July 2011 archive

THE Reserve Currency

Crossposted from The Stars Hollow Gazette

hitchhikingFirst of all you have to give up the idea that “money” has any utility except as a medium of exchange.

If you have a goat or a camel you can milk it, you can eat it and use the hide, AND you can make cute little baby goats and camels.  On the other hand they eat and are smelly and ill tempered.  Gold is shiny and pretty, non-reactive and a good electrical conductor, as well as being easy to shape and bend.  You can’t eat it or use it for tools (try tightening a bolt with a solid gold wrench).

Now whether it’s Dollars or Gold or Yap Island Rais the essential concept of “money” is that it is something that you can trade for a goat should you happen to need one for milk or meat (not to mention those cute little baby goats) without the inconvenience and stink of actually being a goat herder.

Moreover if you’re weighing the economic advantage of camels v. goats (you can ride them and use them to haul heavy things, on the other hand they spit at you and bite you) instead of figuring out how many goat carts makes a camel load you can go to the magical free marketplace and find out how many carved stone doughnuts it takes to get one.

And it gives you an easy way to deal with fractional goats.  How much is a a haircut worth?  A pair of shoes?  A suit?

Because of it’s adaptable and arbitrary nature “money” is a useful measure of the difference in societal desire between various objects.  This is one reason inflation is economically useful, because it encourages investment in actual goats and camels that produce milk and meat and stinky little goats and camels rather than simply holding hoards of rocks you can’t eat.  There are no cute little baby golds.

“Money” is a lousy store of value.

There is over $700 Trillion of ‘notional’ value floating around in the magical free market place.  This is enough to buy all the little goats and camels for 30 years but that’s not a problem if you don’t need one right now so you can sacrifice to the gods and read the entrails for augury.  Should everyone need ALL THOSE GOATS AT ONCE RIGHT NOW! there is literally not enough “money” in the world, even including camels.  Store of value?  Goats 1, Rocks 0.

It’s really all about convenience.

Nobody wants to smell like a goat herder and hard think make brain hurt.  Especially pampered privileged Masters of the Universe types.  They whine and complain not only over their pwecious wittle fee fees but are constantly surprised when the magical marketplace doesn’t conform to their ignorant expectations.

Ah, if only we had less uncertainty.  And it was a bad lie, I’m taking a mulligan, it’s not that I’m a horrible golfer at all.

Dollar dominance is a historical oddity.  It’s partly a result of the fact that after WW II we were the only economy left standing.  It’s also a result of elite intellectual laziness and the fact that there are penalties for being the world’s reserve currency.

Felix TV: Will the US downgrade be a nonevent?

Felix Salmon, Reuters

Jul 27, 2011 12:50 EDT

The fact is that Treasury bonds are going to remain the global fixed-income benchmark, simply because there’s no alternative. There are $9.3 trillion in marketable Treasury securities outstanding – that’s five times the debt stock of triple-A countries like France, Germany, or the UK. And when it comes to liquidity, the gap is even bigger: daily Treasury volume of $580 billion is 17 times higher than the next most liquid triple-A security, UK gilts. And UK gilts are denominated in pounds, which is hardly a global reserve currency; they’re certainly not much use for, say, financial institutions needing collateral for their dollar-based triparty repo transactions.

Cartnoon

Shish Ka Bugs

On This Day In History July 28

Cross posted from The Stars Hollow Gazette

This is your morning Open Thread.

Find the past “On This Day in History” here.

July 28 is the 209th day of the year (210th in leap years) in the Gregorian calendar. There are 156 days remaining until the end of the year.

On this day in 1868, following its ratification by the necessary three-quarters of U.S. states, the 14th Amendment, guaranteeing to African Americans citizenship and all its privileges, is officially adopted into the U.S. Constitution.

snip

In the decades after its adoption, the equal protection clause was cited by a number of African American activists who argued that racial segregation denied them the equal protection of law. However, in 1896, the U.S. Supreme Court ruled in Plessy v. Ferguson that states could constitutionally provide segregated facilities for African Americans, so long as they were equal to those afforded white persons. The Plessy v. Ferguson decision, which announced federal toleration of the so-called “separate but equal” doctrine, was eventually used to justify segregating all public facilities, including railroad cars, restaurants, hospitals, and schools. However, “colored” facilities were never equal to their white counterparts, and African Americans suffered through decades of debilitating discrimination in the South and elsewhere. In 1954, Plessy v. Ferguson was finally struck down by the Supreme Court in its ruling in Brown v. Board of Education of Topeka.

The Fourteenth Amendment (Amendment XIV) to the United States Constitution was adopted on July 29, 1868 as one of the Reconstruction Amendments.

