Week-end Wrap – September 8, 2018

Week-end Wrap - September 8, 2018
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

How the City of London created Eurobonds, destroyed the Bretton Woods world financial system and saved crooks, criminals, and dictators from the rule of law
by Oliver Bullough, September 7, 2018 [The Guardian, via Naked Capitalism 9-8-18]

Bullough is the author of an interesting new book, Moneyland: Why Thieves And Crooks Now Rule The World And How To Take It Back. It appears that Bullough confirms that it was, once again, the British empire, that imposed massive pain on millions of people worldwide. It is always important to recall that in the 19th century, the political economy of Britain was seen to be a hostile competitor to to the political economy of the United States.

Note also that the British have historically specialized in the banking, hiding, and use of dirty money, with the role of the Hong Kong and Shanghai Bank in the 19th century opium trade particularly notorious. The Hong Shang is today HSBC, which has been fined a number of times by USA and other authorities for assisting and directing the laundering of dirty money for a seemingly endless list of shady clients. Among the directors of HSBC is Jonathan Evans, Lord Evans of Weardale, former Director-General of the British Security Service, the United Kingdom's domestic security and counter-intelligence service, proving that the domination of the world's financial system by criminal means is a matter of state policy for the Brits.

The article is an excerpt from the book, and may be a bit of a slog at first, but this is really crucial information for anyone who wants to know who really runs the world, and how.

