Category - Economics

The Deadly Global War for Sand

Wired, By Vince Beiser, March 26

The killers rolled slowly down the narrow alley, three men jammed onto a single motorcycle. It was a little after 11 am on July 31, 2013, the sun beating down on the low, modest residential buildings lining a back street in the Indian farming village of Raipur. Faint smells of cooking spices, dust, and sewage seasoned the air. The men stopped the bike in front of the orange door of a two-story brick-and-plaster house. Two of them dismounted, eased open the unlocked door, and slipped into the darkened bedroom on the other side. White kerchiefs covered their lower faces. One of them carried a pistol.

Inside the bedroom Paleram Chauhan, a 52-year-old farmer, was napping after an early lunch. In the next room, his wife and daughter-in-law were cleaning up while Paleram’s son played with his own 3-year-old boy.

Gunshots thundered through the house. Preeti Chauhan, Paleram’s daughter-in-law, rushed into Paleram’s room, her husband, Ravindra, right behind her. Through the open door, they saw the killers jump back on their bike and roar away.
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Thousands march in evening protest in downtown Montreal

Police quickly declared the demonstration illegal, arrests made

CBC, March 24

Thousands of protesters hit the streets of downtown Montreal Tuesday night as part of student protests against the province’s austerity measures.

Crowds gathered at Parc Émilie-Gamelin at 9 p.m. before marching along the downtown streets.

Police quickly declared the protest illegal, saying an itinerary of the route was not provided, and began making arrests.

CTV News: Montreal students protest for second night, police disperse crowds

France is Europe’s ‘big problem’, warns Mario Monti

Gallic nation threatens to blow Europe’s Franco-German axis apart, warns former Italian prime minister.

The Telegraph, By Szu Ping Chan, March 21

France has become Europe’s “big problem”, according to the former prime minister of Italy, who warned that anti-Brussels sentiment and the rise of populist parties in the Gallic nation threatened to blow the bloc’s Franco-German axis apart.

Mario Monti – who was dubbed “Super Mario” for saving the country from collapse at the height of the eurozone debt crisis – said France’s “unease” with the single currency had already created tensions between Europe’s two largest economies.

“In the last few years we have seen France receding in terms of actual economic performance, in terms of complying with all the European rules, and above all in terms of its domestic public opinion – which is turning more and more against Europe,” he told The Telegraph.

It’s illegal to prevent workers from talking about wages. T-Mobile did it anyway.

A judge has thrown out large sections of T-Mobile’s employee handbook for having a chilling effect on union organizing.

Washington Post, By Lydia DePillis, March 19

Carolina Figueroa works at a T-Mobile call center in Albuquerque, N.M., in the bilingual retention section, trying to talk Spanish-speaking customers out of canceling their accounts. She likes her job, and the pay is decent — $18.50 an hour after eight years working there, plus health coverage, which covers the bills for her and her young daughter.

There’s only one problem: the employee handbook, which covers some 40,000 employees across the country. As long as she’s worked there, workers at the call center have been discouraged from discussing wages and working conditions, through provisions that bar things like disclosure of employee information, making disparaging statements about the company and pursuing wage complaints through anyone other than human resources. Employees can be disciplined or fired for violating any of the rules.
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Trillion Dollar Fraudsters

New York Times, By Paul Krugman, March 20

By now it’s a Republican Party tradition: Every year the party produces a budget that allegedly slashes deficits, but which turns out to contain a trillion-dollar “magic asterisk” — a line that promises huge spending cuts and/or revenue increases, but without explaining where the money is supposed to come from.

But the just-released budgets from the House and Senate majorities break new ground. Each contains not one but two trillion-dollar magic asterisks: one on spending, one on revenue. And that’s actually an understatement. If either budget were to become law, it would leave the federal government several trillion dollars deeper in debt than claimed, and that’s just in the first decade.
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Kingdom of Shadows–the aftermath

I spent the last three days watching Bernardo Ruiz’s Kingdom of Shadows at the SXSW movie festival in Austin. I appear in the film, along with a nun from Monterrey, Mexico and an agent from the Department of Homeland Security in El Paso.

After screenings, we took questions from the audience, but sessions were too short to adequately address issues related to the subject matter of the film—the effect of drugs and drug prohibition on our societies.

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Class and the Classroom

How Elite Universities Are Hurting America

Foreign Affairs, By George Scialabba, March / April 2015

One of the most fruitful ideas to emerge from twentieth-century social theory is Max Weber’s notion of the “iron cage” of purposive rationality. Weber argued that once some principle of organization—market competition, say, or ideological orthodoxy—has achieved dominance in the spheres of production and governance, the rest of a society’s institutions find themselves gradually but inexorably adopting the same principle. In an ideology-dominant society, everything fluid turns to stone; in a market-dominant society, everything solid melts into air.