Its Citizenship Clause provides a broad definition of citizenship that overruled the decision in Dred Scott v. Sandford (1857), which held that blacks could not be citizens of the United States.

Its Due Process Clause prohibits state and local governments from depriving people (individual and corporate) of life, liberty, or property without certain steps being taken. This clause has been used to make most of the Bill of Rights applicable to the states, as well as to recognize substantive rights and procedural rights.

Its Equal Protection Clause requires each state to provide equal protection under the law to all people within its jurisdiction. This clause later became the basis for Brown v. Board of Education (1954), the Supreme Court decision which precipitated the dismantling of racial segregation in the United States.

The there is that pertinent and pesky Article 4:

Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

Validity of public debt

Section 4 confirmed the legitimacy of all United States public debt appropriated by the Congress. It also confirmed that neither the United States nor any state would pay for the loss of slaves or debts that had been incurred by the Confederacy. For example, several English and French banks had lent money to the South during the war. In Perry v. United States (1935), the Supreme Court ruled that under Section 4 voiding a United States government bond “went beyond the congressional power.” Section 4 has been cited (during the debate in July of 2011 over whether to raise the U.S. debt ceiling) by some legal experts and Democratic members in the U.S. House Democratic caucus, as giving current President Barack Obama the authority to unilaterally raise the debt ceiling if the Congress does not appear to be able to pass an agreement by Tuesday, August 2, 2011. The White House Press Office and President Obama have said that it will not be resorted to, though Democratic members of the House that support the move are formally petitioning him to do so “for the sake of the country’s fiscal stability.” A final resolution to the crisis has not yet been decided upon.

Muse in the Morning

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Muse in the Morning

Time for a break from poetry…in order to create some art.

You have to do stuff that average people don’t understand because those are the only good things.

–Andy Warhol



Art Glass 13

Late Night Karaoke

Congressional Game of Chicken: “Super Congress”

Cross posted from The Stars Hollow Gazette

The bills that have been proposed by Republican and Democratic leadership to raise the debt ceiling putting an an to this wholly manufactured crisis, differ little and both will be devastating to most Americans. One of the commonalities is the creation of a bipartisan commission of 12 that on first glance seems innocuous but on looking closer, it is quite toxic and may even be unconstitutional. This “super committee” will be equally comprised of Democrats and Republicans members of congress. Who and how they will be selected is unclear but considering the current corporate owned, deficit hawk nature of both sides, I suspect it will be their worst conservative “cut spending/no revenue ghouls”.

At first glance, this sounds like the President’s Deficit Commission that couldn’t produce recommendations even 14 of the 18 members could agree. The co-chairs, former Sen. Alan Simpson (R-WY) and former Clinton Chief of Staff and South Carolina businessman, Erskine Bowles wrote there own recommendations and ran it up the flagpole. Needless to say President Obama saluted and embraced the draconian principles that it enshrined, such as decimating Medicare and Medicaid and drastic cuts to Social Security. The “Catfood Commission”, however, had no “teeth”, everything that was suggested would have to be passed as a bill. This new commission is another game and will have the force of law behind it.

Ryan Grimm at Huffington Post has the best description of how this “new congress” will function and just how powerful it will be:

Legislation approved by the Super Congress — which some on Capitol Hill are calling the “super committee” — would then be fast-tracked through both chambers, where it couldn’t be amended by simple, regular lawmakers, who’d have the ability only to cast an up or down vote. With the weight of both leaderships behind it, a product originated by the Super Congress would have a strong chance of moving through the little Congress and quickly becoming law. A Super Congress would be less accountable than the system that exists today, and would find it easier to strip the public of popular benefits. Negotiators are currently considering cutting the mortgage deduction and tax credits for retirement savings, for instance, extremely popular policies that would be difficult to slice up using the traditional legislative process.

House Speaker John Boehner (R-Ohio) has made a Super Congress a central part of his last-minute proposal, multiple news reports and people familiar with his plan say. A picture of Boehner’s proposal began to come into focus Saturday evening: The debt ceiling would be raised for a short-term period and coupled with an equal dollar figure of cuts, somewhere in the vicinity of a trillion dollars over ten years. A second increase in the debt ceiling would be tied to the creation of a Super Congress that would be required to find a minimum amount of spending cuts. Because the elevated panel would need at least one Democratic vote, its plan would presumably include at least some revenue, though if it’s anything like the deals on the table today, it would likely be heavily slanted toward spending cuts.

