The siege against capitalism continues unabated. Yesterday, leaders of the 20 largest national economies reached a consensus that they needed to reel in unfettered free markets, which they all agreed was the cause of the world’s economic crisis. The medicine consists of further funding of the IMF (to the tune of an addition $1 Trillion) and an increased regulatory state.
Setting aside differences in philosophy and national character, at least for now, the leaders agreed to make available more than $1 trillion in new lending to spur international growth. While leaving it to individual nations to enact, they promised tough new regulations aimed at banks and other financial institutions whose freewheeling activities sparked the crisis. And they vowed renewed support for trade and more help for the globe’s poorest countries.
“The world’s leaders have responded today with an unprecedented set of comprehensive and coordinated actions,” Obama said, in the spotlight on his first overseas trip as president. “Faced with similar global economic challenges in the past, the world was slow to act, and people paid an enormous price. . . . Today, we have learned the lessons of history.”
For some reason, the bulk of the reporting on the G-20 conference outcome is limited to describing how wonderful everyone feels about the loose agreements, and how industrious they all were to come to terms with one another. Very little press has been devoted to the actual agreements. The media seem to be under the collective impression that the most important aspect of these meetings is the conduct of the diplomacy. They could not be more wrong:
FINANCIAL market “cowboys” who wreaked havoc on the world economy will be brought undone by the G20 agreement, Prime Minister Kevin Rudd says.
Mr Rudd says the $US1 trillion ($A1.4 trillion) deal agreed on at the G20 summit in London, will benefit “tradies”, young people and small business with real commitments against real timelines.
“Today’s agreement begins to crack down on the sort of cowboys in global financial markets that have brought global markets undone with real impacts for jobs everywhere,” Mr Rudd told reporters at the conclusion of the summit overnight.
The summit has agreed to a restructure of the financial regulatory system, reform of and a trebling of funding for the International Monetary Fund (IMF) to $US750 billion ($A1.08 trillion), an extension until the end of next year of a ban on nations introducing trade protection measures, a curb of excessive executive payouts and agreement to co-ordinate further economic stimulus.
Make no mistake. What the G-20 leaders (as stated by PM Rudd above) are saying to world is that none of this would have happened if they had been in charge. “Financial market cowboys” (meaning US and UK bankers), the faces of capitalism, are entirely to blame for the woes of the world. If only there had been more government involvement, according to this theory, then the financial crisis would have been averted or severely curtailed. Accordingly, the G-20 have decided that the way to fix this mass is to assert greater control over the world economy. The immediate targets of this new world order? Tax havens of course:
Switzerland, Singapore, the Cayman Islands, Monaco, Luxembourg and Hong Kong are among 45 territories blacklisted on Thursday by the Organisation for Economic Co-operation and Development and now threatened with punitive financial retaliation for their banking secrecy.
Among the sanctions being considered by the G20 are the scrapping of tax treaty arrangements, imposing additional taxes on companies that operate in non-compliant countries, and tougher disclosure requirements for individuals and businesses that use shelters.
Illegal tax evasion through offshore shelters has been a long-standing irritation for Gordon Brown, President Barack Obama and French President Nicolas Sarkozy. An estimated $7 trillion of assets are held offshore and, according to pressure group Tax Justice Network, developed countries lose $180bn a year in evaded taxes.
Under the OECD definition, countries will be considered non-compliant if they have less than 12 bi-lateral agreements to exchange tax information with foreign governments on request. “Authorities should have access to the information to effectively crack down on tax evasion,” Andrew Watt, director at law firm Alvarez & Marsal Taxand, said.
Jeffrey Owens, director of the OECD’s centre for tax policy said: “This is the major breakthrough we have been trying to get for 13 years. If you intend to evade tax through offshore bases, you will think hard about it now you know tax authorities can trace you.”
Mr Sarkozy added: “Sixty percent of hedge funds are registered in tax havens. Putting hedge funds under supervision isn’t going to generate jobs in the textile industry. But we have to put behind us the madness of this time of total deregulation.”
The reactions of Owens and Sarkozy are like being annoyingly puzzled at why the whipping boy continues to move, seeking to avoid the lash.
