Dr Stuart Jeanne Bramhall's Open Salon Blog

150,000 Postal Workers to Lose Their Jobs

Thu, 31 May 2012 18:05:04 -0400

Occupy the Post Office

May 15^th marked the end of the 4½ month moratorium on post office closures. The Postmaster General was pressured to call the moratorium last December, following an outcry from Senate and state leaders. A week after the moratorium ended, the US Postal Service (USPS) finalized plans to lay off 150,000 postal workers over the next three years. According to the May 26^thNew York Times, the post office plans to close 229 of its 461 processing centers and reduce its workforce from 600,000 to 450,000 by 2104. The first 45,000 mail handlers, who are being offered $15,000 payouts, are slated to go by the end of 2011. According to the Times, a big decline in mail volume, as Americans shift to the Internet to communicate and pay bills, leaves the US no choice but to close processing centers and rural post offices.

The Role of ALEC in the Demise of the Post Office

The Times Free Press indicates the real reason for the closures and layoffs is a $3.2 billion dollar deficit for the first quarter of 2012. Part of this loss relates to declining revenue coupled with escalating fuel and energy costs. However as Ralph Nader emphasizes out in a April 26^th letter to Postmaster General Patrick Donahoe, 80% of this deficit relates to a congressional requirement that the post office pre-pay federal health benefits for their retirees. Occupy the Post Office believes this onerous requirement – unheard of in the corporate world – is part of a deliberate strategy by corporate lobbyists to privatize America’s oldest and most important public service. They remind readers that the law was written by the infamous American Legislative Council (ALEC – see * below) and its Congressional members, who have an overt agenda of shrinking and privatizing public services.

Since 1971, the USPS has been expected to run as an independent, corporation-like agency of the federal government. At the same time, strong ideological opposition to a publicly run postal service has led Congress to create onerous regulations that make it impossible for USPS to run as a competitive business. In addition to the requirement around prepaid retiree health benefits, the post office is still waiting for a refund of an $80 billion overpayment to the Civil Service Retirement System and the Federal Employees Retirement System. USPS also operates under congressional regulations that prevent them from offering digital services to capture some of the first class business they are losing to Internet providers.

Nader finds all this especially ironic, given that the post office was one of the only “corporations” to receive no corporate welfare related to the economic downturn.

Why Nader is Calling for Danohoe’s Resignation

Nader highlights the disconnect between Danohoe’s repeated emphasis on running the post office like a business and his decision to embark on the worst business strategy possible – raising prices while simultaneously cutting services (i.e. closing rural post offices, eliminating Saturday delivery and guaranteed overnight first class delivery). The only effect of such poorly conceived changes will be to hasten the loss of postal customers who won’t return. His letter also reminds Danohoe of the strain his own $400,000 compensation package poses on the USPS budget, along with several other postal executives with base pay rates over $200,000. Added to this is the substantial cost of subsidizing cheap bulk mail services for businesses.

He also faults Danohoe for failing to consider – or even to respond to – dozens of practical proposals for making the post office more profitable. These include suggestions by Senator Bernie Sanders for the post office to offer high demand services, including notary, check cashing and gift wrapping services; the sale of hunting and fishing licenses and accepting wine or beer for delivery.

Danohoe has also failed to respond to two dozen practical suggestions from Ruth Goldway, chair of the Postal Regulatory Commission, and others from one of the conferences on innovation held in the summer of 2010. Nader is equally critical of Danohoe’s dismissive attitude towards the reinstatement of a Postal Savings Service (ended in 1967), a proposal by the Appleseed Group, an agency years of experience dealing with the “unbanked.” They estimate there are over 30 million “unbanked” Americans in 35,000 communities who would make use of such a service.

Effect on November Elections

Makes you wonder how many votes Obama will get from postal workers in November. Not many, I expect. It would appear that our President is tired of the job – that he wants Romney to win.

*On a separate but related issue, ALEC is currently facing a whistleblower suit instigated by Common Cause, related to leaked documents revealing that the corporate lobbying group has misrepresented itself to the IRS as a charity. This enables corporations to claim contributions to ALEC can be claimed as a tax deductible charitable donations. It also means that ALEC is in violation of strict IRS regulations that prohibit non-profit charities from engaging in lobbying.