Not everything, of course. The iron cage is, like most other useful theoretical notions, an ideal type. All societies retain protected (or neglected) spaces where not-yet-rationalized traditions and communities flourish. Still, although the mills of rationalization turn slowly, they grind exceedingly fine. In time, Weber believed, every practice or institution in a modern society, regardless of its original purpose, experiences an irresistible pressure to adapt to the society’s fundamental organizing principle.

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Explaining Life Insurance

In our capitalist economy, it is assumed you are going to spend your working-life saving or investing, or otherwise accumulating “wealth” before you quit working or die. It is assumed you will accumulate enough of the wealth-stuff to become secure–so secure that you won’t need life insurance anymore.

Did you know that?

Let me back up and explain.

I was 53 yrs old before a financial planner actually explained insurance to me in this light, but by then it was too late. Lord knows insurance agents never said so clearly. I had already spent thousands for life, AD&D and Disability Income policies in my early working years. I needlessly spent thousands out of fear (or at least “high anxiety” of the Mel Brooks order).  And guess what? The financial planner sold me some more life insurance!

So it recently came to pass, as I was sorting through my remaining policies, that noticed their expiration dates. I realized before my son graduates from college, I will have no significant life insurance coverage unless I “convert” them to some unknown fixed price policy.  Although I haven’t asked an insurance agent about it, I suspect the conversion I will be able to afford will be nothing more than a burial policy of between $3,000 and $5,000.  I also realized this: sometime between now and then, I am going to have to explain life insurance to my son.  When I do, I want to relieve him of the “high anxiety” issues he might unconsciously be inheriting from me in the same way I inherited them from my parents. Trouble is: that might be hard to do.

So here is how I intend to explain life insurance to my son.

There is an old adage says: “When you buy life insurance, you’re betting the insurance company you are going to die before they get all your money, but they are betting you’ll live.”  You have fear (“high anxiety”). They have actuaries–odds makers. Their actuarial tables represent the odds of The House winning the bet. They are pretty sure they will win most of the time, or at least enough of the time to keep their companies afloat and pay off whatever they agreed to if you should die prematurely, at least according to their tables.

Their actuarial theory is that your life is like a bell-curve. When you are young, you don’t have much, but you don’t need as much either, so your obligations are low. You get older, get married, get a house and kids–you get into your prime earning period and you fear your death or disability would seriously leave your dependents strapped with long term mortgage payments, no money for college, etc., so you run out and buy bigger insurance coverage. Toward the end of your life, the theory continues, your kids go out on their own, the house is paid for, you start spending your savings, your IRA money, living off investments—who needs insurance then, right?

But if you are convinced you will not complete the full ride on the curve, you may have a willingness to choose policies with higher benefits and higher premiums—and live to make all the payments! Insurance companies can stack the odds in their favor by increasing your fear-factor and prompt higher payments for bigger or more elaborate coverage.

All-in-all, it is a wonderful theory but I think it is predicated on undependable premises given the modern age of the 1% vs the 99%. The 99% do not accumulate wealth simply because they can’t. And that, dear friend, is why insurance has become so perplexing because it more-and-more resembles how my parents viewed the world through the lens of the Great Depression.

My father and mother came from a generation that did not–could not–think this way. They came up in the Great Depression, so everyone from millionaires to mineworkers suddenly found themselves with absolutely nothing as a result of failed capitalism. And in a time of despair, they could not envision a future that might be any better.  Sure they hoped it would get better and eventually it did; however, they were knocked off-balance hard enough never to fully recover–at least my parents were.  They came to see insurance as a legacy (a “just-in-case it happens again” cushion) for their kids. More–they thought of it as an obligation. And we kids grew up thinking that way too.  The hazard is conceiving of life insurance as a legacy, a gift, or inheritance. Insurance companies love to sell it to you with that gloss and shine, but their actuaries still don’t rate your fears as highly.

From this simple premise have come a myriad of slick life insurance policies weighted in favor of the insurance company. Term Life, Universal Life, Whole Life policies–annuities, premiums, “surrendering” your policy, “converting” your policy, “exclusions”, “annuities”—all the jargon that goes with insurance is really confusing and intimidating. But the final analysis is the same: they have designed policies which minimize their risk of losing money on the bet you will die before they think you will, and maximizing the amount of money you will pay over term of the policy.

So you have to ask yourself: why am I buying life insurance anyway?

