Piketty Refuses Big Award: Government Shouldn't 'Decide Who Is Honorable'

http://www.huffingtonpost.com/2015/01/01/thomas-piketty-legion-of-honor_n_6403790.html?utm_hp_ref=business&ir=Business


Posted: 01/01/2015 11:45 am EST Updated: 01/01/2015 11:59 am EST
THOMAS PIKETTY

Economist Thomas Piketty refused to accept France's highest honor, the Legion d'honneur, saying government shouldn't decide who is honorable.

"I have just learned that I was nominated for the Legion of honour. I refuse this nomination because I do not think it is the government's role to decide who is honorable," Piketty told AFP.

"They would do better to concentrate on reviving economic growth in France and Europe," Piketty added.

According to Reuters, Piketty was nominated for the honor on Thursday along with Nobel Economics laureate Jean Tirole and Nobel Literature prize winner Patrick Modiano. The Legion d'honnneur is awarded by President Francois Hollande.

Piketty's book Capital in the 21st Century, which addresses capitalism and income inequality, was a best-seller in 2014.

NOBODY CAN BE AS CHURLISH AS A FRENCHMAN

[Demeter]

52. DOJ helps local cops get around state limits on civil forfeiture

http://boingboing.net/2014/11/11/doj-helps-local-cops-get-aroun.html

Many states have passed laws limiting how much of your stuff the police can steal when they accuse you of a crime, but the Department of Justice has the solution for local cops: they will "adopt" a local seizure, making it federal and exempting it from state-level corruption controls.

The DOJ's "Equitable Sharing" program then splits the loot with the cops, making it a win-win for everyone except the poor fucks who are being ripped off by the agencies whose paychecks they subsidize. Muckrock's used the Freedom of Information Act to pry loose the DOJ's Equitable Sharing guidelines from 2009-2013 for 15 of the 20 most populous cities in America.

When the DOJ helps local cops rob the public, it requires that the cops spend their share of the loot on anti-drug and law-enforcement stuff. In the case of El Paso, that included "$5,199.80 on promotional supplies and $2,515 on polo shirts for the El Paso Police Foundation in 2012."

[Demeter]

53. Berlin’s digital exiles: where tech activists go to escape the NSA

IF THE NSA CAN BUG ANGELA'S CELL PHONE, HOW DOES THAT MAKE BERLIN A SAFE HAVEN?

http://www.theguardian.com/world/2014/nov/09/berlins-digital-exiles-tech-activists-escape-nsa?CMP=share_btn_tw

With its strict privacy laws, Germany is the refuge of choice for those hounded by the security services. Carole Cadwalladr visits Berlin to meet Laura Poitras, the director of Edward Snowden film Citizenfour, and a growing community of surveillance refuseniks...It’s the not knowing that’s the hardest thing, Laura Poitras tells me. “Not knowing whether I’m in a private place or not.” Not knowing if someone’s watching or not. Though she’s under surveillance, she knows that. It makes working as a journalist “hard but not impossible”. It’s on a personal level that it’s harder to process. “I try not to let it get inside my head, but… I still am not sure that my home is private. And if I really want to make sure I’m having a private conversation or something, I’ll go outside.”

Poitras’s documentary about Edward Snowden, Citizenfour, has just been released in cinemas. She was, for a time, the only person in the world who was in contact with Snowden, the only one who knew of his existence. Before she got Glenn Greenwald and the Guardian on board, it was just her – talking, electronically, to the man she knew only as “Citizenfour”. Even months on, when I ask her if the memory of that time lives with her still, she hesitates and takes a deep breath: “It was really very scary for a number of months. I was very aware that the risks were really high and that something bad could happen. I had this kind of responsibility to not fuck up, in terms of source protection, communication, security and all those things, I really had to be super careful in all sorts of ways.”

Bad, not just for Snowden, I say? “Not just for him,” she agrees. We’re having this conversation in Berlin, her adopted city, where she’d moved to make a film about surveillance before she’d ever even made contact with Snowden. Because, in 2006, after making two films about the US war on terror, she found herself on a “watch list”. Every time she entered the US – “and I travel a lot” – she would be questioned. “It got to the point where my plane would land and they would do what’s called a hard stand, where they dispatch agents to the plane and make everyone show their passport and then I would be escorted to a room where they would question me and oftentimes take all my electronics, my notes, my credit cards, my computer, my camera, all that stuff.” She needed somewhere else to go, somewhere she hoped would be a safe haven. And that somewhere was Berlin.

What’s remarkable is that my conversation with Poitras will be the first of a whole series of conversations I have with people in Berlin who either are under surveillance, or have been under surveillance, or who campaign against it, or are part of the German government’s inquiry into it, or who work to create technology to counter it. Poitras’s experience of understanding the sensation of what it’s like to know you’re being watched, or not to know but feel a prickle on the back of your neck and suspect you might be, is far from unique, it turns out. But then, perhaps more than any other city on earth, Berlin has a radar for surveillance and the dark places it can lead to.

“There is just a very real historical awareness of how information can be used against people in really dangerous ways here,” Poitras says. “There is a sensitivity to it which just doesn’t exist elsewhere. And not just because of the Stasi, the former East German secret police, but also the Nazi era. There’s a book Jake Appelbaum talks a lot about that’s called IBM and the Holocaust and it details how the Nazis used punch-cards to systemise the death camps. We’re not talking about that happening with the NSA [the US National Security Agency], but it shows how this information can be used against populations and how it poses such a danger.”

MUCH MUCH MORE

[Demeter]

54. Tansy is up with SMW for Friday, so see you Later!