Gangster Capitalism: Same as it ever was?

If you are going to read one thing and just one thing on the financial crisis and how it is working itself out you need to read this blog post at naked capitalism:  the one stop shop for understanding contemporary finance.

After the September 2008 crash, Iceland’s government took over the old, collapsed, banks and created new ones in their place. Original bondholders of the old banks off-loaded the Icelandic bank bonds in the market for pennies on the dollar. The buyers were vulture funds. These bondholders became the owners of the old banks, as all shareholders were wiped out. In October, the government’s monetary authority appointed new boards to control the banks. Three new banks were set up, and all the deposits, mortgages and other bank loans were transferred to these new, healthier banks – at a steep discount. These new banks received 80 percent of the assets, the old banks 20 percent.

Then, owners of the old banks were given control over two of the new banks (87% and 95% respectively). The owners of these new banks were called vultures not only because of the steep discount at which the financial assets and claims of the old banks were transferred, but mainly because they already had bought control of the old banks at pennies on the dollar.

The result is that instead of the government keeping the banks and simply wiping them out in bankruptcy, the government kept aside and let vulture investors reap a giant windfall – that now threatens to plunge Iceland’s economy into chronic financial austerity. In retrospect, none of this was necessary. The question is, what can the government do to clean up the mess that it has created by so gullibly taking bad IMF advice?

In the United States, banks receiving TARP bailout money were supposed to negotiate with mortgage debtors to write down the debts to market prices and/or the ability to pay. This was not done. Likewise in Iceland, the vulture funds that bought the bad “old bank” loans were supposed to pass on the debt write-downs to the debtors. This was not done either. In fact, the loan principals continued to be revalued upward in keeping with Iceland’s unique indexing designed to save banks from taking a loss – that is, to make sure that the economy as a whole suffers, even suffering a fatal austerity attack, so that bankers will be “made whole.” This means making a windfall fortune for the vultures who buy bad loans on the cheap.

Go read the whole article.

The irony of greed: The end game for Neoliberalism?

The global economy is in the toilet and the Boomers’ representatives are chanting: “flush, flush, flush.”  Me? I am eating cigarettes and wine while admiring the remarkable consistency in the myopia of all of it.

In the name of fiscal prudence the whole of the advanced capitalist zone is in engaged in austerity budgeting and calls for more of the same.  Even Martin Wolf, in his otherwise insightful column in the FT online today, felt the need to tap his hat and nod in the direction of the genteelism of supply.  Exhibit A, the conclusion to his incisive intervention:

Reconsidering fiscal policy is not all that is needed. Monetary policy still has an important role. So, too, do supply-side reforms, particularly changes in taxation that promote investment. So, not least, does global rebalancing. Yet now, in a world of excess saving, the last thing we need is for creditworthy governments to slash their borrowings.

As is widely acknowledged, monetary policy has little outside of conciliatory role to play at this time.  In so far as the CBs should not make the mistake of tightening policy as the ECB and the BoC did.  But apart from the role of spoiler there really is not much left for the CBs to do.  The problem is squarely fiscal.  As Wolf himself went to pains to argue.  Why then the conclusion given that further tax reductions are not only going to make the fiscal positions of governments worse they will also likely have the same effect as lowering interest rates at this time:  Nadda, ziltch, rien, nothing?  The problem is that Wolf has to tip his hat to conventional wisdom.  If not; he has no hope of bending the ears of policy makers.  Oh well, that is his plight not mine.

Here, given none are listening we may speak frankly.  The world economy is in the toilet because free trade, tax cuts, deregulation and above all the liberalization of finance over the last thirty years let loose a Tsunami of forces both economic and political.  The liberalization of finance and production allowed for the national gutting and then global whipsawing of labour.  As the profiteers profited and retired workers slept while the assets they had built were being systematically stripped and the fortunes being amassed were then turned to the seedy business (although a time honoured practice if one cares to actually read Smith) of buying off the government–and it must be stressed the intelligentsia too–broadly understood.