Similarly, when Britain and France attempted to regain control of the Suez canal in 1956, a disapproving Washington froze their access to dollars and doomed the venture. These were not the actions of a neutral arbiter. Britain at the time was staggering from one crisis to another. In 1957, it raised interest rates and stopped banks using sterling to finance trade in an attempt to keep the pound strong (this was the “currency crisis and the high bank rate” that Smithers told Bond about). 
City banks, which could no longer use sterling in the way they were accustomed, began to use dollars instead, and they obtained those dollars from the Soviet Union, which was keeping them in London and Paris so as to avoid becoming vulnerable to American pressure. This turned out to be a profitable thing to do. In the US, there were limits on how much interest banks could charge on dollar loans – but not so in London. 
...Up to this point, if a company wanted to borrow dollars, it would have to do so in New York. Warburg, however, was pretty confident he knew where he could find a significant chunk of that $3bn – Switzerland. Since at least the 1920s, the Swiss had been in the business of hoarding cash and assets on behalf of foreigners who wanted to avoid scrutiny. By the 1960s, perhaps 5% of all the money in Europe lay under Switzerland’s steel mattresses. 
For the City’s most ambitious financiers, this was tantalising: there was all this money squirrelled away, doing nothing much, and it was exactly what they needed in their quest to start selling bonds again....  It was impossible for Warburg to move that money from Switzerland via London to clients who wanted to borrow it. But he took two of his best men and told them to get it done anyway. 
They began their efforts in October 1962, the same month that the Beatles released Love Me Do. The bankers finalised their deal on 1 July the following year.... 
Warburg’s new bond issue – these bonds became known as “eurobonds”, after the example set by eurodollars – was led by Ian Fraser, a Scottish war hero turned journalist turned banker. He and his colleague Peter Spira had to find ways to defang the taxes and controls designed to prevent hot money flowing across borders, and to find ways to pick and choose different aspects of different countries’ regulations for the various elements of their creation. 
If the bonds had been issued in Britain, there would have been a 4% tax on them, so Fraser formally issued them at Schiphol airport in the Netherlands. If the interest were to be paid in Britain, it would have attracted another tax, so Fraser arranged for it to be paid in Luxembourg. He managed to persuade the London Stock Exchange to list the bonds, despite their not being issued or redeemed in Britain, and talked around the central banks of France, the Netherlands, Sweden, Denmark and Britain, all of which were rightly concerned about the eurobonds’ impact on currency controls. The final trick was to pretend that the borrower was Autostrade – the Italian state motorway company – when really it was IRI, a state holding company. If IRI had been the borrower, it would have had to deduct tax at source, while Autostrade did not have to. 
The cumulative effect of this game of jurisdictional Twister was that Fraser created a bond paying a good rate of interest, on which no one had to pay tax of any kind, and which could be turned back into cash anywhere. These were what are known as bearer bonds. Whoever possessed the bond owned them; there was no register of ownership or any obligation to record your holding, which was not written down anywhere. 
Fraser’s eurobonds were like magic. Before eurobonds, hidden wealth in Switzerland couldn’t really do much; but now it could buy these fantastic pieces of paper, which could be carried anywhere, redeemed anywhere and all the while paid interest to their owners, tax free. Dodge taxes and make a profit, worldwide. 
....The eurobonds set wealth free and were the first step towards creating the virtual country of the rich that I call Moneyland. Moneyland includes offshore finance, but is much broader than that, since it protects every aspect of a rich person’s life from scrutiny, not just their money. The same money-making dynamic that enticed Fraser to defang capital controls on behalf of his clients, entices his modern-day counterparts to find ways for the world’s richest people to avoid visa controls, journalistic scrutiny, legal liability and much more. Moneyland is a place where, if you are rich enough, whoever you are, wherever your money comes from, the laws do not apply to you. 
This is the dirty secret at the heart of the City’s rebirth, the beginning of the process that eventually led to today’s stratospheric inequality.... Countries that were once democracies are becoming plutocracies; plutocracies are becoming oligarchies; oligarchies are becoming kleptocracies.
Massachusetts Supreme Court Upholds State's Ban of Corporate Money in Politics, Citing Concern Over Corruption
by DownWithTyranny, September 7, 2018 [DownWithTyranny.com]
Watching Brett Kavanaugh's confirmation hearings in the Senate has put on display what can go wrong with an out-of-control Supreme Court controlled by far right extremists like Kavanaugh. But on Thursday the opposite was on display in Massachusetts where the state Supreme Judicial Court held that the longtime ban on corporate money in politics-- to candidates, parties and candidate-focused PACs-- does not violate the First Amendment, and that overturning it could lead to instances of quid pro quo corruption. 
The justices ruled unanimously that the same cannot be said for unions, nonprofits or trade associations, which means this ruling will certainly be headed to the union-hating U.S. Supreme Court. 
Chief Justice Ralph Gants wrote, "Both history and common sense have demonstrated that, when corporations make contributions to political candidates, there is a risk of corruption, both actual and perceived."
New York Democratic Party candidate for state attorney general Zephyr Teachout, who is a law professor at Fordham University, wrote a 2014 book, Corruption in America: From Benjamin Franklin's Snuff Box to Citizens United, providing an excellent historical overview of the issue of corporations corrupting the republic and how corporations have been winning the right to corrupt just like a human person. It used to be that lobbyists were illegal! In 2011, she published an article that is a preview of the book: "The Historical Roots of Citizens United v. FEC: How Anarchists and Academics Accidentally Created Corporate Speech Rights."

