| The term red pill and its opposite, blue pill, are pop culture terms that have become a common symbol for the choice between the blissful ignorance of illusion (blue) and embracing the sometimes painful truth of reality (red). |
| Take The Journey |
|
|
- Expatriation in the Wake of the Facebook IPO
- Run, Saverin! Run!
- Brazil and the Spirit of Liberty
- Immune to the Financial Crisis
- Data Show US Economy is Improving
- Why the World’s Unemployed Youth are Flocking to Brazil
- “Jon Corzine – What’s Going On?”
- Correction Fighting: How Feds Prolong Economic Depressions
- British Pound Sterling Losses “Safe-Haven” Status
ACTA Copyright Treaty Sparks Protests In Latest Anti-Piracy Battle
In the United States, a massive Internet protest last week led by Wikipedia and Google drove congressional leaders to place controversial anti-piracy legislation on hold.
But in other parts of the world, another proposal to increase copyright enforcement is gaining momentum, despite protests from opponents concerned about Internet censorship.
On Thursday, the European Union and 22 of its member states signed the Anti-Counterfeiting Trade Agreement, or ACTA — a major step toward enforcement of the copyright treaty. Eight countries, including the United States, had signed the agreement this past fall.
ACTA has always been controversial because the international negotiations that began in 2007 took place in secret. But now, opponents of the treaty have developed new muscle after witnessing the success of the Internet outcry against the two U.S. bills, the Stop Online Piracy Act (SOPA) and the Protect IP Act (PIPA).
In Poland, hundreds took to the streets this week to protest the government’s intention to sign ACTA. Several popular Polish websites replaced their regular content with statements expressing concerns about ACTA, and government websites were taken offline in an apparent denial-of-service attack coordinated by the hacker group Anonymous.
Economics Lesson 1
Last Friday (January 27) the US Bureau of Economic Analysis announced its advance estimate that in the last quarter of 2011 the economy grew at an annual rate of 2.8% in real inflation-adjusted terms, an increase from the annual rate of growth in the third quarter.
Good news, right?
Wrong. If you want to know what is really happening, you must turn to John Williams at shadowstats.com.
What the presstitute media did not tell us is that almost the entire gain In GDP growth was due to “involuntary inventory build-up,” that is, more goods were produced than were sold.
Net of the unsold goods, the annualized real growth rate was eight-tenths of one percent.
And even that tiny growth rate is an exaggeration, because it is deflated with a measure of inflation that understates inflation. The US government’s measure of inflation no longer measures a constant standard of living. Instead, the government’s inflation measure relies on substitution of cheaper goods for those that rise in price. In other words, the government holds the measure of inflation down by measuring a declining standard of living. This permits our rulers to divert cost-of-living-adjustments that should be paid to Social Security recipients to wars of aggression, police state, and banker bailouts.
Taxpayers Still In Hole $133 Bil From Gov’t Bailouts
The bailouts of the last three years were a rousing success, Democrats like to say, a shining example of how government activism can save the economy. Really? A new government report suggests otherwise.
In 2010, the newspapers were full of reports of companies “paying back” loans under the $700 billion Troubled Asset Relief Program (TARP).
Over and over, Democratic politicians and left-leaning pundits suggested the money would not only be paid back, but that taxpayers might even profit from it. And even if the money could not be recovered, they said, a depression has been averted.
Well, here’s some news for them, courtesy of the Associated Press: “U.S. taxpayers are still owed $132.9 billion that companies haven’t repaid from the financial bailout, and some of that will never be recovered.”
It may be even worse than that gloomy prognosis delivered to Congress on Thursday. The federal government has already written off $12 billion, and it may take years — if ever — to get the rest of the money owed by the 458 companies it “invested” in.
Take General Motors. The government break-even on its GM investment is $54 a share. GM closed Thursday at $24.72 a share. But in… Continue reading
The Most Common and Costly Investment Mistake
It’s a slim little booklet titled One-Way Pockets by Don Guyon (a pen name for a broker). The book, which was first published in 1917, covers some studies he did on the trading behavior of accounts at the time. What he found was timeless.