Well, mainly it is out of fear. You fear your loved ones will be without some money if you die, and the more they depend on you, the more you have a responsibility to provide a cushion at your death. “Burial policies” are a kind of minimum—policies that basically pay the undertaker to put your rotting corpse decently into the ground or an urn.  And they are “cheap” as insurance policies go. About the rest of them, I am not so sure.  I do know that it is harder to accumulate “wealth” in an era when wages have not kept up with inflation and jobs are scarce, and becoming scarcer. I do know the cost of education and health care are going up. And I know your social security is not going to be as generous as your father’s .  Who knows? Maybe your father’s high anxiety was just ahead of its time.

 

US anger at Britain joining Chinese-led investment bank AIIB

US statement says of UK membership that it is ‘worried about a trend of constant accommodation’ of China, in a rare public breach in the special relationship.

The Guardian, By Nicholas Watt, Paul Lewis & Tania Branigan, March 12

The White House has issued a pointed statement declaring it hopes and expects the UK will use its influence to ensure that high standards of governance are upheld in a new Chinese-led investment bank that Britain is to join.

In a rare public breach in the special relationship, the White House signalled its unease at Britain’s decision to become a founder member of the Asian Infrastructure Investment Bank (AIIB) by raising concerns about whether the new body would meet the standards of the World Bank.

The $50bn (£33.5bn) bank, which is designed to provide infrastructure funds to the Asia-Pacific region, is viewed with great suspicion by Washington officials, who see it as a rival to the World Bank. They believe Beijing will use the bank to extend its soft power in the region.

The White House statement reads: “This is the UK’s sovereign decision. We hope and expect that the UK will use its voice to push for adoption of high standards.”

Overdue Justice for Ferguson, Missouri

For related articles by Numerian on the Ferguson racial crisis, see America’s Police on Trial, and The Cycle of Fear in Ferguson, Missouri, both posted on the jehoshuathebook.com website.
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The U.S. Department of Justice Civil Rights Division has released its report on the causes behind the civil disturbances last year in Ferguson, Missouri.  This is a long overdue contribution to the national discussion on race and municipal policing strategies and tactics.  During last year’s protests in Ferguson, several reporters wrote about what appeared to be a side issue: the propensity of the Ferguson city authorities to use the police force and the municipal court as a money-raising mechanism, which relied on harassment to enforce its fines and penalties liberally bestowed upon the African-American population of Ferguson.  This side issue turns out to be the main focus of the Department of Justice report. The report turns attention away from Officer Darren Wilson, who was exonerated by the Department of Justice for civil rights violations, based on what the FBI learned about the shooting of Michael Brown.  The evidence suggests that Officer Wilson was responding reasonably to a threat to his life.  The attention instead turns to the municipal practices in Ferguson which pressured the police department to harass African-Americans as a matter of routine.  City authorities put no constraints on police behavior, and had no concern for community safety standards.  Instead, the police department, and the municipal court system, were turned into profit centers, with business-like monthly targets for revenue generation.  Here is what the report reveals:

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U.S. optimistic global trade deal will come into force this year

Reuters, By Krista Hughes, March 4

Washington – The United States expects a global deal to cut customs red tape and streamline import procedures to come into force this year, a senior trade official said on Wednesday.

Mark Linscott, Assistant U.S. Trade Representative for World Trade Organization and Multilateral Affairs, said Washington was “pretty confident” the deal agreed in Bali in 2013 would be up and running by year-end.

“It’s quite realistic to expect that the trade facilitation agreement [wikipedia: The “Bali Package”, WTO: Trade Facilitation] can come into force by the end of the year,” he told a Washington International Trade Association event.

[…]

Virginia Brown, director of trade and regulatory reforms at USAID, said the aid agency was ready to work with countries on implementation steps, which in many cases require lawmakers’ approval. “Our bread and butter is drafting that legislation and getting it through the legislative process,” she said.

JPMorgan Chase & Co. To Start Charging Large Customers Deposit Fees

Reports suggest JP Morgan will initiate charges on certain deposits

Bidness, Etc., By Larry Darrell, February 24

The largest bank in the US in terms of assets, JP Morgan Chase & Co., is likely to start charging large customers on deposits and is making holding money costly for clients, reports the Wall Street Journal.

The move is an attempt to reduce the effect on deposits that are affected by billions of dollars and is said to bring the number down in 2015. It is the recent in a series of discussions by big banks to discourage certain deposits by corporate clients that are attracted by the low interest rates and new regulations.