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CIA Whistleblower Talks of 12 Month Incarceration over 9-11

Tue, 29 May 2012 20:05:11 -0400

Ex-CIA Asset Susan Lindauer

Embed feature still not working today. Click on this link: http://www.youtube.com/watch?v=68LUHa_-OlA&feature=related

Former CIA asset Susan Lindauer describes how the Department of Homeland Security locked her up on a military base for 12 months and tried to detain her indefinitely without a hearing and drug her with Haldol and other psychotropic medication. Why? Because she possesses extensive documentary evidence that the CIA had foreknowledge of the 9-11 attacks as early as February 2001. This, along with other important documents related to the Lockerbie bombing and the US wars on Iraq and Libya, are published as an appendix in her new book Extreme Prejudice.

Prior to her arrest, Lindauer was the chief CIA asset in charge of Iraqi and Libyan back-channel communications. She was under indictment for five years. Eventually her late partner’s exhaustive efforts to publicize her case paid off and she was granted a hearing – and released.

Towards the end of her talk, she describes her late partner’s conversation with Amy Goodman, host of Democracy Now! Amy’s flimsy excuses for refusing to cover the story, during a period when Lindauer was being held incommunicado at Caswell Air Force Base, aren’t at all surprising. Especially when you have a look at the CIA-funded foundations that finance Democracy Now! See Does the CIA Fund Both the Right and the Left?

Fast forward to 7:00 minutes, which is where Lindauer starts speaking. If video won’t play, there’s a free link at http://www.youtube.com/watch?v=68LUHa_-OlA&feature=related

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97% Owned: Democratizing the Money Supply

Sun, 27 May 2012 18:05:35 -0400

Film Review

(The embed feature isn't working today - for a free link go to http://topdocumentaryfilms.com/97-owned/)

97% Owned is a documentary by a British group called Positive Money. It’s an ideal film for people who have difficulty comprehending that the government doesn’t issue money – that nearly all money is created out of a thin air by private banks when they issue loans. The film mainly focuses on the British banking system, with numerous comparisons with the US, which operates along identical principles. The total lack of transparency on the part of private and central banks is the main reason people have so much difficulty understanding where money comes from. One of the filmmakers laments that the majority of elected officials don’t understand where money comes from.

The film begins by pointing out that paper money and coins constitute only 3% of the money circulating in Britain. The 97% consists of digital currency. In other words, it only exists as numbers on a computer. Digital currency is created when banks generate loans. A lot of people have the mistaken impression that banks use their reserves or other depositors’ money to loan you money to by a house. What actually happens is that the money creates the money out of thin air by entering the amount of the loan into a computer.

Why Saving Money and Debt Reduction Causes Recession

Because this is the only legal way to issue money, keeping enough in circulation to carry out basic economic activities requires large amounts of debt creation. People must continually borrow money and banks must continually lend it. Although conservative politicians love to talk about the need for individuals and governments to save money, saving too much money throws the economy into recession. Likewise if all the world’s private banks suddenly failed, 97% of the global money supply would disappear.

It’s also virtually impossible for governments to reduce debt without taking money out of circulation and causing recession and/or deflation. We currently see this being played out in Europe, where austerity cuts are causing country after country to experience a decline in economic growth (aka recession). Using a recent speech by British prime minister David Cameron as an example, the filmmakers assert that, like Cameron, like most American politicians, doesn’t have a clue where money comes from.

How Government Increases the Money in Circulation

The only way governments can increase the money supply is by borrowing money by selling treasury bonds (a kind of promissory note) to investment banks or through “quantitative easing.” With quantitative easing, the government itself creates digital money, which it uses to purchase treasury bonds (from banks) or private bank assets. The World Economic Forum that met in Davos in January 2012 recommended that a $103 trillion global credit (i.e. debt) expansion was needed to keep the world economy from collapsing – through government borrowing and/or quantitative easing.

How Debt-Based Money Increases Wealth Inequality

One of the most serious draw backs of debt-based money is that it results in a steady redistribution of income from the poor to the rich. It’s mainly the wealthy elite that profits from the interest charges government pays on the money they borrow. It falls on low and middle income taxpayers to pay this interest, as well as the debt, owing to loopholes and offshore tax havens that result in banks and bankers paying very little tax. Low and middle income workers also suffer the most from the austerity cuts enacted to reduce government debt – by losing public sector jobs and/or access to public services, such as health care, tertiary education and disability benefits and services.

