G 20 on The Huffington Post

Chicago Cops Punished For Posed Photo With Cuffed G-20 Summit Suspect

2009-11-25T09:49:00Z

CHICAGO — A Chicago police spokesman says two high-ranking officers have been reprimanded after a video surfaced that showed officers posing with a handcuffed suspect at the G-20 meeting in Pittsburgh.

Police began investigating after video of the September incident began circulating on the Internet. In the video, more than a dozen officers in riot gear pose for a photo with the suspect kneeling in front of them.

Gillian Tett: Sovereign Debt Could Be The Next Subprime

2009-11-23T10:37:07Z

These days, there is a near-unanimous belief among western regulators that one way to prevent a repeat of the 2007-08 crisis is to stop banks taking crazy risks with subprime mortgage bonds or complex instruments such as collateralised debt obligations (CDOs). Instead, banks are being urged to hold a higher proportion of their assets in the form of "safe" instruments, most notably sovereign or quasi-sovereign debt. G20 regulators are holding regular meetings in Basel to draw up rules on how banks should do this, as part of a wider reform of financial regulation.

Ellen Brown: Goldman's Profits Come from Our Pockets: Why We Need a Tobin Tax

2009-11-09T17:25:23Z

"The homeless in America have Goldman Sachs to thank for their homelessness and starvation right now. They took the money from their pockets, they put it in their bonuses for this year. . . . That's a financial terrorist crime."

-- Former stock trader Max Keiser in a France 24 interview

In the midst of the worst recession since the Great Depression, Goldman Sachs is having a banner year. According to an October 16 article by colin Barr on CNNMoney.com:

While Goldman churned out $3 billion in profits in the third quarter, the economy shed 768,000 jobs, and home foreclosures set a new record. More than a million Americans have filed for bankruptcy this year, according to the American Bankruptcy Institute.

Barr writes that Goldman's "eye-popping profit" resulted "as revenue from trading rose fourfold from a year ago." Really. Revenue from trading? Didn't we bail out Goldman and the other Wall Street banks so they could make loans, take deposits, and keep our money safe?

That is what banks used to do, but today the big Wall Street money comes from short-term speculation in currency transactions, commodities, stocks, and derivatives for the banks' own accounts. And here's the beauty of it: the Wall Street speculators have managed to trade in practically the only products left on the planet that are not subject to a sales tax. While parents in California are now paying 9% sales tax on their children's school bags and shoes, Goldman is paying zero tax to sustain its gambling habit. Race track winnings and other forms of gambling are taxed at up to 25%. But stock market trades get off scot free.

That helps explain Goldman's equally eye-popping tax bracket. What would you guess - 50%? 30%? Not even close. In 2008, Goldman Sachs paid a paltry 1% in taxes - less than clerks at WalMart.

Speeding Tickets to Slow Day Traders?

Wall Street bankers have been called today's "welfare queens," feeding at the public trough to the tune of trillions of dollars. The fact that their speculative trades remain untaxed suggests a tidy way that taxpayers could recover some of their bailout money. The idea of taxing speculative trades was first proposed by Nobel Prize winning economist James Tobin in the 1970s. But he acknowledged that the tax was unlikely to be implemented because of the massive accounting problems involved. Today, however, modern technology has caught up to the challenge, and proposals for a "Tobin tax" are gaining traction. The proposals are very modest, ranging from .005% to 1% per trade, far less than you would pay in sales tax on a pair of shoes. For ordinary investors, who buy and sell stock only occasionally, the tax would hardly be felt. But high-speed speculative trades could be slowed up considerably. Wall Street traders compete to design trading programs that can move many shares in microseconds, allowing them to beat ordinary investors to the "buy" button and to manipulate markets for private gain.

Goldman Sachs admitted to this sort of market manipulation in a notorious incident last summer, in which the bank sued an ex-Goldman computer programmer for stealing its proprietary trading software. Assistant U.S. Attorney Joseph Facciponti was quoted by Bloomberg as saying of the case:

The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways.

The obvious implication was that Goldman has a program that allows it to manipulate markets in unfair ways. Bloomberg went on:

The proprietary code lets the firm do 'sophisticated, high-speed and high-volume trades on various stock and commodities markets,' prosecutors said in court papers. The trades generate 'many millions of dollars' each year.

Those many millions of dollars are coming from ordinary investors, who are being beaten to the punch by sophisticated computer programs. As one blogger mused:

Why do we have a financial system? I mean, much of its activity looks an awful lot like gambling, and gambling is not exactly a constructive endeavor. In fact, many people would call gambling destructive, which is why it is generally illegal....

What makes Goldman Sachs et. al. so evil is that they offer vast wealth to our society's best and brightest in exchange for spending their lives being non-productive. I want our geniuses to be proving theorems and curing cancer and developing fusion reactors, not designing algorithms to flip billions of shares in microseconds.

Gambling is an addiction, and the addicted need help. A tax on these microsecond trades could sober up Wall Street addicts and return them to productive labor. It could transform Wall Street from an out-of-control casino back into a place where investors pledge their capital for the development of useful products.

The Tobin Tax Gains Momentum

Various proposals for a Tobin tax have received renewed media attention in recent months. President Obama gave indirect support for the tax in a Press briefing on July 22, when he recommended that the government consider new fees on financial companies pursuing "far out transactions". Leaders from France, Germany, and the European Commission endorsed putting a speculation tax on the agenda at the G20 meeting in Pittsburgh in September. Brazil has now imposed what may be the first Tobin Tax on foreign investment inflows. A U.S. bill proposing to tax short-term speculation in certain securities, called "Let Wall Street Pay for Wall Street's Bailout Act of 2009", was introduced by Rep. Peter DeFazio (D-OR) last February. A different bill to regulate derivative trades was approved by the Financial Services Committee in October.

Derivatives are essentially bets on whether the value of currencies, commodities, stocks, government bonds or virtually any other product will go up or down. Derivative bets can cause shifts in overall market size reaching $40 trillion in a single day. Just how destabilizing short-term speculation can be - and just how lucrative a tax on it could be - is evident from the mind-boggling size of the market: $743 trillion globally in 2008. Another arresting fact is that just five super-rich commercial banks control 97% of the U.S. derivatives market: JPMorgan Chase & Co., Goldman Sachs Group Inc., Bank of America Corp., Citigroup Inc. and Wells Fargo & Co.

Pros and Cons

Promoters of international development have suggested that a mere .005% tax could raise between $30 billion and $60 billion per year, enough for the G7 countries to double international aid. But more than raising money, the tax could be an effective tool for slowing harmful speculative practices. According to a number of Nobel Prize economists, a downsized speculative market would go far towards creating a more sturdy financial system, helping to avoid the need for future bailouts. But if the tax is too small, it might not have the desired effect on speculation. The larger 1% tax originally proposed by James Tobin is therefore favored by some proponents. The much-needed income from a U.S. tax could be split between federal and state governments.

Opponents of the Tobin tax, led by the financial sector, argue that it would kill bank jobs, reduce liquidity, and drive business offshore. Supporters respond that Tobin tax profits could be used to create new jobs, and that the small size of the tax would hardly affect cash flows - although certainly the speculative market would shrink. Players in dice-rolling speculative operations have long claimed that their trades "stabilized" the system by enabling investors to hedge risk, but the recent financial crash has exposed that defense as being without clothes. Inflows of "hot money" are not good for a country. They create quick speculative bubbles that can collapse equally quickly when the money flows out again. Better for the country and its economy are the funds of prudent investors who intend to stick around for a while. A modest tax could even encourage these preferred investors, who will be more confident if their investments are not liable to collapse suddenly from hot money outflows.

Besides technical questions about how to implement the tax internationally, the offshore argument probably presents the most serious challenge. Should a Tobin tax pass in the U.S., investors would be likely to move to other markets beyond the reach of taxation. The U.S. could penalize traders for doing business abroad, but governments in major markets like Germany and London would no doubt need to endorse the tax for any meaningful shift to be seen. Some experts have argued that the Tobin tax would be best implemented by an international institution such as the United Nations, which would gain a large source of funding independent of donations from participating states.

That proposition sets off alarm bells for other observers, who see any international tax as a move toward further strengthening the power of the global financial oligarchs. However, the very fact that the United Nations, the G20, and the Bank for International Settlements are discussing this option suggests that we the people need to jump in and stake out our claim for national purposes, before we lose the tax money to international bodies controlled by the global bankers. We need to design the tax the way we want, before they design it the way they want. It needs to be collected by the U.S. Treasury and to go into the Treasury's coffers. It needs to bypass Wall Street and reach Main Street, where it can be used to stimulate local business and investment.

Officials from the International Monetary Fund insist that implementing a Tobin tax would be logistically impossible. But Joseph Stiglitz, a Nobel Prize winning economist and former World Bank leader, disagrees. In Istanbul in early October, he said that a Tobin tax was not only necessary but, thanks to modern technology, would be easier to implement than ever before. "The financial sector polluted the global economy with toxic assets," he said, "and now they ought to clean it out."