Clearly the aim here is not at fixing anything other than the ability of wealthy nations to collect taxes. Small countries typically designated as “tax havens” tend to have one thing in common: they have no other means of competing in the world market place other than in the area of business taxation. If the economies of these countries were all dependent upon growing and selling corn, then the G-20 actions would be met with a much different response. Instead, companies that wish to minimize their tax burden, so that they may instead fund R&D, expand (create jobs), or re-invest, are treated as outlaws, unworthy of little more than scorn. And the small countries that have been willing to host these companies as a means of boosting their own economies, are labeled pariahs to be sanctioned by the wealthiest nations in the world. The message: “Don’t muscle in on our territory. That’s our tax money and we’re here to collect.”
In addition to punishing tax havens, the G-20 decided that the favorite whipping boys of statists needed to be better restrained so as to prevent their squirming:
Leaders agreed to craft tighter controls over hedge funds and establish more rigorous regulations to prevent the buildup of toxic assets that poisoned the U.S. financial system in and spread overseas.
The leaders agreed to set benchmarks for executive pay and make accounting standards more uniform across borders. Most would be drafted by a new Financial Stability Board, where central bankers, regulators and finance ministers from the more than 20 nations represented at the summit will eventually hash out the details.
Credit agencies — whose top-notch ratings of instruments linked to bad U.S. subprime mortgages gave false indications of their relatively safety — would be subjected to new oversight and regulations. But there was no call for a global regulator that could overrule decisions made by individual countries.
While I’m glad to see the ratings agencies (whom have inexplicably been absent from public criticism and ire) taking their turn at the post, everyone should be dismayed at what these sorts of agreements portend. The collective effort to rein in “cowboy capitalism” is little more than a barely disguised effort to place the European bit in the mouth of American (and, to a lesser extent, British) mouth. Business decisions are no longer to be made in the interests of the shareholders, but in favor of “public good.” What constitutes the “public good” will be determined by the special interests who exact the most influence upon, and best line the pockets of, the political forces in charge. In short, consumers no longer rule the market place; bureaucrats do.
As with all movements based on collective will, such as that which the G-20 has furthered, an unfettered free market is featured as the main culprit. America is widely considered to be an economic jungle where the capitalist beast roams freely, devouring the innocent and maiming cautious outsiders. Ironically, Leviathan himself has identified capitalism as an unrestrained beast in need of controlling. Yet, we have nothing like an uncontrolled free market here. It only appears that way because the remainder of the world has cloaked their industries in thick blankets of protectionism and shackled their businesses with an alarming array of bureaucratic chains. Comparatively, America does look like a free market jungle.
But therein lies the problem. As the Washington Post stated it:
Along with declarations of optimism came the recognition of at least a temporary shift in attitude away from two decades of intense reliance on free trade, deregulation and market-knows-best policies that fueled stunning growth across the planet.
Brown — the leader of a country closely associated with that philosophy — declared “the Washington Consensus” over, using a term that recognizes the American roots of an economic system seen by many in the world as unfair and unhealthy.
As far from a pure free market as we are, it is our relative distance from the nanny-statism of Europe and beyond that props up the economies of the world. That stunning growth was made possible precisely because of what the rest of the world refers to as “cowboy capitalism” and they were all happy to join in the ride. But now that woe times betide us, thanks primarily to government meddling (e.g. CRA, Fannie Mae, Freddie Mac, Fed policy, etc.), the world is ready to chop down the last pillar of capitalism, and assert government control over everything. With that final support gone, the capitalist beast will be brought to heel, confined to the zoo where it will live its remaining days as little more than a novelty. Unfortunately, it will take its wealth producing powers with it.
Yeah, yeah, I know, you’re tired of “budget talk”. Well too bad – this is extremely important stuff. It’s not just about the amount of money, which is monstrous, but the agenda it puts into place:
Congressional Democrats overwhelmingly embraced President Obama’s ambitious and expensive agenda for the nation yesterday, endorsing a $3.5 trillion spending plan that sets the stage for the president to pursue his most far-reaching priorities.