....in the 1874 case Trist v. Childs, the Supreme Court refused to enforce a contract to lobby, because paid lobbying was so fundamentally corrupt that to use the law to enforce such a contract would be to undermine the legitimacy of the government that enforced the law.11 Ten years later in Ex Parte Yarbrough, Justice Miller wrote eloquently about how any state has, as a constitutional, foundational element, the right and duty to fight against the twin threats of violence and corruption.12 The right to combat these evils, the Court held, need not be constitutionally grounded in order to be constitutional—such rights are fundamental and presumed in the very structure of a republican state.13 Neither of these cases was an outlier. They reflected a broad consensus that one of the fundamental goals of the American constitutional system was to protect against corruption. 
.... [But in a later era], But what happens in this era, matching the First Amendment and corruption cases up against each other, is a subtle but important shift in the Court’s basic understanding of the Constitution’s political theory. Up through the 1930s, the Court—when it is forced to refer to core American political values—turns to classic republican ideals and considers its role to be a limited one, largely protecting the country from the threats of corruption. Afterwards, when it is forced to directly engage in political theory, the first place the Court looks is the First Amendment, and it sees its role as protecting the country from incursions upon the First Amendment. 
This newly robust First Amendment grew out of political fights during World War I, when anarchists and activists were convicted of violating anti-sedition statutes for distributing pamphlets and criticizing the war, American foreign policy and economic policies.47 Almost all of these convictions were upheld, and the First Amendment initially played a trivial role in discussions of the anti-sedition statutes’ constitutionality. However, Justices Brandeis and Holmes dissented in several of these cases, and in these dissents created a different vision for the First Amendment.48 As their vision was adopted in what Professor Jay calls the “creation” of the First Amendment, that amendment became the first among equals, not just as “an” amendment, but “the amendment,” the one around which the American political philosophy was based.49 This period both defined the scope, and the relative importance, of the First Amendment—and the Free Speech clause of the First Amendment—as compared to other rights. 
....These dissents created the foundation of the modern era, where questions of politics and self-government are all referred first to the First Amendment, and larger questions of what constitutes a republican form of government, the explicit political philosophy clause in the Constitution, come second. 
The emphasis in the last sentence is mine. It is fair to assume the Kavanaugh would join the other Republicans on the Supreme Court in waiving aside such concerns. After all, USA is no longer a republic, but a plutocratic oligarchy, fast becoming a kleptocracy.

Why North Carolina Democrats should fight gerrymandering using state law
By Sam Wang and Rick Ober, September 4, 2018 [Washington Post, via Naked Capitalism 9-5-18]
...But a very similar argument is also available under North Carolina state law: Article 1, section 19 establishes that all persons in North Carolina shall enjoy equal protection of the law. he key point is that while the U.S. Constitution provides a floor for the basic rights enjoyed by all citizens, states are free to add additional protections. And nothing prevents states from going further on the question of partisan gerrymandering than the Supreme Court is willing to.... 
All 50 state constitutions include First Amendment and 14th Amendment-like protections, and all specifically protect the right to vote. And a majority of constitutions, including North Carolina’s, specify that elections should be free and fair. 
The power of such state-level provisions was evident in a case this year in Pennsylvania, in which the state Supreme Court ordered the congressional map redrawn, based on the free and equal elections clause of the state constitution. The U.S. Supreme Court declined to intervene...

Why I Am Not Wildly Enthusiastic about Sanders’ Plan to Tax Amazon
by Lambert Strether, August 26, 2018 [Naked Capitalism]
1) The framing reinforces the notion that Federal taxes “pay for” Federal spending, so Sanders traps us in the austerity box;
2) The framing turns public assistance into a public-private partnership, since Amazon would now pay its “fair share” (my shudder quotes);
3) Even if you accept the “pay for” model, only cost of the services conveyed is covered, so the government would still be subsidizing Amazon for administrative costs.

The future is here today: you can’t play Bach on Youtube because Sony says they own his compositions
[Boing Boing, via Naked Capitalism 9-4-18]
In one week, the European Parliament will vote on a proposal to force all online services to implement Content ID-style censorship, but not just for videos -- for audio, text, stills, code, everything. Just last week, German music professor Ulrich Kaiser posted his research on automated censorship of classical music, in which he found that it was nearly impossible to post anything by composers like Bartok, Schubert, Puccini and Wagner, because companies large and small have fraudulently laid claim to their whole catalogs. 
Europeans have one week to contact their MEPs to head off this catastrophe.
This is not capitalism; it is ruthless rent extraction; and it is making socialism an inevitable alternative.

China spends more on R&D than Europe and Japan
by Barry Ritholtz, September 6, 2018 [The Big Picture]