Sources privy to the matter said that the memo in place cites new rules that will not affect retail clients. However, some financial firms and corporate clients might be charged higher fees. It is reported that JP Morgan will unveil the bank’s strategy with investors on Tuesday.

“We are adapting to a changing regulatory environment across our company,” Wall Street Journal quotes the JP Morgan memo sent on Monday.

Wall Street Journal [paywalled]: J.P. Morgan to Start Charging Big Clients Fees on Some Deposits

U.S. Oil Workers’ Union Expands Biggest Plant Strike Since 1980

Bloomberg, by Lynn Doan & Barbara Powell, February 21

The United Steelworkers, which represents 30,000 U.S. oil workers, called on four more plants to join the biggest strike since 1980 as talks dragged on with Royal Dutch Shell Plc, negotiating a labor contract for oil companies.

The USW, with members at more than 200 refineries, fuel terminals, pipelines and chemical plants across the U.S., asked workers late Friday at Motiva Enterprises LLC’s Port Arthur refinery in Texas, the nation’s largest, to join a nationwide walkout on Saturday, and issued notices for three other plants to go on strike in 24 hours.

This brings the work stoppage — which began on Feb. 1 at nine sites from California to Texas and expanded to two BP Plc refineries in the Midwest a week later — to 12 refineries and 3 other facilities. The union has rejected seven contract offers from Shell, which is representing companies including Exxon Mobil Corp. and Chevron Corp.

An agreement would end a strike at U.S. plants that account for almost 20 percent of the country’s refining capacity. It’s the first national walkout of U.S. oil workers since 1980, when a work stoppage lasted three months. The USW represents workers at plants that together account for 64 percent of U.S. fuel output.

Previously: US oil workers on largest national strike since 1980

Russia Launches Own ‘SWIFT’ Service, Links Up 91 Credit Institutions

Almost 91 of Russia’s credit institutions have been incorporated into a newly launched Russian domestic ‘SWIFT’ analogous.

Sputnik News, By Ekaterina Blinova, February 13

Almost 91 domestic credit institutions have been incorporated into the new Russian financial system, the analogous of SWIFT, an international banking network.

The new service, will allow Russian banks to communicate seamlessly through the Central Bank of Russia. It should be noted that Russia’s Central Bank initiated the development of the country’s own messaging system in response to repeated threats voiced by Moscow’s Western partners to disconnect Russia from SWIFT.

SWIFT (The Society for Worldwide Interbank Financial Telecommunication) is a Belgium-based international organization that provides services and a standardized environment for global banking communicating that allows financial institutions to send and receive messages about their transactions.

Joining the global interbank system in 1989, Russia has become one of the most active users of SWIFT globally, sending hundreds of thousands of messages per day. In general, SWIFT provides a secure communication network for more than ten thousands of financial institutions around the world, approving transactions of trillions of US dollars.

Via Ian Welsh: Russia Creates Its Own Payment System

This almost forgotten metric is suddenly driving the oil market

Bloomberg News, By Lynn Doan & Dan Murtaugh, February 18

San Francisco & Houston – It was like clockwork.

Every week since 1944, Baker Hughes Inc. would release its survey of how many rigs were out drilling for U.S. oil and gas. And every week, oil and gas traders would, for the most part, overlook it.

What a difference a slide in oil of $50 (U.S.) a barrel makes. This past Friday, traders were bent over their desks, staring at their screens, waiting for 1 p.m. ET to see whether drillers extended their biggest-ever retreat from U.S. oil fields. (They did.) Oil futures spiked within minutes of the count, closing at the highest level in four days.

“I don’t think I’ve heard ‘Baker Hughes’ more in my life than I have in the past month,” Dan Flynn, a trader at Price Futures Group in Chicago, said by phone recently. “It’s like I’m saying it in my sleep.”

The sudden interest in Houston-based Baker Hughes’s rig counts shows how desperate traders have become to find the bottom of the oil market after the biggest collapse since 2008. The company, which was Hughes Tool Co. 71 years ago when it first released the weekly count, is the third-biggest oil field service provider in the world.

Naked Capitalism: Wolf Richter: The Chilling Thing Devon Energy Just Said About the US Oil Glut

This is the brutal irony: drillers are hoping that rising production achieved with greater efficiencies allows them to meet their interest costs; but rising production pressures the price of oil to a level that may not be survivable long-term for many of them. They can lose money, burn through cash, and keep themselves above water through asset sales for only so long. And this is the terrible fracking treadmill they’ve all gotten on and now can’t get off.

Globe and Mail: CNRL’s warning to oil sands: Cut costs or face ‘death spiral’
Bloomberg: What’s behind Buffett’s exit from Big Oil

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