While Wall Street's welfare queens have been busy collecting generous government handouts, the 50 states have been left to fend for themselves. Some 48 states have faced budget crises in the past year, forcing them to cut libraries, schools, and police forces, and to raise taxes on income and sales. A sales tax on the exotic financial products responsible for precipitating the economic crisis is long overdue.

Bank Tax: Geithner And U.K.'s Gordon Brown Face Off On Bank Transaction Tax At G20 Meeting

2009-11-09T08:09:24Z

ST. ANDREWS, Scotland -- U.K. Prime Minister Gordon Brown and U.S. Treasury Secretary Timothy Geithner clashed over potential taxes on bank transactions at a weekend meeting here of finance policy makers from the Group of 20 leading economies.

At the gathering, G-20 finance ministers and central-bank chiefs discussed the fragility of the global economic recovery, agreed that stimulative efforts should continue and approved a timetable for agreeing on policies to help rebalance the global economy.

Nouriel Roubini: 'Too Big To Fail' Revisited

2009-11-05T16:36:56Z

Although the G-20 finance ministers pledged stronger prudential regulation and financial oversight of systemically important firms at their September meeting, there is no consensus yet among regulators, lawmakers and academics on how best to proceed.

President Abdoulaye Wade: Africa's Seat at the Table

2009-11-05T10:16:00Z

At the UN General Assembly in New York in late September, President
Barack Obama invited sub-Saharan leaders to a private lunch and
informal chat at the Waldorf-Astoria. Following on his Accra speech
this summer, the president asked African heads of state to share
responsibility on global issues. I am just beginning to get to know
the President, but his approach impressed me as indisputably sincere.

Africa's concerns today are interconnected with those of the West -- and
solutions must come from all continents and sectors. Battling global
warming, the economic crisis, food and energy shortages, and AIDS and
malaria requires co-partners, not post-colonial relationships. The
U.S. and Europe have no monopoly on brainpower, and African leaders
must wake up to a new reality: We are finally being listened to by the
industrial world. In a separate conversation on the same day that
African heads of state met with President Obama, World Bank president
Robert Zoellick informed me that the bank has "borrowed" a number of
Africa's sharpest minds for missions around the world. African
expertise and global expertise are beginning to merge.

When international debate on stimulating a global but sustainable
recovery shifted to the G-20 meeting in Pittsburgh after the UN
General Assembly, the focus again was on boosting African
participation. At every international conference where the governance
of the planet is concerned, I continue to press five reform
recommendations:

Insist that rich countries respect existing commitments to reinforce
the message of shared responsibility and accountability.

In the 2005 Gleneagles G-8 summit, dubbed the "100% debt relief
summit," the G-8 committed to double aid to Africa and forgive the
debt, both neither commitment has been realized. Oxfam calculates
that these pledges alone could save some three million lives in
Africa. In the 2009 G-8 meeting in Italy, another $20 billion was
pledged for African agricultural development, but these funds too are
for the most part undelivered. Even funds promised to the World Bank
at the Rome meeting have been held up, hindering vital programs.

The Obama Administration now promises to lead by example and make good
on its $3.2 billion pledge to the fund. But the remainder of
international commitments should voluntarily and promptly be entrusted
to the World Bank. G-20 leaders should recommend the immediate
creation of a "payment follow-up committee" for unkept promises if the
message of shared responsibility and accountability is to be taken
seriously around the world.

Continue investing massively in infrastructure as a strategy for
development, security, and boosting self-sufficiency in Africa, while
moving away from unrestricted cash aid.

I've been preaching infrastructure investment for decades. The
Americans, the Europeans, and the Chinese now all agree. There will be
no end to poverty and the Millennium Development Goals will be
meaningless if nations do not reinforce their ability to efficiently
move people and products to market. Senegal's recent Millennium
Challenge Corporation (MCC) compact for $540 million for building
roads and an irrigation network is a tremendous step in the right
direction, but the African continent needs a lot more: a
transcontinental rail network, intra-national highways, bridges,
improved modern ports ... Think of what the US would have become had
the private sector not invested in the railroads, waterways, and
interstate highway system. If we increase mobility commerce will
follow. Without commerce, economic growth and poverty relief cannot be
expected. But Africa is not just looking for the West to throw money
at its problems.

Think agriculture to stimulate employment and economic growth in the
developing world.

Africa doesn't suffer from unemployment like the US or Europe; we are
burdened by millions of "insufficiently-occupied people". Western jobs
may need to be saved or recovered; African employment has to be
invented. In Senegal, 70 percent of our population relies on
agriculture to survive. Our home-grown GOANA initiative, a global
offensive for promoting food self-sufficiency and security, has
already created thousands of new jobs for people who have never worked
before.

Our youth do not seek to become become "peasants", but they take to
their new identity as modern farmers. Young adults with a fertile
piece of land to cultivate, are much less tempted by the risk of
illegal immigration. In our southern region of Casamance,
newly-empowered women will be stimulating the local economy by
transforming fruit production into juice and dried fruit factories.
Agriculture, reinforced with equipment and infrastructure, paves the
way for economic growth. I never stop repeating: Don't send Africa
money -- give us seeds and tractors.

Reinforce existing international structures for development.

World Bank president Zoellick, whose commitment to Africa has been
exemplary, deserves greater support and creative input from African
leaders. Like most international institutions, the World Bank is
imperfect. But it's the best mechanism Africa has to work with today,
and African leaders can help improve it by intensifying efforts to get
the bank's interest-free loan program, the International Development
Association (IDA), back on its feet.

Invite the private sector to play a much greater role in the African
economic renaissance.

Africa is open for business. Opportunity abounds in almost all sectors
of the economy. Senegal invites both small and large companies, as
well as its resident diaspora, to come develop our infrastructure. We
cannot create trans-national infrastructure without direct foreign
investment. The revised Africa Growth and Opportunities Act (AGOA)
paves the way, and we invite Americans to come create joint ventures
with us in order to export African goods to the US market. American
legislators can utilize these opportunities, as trade advocate Rosa
Whitaker has suggested, with tax incentives for revenues generated in
Africa.

Those are just five ideas. More will follow now in this "new era of
engagement based on mutual interest" -- to borrow President Obama's
words. But already, the days of "throw Africa a crumb" are over.

Amb. Nancy E. Soderberg: President Obama Must Take the Lead on Climate Finance

2009-10-30T14:20:20Z

There's another financial crisis on the horizon -- the climate financial crisis. Working towards the global meeting in Copenhagen this December, the UN's climate negotiations are teetering on the brink of failure. The elephant in the room of these negotiations is how to pay for a global agreement -- and who will pick up the tab.

If the administration does not get ahead of Congress and commit now to financing a global deal on climate change, negotiations will fail. And the cost of inaction and certain failure will be much higher than the cost of action. Once a tipping point is reached, we will face a human and financial catastrophe that will make this recession seem like a golden age of prosperity. And unlike our economy, once the damage is done, the climate will not rebound with a bailout package.

The challenge boils down to this: the developed world -- responsible for today's crisis -- must help pay the costs for the developing world to do the right thing. Those catching up to us -- China and India -- will have to participate too, but developed countries need to lead. The good news is that for $150 billion, the world can get far ahead of the problem. While the long terms costs are likely to be higher, this investment now will set the world on the right course.

At the September G-20 meeting in Pittsburgh, leaders recognized the need to get the financing right by directing their Finance Ministers to report back at the next meeting in November with a range of possible options for climate change financing. They should recommend a global target for climate finance of at least $150 billion annually by 2020 - and commit the United States to funding 30% of that target, or $50 billion, through public financing. Roughly a third of this would be used to help the developing world adapt to the current effects of climate change, another third for helping poor nations adopt clean technologies, and the remainder for other mitigation objectives, such as energy efficiency and forest protection.

To be sure, in the wake of the current financial crisis, such funding will be politically difficult to obtain. Yet, we managed to find $15 trillion for bank bailouts and stimulus plans, $1.3 trillion in tax cuts, and one trillion dollars for the wars in Iraq and Afghanistan. The investment in saving our planet is no less urgent a challenge. The risks to our national security are real, including natural disasters, political upheaval, and further instability in states that could harbor the next Osama Bin Laden. And again, there is some good news. It costs billions, not trillions, and possible sources of public financing already exist, including revenues from the auctioning of allowances under cap-and-trade mechanisms, current climate and energy legislation, bunker fuel mechanisms, and international carbon and currency transaction levies.

But perhaps the most cost-effective way to help the world adopt clean energy and adapt to the effects of climate change is to stop propping up the very industry we should move away from -- fossil fuels. The world's richest G20 economies spend an estimated $300 billion a year to subsidize the industry most responsible for global emissions. In other words -- we have the money, we're just using it the wrong way. Re-directing this money would generate double the amount needed for climate financing -- and it wouldn't cost us a dime. At the September G20 summit in Pittsburgh, leaders asked for a plan to phase out those subsidies, but they won't consider it until June of 2010.

That is too leisurely a pace.