The Financialization of the Industrialized World

97% Owned also discusses the epidemic of deregulation and financial speculation that accelerated debt creation and overinflated the world economy in the decades that preceded the global financial crisis. This related in part to the “financialization” of the economies of the global north. Beginning in the mid-seventies, their focus shifted from producing manufactured goods to selling financial products. Many of the latter – derivatives, futures, options, credit default swaps, foreign exchange – were so speculative that buying them was really a posh form of gambling.

Banning the Creation of Money by Private Banks

The filmmakers believe only solution to the current economic crisis is to ban private banks from issuing digital money. They argue that only democratically accountable public bodies should be given the authority to create money. Until we make this happen, private banks will continue to use their control of the monetary system to undermine genuine economic and political reform.

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Insider Trading by Facebook and Goldman Sachs: Implications for New Zealand

Thu, 24 May 2012 22:05:02 -0400

Learning that Goldman Sachs is being sued for insider trading for their role in misleading investors about Facebook’s initial public offering (IPO) is raising a lot of red flags here in New Zealand. Goldman Sachs is one of three investment banks New Zealand’s National government has chosen to manage the IPO of our publicly owned energy companies and Air New Zealand.

Just to be clear: insider trading is a federal crime the US. However given Obama’s extremely poor track record when it comes to prosecuting investment banks, the move by Facebook investors to file civil lawsuits against Facebook CEO Mark Zuckerberg and the banks who managed the IPO was a good call. It has prompted the state of Massachusetts, the Securities and Exchange Commission, the Financial Industry Regulatory Authority, the U.S. Senate Banking Committee and the House Financial Services Committee to launch investigations. In addition Morgan Stanley, one of the investment banks being sued, has announced that it will reimburse “some” investors who were ripped off by the insider trading. But according to analysts StarMine, Facebook shares are still overvalued and the stock price could drop as low as $9.59 a share (see Facebook IPO).

Why Facebook and Their Bankster Friends Are Being Sued

US mainstream coverage of this high profile crime has been somewhat sketchy. For example, most reports refer to the banks being sued as “Morgan Stanley and others.” You have to read the business or international press to learn that Goldman Sachs and JP Morgan, as well several smaller banks, were also among the perps. The reason Facebook et al are being sued and investigated is that they shared information about an anticipated drop in Facebook revenue growth with “insiders” (Facebook and institutional investors), but not with the general public. As a result public investors lost more than $2 billion when Facebook stock lost more than 17% of its original value ($38 per share) in its first day of trading. The Nasdaq exchange is also being sued, as much of this drop occurred in the first 17 seconds of trading, when Nasdaq software malfunctioned and investors were unable to buy, sell or cancel trades. (Facebook investor sues Nasdaq).

In my view, Goldman Sachs is a particularly important player in this debacle. Goldman Sachs and funds they manage already owned $850 million in Facebook shares. They sold 28.7 of their 65.9 million shares at $38 per share for $1.9 million. According to my calculations, that works out to approximately 500% profit.

Public Opposition to the Privatization of State-Owned Assets

Even before this latest scandal broke, a lot of New Zealanders were really unhappy about our government’s plan to pay Goldman Sachs and two other investment banks $150 to manage the IPO of “a partial sale” of five of our state owned companies (see Oral Questions to Ministers). A lot of people view the decision to privatize our extremely profitable state owned energy companies as “ideological” (i.e. benefiting investment trusts and wealthy New Zealanders who are Prime Minister John Key’s major backers). Key himself is a former investment banker and a former member of the New York Federal Reserve (NZ Parliament John Key).

It sure makes no economic sense to sell companies providing an average 7.6% return to New Zealand taxpayers – at least not when the cost of overseas borrowing is 4-5%.(see 10 myths about asset sales). A recent study shows that past privatization of publicly owned companies by the Labour government made the New Zealand economy worse off. Not only did the loss of revenue necessitate an increase in overseas borrowing, but ever since these companies wound up in foreign hands, there has been a steady loss of our country’s wealth in profit/dividend transfers to foreign investors (see Ganesh Nana study).

Organized Opposition to Asset Sales

There is a particularly strong opposition to the asset sales in the Maori community, which they feel violate the Treaty of Waitangi some of their chiefs signed with the British in 1840. The New Zealand Maori Council has filed a legal challenge with the Waitangi Tribunal.