By Pam Martens and Russ Martens: September 5, 2018 [Wall Street on Parade]
i360, "the Koch Industries voter database/data mining/micro-targeting/media buying/door-to-door knocking/phone banking/artificial intelligence business," boasts of its 2016 US Senate election results in Ohio Republican Rob Portman won a surprise victory against former Ohio Governor Ted Strickland, 58 to 37 percent.
The i360 operation was so proud of its stunning success that it has posted a detailed description of how it achieved victory, writing as follows: 
“For grassroots activity, the campaign was one of the most active on i360 Walk and i360 Call having logged more than 6 million voter contacts by the end of the cycle. They also took full advantage of the nimbleness of the i360 analytics team to create custom dashboards quickly, ensuring their team had the most useful data possible at all times. By using all of these i360 solutions, the campaign was able to ensure that all their data and analytics were updated in real time as they gained more information about voters through field work, web and social data, AB/EV returns, and other data sources. 
“By working with i360 to onboard the same universes used for grassroots outreach into online digital segments, the campaign could talk to the same voters online with the same level of targeting sophistication as they were offline – ensuring each voter saw only the most optimized message no matter where they were. The same tactic was employed for the TV media buys as well as for traditional mail outreach…”

How a Twitter account convinced 4,000 companies to stop advertising on Breitbart
By Eric Johnson, September 3, 2018 [Recode, via Barry Ritholtz's Big Picture]
By David Lazarus, August 31, 2018 [Los Angeles Times, via Naked Capitalism 9-4-18]
The Urban Institute, a left-leaning Washington think tank, surveyed more than 7,500 adults about their experience making ends meet. It found that about 40% of people ages 18 to 64 faced some sort of hardship last year. The stats become more troubling the deeper you drill down. More than 35% of families with at least one working adult reported difficulty meeting at least one basic need last year. 
Almost a quarter of Americans experienced food insecurity, which is to say they didn’t always know if they’d be able to eat if they were hungry. A staggering 18% faced issues paying medical bills, and nearly as large a percentage reported skipping treatment for an ailment because they couldn’t afford it. Slightly more than 10% of Americans missed a rental or mortgage payment. Thirteen percent couldn’t pay a utility bill.... 
Trump pledged his $1.5 trillion in tax cuts would boost average paychecks by as much as $9,000 a year as businesses shared their tax savings with employees. In reality, corporations received 11 times more in tax cuts than they doled out in one-time bonuses or modest wage hikes, according to the advocacy group Americans for Tax Fairness.

Soaring bankruptcy rates signal a ‘coming storm of broke elderly,’ study finds
[ABC, via Naked Capitalism 9-5-18]

The Online Gig Economy’s ‘Race to the Bottom’by Alana Semuels, August 31, 2018 [The Atlantic, via Naked Capitalism 9-3-18]
The global digital-labor force will only continue to grow: Nearly a quarter of a billion people came online for the first time last year, and about 4 billion people, more than half of the world’s population, now have internet access. In 2016, the World Bank estimated that the global market for online freelancing was $4.4 billion. 
But while freelance websites may have raised wages and broadened the number of potential employers for some people, they’ve forced every new worker who signs up into entering a global marketplace with endless competition, low wages, and little stability. Decades ago, the only companies that outsourced work overseas were multinational corporations with the resources to set up manufacturing shops elsewhere. Now, independent businesses and individuals are using the power of the internet to find the cheapest services in the world too, and it’s not just manufacturing workers who are seeing the downsides to globalization. All over the country, people like graphic designers and voice-over artists and writers and marketers have to keep lowering their rates to compete.

JPMorgan Is Thinking Pitchforks and Fed Stock Buying in the Next Financial Crash
By Pam Martens and Russ Martens, September 7, 2018 [Wall Street on Parade]
JPMorgan Chase issued a report earlier this week to mark the 10thanniversary of the 2008 Wall Street crash and provide its outlook for what’s ahead. JPMorgan suggests that the next financial crash may be so cataclysmic that the Federal Reserve may have to enter the market to buy up stocks – something which the central bank has never done before in the U.S. or, at least, acknowledged doing, because stock ownership is heavily skewed to the one percent. 
JPMorgan further suggests that if the Fed did take this unprecedented step, it might lead to pitchforks in the street (our phrase) as a class war breaks out.