President Obama should press for a plan to be in place before the Copenhagen meeting this December -- preferably by the end of the G20's Finance Ministers and Central Bank Governors Meeting on November 6 and 7. In the meantime, he should move to end our own subsidies and instruct the U.S. agencies that currently provide fossil fuel subsidies internationally to do so, including the Overseas Private Investment Corporation, the U.S. Export Import Bank, and the Treasury Department which works through the World Bank. According to the Environmental Law Institute, this step alone would save us $72 billion, well more than what the United States needs to commit for its fair share of climate financing. Such transfers could break a major deadlock in the negotiations, and bring the developing world on board.

These are all ways to pay for a climate deal now - and at a much lower cost than doing it later. And such a move may be the only way to salvage the faltering Copenhagen negotiations. Should President Obama take the lead, the world will follow. And Congress just might as well.

Nancy Soderberg is a former US Ambassador to the United Nations and President of the Connect U.S. Fund, a consortium of six U.S. foundations promoting key foreign policy goals.

Francesco Femia is a Program Officer at the Connect U.S. Fund, where he focuses on climate and development issues.

G-20 Police Investigated Over Picture With Handcuffed Student (WATCH)

2009-10-16T11:15:47Z

CHICAGO - (AP) The Chicago Police Department is investigating several of its officers accused of forcing a college student they arrested during last month's G-20 summit in Pittsburgh to pose for a group photo with them.

The department, which has been dogged by embarrassing allegations of misconduct in recent years, began investigating the Pittsburgh claims after video of the alleged incident was posted on YouTube.

The video apparently shows about 15 police officers in riot gear posing for a photo with a man they detained kneeling in front of them.

Kyle Kramer, the 21-year-old University of Pittsburgh student forced to pose with police, was returning to campus from a pizza parlor when he was detained by police who were rounding up protesters, his attorney Cristopher Hoel told The Associated Press on Friday.

"He was a college student arrested for walking on campus. That seems to me to make him a victim," Hoel said.

Kramer faced a preliminary hearing Wednesday on misdemeanor charges of failure to disperse and disorderly conduct. Hoel said his client is innocent of both charges.

The department issued a statement saying the officers were working in Pittsburgh on their own time, but that they were still representing the city of Chicago.

"The Chicago Police Department does not tolerate misconduct by any of its members, regardless of where it might occur."

It's possible the officers violated Kramer's constitutional rights, as well as internal departmental rules, said Craig Futterman, a University of Chicago law professor who has studied the department and allegations of police brutality extensively.

If the officers were retaliating against Kramer for something he said that offended them, it is possible they could have violated Kramer's First Amendment right of free speech. The officers also might have violated Kramer's 4th Amendment right against unreasonable search or seizure, Futterman said.

Some fellow police officers declined to comment publicly about the investigation. But they pointed to a popular blog -- Second City Cop -- that blasted the officers for heaping more ridicule on a department dogged by several recent embarrassing incidents, including the beating of a female bartender by an off-duty officer.

"How do you even begin to defend something like this?" reads the blog. "You can't it's impossible... You are embarrassments."

Pat Camden, who spent more than 30 years with the department and was its spokesman for several years, harshly criticized the officers for damaging the reputation of a department that has been trying to rehabilitate its image that was hurt by several incidents, including one, captured on film and shown worldwide, of an off-duty officer beating up a female bartender.

"When you put on a police uniform you represent the Chicago Police Department and we've got these idiots with a prisoner right in front of them, and supervisors are standing right there," he said, incredulously. "That kind of childish behavior is totally unacceptable."

Some, though, wondered whether Kramer may have willingly posed for the photo with the officers.

Robert Weisskopf, a Chicago police lietenant, said he remembered an incident when a man insisted on being in a photograph along with several officers in riot gear.

And Daniel P. Smith, who wrote "On the Job: Behind the Stars of the Chicago Police Department," had the same thought when he saw the video.

"I could see the guy, thinking, 'They handcuffed me, this would be a great photo for my frat house,'" he said. "That's what it looked like to me."

But Camden said it's hard to imagine how something like this could have occurred, with all of the efforts that have been made to get officers to understand they should always act in public as if their actions are being recorded.

"You continue to make people aware that everything you (police officers) do from the moment you walk out the door until you get home at night is on camera somewhere," said Camden, who said he stresses that in media relations classes he teaches to police supervisors at Northwestern University.

"If you're in the public way, it's more than likely being recorded."

___

Associated Press Writer Joe Mandak in Pittsburgh contributed to this report.

Sony Kapoor: Time for Economic Polluters to Pay Up? Tobin or not Tobin...

2009-10-14T11:00:03Z

Proponents of Tobin Tax(es) or, more technically, Financial Transaction Taxes, are happy that these have been in the news a lot lately. The so-called "Tobin Tax" on capital flows was originally proposed in 1971 by Nobel laureate James Tobin as a way to address speculation in global markets. Today, everyone from Sarkozy and Merkel to the head of the UK Financial Regulator has been positive about levying such a tax. Even the former Senator Obama had voiced support on the campaign trail. Does it mean that we will get some form of a Tobin Tax, finally? Or are the proponents set for yet another disappointment? Signs are that that they are likely to get their way ... well sort of.

The financial crisis, the biggest in living memory, has massively tilted the political and financial landscape in a direction that makes such taxes not just more desirable but also much easier to implement.

Keynes was an early proponent of FTTs, and the idea got a new lease on life when James Tobin extended it to currency markets. The Asian crisis helped revive the discussion, and after falling off the agenda again, the idea was brought back once more as a potential source of revenue for funding poor country development. Each time it died a slow death. The opponents of FTTs won those battles, but they are about to lose the war. Here is why.

Even before the crisis hit, the 'markets always work efficiently and know best' school of thought was losing the battle of evidence. Those that believed that while financial markets mostly worked well, they were often prone to excesses and sometimes failed with bad social consequences were clear front-runners. The crisis has picked the winning side in a dramatic way. It's time for those who opposed FTTs with the argument that any interference with what they regarded to be well-functioning markets to shut up. Many have done so already.

Everyone agrees that even a small tax would penalize short term transactions and favor longer investment horizons. At a 0.01% rate, those trading 100 times a day will end up with a tax rate of 240%/year, and those that hold onto their stocks for 5 years will pay 0.002%. Automated computer trading based on mechanistic rules which sometimes buys and sells the same security hundreds of times a day would become untenable. Given the risk such trading poses to the financial system as highlighted by its total breakdown in August 2007, that would be no bad thing. Such High Frequency Trading is also dubious because the fact that it allows large actors access to markets a fraction of second before others and raises serious questions of fairness at a time where the little people are getting screwed all around. A reduction in trading patterns which threaten financial stability and skew the playing field without delivering much in the form of social benefits would reduce the likelihood of financial crisis. This appeals both to regulators and politicians.

It is good policy to tax polluting activities which have a negative footprint on society. An increasing number of financial transactions served no underlying social purpose and in the case of trades in complex derivatives and credit default swaps significantly increased systemic risk. Ever higher volumes of financial trades (churning) have been driven by the prospect of increasing fee based incomes. Ever increasing complexity was driven by the prospect of juicier profit margins. While privately profitable to the financial sector, both trends have imposed costs on the wider economy. It is good public policy then to impose a sin tax that penalizes churning and complexity. Financial Stability regulators are taking serious note.

This systemic risk which has crystallized in the shape of the ongoing crisis necessitated the allocation of trillions of dollars of scarce taxpayer funds to bail out the financial sector. Recovering the costs of these bailouts from the financial sector is not only fair but is also the only sensible policy option in line with the 'polluter pays' principle. The many existing transaction taxes raise substantial amounts of tax revenue. Extending these taxes to recover bailout funds from the financial sector is an idea that has snowballing political support behind it.

The crisis depressed tax revenues and necessitated stimulus spending. Governments are now saddled with the highest debt and deficit levels seen in a generation. These debts need to be repaid and the money will need to come from higher taxation. While no tax is perfect, the FTT stands heads and shoulders above other feasible options such as increasing Sales Tax, Value Added Tax or social security contributions. In contrast to these taxes, a FTT will have a highly progressive incidence and will tax activities that at best offer little social utility and at worst pose serious systemic risk. Increasing the tax burden on 'the little people' while ignoring the role of the under-taxed financial sector in facilitating tax avoidance by rich individuals and corporations would be political suicide. Politicians have already taken note.

For those skeptical about the dual revenue and stability goals of the tax, it might be instructive to look at sin taxes on smoking or pollution which marry substantial revenues while at the same time depressing harmful activities. To address the concerns of those who think the tax may harm markets, tax rates could start out very low and ratchet up annually once it is clear that the markets can bear the load. The regulatory response to the crisis has settled any remaining doubts about feasibility for good. The G-20 response of driving derivative transactions on to exchanges, making centralized clearing compulsory, introducing enhanced registration and reporting requirements and expanding the regulatory boundary to include hedge funds as well as off shore jurisdictions has all made it cheaper and easier to collect financial transaction taxes and will make it impossible to avoid them.

While international co-ordination is desirable, the success of existing taxes such as the UK Stamp Duty, a 0.5% tax on share transactions in the London Stock Exchange indicates that it is not necessary. This Stamp Duty nets the UK more than $8 billion every year. The US imposes a much smaller section 31 fee on stock transactions which funds the operations of the Security Exchange Commission. Increasingly electronic audit trails, greater cross-border regulatory co-ordination, action against tax havens and greater oversight of derivatives has only made implementation much easier both at a unilateral and multilateral level.