Voting along party lines, the House and Senate approved budget blueprints that would trim Obama’s spending proposals for the fiscal year that begins in October and curtail his plans to cut taxes. The blueprints, however, would permit work to begin on the central goals of Obama’s presidency: an expansion of health-care coverage for the uninsured, more money for college loans and a cap-and-trade system to reduce gases that contribute to global warming.
These are the paving stones for the road to hell and they’ve now been authorized by the Congress. Of course this is just the blueprint. The authorization of the funds will come in separate appropriation bills. And you had better believe Democrats are going to try to use every procedural trick in the book to ease their passage.
Just to leave you with the appropriate chill up your back, I leave you with an example of what is to come:
Sen. Benjamin L. Cardin (D-Md.) called cap-and-trade “the most significant revenue-generating proposal of our time,” and said it would be difficult to pass without reconciliation because Democrats would be forced to accommodate a handful of Republicans as they did in the debate over the president’s stimulus package.
And when it comes to “revenue-generating”, the Democrats want nothing standing in their way, especially a few Republicans. The third wave of liberalism (New Deal, Great Society and now the Raw Deal) is afoot.
A federal judge ruled on Thursday that prisoners in the war on terror can use U.S. civilian courts to challenge their detention at a military air base in Afghanistan.
U.S. District Judge John Bates turned down the United States’ motion to deny the right to three foreign detainees at Bagram Airfield in Afghanistan.
The U.S. Supreme Court ruled last year that detainees at Guantanamo Bay, Cuba, have the right to challenge their detention in court. But the government had argued that it did not apply to those in Afghanistan.
Bates said the cases were essentially the same and he quoted the Supreme Court ruling repeatedly in his judgment and applied the test created by it to each detainee. It is the first time a federal judge has applied the ruling to detainees in Afghanistan.
Similarly, extending habeas corpus rights to prisoners detained on the battlefield is an exercise in futility. Of course, that ship sailed with the ruling in Boumediene v. Bush. I’m not sure what argument the government could make that any prisoners under the control of the U.S., regardless of where they are being held, are not entitled to some sort of habeas proceeding. And since the very procedures deemed constitutionally valid by the Supreme Court in Hamdi were struck down as inadequate in Boumediene, I don’t know what options are actually left to the Obama administration other than the unsavory prospect of field executions.
Barring a contrary ruling from the Supreme Court, I think this most recent case proves the point.
But, Ed Morrissey seems to think the Bates’ decision does much more. Where he (reasonably) finds that the foregoing is an unconstitutional interjection of the judiciary into matters delegated to the Executive, Ed also seems to think that Bates’ order violates the Geneva Conventions (his bolding applied):
Not only does this violate the separation of powers in the Constitution, it actually violates the Geneva Convention. Article 84 states clearly that prisoners of any stripe shall not get tried in civil courts:
A prisoner of war shall be tried only by a military court, unless the existing laws of the Detaining Power expressly permit the civil courts to try a member of the armed forces of the Detaining Power in respect of the particular offence alleged to have been committed by the prisoner of war.
In no circumstances whatever shall a prisoner of war be tried by a court of any kind which does not offer the essential guarantees of independence and impartiality as generally recognized, and, in particular, the procedure of which does not afford the accused the rights and means of defence provided for in Article 105.
We do not try our military personnel in civil court for offenses committed in the service. Therefore, we do not have the right to try prisoners in our civil courts, either.
There are a few problems with that conclusion:
(1) The detainees are not being tried. They’re challenging their detention. Another way of putting it is that they’re the plaintiffs in such an action (habeas hearing) as opposed to the defendants (as in a trial).
(2) Civilian courts may be used under the GC where the crimes/offenses alleged are already illegal (i.e. no a bill attainder or ex post facto law) and the court procedures provide the minimum guarantees set forth in the GC (this is spelled out in the rest of Ed’s Article 84 excerpt starting with “unless”).
(3) The Boumediene decision pretty much made this ruling necessary since the SCOTUS designated anywhere under U.S. control as being “U.S. territory”, with a few exceptions. An active battlefield is one of them IIRC and the judge may have decided that Bagram AFB doesn’t qualify.