We now have the perfect storm.  A generation of public and private sector functionaries has been trained to believe that the market can do no wrong and the government no good.  As a corollary is of course the proposition that monetary and regressive tax policy is everything.

The irony, of course, is that any credible account of the present crisis would have to admit that we are here because free trade, tax cuts, deregulation, the flexibilization of labour markets  and above all the liberalization of finance brought us here.  How odd it is then that we should be treated to more of  the same as the cure for what ails us.

IIlicit money flows

Not really into re-blogging articles but this essay effectively puts money laundering and corruption into context. It is useful for explaining key processes in the ‘the web of secrecy, collusions and the players that drive and sustain the world of illicit money flows’

http://pambazuka.org/en/category/features/75085

What is up with Jeff Sachs?

Watch this he gets better as he goes.

I am getting less fringe everyday.

Usage based billing already killing competition

I have been an Acanac customer nearly since they started offering service.  Outside of a disastrously poor costumer service side (which is what happens when geeks go into business) and almost zero technical support in terms of price point it is the best value you can get.  Lightening fast, unlimited service for around 400$ a year.  To put that in perspective I am paying over 700$ for an equivalent service with Telus (I had to switch when I moved).  Given their costumer and technical service Acanac was never really a threat to Bell.  The vast majority of high speed consumers are of the Mac plug and play mentality with little tolerance for doing their own troubleshooting.  So Acanac serves primarily a niche market offering no frills unlimited high speed.

The short of it is their business model is now dead.  The CRTC ruling effectively means that Bell can impose its business model on Acanac and its customers.  As per my in-box:

Dear Acanac Customer,

The CRTC just decided to allow Bell Canada to charge independent ISPs, like Acanac Inc., what’s called “usage-based billing”(UBB)on our customers.

This means that Bell will force us to pay usages fees similar to those that Bell charges to its own retail customers, when you exceed certain limits. Bell and other Big Telecom companies are obviously trying to gouge consumers, control the Internet market, and ensure that consumers continue to subscribe to their television services.

If we do not fight this you will have no choice but to pay MORE for LESS Internet. This will crush innovative services, Canada’s digital competitiveness, and your wallet.

250,000 people across Canada have already signed the petition to stop these companies from charging you more. Signing the petition automatically sends Industry Minister Tony Clement an email. This is our best chance to stop usage-based billing.

Please Sign the Stop The Meter petition at: http://stopthemeter.ca/ Please also help us spread the word to your friends and neighbors.

Please make your voices heard. If we don’t stop UBB, as of March 4th, 2011,  Acanac will make the following changes to accommodate the charges that will be FORCED on us and subsequently you, our valued customers:

Ontario Residential 5Mbps DSL Plan:
First 25GB at up-to 5Mbps. Beyond 25GB your speeds will be reduced to 100Kbps with unlimited transfer.

If you wish to remain at up-to 5Mbps, you can buy an additional 100GB of transfer for $9.95 per month. Beyond 125GB, speeds will be reduced to 100Kbps with unlimited transfer.

Quebec Residential 5Mbps DSL Plan:
First 60GB at up-to 5Mbps. Beyond 60GB, your speeds will be reduced to 100Kbps with unlimited transfer.

If you wish to remain at up-to 5Mbps, you can buy an additional 100GB of transfer for $9.95 per month. Beyond 160GB speeds will be reduced to 100Kbps with unlimited transfer.

Ontario & Quebec Residential MLPPP DSL Plans:
Same as above but multiply it by the number of lines you have. If you have 2 lines or Home 10Mbps in Ontario, you would get 50GB included and you can buy an additional 200GB for $19.90. Once you reach your allocated transfer, your speeds will be reduced to 100Kbps per line with unlimited transfer.  In this scenario you would have a total of 200Kbps after 250GB of usage.