Under pressure from the French and Germans, the G-20 has finally asked the IMF to look into various options to get the financial sector to put in a greater contribution -- the Tobin tax was on the top of their minds. There are also strong suggestions that some of the revenue could also be put to use savings lives in poor countries. Even then, expect the financial sector to cry bloody murder and send their lobbyists out in full force -- surely one cannot expect the big banks to take a new tax lying down!

Proponents take heart ... while it remains unlikely that the G-20 will agree to a 'global tax'; the world will nonetheless still see a mushrooming of new unilateral transaction taxes in several financial markets and countries around the world. Little Tobin Taxes will bloom all around - and that would be a good thing!

Sony Kapoor is an ex-investment banker and Managing Director of Re-Define (Re-thinking Development Finance & Environment), an international Think Tank dedicated to improving the footprint of the financial system.

*This piece is based on an Op-Ed in SuedDeutsche Zeitung, Germany's leading daily newspaper.

Originally posted on New Deal 2.0

Find Out Which Of The G20 Countries Emits Most

2009-10-08T16:04:59Z

Explore changes in carbon emissions from fossil fuels for G-20 countries, selected developing nations and others critical to the climate debate.

Financial Reform: Political Will For Change May Be Disappearing

2009-10-07T13:39:03Z

As the world's banking system teetered on the brink of collapse just about a year ago, there were widespread, heartfelt, calls for reform.

Politicians of all stripes on both sides of the Atlantic, spurred on by taxpayers' outrage at the cost of bailing out those who ought to need help least, vowed to get tough. No longer would banks be allowed to become too big to fail, or bankers be rewarded for taking risks that prove the undoing of their institutions.

Glenn Denning: You Can't Eat Potential

2009-10-06T15:10:53Z

The passing of Norman Borlaug last month closed the chapter on an exemplary life of service to humankind. Dr. Borlaug, 1970 Nobel Peace Prize laureate and acknowledged "father" of the Asian Green Revolution, is credited with saving hundreds of millions of lives by breeding high yielding wheat varieties that spread throughout Asia during the 1960s and 70s. Inspired by Dr. Borlaug's successes, new rice types were also developed and widely adopted. As a result, food production in Asia doubled over the subsequent 25 years, outpacing population growth. The predicted famines were averted.
Dr. Borlaug was not content with the potential that his new varieties showed for increasing food supplies. "The potential is there, but you can't eat potential," was one of his most memorable lines. Dr. Borlaug was a passionate advocate of his new varieties with governments and aid agencies, urging them in the strongest terms to support smallholder farmers with credit, fertilizer, irrigation, roads, and a fair price for their produce. Only with these multiple, coordinated investments could the genetic potential of his new varieties be realized.

Less than three months ago in L'Aquila, Italy, the G8 declared to act "with the scale and urgency needed to achieve sustainable global food security", acknowledging that adequate food is not only necessary for economic growth and social progress but, more fundamentally, is the cornerstone of political stability and peace. In a rare departure from rhetoric of vague intent, the G8 and a posse of other like-minded governments and international agencies agreed to provide $20 billion over three years for sustainable agricultural development. Such a commitment, if realized, would sharply reverse a 30 year downward trend that has seen agriculture fall from the radar of most aid agencies and governments.

In Pittsburg last Friday, the G20, endorsed the L'Aquila initiative and called on the World Bank to establish a new global fund to scale up agricultural assistance in poor countries. In what the G20 communique called "this historic effort", the new fund would require country ownership, bring in the private sector and NGOs, and allow rapid disbursement of money, breaking through the bureaucracy that has plagued past efforts to deliver aid promises.

So why invest in agriculture? Why now? What happened to Dr. Borlaug's Green Revolution?
The answer is that we have been complacent, a condition that Dr. Borlaug warned us about in his Oslo acceptance address almost 30 years ago. In Asia, agricultural productivity has slowed, and in Africa, per capita food production has declined steadily for 40 years. As a result, one in every six people on earth is hungry. And malnutrition is implicated in about 40% of the 11 million deaths of children under five in developing countries.

For most, hunger and malnutrition are not the results of war or catastrophic events like droughts or floods. This is chronic hunger and malnutrition that perennially affects poor people, leaving them unable to produce or buy the food they need to stay healthy, go to school, undertake a day's work, or simply live with dignity. Global food shortages in 2007 and 2008 and, more recently, the global financial crisis, have plunged millions more into a state of extreme vulnerability and dependency on food aid and other forms of emergency assistance. The World Bank reported that despite sharp declines in commodity prices in the wake of the economic slowdown, food prices in August 2009 were almost 60 percent higher than in 2005. Thus, through a combination of benign neglect of agriculture and financial mismanagement, the planet is fast running out of food.

The global epicenter of chronic hunger is Africa. One in three Africans is undernourished. Most are not living in war zones or refugee camps. The bulk of Africa's hungry and malnourished live on farms of less than two hectares. Typically, these small farms have lost their soil fertility through years of cropping without the benefits of fertilizer, improved seed or irrigation. There has been no Green Revolution here. And there have been no surpluses to store or sell.

The good news for the G20 - and for humanity - is that chronic hunger in Africa and other hot-spots, like Haiti, Afghanistan and Timor Leste, can be ended within a few years with targeted investments based on our current knowledge. This was the unanimous conclusion of several recent expert reports, including those of the UN Millennium Project (2006), the Irish Hunger Task Force (2008), an independent Advisory Group to the Madrid Conference on Food Security (2009), and the UN High Level Task Force on the Global Food Crisis (2008/9). These reports, representing the analyses and conclusions of hundreds of scientists, practitioners and policy experts from international organizations, governments, civil society organizations and the private sector, concluded that small-scale farmers hold the key to ending hunger and malnutrition. The experts have done their work. We know what's needed. It's now time to put those recommendations into action.

Illustrating this point, the Government of Malawi, over the past four years, has demonstrated beyond any doubt that investing in small-scale farmers not only brings national food security but enhances economic growth. According to the IMF, Malawi's growth rate in 2008 was a remarkable 9.7%, with the maize crop acknowledged as an important contributor. This year throughout Malawi, men, women and children harvested the country's fourth successive bumper crop - a whopping 3.7 million tons of maize, enough to feed the country for a year and provide over a million tons to its neighbors.
After the disastrous harvest of 2005, the then newly elected (and to nobody's surprise, recently reelected) President Bingu wa Mutharika declared "enough is enough" to his nation's regular call for emergency food aid. For each of the past four seasons, around half of the country's 3.4 million small-scale farmers has received improved maize seed and fertilizer at sharply discounted prices through a national voucher program. Farmers responded to this programme by doubling their yields and exceeding the national maize requirements. In all likelihood, Malawi will be a food donor to the region this year, as it was two years ago in supplying impoverished Zimbabwe with 300,000 tons of grain.

Malawi's experience is inspiring similar efforts through the continent, including in neighboring Tanzania, which this year launched its own fertilizer voucher program reaching 700,000 farmers through a private sector agro-dealer network. The governments in both Malawi and Tanzania have taken bold steps to increase smallholder production in a time of reduced tax revenues, declining overseas remittances and faltering donor assistance. There are at least a dozen other countries across Africa that have plans to begin similar program with the potential to boost agriculture and reduce hunger sharply. Decades of agricultural research, means that the knowledge exists to produce, protect and market more food. But we should not ask governments to cut back on health, education and road-building programs in order to finance agriculture. We need to invest in all these areas simultaneously and without further delay.

The L'Aquila commitment of $20 billion over 3 years, if realized, represents less than one third of the unmet promise made at Gleneagles by the same G8 to double aid to Africa. A year from now, the world's leaders will gather in New York to reflect on progress towards the Millennium Development Goals. In terms of the hunger goal, we are actually in a worse state today than we were when the MDGs were agreed by 189 nations in 2000. We have to seize the moment and grasp the opportunity that L'Aquila and Pittsburg have provided.

The new agriculture fund - perhaps called the Borlaug Fund - could produce results within a year without the need to cut back investments in other crucial development areas. With the United States and a few committed partners showing the way with hard cash, early successes could inspire other aid agencies to step up and deliver on past promises. By tackling hunger at its roots, there would be no better way to continue the work and honor the life of the great Nobel laureate. If we get this right, food-insecure nations will at last have the resources they need to end hunger.

Jeanine Molloff: A Revolution of Values, Bearing Witness to the Death of Our Rights

2009-10-06T13:36:00Z

Thursday, October 1st, Cindy Sheehan arrived in St. Louis, armed with righteous indignation and her new book, "Myth America: 10 Greatest Myths of the Robber Class and the Case for Revolution!" Still recovering from flu severe enough to require a hospital visit; Sheehan explained her case for 'revolution,' from a passage in her new book.

"Am I calling for an armed insurrection? Hardly, and only because I don't think it's possible or probable that an armed revolution would be successful and as in all armed conflicts, many innocents get caught, intentionally or unintentionally in the crossfire. I am urging for what Dr. Martin Luther King, Jr. called: A Revolution of Values."