India: Demonetization Debacle
by Jerri-Lynn Scofield, September 2, 2018 [Naked Capitalism]
Earlier this week, the Reserve Bank of India (RBI) published its annual report, which included further assessment of the government’s demonetization policy, imposed on November 8, 2016, when Prime Minister Narendra Modi announced the immediate cancellation of Indian Rupees (Rs) 500 and Rs 1000 notes– 86% of all cash then in circulation in what’s largely a cash-based economy. 
As I wrote here:

The government estimated that demonetization would flush up to 1/3 of currency then in circulation from the economy, with holders of black money choosing to trash or abandon their holdings rather than admit its shady provenance. Central bank liabilities were expected to decline, and the government to reap a windfall.
Widespread and immediate chaos followed, as I observed firsthand as I was visiting India at that time (and discussed here, here, here, here, here, here and here.) 
The latest RBI report reaffirms that far from ferreting out large sums of illicit money, most of the cancelled banknotes were exchanged for new currency, as reported by The Wire in It’s Finally Official: RBI Says 99.3% of Demonetised Money Returned to Banking System...

Is It Social Media or Corporate Surveillance? Facebook’s Business Model
By Pam Martens and Russ Martens: September 4, 2018 [Wall Street on Parade]
It’s time to ask this question: is Facebook wearing the friendly façade of a social media company while actually operating as a high tech citizen surveillance center? We’ll get to that in a moment, but first a look at what an actual citizen surveillance center looks like in New York City.

MIT Professor: Big Banks Are Using Data Profiling to Prey on Unsophisticated
By Pam Martens and Russ Martens: August 27, 2018 [Wall Street on Parade]
...one highly relevant paper [from the Kansas City Fed’s annual symposium in Jackson Hole]: Professor Antoinette Schoar of the Massachusetts Institute of Technology (MIT) spoke on the effect of investments by “JP Morgan Chase, Citi, Goldman Sachs and Bank of America into AI [artificial intelligence], machine learning and big data,” stating that their investments are “a multiple of all other banks.” Schoar warned that the “emergent Fintech technologies” that result from these large investments “might in fact reinforce concentration in the industry given the enormous economies of scale from having larger data sets.”

GE building world's largest and most powerful wind turbine
by Geert De Clercq, March 1, 2018 [Reuters, via American Wind Energy Association archives]
General Electric plans to invest more than $400 million over the next three to five years to develop the world’s biggest offshore wind turbine, which will have a capacity of 12 megawatts and stand 260 meters (853 feet) tall. With 107-metre blades, longer than a soccer field, the Haliade-X turbine will produce enough power for up to 16,000 households, GE said in a statement. 
GE Renewable Energy will develop and manufacture the new turbine largely in France and aims to supply its first nacelle, - or power generating unit - for demonstration in 2019 and ship the first turbines in 2021. The firm will invest close to $100 million in a new blade manufacturing plant in Cherbourg, western France, which will open in 2018. It will also invest close to $60 million over the next five years to modernize its Saint-Nazaire factory, where the nacelles for the Haliade-X will be built.

Report: Green investments could infuse $26T into economy by 2030
[Reuters, via American Wind Energy Association 9-5-18]
Investments in wind, solar and other technologies that address climate change could infuse a minimum of $26 trillion into the global economy by 2030 and create 65 million jobs in the process, says the Global Commission on the Economy and Climate. The report added that switching to clean energy sources like wind could prevent 700,000 premature deaths by the same year.
In November 2009, Mark Z. Jacobson, at the Department of Civil and Environmental Engineering, Stanford University, and Mark A. Delucchi, at the Institute of Transportation Studies, University of California at Davis, had an article in Scientific American tabulating was required to end the burning of fossil fuels, with a total of $100 trillion. In 2011, they posted two pdf files providing heavily footnoted details of their 2009 Scientific American article; the pdfs provide all the details you could want, including discussion of critical material shortages, such as rare earth elements, for a mass, crash program: Providing all global energy with wind, water, and solar power, Part I: Technologies, energy resources, quantities and areas of infrastructure, and materials, and Providing all global energy with wind, water, and solar power, Part II: Reliability, system and transmission costs, and policies.