In fact, on that last point, Judge Bates specifically noted that:
… non-Afghan detainees captured outside the country and moved to Bagram for a lengthy detention should have access to the courts to prevent the United States from being able to “move detainees physically beyond the reach of the Constitution and detain them indefinitely.”
As Boumediene is written, I think Bates got it exactly right. I do think that the entire line of reasoning and case law is incorrect from both a policy and constitutional basis, but Judge Bates is required to follow Supreme Court precedent. That his ruling serves as a perfect example how reductio absurdum can happen in real life doesn’t make him wrong.
Furthermore, I don’t see how allowing detainees to challenge their detention could possibly violate the Geneva Conventions. Again, that does not mean detainees should be afforded such rights, just that such a grant does not in any way run counter to either the letter or spirit of those treaties.
“For anyone who questions why the President has offered this plan, these pledges will be the answer.”
Obama’s army of cultists is very hard at work.
Like (I assume) most other news junkies who closely followed the election, I am still receiving emails from Obama’s political action people. Much of it is aimed at getting the recipients to participate in the “Organizing for America” politicking. It has always seemed a little creepy to me because the election is over. I mean, why the endless campaign unless the real purpose is to propagandize the voters? But I also figured that my biases made it seem worse than it really is. That is, until viewing this video:
Neo-neocon provides an excellent analysis of why this sort of White House driven organizing just seems wrong. For example, she notes the rather troublesome fact that the Obama administration intends for people to simply pledge blind support to his agenda:
Some of the most disturbing things about this video are its vagueness, its focus on Obama himself in what I can only call his cult of personality, and its use of the word “pledge” (at minute :56, note the words, under “The Pledge” and next to a check box, “I support President Obama’s bold plan….”)
The vagueness comes from the fact that whatever people are pledging to support is never described in any detail whatsoever. The petition, or pledge sheet, or loyalty oath, or whatever you want to call it, is very short. It appears that each policy area—energy, health care, education—has but a single sentence describing it.
Think about this for a moment: people are blindly pledging loyalty to policies about which they know virtually nothing except the fact that Obama is behind them, and he says it’s for our own good.
Moreover, reasonable dissent from Obama’s agenda is not possible according to the training video:
The trainer gives only one reason that “the establishment in Washington” would oppose this: opposition to change. Never mind principled opposition; there is no such thing where Obama is concerned. Never mind the cost of these policies in a recession.
Never mind; just sign on the dotted line. And is anyone else as perturbed as I am by this statement: For anyone who questions why the President has offered this plan, these pledges will be the answer.
I think that definitely qualifies as creepy, biases or not.
[HT: Bird Dog]
It gives you great confidence in someone when they can’t even tell you how much is left in a fund which they control. Apparently Treasury Secretary Tim Geithner thinks he has about $132 billion left in TARP funds.
But the Government Accountability Office, a non-partisan federal agency, reports that figure is closer to $32 billion, which is what ABC News and other independent analysts thought.
The Treasury Department continues to insist GAO and others are double-counting commitments and underestimating potential paybacks.
So everyone but Treasury is wrong. I’m willing, at this point, to wait until a final determination is forthcoming, but I have to tell you, if I were a betting person, I wouldn’t be backing Geithner’s position. And don’t forget how cooperative his department has been with the oversight folks.
I can’t say with any certainty what this forebodes, but this is a staggering amount of debt to pile onto any country, especially within just a few months (my emphasis):
The U.S. government and the Federal Reserve have spent, lent or guaranteed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s.
New pledges from the Fed, the Treasury Department and the Federal Deposit Insurance Corp. include $1 trillion for the Public-Private Investment Program, designed to help investors buy distressed loans and other assets from U.S. banks. The money works out to $42,105 for every man, woman and child in the U.S. and 14 times the $899.8 billion of currency in circulation. The nation’s gross domestic product was $14.2 trillion in 2008.
The really scary thing is, the government is not even close to being done spending money. Yet we’ve already committed about 90% of GDP. Where is all that money going to come from?