She spoke about the prejudicial class distinction in our alleged 'classless society,' namely the 'Robber Class' composed of multinational corporations, fawning politicians and media celebrities, vs. the 'Robbed Class' which is everyone else. Her book goes on to discuss the ten 'myths' of our society, and how they 'rob' us of a democracy. In short, she is 'bearing witness' to the last death knells of our civil liberties.

G20 Impressions:

Just back from Pittsburgh, she spoke about the G20 talks, the G20 protests and the multiple abuses by various police agencies 'for our own protection.' Although not arrested herself this time; Sheehan witnessed arrests of young people, with federal, state and local police geared up in military, Robocop garb, implementing multiple 'torture' strategies and devices on people whose only crime was using their 1st amendment rights. Not only did they teargas protesters and bystanders alike, but the authorities used two other prominent tools; one an acoustic weapon called the LRAD, and the other a simple but effective 'snatch and grab.'

LRAD:

Verifying what other online journalists present at the G20 visit to Pittsburgh witnessed; she vented against the newest toy in the 'homeland security arsenal.' It's simply called LRAD, Long Range Acoustic Device. The LRAD has been used in Iraq and is now sanctioned for use on civilians in the US by the Obama administration for 'crowd control.' It emits a sound measured between 145 to 151 dB, (depending on the model) according to the manufacturers' own web site.

According to various agencies including the CDC (Centers for Disease Control), any sound which is 85 dB or higher will cause permanent noise-induced hearing loss (NIHL). The company that manufactures this allegedly benign 'crowd management tool' is American Technology Corporation. This device is marketed using the following description:

"The Long Range Acoustic Device (LRAD) is a highly directional acoustic array that is designed for long range communication and unmistakable warning. The LRAD device can issue a verbal warning and has the capability of following up with a deterrent tone TO INFLUENCE BEHAVIOR OR DETERMINE INTENT."

The federal Department of Homeland Security has budgeted monies for the purchase of LRAD devices by most local police departments.( Source: DHS Doles Out Fed Cash to Deploy Military LRADs in US Cities). It has already been used on civilian populations in San Diego by Sheriff Bill Gore, on rowdy citizens at a 'townhall meeting.

Based on observations by Sheehan and other activists such as Minnesota based independent journalist, Melissa Hill, the LRAD was used in multiple neighborhoods including those far away from the G20 venue or any citizen protests. According to Hill, police actively confiscated cameras, cell phones, or any other device which could record their actions. Yet, in spite of their best efforts photos and videos leaked out into the net. You Tube videos by Hill and others, documenting both military and police abuses are abundant.

In addition to the LRAD torture device used against citizens, we had the 'snatch and grab,' aptly named as this involved the instantaneous kidnapping of people by unidentified officers in military camouflage uniforms. In a video easily found online, (You Tube--Military Arrest or Snatch & Grab at G20 Protest); two such officers have dragged someone off the street, shoved him in an unidentified car to be sent to some unknown destination. These scenes are more reminiscent of the STAASI Secret Police, than downtown Pittsburgh. No explanation has been provided by Mayor Luke Ravenstahl, Governor Ed Rendell, DHS Secretary Janet Napolitano or President Obama.

Upon further investigation, I found that the 'security' for this event was controlled and coordinated by the Secret Service. This fact was confirmed by Governor Ed Rendell's press secretary, Gary Tuma. Here is the email response to that issue dated 10/2/09, from Tuma:

Jeanine,

Planning for the G-20 was headed by the federal government, specifically the US Secret Service with assistance from the FBI. All law enforcement activities were at the direction of the federal government. Therefore, these questions should be directed there.

--Gary

Sheehan concurred. The Secret Service is now under the jurisdiction of the Department Of Homeland Security, whose head is DHS Secretary Janet Napolitano. Napolitano in turn, reports DIRECTLY to President Obama. Though coordinated through multiple agencies; the responsibility for this temporary martial law and suspension of the constitution lies directly with the President. No 'far right wing conspiracy' here; just the simple chain-of-command.

Sheehan was not surprised by any of these events. She has come to expect such treatment. She ties the assault on our civil liberties to the assault on our economy. In her book she quotes Mayor Anselm Rothschild;

"Permit me to issue and control the money of a nation, and I care not who makes its laws."

Sheehan also goes on to quote President Obama when he issued the statement, "Credit is the lifeblood of our economy." Sheehan's concern with credit and money is not based on materialism, in fact she brags about not owning anything, any property, any cars, etc. Her preoccupation with money truly focuses on power and those who wield it. Referring back to Senator Durbin's confession that ...the banks own congress; Sheehan knows that those who control the money--control the world. This is exactly why the protests outside the G20 were so important, and why the jack booted response coordinated and ordered by the Oval Office is so dangerous. The G20 participants included individual leaders such as presidents, prime ministers, kings, military dictators and their respective finance officers and private bankers. These are the people who decide who will find work, who will lose jobs, who will have healthcare, who will die from medical neglect, in short, who will live and who will die.

So, while President Obama ran off to Copenhagen in an effort to secure Chicago as the next Olympic venue; Sheehan spoke of homeless citizens being arrested--for vagrancy. After the First Lady and her international counterparts enjoyed an afternoon of shopping in the crisp autumn air; her fellow Americans were breathing in teargas poisoned winds, courtesy of the Oval Office. In an age where 'bearing witness' can bring indefinite detention based on the whim of ANY president; we find this strident contrast in styles--Sheehan the idealist who peppers her substantive speeches with profanity borne out of grief and frustration, and Obama the pragmatist whose eloquent yet empty words match this 'Marie Antoinette' moment. Somehow, I prefer the plain truth, the 'revolution of values,' over 'cake.'

Barry D. Wood: Financial Crisis: Four Take Aways from Istanbul

2009-10-05T07:30:27Z

Istanbul, Turkey -- Over three days in early October, top economic policymakers plus several hundred global bankers held parallel meetings at posh hilltop venues overlooking the fabled Bosporus, where Europe ends and Asia begins. Serial discussions analyzed the 2007/2008 financial collapse, the measures put in place to clean up the mess, and various regulatory proposals intended to prevent a recurrence. Drawing from panels, briefings, press conferences, and conversations -- four broad messages emerge from this annual gathering of the International Monetary Fund and World Bank.

First, the worst of the financial crisis is behind us, or as IMF Managing Director Dominique Strauss-Kahn put it, "we've turned the corner." However, this self-congratulatory message, voiced earlier by G20 leaders at Pittsburgh, is tempered with caution. There is a strong belief that while coordinated global stimulus has pulled the global economy back from the abyss, normal economic activity has not yet resumed and it is too early to cut back on the huge increases in government spending that have propped up consumer demand.

Bosporus, at the intersection of Europe and Asia.

Second, economic power is shifting away from the United States and Europe to the fast growing emerging economies, particularly China and India. Virtually no-one in Istanbul, neither bankers nor policy makers, laments the passing of the euro-atlantic focused G8 to the more representative and diverse G20. But now comes the hard part. As the IMF is being handed increased responsibility over the world economy, how does it become more like the G20? Currently, the fund is controlled by the Americans and Europeans, each having a veto on important decisions. Leaders at Pittsburgh endorsed a five percent increase for emerging market votes in the IMF. But the rising developing nations want more, while the small European nations, that are expected to give up votes, are resisting. Regrettably, this looming clash in the IMF is likely to surface within the G20, once crisis management ends. One creative suggestion comes from Stan Fischer, the former number two man at the IMF who now heads the Bank of Israel. He suggests that the 24 nation IMF board of directors should be replaced by the G20.

Third, there is an urgent need to remedy the huge financial and trade imbalances between North America and East Asia that experts believe helped precipitate the crisis. New York University professor Nouriel Roubini told the bankers that a decade of over-consumption in the United States led to huge increases in household debt, while in Asia excess savings caused a huge increase in dollar reserves, a mismatch that distorted normal trade relations. Toyoo Gyohten, a leading Japanese thinker on finance, agreed, and said American consumers have to adjust and curb their appetite for cheap Asian products. But he is not optimistic that the needed exchange rate adjustments--the dollar declining against the Chinese yuan--will occur.

Fourth and finally, there is the perceived risk that as the crisis eases, all of us, and the world economy in general will simply revert to business as usual. University of Chicago economics professor and former IMF chief economist Raghuram Rajan says "while the crisis has been painful, it may have been painful enough" to force the kind of systemic changes that should be put in place. The problem here is that there as yet is no agreement on what regulatory reforms are needed and how they can be implemented. Currently there is a maze of national regulations with very few international standards. In accounting, for example, the Americans do it one way, the rest of the world another. Bankers rightfully worry that tough regulation on risky transactions in America could simply force those operations off shore, to a place where they are allowed.

Policy makers in Istanbul warned bankers that they shouldn't fight additional regulation. But Josef Ackermann of Deutsche Bank, said "stricter regulation could be damaging if it is introduced too quickly and unevenly." David Mulford, the former US Treasury official who is vice-chairman of Credit Suisse, lamented that "as yet there is no consensus on how to balance the need for finance", essential for economic growth, with cross-border measures that "curb the excessive financial risk-taking" that precipitated the crisis.