On May 12th, a coalition of other groups (Grey Power, the New Zealand Council of Trade Unions (CTU), the Labour Party and the Green Party) launched a petition demanding a Citizens Initiated Referendum on state assets sales. As a member of both Grey Power and the Green Party, I’ve been out in the streets nearly everyday collecting signatures. Nearly everyone I approach signs. They already know the people who run Goldman Sachs are crooks – and don’t want them anywhere near our public utilities or Air New Zealand.

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Hall of Shame

Below is a list of the Facebook inside traders who cashed in big by selling their shares before the stock price plummeted:

Mark Zuckerberg, Facebook CEO

Shares sold: 30.2 million

Value: $1.13 billion

Accel Partners, venture capital investor

Year invested in Facebook: 2005 for $12.7 million

Shares sold: 49 million

Value: $1.86 billion

Peter Thiel, PayPal co-founder

Year invested in Facebook: 2004 for $500,000

Shares sold: 16.8 million

Value: $640 million

DST Global Ltd, investment firm based in London and founded by Russian oligarch

Year invested in Facebook: 2009 and late 2010 for $200 million

Shares sold: 45.7 million

Value: $1.74 billion

Goldman Sachs, investment bank

Year invested in Facebook: 2011 for $450 million

Shares sold: 28.7 million

Value: $1.09 billion

Elevation Partners, private equity firm with Bono as spokesman

Shares sold: 4.6 million

Value: $176 million

Greylock Partners, venture capital investor

Year invested in Facebook: 2006 for $27.5 million

Shares sold: 7.6 million

Value: $289 million

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The Loan Sharks Behind China’s Economic Boom

Wed, 23 May 2012 23:05:31 -0400

Wenzhou: birthplace of Chinese capitalism

Last week I was surprised to learn that private lending is illegal in China. In view of the country’s economic miracle, I was even more surprised to learn that small and medium sized enterprises (SMEs), which make up 90% of businesses, are ineligible for start-up or bridge funding from Chinese banks. The latter are still government owned. The vast majority of Chinese SMEs are financed by private “illegal” loans, amounting to 3.7 trillion yuan or $US 500 billion dollars per year. About half of this financial activity occurs in Zheijiang province, whose most prominent city is Wenzhou, the birthplace of China’s private economy. It’s currently home to 360,000 small businesses that make a major portion of the world’s consumer goods.

70% Interest Rates and “Penalties” for Missed Payments

Until recently, government enforcement of the ban on private lending has been piecemeal and arbitrary. They supposedly go after lenders when the rate of interest exceeds four times the interest charged by state-owned banks (currently about 6%). However many lenders get away with charging interest rates as high as 70%. Borrowers have been happy to pay high rates for start-up funding, owing to the immense profit potential of small factories producing consumer goods for export.

Loans are typically informal. The loan originators pool savings from family members and friends. Borrowers are often friends, as well, and loans are typically agreed with a handshake, rather than a formal contract. People who miss an interest payment get a visit from thugs who beat them up. With the recent slowdown of the Chinese economy, many borrowers, unable to make monthly interest payments have fled Wenzhou. There has also been one high profile suicide.

About 60% of borrowers had taken out loans to invest in the local property boom. When the Chinese government intervened in November to rein in the real estate bubble (by limiting the number of houses people could purchase and increasing the size of deposit required), Wenzhou lenders lost millions of dollars, when loans became tied up in unsellable homes and commercial buildings. At the end of 2011, the shortage of finance capital caused approximately one fifth of Wenzhou’s 360,000 SMEs to cease operating – owing to the unavailability of bridge financing.

Death: the Government Penalty for Usury

In the most high profile illegal lending prosecution, Wu Yung, one of China’s most famous multi-millionairesses was sentenced to death in 2009 for charging an “unreasonably high rate of interest.” The 2011 credit crunch, as well as the uproar Wu Yung’s sentence provoked in the legal and small business community, has spurred the Chinese government to legalize and reform private lending. They are starting with a pilot program in Zheijan and Shenzhen province, based on legislation drafted by Zhou de Wen, head of Wenzhou’s small and medium business association. It will provide government support for the creation of numerous small private funding institutions, including rural banks, micro-financing firms and most importantly, a private equity fund run by the city government, to invest in its private companies.

In a separate but related development, the Chinese supreme court has commuted Wu Yung’s death sentence and ordered her retried.

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