The language is charmingly stuck in the World War I era. “At the fag-end of the never-to-be-forgotten ‘war brides’ market,” he begins, “I began, in a casual sort of way, to analyze the accounts of half a dozen of the firm’s most active traders.”
During the “war brides” market of 1914-15, defense stocks and industrials surged in response to the outbreak of World War I. [Editor’s note: “War bride” was a nickname for what we now call “defense stocks.”] But Guyon found that even though such stocks had already made large moves up, his firm’s clients had big stakes in them with small profits. This was not a unique circumstance. Guyon found that this was the way the top of every bull market looked, in his experience in the brokerage business. In 1917, there was a bear market, and these traders lost money.
Freddie Mac Bets Against American Homeowners
Freddie Mac, the taxpayer-owned mortgage giant, has placed multibillion-dollar bets that pay off if homeowners stay trapped in expensive mortgages with interest rates well above current rates.
Freddie began increasing these bets dramatically in late 2010, the same time that the company was making it harder for homeowners to get out of such high-interest mortgages.
No evidence has emerged that these decisions were coordinated. The company is a key gatekeeper for home loans but says its traders are “walled off” from the officials who have restricted homeowners from taking advantage of historically low interest rates by imposing higher fees and new rules.
Freddie’s charter calls for the company to make home loans more accessible. Its chief executive, Charles Haldeman Jr., recently told Congress that his company is “helping financially strapped families reduce their mortgage costs through refinancing their mortgages.”
But the trades, uncovered for the first time in an investigation by ProPublica and NPR, give Freddie a powerful incentive to do the opposite, highlighting a conflict of interest at the heart of the company. In addition to being an instrument of government policy dedicated to making home loans more accessible, Freddie also has giant investment portfolios and could lose substantial amounts of money if too many borrowers refinance.
“We were actually shocked they did this,” says Scott Simon, who as the head of the giant bond fund PIMCO’s mortgage-backed securities team is one of the world’s biggest mortgage bond traders. “It seemed so out of line with their mission.”
The trades “put them squarely against the homeowner,” he says.
Those homeowners have a lot at stake, too. Many of them could cut their interest payments by thousands of dollars a year.
Freddie Mac, along with its cousin Fannie Mae, was bailed out in 2008 and is now owned by taxpayers. The companies play a pivotal role in the mortgage business because they insure most home loans in the United States, making banks likelier to lend. The companies’ rules determine whether homeowners can get loans and on what terms.
The Federal Housing Finance Agency effectively serves as Freddie’s board of directors and is ultimately responsible for Freddie’s decisions. It is run by acting director Edward DeMarco, who cannot be fired by the president except in extraordinary circumstances.
Freddie and the FHFA repeatedly declined to comment on the specific transactions.
Freddie’s moves to limit refinancing affect not only individual homeowners but the entire economy. An expansive refinancing program could help millions of homeowners, some economists say. Such an effort would “help the economy and put tens of billions of dollars back in consumers’ pockets, the equivalent of a very long-term tax cut,” says real-estate economist Christopher Mayer of the Columbia Business School. “It also is likely to reduce foreclosures and benefit the U.S. government” because Freddie and Fannie, which guarantee most mortgages in the country, would have lower losses over the long run.
Freddie Mac’s trades, while perfectly legal, came during a period when the company was supposed to be reducing its investment portfolio, according to the terms of its government takeover agreement. But these trades escalate the risk of its portfolio, because the securities Freddie has purchased are volatile and hard to sell, mortgage securities experts say.
The financial crisis in 2008 was made worse when Wall Street traders made bets against their customers and the American public. Now, some see similar behavior, only this time by traders at a government-owned company who are using leverage, which increases the potential profits but also the risk of big losses, and other Wall Street stratagems. “More than three years into the government takeover, we have Freddie Mac pursuing highly levered, complicated transactions seemingly with the purpose of trading against homeowners,” says Mayer. “These are the kinds of things that got us into trouble in the first place.”