Elliot Madison Accused Of Using Twitter To Tweet Police Actions At G-20 Protests

2009-10-04T11:10:32Z

NEW YORK — A self-described New York City anarchist has been accused of tweeting the location of police officers to protesters trying to evade them during the Group of 20 economic summit in Pittsburgh.

Pennsylvania State Police arrested Elliot Madison alleging he used Twitter to direct the movement of protesters and inform them about law enforcement actions at last month's summit.

G-7 To Meet, Talk Less As G-20 Ascends: Officials

2009-10-03T18:16:23Z

Group of Seven finance chiefs said they will meet less and issue fewer statements as the G-20 becomes the main arena for setting global economic policy.

Eric Stoner: Obama Is No FDR

2009-09-30T15:42:00Z

On the eve of the G-20 summit last week, President Barack Obama gave a long interview to the Pittsburgh Post-Gazette, in which he said that even during his days as a community organizer in Chicago he was never a big fan of mass protests.

With the clear intention of discouraging those who might join the looming demonstrations against the G-20, Obama explained that he was always a believer that "focusing on concrete, local, immediate issues that have an impact on people's lives is what really makes a difference; and that having protests about abstractions [such] as global capitalism or something, generally is not really going to make much of a difference."

While I personally never jumped on the Obama bandwagon, such a flippant dismissal of protest by the president is disappointing nevertheless, and slightly reminiscent of how his predecessor wrote off the millions who took to the streets before the invasion of Iraq.

Post-Gazette columnist Tony Norman noted in response: "Of course, Mr. Obama's answer would be news to those who marched in countless civil rights, women's rights and anti-war demonstrations over the decades. It would also be news to those who filled stadiums to hear candidate Obama's stump speeches in 2008."

Not surprisingly, his remarks were also not well received by the protesters who had arrived in Pittsburgh.

"You have revealed the real Obama!" Clarence Thomas, a member of the International Longshore and Warehouse Union, said during a rally demanding new jobs programs, according to the Wall Street Journal. He said the president's statement was "very, very disrespectful" to the civil rights and other social movements.

For all of his flaws, Obama is clearly an intelligent person who must have known better.

It would not have taken an incredible investigative feat to discover that the protesters descending upon Pittsburgh were doing so for very "concrete" reasons that touch their daily lives in very real ways.

They came to advocate for greater assistance for everyday people during these tough economic times, for more serious government action on global warming ahead of the U.N. climate talks in Copenhagen, Denmark, and for an end to the wars in Iraq and Afghanistan that have already taken such a staggering human and financial toll.

In fact, as a general rule of thumb, most people -- whether they are diehard activists or not -- don't normally travel great distances to face ominous riot police firing rubber bullets, pepper spray and deafening sound cannons, unless they have been deeply, personally affected by the issues being protested.

And given the global financial meltdown that has hit working people so hard, can anyone really say that those who critique the entire capitalist system don't have a point?

Rather than being a mere "abstraction," as Obama claimed, capitalism is an economic system that functions on a set of rules that we created, which inevitably leads to massive inequalities between the haves and have-nots and the easily avoidable deaths of millions around the world every year who simply cannot afford basic medical care or food. It rewards greed and is based on a belief that continual, limitless economic growth is not only possible, but necessary.

The planet's atmosphere and natural resources, however, are finite and being quickly exhausted by the developed world's gluttonous consumption.

In his new book, All My Bones Shake, Robert Jensen succinctly sums up our predicament: "Capitalism is fundamentally inhuman, antidemocratic and unsustainable. Capitalism has given those of us in the First World lots of stuff (though much of it of questionable value) in exchange for our souls, for our hope for progressive politics, and for the possibility of a decent future for children. Either we change or we die -- spiritually, politically, literally."

Obama's dismissal of mass nonviolent action was disingenuous for other reasons as well. Behind his desk in his Senate office, Obama prominently displayed pictures of Mahatma Gandhi and Martin Luther King Jr.

In an interview last year, he explained that the portraits were there "to remind me that real results will not just come from Washington, they will come from the people." And only weeks before the G-20, during his "controversial" address to school children, the president brought up Gandhi, calling him "a real hero of mine."

Could anyone possibly argue with a straight face that King, who was killed while planning the Poor People's Campaign, would not be on the streets with those calling for economic justice? Would Gandhi not oppose the diversion of $700 billion this year from meeting people's basic needs to fund the Pentagon and the military occupations of Iraq and Afghanistan?

The interview with Obama also revealed a growing chasm between his approach to social movements and that of Franklin D. Roosevelt, to whom he is widely compared.

After listening to the concerns of the legendary labor organizer and civil rights leader A. Philip Randolph during a meeting, as the famous and perhaps apocryphal story goes, FDR replied: "I agree with everything that you've said, including my capacity to be able to right many of these wrongs and to use my power and the bully pulpit ... But I would ask one thing of you, Mr. Randolph, and that is go out and make me do it."

During his presidential campaign, Obama even used this story. He told his supporters that he was just one person who could not make the changes they wanted to see by himself. Obama's final message was clear: "Make me do it."

Now that Obama is in the White House, however, he is singing a different tune. Rather than encouraging grassroots protest to help push the public debate and further a progressive legislative agenda as Roosevelt did, Obama is unfortunately publicly trying to quash pressure from the left.

As a counter to the recent mobilization of right-wing tea-baggers, it would seem that now is as good a time as ever for the president to embrace the protesters who are championing at least some of the causes that he once claimed to believe in.

Instead, Obama disgracefully sent in the militarized police -- with the National Guard on the ready -- to silence their dissent.

This article was originally published by Alternet.

Bob McKinnon: Letting Our Actions Speak

2009-09-30T13:13:24Z

The fall is the season for football, foliage and - increasingly - important meetings with important people. Fresh from the folly of summer recesses, when children play and people around the world wrap up their vacations, various prestigious gatherings take place. Last week alone saw the opening of the General Assembly of the United Nations, the inaugural G-20 summit, and the Clinton Global Initiative. In the upcoming weeks, more social innovators will gather at conferences such as The Feast, Pop!Tech and TED, just to name a few.

During these sessions, no shortage of important issues will be addressed. Inspiring speeches will abound. Some agreements will be made, partnerships solidified. And hopefully, change and progress will follow.

Attending these sessions are a growing group of leaders, social innovators, and dedicated public servants who to paraphrase the journalist Juan Williams, "have put their hands in the muck and mire of life and tried to create something of beauty--a better outcome."

Yet in spite of this burgeoning group of change agents or perhaps as a reflection of them, there is no shortage of serious issues that face us today.

Every generation makes an implicit promise to leave their children a better world than they themselves inherited. In America, we have been fortunate to make good on that promise for almost three hundred years.

Yet today, the effects of everything from childhood obesity to climate change conspire to threaten this commitment. Facts now suggest that this may be the first generation of children to live shorter, unhealthier and unhappier lives than their parents.

This is despite having more resources (financial and human) and better solutions (with the infrastructure to bring them to scale) than ever before.

Mark Twain once famously remarked, "Actions speak louder than words." This is a sentiment we have all heard and would agree with. But it is the second lesser-known part of Twain's quote, "but seldom ever do" that must give us pause and ask the question "why".

My Grandmother has never attended the Clinton Global Initiative or Pop!Tech. She is not part of the "slow food" movement but for most of her life had a garden from which she fed her family. She has never attended a protest or rally but has voted in every election since she cast her first ballot for FDR. She has never blogged about politics but after losing her husband to World War II, continued writing a dozen of his friends who had no one at home to write to. She is not linked in, does not tweet and you cannot friend her on facebook. Yet she has an unrivaled social network of friends and family who would gladly step in front of a bus for her.

What makes her and others of her generation what Tom Brokaw calls "the greatest" is how ordinary she is. How common her actions were. How unremarkable her life has been. She was not a social innovator or social entrepreneur. Just another citizen doing her part. And that is what has collectively allowed her generation to leave the world a better place for us.

Some would suggest that her times were simpler, ours more complicated. Yet I don't think anyone would trade our recession for her depression. Our wars in Iraq and Afganistan for hers with Germany and Japan. We would not trade our childhood obesity for her polio or TB.

So what of us now? What will be said of each of us as individuals and collectively as a generation? What will be our common acts? Will it be to talk or do? To express dissent or empathy? To focus on only those things that concern us personally or realize that our issues are all connected. Will we continue to focus on the bickering over the suffering or work together on the more complicated task of overcoming?

So let's neither take comfort in the meetings of extraordinary people nor find cynicism in their outcomes. Instead, let's be "ordinary" and put our hands in the muck and mire of life and also create something of beauty. And let's do so by embracing the two seemingly contradictory parts of our heritage - that we are a nation born from equal parts personal responsibility and collective action.

Lincoln once wrote, "We can succeed only by concert. It is not "can any of us imagine better?" but "can we all do better?"

The answer to his question should be "yes". But the answer is ultimately one our children and grandchildren will have to answer for us years from now.