The tea party Republicans in the House have informed Speaker John Boehner that the commission is totally unacceptable to them. There main objection is they feel it could lead to tax increases. Other critics from the right like Eric Erickson of Red State are opposed mostly because it just ads another costly layer to the bureaucracy that won’t work. From the left, Rep Barney Frank (D-MA) and MoveOn.org expressed concerns that it would cut the big three social safety nets and the idea that it would supersede congress’s parliamentary power.

The ratings agencies have said that the Boehner bill will result in a ratings downgrade since it only raised the debt ceiling by $1 trillion which will require another cap raise in 5 months, creating uncertainty in the bond market. The White House has embraced the Reid version which would move the need raising the ceiling again past 2012 which is more acceptable to the ratings agencies who think the ceiling should just be removed entirely.

This is going to the wire with both sides deadlocked and hamstrung by a small loud and incredibly stupid minority and ineffective leaderchip on both sides.

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“!No Pasaran!” – The Abraham Lincoln Brigade and the Fight against Fascism in Spain, Part I

Crossposted at Daily Kos

Part II of this diary will be posted on Wednesday, July 27th.

In July 1936, the Spanish Army staged a military uprising against the democratically-elected Republican government of Spain, which had been in power for less than six months. The revolt started in the Protectorate of Morocco under the leadership of General Francisco Franco and by the next day, had spread to the mainland. The rebels had badly miscalculated and not anticipated that several army units would side with the government nor expected that the working classes in towns and cities would be quickly mobilized and armed in a popular resistance against the rebellion.  In what would become a dress rehearsal for World War II, the struggle that ensued between Republican and Nationalist forces to determine the future direction of the country would rage on for the next three years.

In 1937, Bill Bailey (a son of Irish immigrants to America) wrote a letter from Spain to his mother in New Jersey.  Unbeknownst to her and defying a travel embargo imposed by his own government, he had secretly traveled to that country to become one of almost 2,800 American volunteers to eventually fight on the Republican side in a brutal war against the defenders of authoritarian conservatism

You see, Mom, there are things that one must do in this life that are a little more than just living.  In Spain there are thousands of mothers like yourself who never had a fair shake in life.  They got together and elected a government that really gave meaning to their life.  But a bunch of bullies decided to crush this wonderful thing.  That’s why I went to Spain, Mom, to help these poor people win this battle, then one day it would be easier for you and the mothers of the future.  Don’t let anyone mislead you by telling you that all this had something to do with Communism.  The Hitlers and Mussolinis of this world are killing Spanish people who don’t know the difference between Communism and rheumatism.  And it’s not to set up some Communist government either.  The only thing the Communists did here was show the people how to fight and try to win what is rightfully theirs.

You should be proud that you have a son whose heart, soul and energy were directed toward helping the poor people of the world get back what was taken from them.  When the horrible conditions of this world are eventually made right, you can look with pride at those who will be here to enjoy it and say, “My son gave his life to help make things better, and for that I am grateful.”

If it will make my departure from the world of the living a little easier for you, just remember this, Mom: I love you dearly and warmly, and there was never a moment when I didn’t feel that way.  

I was always grateful and proud that you were my mom.


Bill Bailey’s letter to his mother explaining why he was fighting in the Spanish Civil War, Photograph Source: Spartacus Educational, U.K.  Sketch Source: GMT Games

Cartnoon

High Diving Hare

Cenk Uygur leaves MSNBC

Courtesy of TheMomCat

The last couple of weeks Cenk Uygur, a liberal, outspoken commentator, has been missing from the 6 PM program he had been regularly hosting on MSNBC.

Cenk Leaves MSNBC (Inside Story)

Cenk Uygur (host of The Young Turks) explains why he turned down a new, significantly larger MSNBC contract after hosting a prime-time show on the network that was beating CNN in the key demo ratings. He also shares his thoughts on Rachel Maddow and Fox News.

What Jane Hamsher at FDL Action said:

I have, and always have had, tremendous respect for Cenk Uygur. His contract with his audience is that he will never put himself in a position where he cannot say what he really thinks.  And in turning down MSNBC’s offer to host a weekend show so he could give his audience a fair appraisal of what happened, he honors that contract.

What Glenn Greenwald at Salon said:

(But as) Uygur’s stories make clear, MSNBC very much considers itself “part of the establishment” and demands that its on-air personalities reflect that status.  With some exceptions, MSNBC largely fits comfortably in the standard, daily Republicans v. Democrats theatrical conflicts, usually from the perspective that the former is bad and the latter are good.  It’s liberal — certainly more liberal than other establishment media outlets have been in the past — but it’s establishment liberalism, and that’s allowed.  It’s wandering too far afield from that framework, being too hostile to the system of political and financial power itself, that is frowned upon.

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