As we’ve said before, there’s only a few options: (1) taxes; (2) borrowing; and (3) printing press.
Taxes will only raise so much, even when the government starts raising rates on lower income quintiles, and certainly not enough to keep up with the ballooning debt-service payments.
Borrowing just isn’t going to happen because there isn’t anybody else who either wants to or is capable of lending us more money. To wit, here’s some of Peter Murphy’s analysis on our borrowing problems:
The biggest buyers of US Government (and Agency) debt, for the past several years, have been China, Japan, and the Oil States.
However, the supply of loanable funds among these entities from which the US can borrow is drying up.
China’s current-account surplus, the source of the funds for its Treasury purchases, has dropped precipitously as the global economy has contracted over the past several months.
Japan, another major buyer of Treasuries over recent years, is now posting trade deficits for the first time since the early 1970′s. This current account deficit, combined with a significant fiscal shortfall and planned issuance of $33 Trillion Yen ($340 Billion USD) in government debt this year, means that Japan will be, in effect, competing with the US for funds, rather than lending to us.
And, the oil-exporters are in no shape to be buying anything right now, as oil prices have collapsed since last summers $147/barrel peak. Russia is busy selling foreign exchange to prop up its currency.
Brad Sester of the Council of Foreign Relations reports that foreign demand for long-term treasuries has faded, and notes, ominously, that “global reserves aren’t growing”.
Accordingly, borrowing does not look like an option. Which leaves really just one choice.
Printing money in a down economy, which will have to be done, increases inflation and saps purchasing power (potentially leading to hyper-inflation). We may be able to pay off our debts this way, but we’ll wipe out the wealth of the nation doing so. Think post-Franco-Prussian War where France drove its economy into the ground in order to pay off about 22% of its yearly GDP in war reparations to Germany … over three years. That strife led to the Paris Commune uprisings among other things. Or worse, consider post-WWI Germany, with inflation rising so fast that workers had to be paid twice a day and cart around wheelbarrows full of money just to buy a loaf of bread.
Is that what we’re headed for? I sure hope not, but the signs aren’t very encouraging if history is any guide. It is true that a much more dynamic and nimble economy exists today as compared to the late 19th and early 20th centuries. But the world tendency right now seems to be to shackle that economy, making it much less dynamic and nimble. The end result must be less wealth produced, and less money to pay these debts. In short, our government is currently cashing checks that our economy can’t pay.
If you’ve not kept up or been unable to keep up (that’s why we’re here), you’ve probably wondered about the references to the “underpants gnomes” when discussing the banking and auto industry situations.
Naturally we have precisely the information you need to be in the know. Just remember, as our own underpants gnomes are discovering, the tricky part is “Phase II”.
I‘m sure some will find this surprising. Others will say, “yeah, baby!” It certainly is the logical extension of what happened to GM’s CEO. I, for one, still find it to be very disturbing:
On the heels of the resignation of General Motors CEO Rick Wagoner, the Service Employees International Union is urging President Barack Obama to oust Bank of America CEO Ken Lewis.
“It defies logic, common-sense, and responsible governance to punish the auto industry while letting financial institutions off the hook,” SEIU President Andy Stern said, announcing his call for Lewis’s job Tuesday.
The same could be said for letting the union leadership off the hook.
Aren’t they responsible for declining membership? Aren’t they as much a part of the problem as the management of the auto industry? Why isn’t the SEIU calling for union heads as well?
Of course I ask that facetiously. Obviously we’re now going to hear every whiner and complainer in the world will demand the government fire their boss. Hey, the precedent has been set with one of the worst decisions I’ve seen in a while. Now we begin to see the results of such a blatantly dumb move.
The person to whom the Navy recently bestowed the formerly prestigious Distingusihed Public Service Award had this to say:
“If I’m corrupt, it’s because I take care of my district,” Mr. Murtha said.
Because, you know, there’s obviously no other way to do that than be corrupt.
Shades of Georgia’s Eugene Talmadge:
“Sure, I stole. But I stole for you,”
My latest Examiner column. With housing values tanking, taxes based on that value ought to be going down as well, right?