Robert L. Borosage: Obama and China: Vandalism or Vision

2009-09-29T16:39:21Z

"Vandalism" screams the cover of the Economist, depicting Obama leaving an ice pick in the tire of free trade. (No racial overtones there; after all, as the president explained, he was black before he was elected.) When the president imposed tariffs on Chinese tire imports, following the ruling of the independent International Trade Commission, the free trade establishment went ballistic. David Rockefeller took to the op-ed pages to warn of the threat of surrendering to the protectionist instincts of his union allies. Editorialists from the Washington Post to the New York Times sternly rebuked the president for deviating from the free trade gospel. Surely, the heavens will tremble; trade wars impend; the apocalypse of Depression era Smoot Hawley tariffs are about to descend upon us.

Nonsense. Obama isn't descending into the old trade debate. Remarkably, he has added another explosive issue to his already crowded agenda: that of transforming America's global economic strategy. At the G-20 meetings in Pittsburgh, he succeeded in gaining international approval - including that of the Chinese - for a continuing review of the unsustainable imbalances in the global economy. The decision on Chinese tires may just be the president suggesting that he may put some teeth into digesting that change.

Like health care, climate change, and financial reform, the challenge is inescapable. America can't go back to borrowing $2 billion a day from abroad to act as the world's consumer. Americans can't go back to spending more than they make, maxing out credit cards, treating their homes as an ATM machine. Those days are over.

That means, as the president has said, the US must spend less and invest more. We must produce more at home, and export more. If that is the case, then inevitably the surplus countries, the mercantilist nations that have used export-led growth to drive their economies -- China, Germany, Japan and others -- also have to change course. They have to save less and spend more, import more and export less. If they don't generate increased demand while the US cuts back, then the recession will return with a vengeance. This entails wrenching changes in public policy and private attitudes. But what's clear is that the old imbalances were and are a constant peril, supplying the kerosene for the contagion that laid waste to the global economy.

At Pittsburgh, President Obama insisted that the leaders of the world's major economies make this a centerpiece of their agenda. He exacted an agreement -- despite the stated skepticism of Germany's Chancellor Angela Merkel and China's leaders -- on a framework for "strong, sustainable and balanced growth." The G-20 countries agreed to set priorities, report annually on their own domestic policies, and monitor one another, with the IMF serving as an independent goad.

Cynics dismissed the agreement as toothless. There's no enforcement mechanism except naming and shaming (which hasn't exactly proved effective in dealing with China). The IMF has been warning about these imbalances for years to no effect. China and Germany vigorously resist any external questioning of their national economic policies. Merkel dismissed global imbalances as an "ersatz" issue. Tu Jianhua, director general for international trade in the Chinese commerce ministry, tweaked the West, noting that "I'm not sure that one country's leader calling another to import more represents market practices." The G-20 couldn't even get a murmur concerning currency manipulation (a central Chinese strategy) in the document.

The cynicism may be deserved. But here's where the Obama decision on tire tariffs has bite. As the free trade zealots admit, tire imports barely register on US-China trade accounts. The decision is important for its symbolism, not its substance. That's why the free trade lobby howls about protectionism.

But the president may well have moved beyond the screamers to an adult discussion. He's telling the Chinese, these staggering imbalances can't continue. We should both adjust, preferably in a coordinated fashion. But the US is serious about changing the game. If we can't do that cooperatively, then we'll find a way to do it independently.

Now, this is a dance that makes the tango look demure. The US is the world's largest debtor. We're telling our leading banker that we're changing our wastrel ways, so they'll need to find a different way to prosper. But the US is hardly in a position to dictate policy to the Chinese. They've already sent tremors through the bond market by raising doubts about the US finances.

Will Obama succeed? It's hard to know, for this transformation will require major reconstructive surgery to economies at home and abroad, compared to which health care reform is a mere face lift. In the short term, consumers, sobered by their losses in the Great Recession, are tightening their belts on their own. Savings by US households have soared to four times the rate of 2008 before the financial collapse. Chinese exports are down 23% from last August. But once the economy recovers and people go back to work, Americans may well go back to borrowing and spending. And we know that Wall Street has already reopened the casino.

One thing is clear. As in health care, energy, and financial reform, Obama has once more addressed an inescapable challenge that his predecessors ignored. He has once more aroused the ire of one of the most powerful lobbies -- in this case, the global corporations and the free trade zealots that have dug this country into a deep hole. Once more, he has done so cautiously, in small steps, ready to compromise, hoping not to offend. Once more, he's invited Americans -- and the world -- into an adult conversation about what is to be done. And once more, he's likely to be greeted by hysteria and insult, graphically illustrated by the Economist's disreputable cover.

Marshall Auerback: The G20 Summit: Hijacked by Neo-Liberalism

2009-09-29T15:23:50Z

We've said it before and we'll say it again. As a matter of national accounting, the domestic private sector cannot increase savings unless and until foreign or government sectors increase deficits. Call this the tyranny of double entry bookkeeping: the government's deficit equals by identity the non-government's surplus.

So, if the US private sector is to rebuild its balance sheet by spending less than its income, the government will have to spend more than its tax revenue. The only other possibility is that the rest of the world stops saving on a massive scale -- letting the US run a current account surplus. But that is highly implausible and socially undesirable, since it means we export our economic output, rather than consume it domestically. And if the government deficit does not grow fast enough to meet the saving needs of the private domestic sector, national income will decline, which, given the size of the private sector's debt problem, will generate a huge debt deflation.

This is the foundation of modern monetary theory. Would that the IMF and the G20 understood these basic facts. The anodyne communiqué from last weekend's Pittsburgh summit makes clear that this is not the case. Western policy makers appear determined to consign us to years of additional economic misery because of the continued embrace of a flawed market fundamentalist economic paradigm.

So far, instead of trying to revive the productive economy, most of the G20's resources have consisted of mouth-to-mouth resuscitation for a dying financial sector. This has not "worked" to the extent that last weekend's communiqué advertised. The best analogy to describe the current state of our financial system is that we have placed scaffolding over a decaying building, but done little to repair the underlying structure. What happens when the economic scaffolding is removed via "exit strategies," as the G20 participants have advocated?

For many generations, we didn't face the unprecedented financial fragility we are experiencing today. But there are good reasons why we avoided this until recently. We have spent the past quarter century eviscerating what was fundamentally a robust structure originally devised during the New Deal, a system which basically saved the US capitalist system and served the interests of its citizens very well until it was hijacked by a bunch of corporate predators under the guise of deregulation and neo-liberalism.

To read the communiqué from the Pittsburgh summit is to gain insight into an ideology which views government, not as a stabilizing influence protecting us from private sector rent seeking monopolists. Rather it's an unwanted stepchild, brought out on display as a necessary evil, and destined to be shoved away as soon as we get back to a "normal" economic state of affairs, where the government minds its own business and lets the magic of the "free market" operate. Hence, the emphasis by the Pittsburgh summiteers on "sustained, strong and balanced growth", the usual code words designed to encourage budget surpluses, more private sector savings and shift from public to private sources of demand.

There is little understanding that if households and firms try to net save (save more out of income flows than they tangibly invest) incomes collapse, and desired private net saving is thwarted. The private "excess saving" cannot exist without a budget deficit or a trade surplus. Many people make this mistake. At best, we can talk about planned private saving being in excess of planned private investment, but other than that, we are violating double entry bookkeeping principles.

And consider this: in 1998, 1999 and 2000 (increasing each year), the US government "virtuously" ran budget surpluses. And guess what happened? The private sector became more heavily indebted than before as the fiscal drag squeezed liquidity and destroyed aggregate demand and incomes. Along with our misconceived embrace of financial deregulation, the combined result was sharply rising unemployment and a major recession in 2001-02 with unemployment rising sharply and the automatic stabilizers pushing the budget back into deficit.

Unfortunately, that was the yellow flag for what was to follow, a warning signal blithely ignored by our economically illiterate policy makers. Instead, we perpetuated a massively leveraged financial system via Frankenstein financial products such as collateralized debt obligations, and credit default swaps. We squeezed private sector incomes via constrictive fiscal policy, thereby inducing the debt-fueled consumption that is now regularly decried by our officialdom and the commentariat.

The bottom line is that if we want habitual private sector savings, we need habitual government deficits.

And government deficits are not an aberration; they are the norm. Our first (and possibly greatest) Treasury Secretary, Alexander Hamilton, called the national debt a "national blessing." Similarly, Paul Krugman and L Randall Wray have argued that it was World War II and the subsequent cold war that ended the depression, which created the foundations for a significant expansion of government debt, which in turn set the stage for the "Golden Age." The government deficit reached 25 percent of GDP during the war, providing a massive amount of private sector saving in the form of safe financial assets that strengthened balance sheets. From 1960 onward, the baby boom drove rapid growth of state and local government spending, so that even though federal government spending remained relatively constant as a percent of GDP, total government spending grew rapidly until the 1970s. This pulled up aggregate demand and private sector incomes, and thus consumption.