Will more Republican states embrace low-carbon agendas?
[CNN, via American Wind Energy Association 9-5-18]
The falling cost of renewables like wind and solar, the cons of climate disruption, renewable energy employment and other factors may result in a long-term shift where more Republican states embrace low-carbon agendas, writes Ronald Brownstein. Some states, like Texas, are leading the way on clean energy, yet the fact remains that Republican states generally have the highest carbon emissions, he writes.

North Carolina county to cover light rail funding gap
[Railway Age 8-29-18]
A North Carolina light rail project is a go again after Durham County officials came up with two separate fees and tax revenue to cover a funding shortfall. This, after legislators capped the state’s share of the $2.47 billion project in the latest budget. Full Article

$2.8B for Vancouver urban rail projects
[Railway Age  9-5-18] 
Canada’s federal government and the province of British Columbia have reconfirmed more than C$3B ($2.28B) in funding for two rapid transit projects in metro Vancouver: the Broadway Subway project and the Surrey–Newton–Guilford light rail line. Full Article

New York commits to Brooklyn-Queens light rail
[Railway Age  9-5-18] 
The 11-mile line will follow the Brooklyn-Queens waterfront, an area which is not currently well- served by the Metropolitan Transportation Authority’s New York City Transit subway network. According to the study more than 400,000 people live and almost 300,000 work along the waterfront corridor and the line will connect mixed-income districts to employment centers and transit hubs.... Weekday ridership is forecast to be around 50,000 passengers per day based on a commercial speed of 12 mph. The project analysis was based on trains running at headways of five minutes at peak times, 10 minutes off-peak and 20 minutes after 23.00, with a 10-minute interval service at weekends.  Full Article

This city has a vision for mass transit that doesn’t involve city busesArlington, Texas, is developing a transit system based on ride-hailing shuttles.
by Timothy B. Lee, August 31, 2018 [Ars Technica, via Naked Capitalism 9-3-18]

$A 50bn orbital railway proposed for Melbourne, Australia
by  Mark Carter, September 03, 2018 [International Railway Journal]
The Victoria state government has announced ambitious plans for the construction of a 90km underground orbital railway linking key points on the existing Melbourne suburban rail network, and has set an estimated price tag of $A 50bn ($US 36bn) for the project. 
The proposed Suburban Rail Loop would connect all main suburban lines radiating from the centre of Australia’s second largest city, starting with the Frankston line in the south through the northern and eastern suburbs to the Werribee Line in the southwest, including construction of up to 12 new underground stations.
Very few cities in the world have an adequately dense rail transit network. Most striking is the absence of orbital routes such as this one for Melbourne.

Fully Autonomous Cargo Ships Face Enormous Challenges
[Wolf Street, via Naked Capitalism 9-5-18] 
“Excellent detailed rundown on the various projects underway in a crucial transport segment which in contrast to cars does not have the added complications of road conditions/closures, bumper-to-bumper traffic, pedestrians and cyclists. If full autonomy faces ‘enormous challenges’ here, that says much about the prospects of same for automobiles.”

Error in Measuring Low Flows Could Cost Chipmakers Millions
[Machine Design, September 5, 2018] 
A new study by researchers at the National Institute of Standards and Technology (NIST) has uncovered a problem with an industry-standard calibration method that could lead microchip manufacturers to lose a million dollars or more in a single fabrication run.
Another example of runaway socialism at the National Institute of Standards and Technology.

The Servers Are Burning
by Dale Markowitz [Logic, via Naked Capitalism 9-6-18]
Inside a software crash, by the programmer responsible. Note how testing is conducted: let the users be the guinea pigs.
...the way we kept from breaking the site was to push updates to small subsets of users and watch what happened. Did anything crash? Did lag increase? Were users reporting new problems? The idea was that the best way to discover errors was to expose software to real site traffic and respond quickly with a patch or rollback if necessary.

Scientists reveal technique to make 'unlimited renewable energy' by boosting photosynthesis using a 'dormant' chemical found in algae
by Phoebe Weston, September 5, 2018 [Daily Mail, via Naked Capitalism 9-5-18]
The technique involves using semi-artificial photosynthesis
It could create an unlimited source of hydrogen for renewable energy
They did it by using a mixture of photosynthesis and manmade technologies