This is unsurprising: The private sector cannot create "net nominal wealth" because every private financial asset is offset by a private financial liability. Over the long term, the maximum that a government can hope to collect in the form of taxes is equal to its purchases of goods of services. There is no hope of running long-term budget surpluses because the government cannot possibly collect more than the income it has created as it paid out dollars. When the government attempts this, as it did during the Clinton Administration, the public finds that its net financial assets would be less than its tax liability, requiring households to dip into its "reserves" of accumulated savings, which gradually become depleted. In the absence of other factors, demand slows and the government almost invariably falls back into deficit.

If an external creditor is added (such as China or Japan) it merely delays or extends the process, since for a time, countries running current account surpluses with the US can use their surplus dollars to accumulate additional US dollar financial claims. But in the absence of any increase in US government spending (which is the only source of NEW NET FINANCIAL ASSETS), the end result is still a massive accumulation of private sector debt, which is what got us into this mess in the first place. By contrast, assuming a non-convertible, freely floating fiat currency, a government can never be insolvent even if its tax revenue declines significantly. Its balance sheet can never become precarious in the same way that a household balance sheet can.

In the abstract, this always sounds controversial to those uncomfortable viewing the world within a financial balances construct. It also helps to explain the intellectual incoherence at the heart of the G20 communiqué and the Obama Administration's economic policies, which has been dominated by Wall Street interests.

So it's worthwhile considering some historic examples, which illustrate the point better. During WWII, the US government generated huge deficits and bond issues. The record expansion of government deficits not only facilitated the war effort, but created full employment. (As an aside, it is always interesting to pose the following question to "deficit terrorists": if government budget deficits are so awful, and so egregious for the long term performance of an economy, then why run them at all during wartime, when presumably we need the economy to be functioning in an optimal manner?)

After the war, the Fed was concerned with potential inflationary pressures and raised interest rates. President Truman, a hard money man par excellence, drastically cut defense spending from $90.9bn to $10.3bn and the US accumulated huge fiscal surpluses. Post war surpluses, combined with Fed tightening, contributed to a recession in 1949. Unfortunately, it took the "military Keynesianism" brought on by the Korean War to shift Truman away from his aversion to deficit spending, which was continued by Eisenhower, and sustained via his national highways building program. During that period, unemployment decreased. Similarly benign effects on unemployment were manifested in the wake of the Kennedy tax cuts and those of Reagan in the early 1980s.

Today, budget deficits are the highest as a percentage of GDP, but they are overstated to some degree, because they include the TARP measures to stabilize the financial system which brought the global economy to its knees in 2007/08. Classic Treasury expenditures deal with the purchase of real goods and services; Federal Reserve functions deal with the purchase and sale of financial assets. And yet, the focus of policy makers is quickly reverting to "exit strategies" and a reduction of budget deficits, where the Pittsburgh communiqué pledged to "prepare our exit strategies and, when the time is right, withdraw our extraordinary policy support in a co-operative and co-ordinated way, maintaining our commitment to fiscal responsibility."

If only that were true. The only way one could politically justify a government running a sustained surplus would be to make the case that unemployment created a more functional way of ensuring high profits (via wage discipline) than full employment. Put in those terms, it's not a particularly compelling message, but it has the virtue of being consistent with modern monetary theory.

Oddly enough, the G20 communiqué devotes considerable attention to the government's "exit strategies", which came in response to the destructive private sector financial practices which created this catastrophe. There has been less attention directed to the underlying causes themselves. Thus the IMF, in its latest "Global Financial Stability Report", suggests that restarting securitization markets is "critical" to a wider economic recovery, and that current US and European proposals to force banks that originate loans to hold on to the first 5% of losses in all securitizations, were not sufficiently flexible and might backfire. In the words of Credit Lyonnais Asia strategist, Christopher Wood:

[The IMF] is yet again doing the world a disservice by acting as a lobbying group for the securitised debt peddlers. It is clearly fundamentally correct that the agents of securitisation should be made to retain some 'skin in the game' after the terrible damage they have inflicted. It is true that the collapse of securitisation represents a massive deflationary risk for the global economy. But that does not mean that the answer is to allow a new free-for-all in securitisation assuming, charitably, there is demand for the securitised product. ("Greed and Fear", 24 Sept. 2009, CLSA, Asia Pacific Markets)

The IMF, the G20, indeed virtually all policy makers -- including the Obama Administration -- will make themselves far more relevant when they emphasize that full employment and prosperity can only be achieved to the extent that governments are prepared to spend up to a level justified by non-government saving. That does not mean unconstrained government spending. But the spending ought to be set with regard to results desired and competencies to execute plans -- not out of some pre-conceived notion of what is "affordable". Our federal government can afford anything that is for sale in terms of its own currency. And if it spends too much after getting us to a state of full output, it can get inflationary. But let's get to that state of affairs first before we start worrying about perpetuating the flawed model of the past. That got us transitory prosperity and wage gains. And it promises years of economic misery if we do not move beyond neo-liberal economic fairy tales.

Cross-posted from New Deal 2.0.

Mark Weisbrot: G-20 Doesn't Offer Much Reform

2009-09-29T11:15:13Z

"The old system of international economic cooperation is over," announced UK Prime Minister Gordon Brown at the G-20 summit in Pittsburgh. "The new system, as of today, has begun."

The first part of that statement is partly true (see below). The second is a fantasy.

The G-20 is not a system of international economic co-operation, or a board of directors, or a governing council for the global economy, to pick some of the terms that have appeared in the media. It is a forum where the heads of state of 20 economies discuss some of the important economic issues. It has very little ability to directly implement decisions.

The institutions that do have economic enforcement capability are the International Monetary Fund (IMF), the World Bank, and World Trade Organization (WTO). These first two are directly controlled by the rich countries, mostly by the United States Treasury Department.

The third organization that actually makes decisions that affect hundreds of millions (or billions) of people, the WTO, is not so completely controlled by the U.S. and a few rich countries as the others are, since it was formed half a century later. Developing countries have a formal veto power in decision-making. However, it is still dominated by the rich countries, and most importantly, its rules are heavily stacked against developing countries and in favor of the rich countries - and especially rich country corporations. For example, the WTO's TRIPS (Trade Relate Aspects of Intellectual Property Rights) is unequivocally designed to extract more money from throughout the world for corporate patent holders such as the big pharmaceutical companies.

These facts help put the G-20 in context. First, the expansion from the G-8 to the G-20 is mostly a symbolic move. Since the rich countries control the institutions with actual power -- in addition to their own enormous international economic, military, and diplomatic influence -- the G-20 is still mainly the G-7 with the other 13 countries sitting in. (I am counting the G-8 member Russia with the other middle-income countries. The rich countries have still not even allowed Russia join the World Trade Organization.)

Furthermore, the new, augmented G-7 is not even as much of a decision-making body as it was a quarter century ago. For example, in 1985 five of the G-7 countries (the U.S., France, U.K., Germany, and Japan) agreed on the Plaza Accord to bring down the value of the dollar. This was accomplished through coordinated intervention by central banks. The dollar lost more than a third of its value during the next two years.

Today the dollar is even more overvalued and as a result we have large global imbalances that the G-20, in their final statement yesterday, pledged to rectify. However, do not expect them to do anything about it.

For now, the United States government does not even have a logically coherent position on this issue. Treasury Secretary Tim Geithner says we want a "strong dollar." At the same time, our government complains that China is keeping its currency undervalued. These two statements are logically contradictory, since an undervalued Chinese currency is the same thing as a "strong dollar." And without a fall in the value of the dollar - not only against the Chinese currency but others as well - we cannot expect the global trade imbalances to be corrected. (The U.S. trade deficit has fallen by more than half since this recession started, but this will be reversed when the economy recovers.)

A solution to this problem would also require the G-7 to accept China as an equal partner, something they do not appear willing to do. China's economy is now the third largest in the world (or second largest, depending on how its currency is converted).

The IMF is the most powerful of the institutions controlled by the U.S. and its rich allies, and currently has about 50 agreements with low-and-middle income countries. In the vast majority of these agreements it has prescribed "pro-cyclical" policies such as budget cuts and monetary tightening that worsen the impact of the world recession. For many years developing countries have demanded a greater voting share in the organization, but the tiny (1.8 percent) reallocation in 2006 was insignificant. At this week's summit, the leaders pledged to reallocate 5 percent of voting shares from over-represented to under-represented countries. It is not clear that this will actually happen. The European governments were reportedly upset at giving up some of their influence, even though they have almost never gone against the U.S. at the Fund in the last 65 years. But even if 5 percent is shifted, this will not change the balance of power. The United States, with its 17 percent share, will be able to veto important decisions that require 85 percent; and together with allies, will have a majority for almost anything it wants.

Most of the other issues that the G-20 includes in its final communiqué are either inadequate or would have to be implemented at the level of the individual countries. This includes badly needed financial reform - the rich countries just can't seem to say the words "too big to fail is too big" - and economic stimulus. And for the poor countries, where the recession has pushed tens of millions of people closer to the edge of survival - the G-7 countries have yet to offer any significant debt relief. Loans are better than nothing, although even these will offer only a small fraction of the capital inflows that poor countries have lost due to the world recession that the rich countries have caused. But most of the poor countries have too much debt already, and can't afford to take on more.

Reform at the top of the international economic system is still a long way off.

This column was published by The Guardian Unlimited on September 28, 2009.