Tuesday, August 09, 2011

The Fed has been the Problem, not the Answer...

Investors, bankers, economists, politicians, and media sources around the world are looking to “The Fed” today for a response to the collapsing world economy. Like Munchkins running to see what The Wizard says about the evil in the sky, one wonders if they will be comforted for long by the grandiose display of smoke and mirrors to which they will be treated.

The Federal Reserve System (“The Fed”) is, inarguably, the single most powerful institution in the American economy. Almost completely removed from accountability to democratic processes, the Fed’s manipulation of the nation’s money supply is believed by many to have been a prime cause of the 1929 stock crash and depression…and here we have history repeating itself. Rather than being the economy’s savior, it has painted itself into a corner. It will make soothing announcements this afternoon as to how it is on the job, but the reality is that it is out of options.

The Federal Open Market Committee (or “FOMC”) of the Federal Reserve System is a committee comprised of the 7 Governors of the System, the President of the New York Federal Reserve Bank, and 4 other rotating Regional Fed Bank Presidents. Traditionally, they have authority in three areas:

1) The Discount Rate. This is the interest rate that the Fed charges member banks to borrow money. By lowering the Discount rate, local banks are able to borrow money cheaply, and then lend it out to consumers at fairly reasonable rates. By making loan money available, this stimulates borrowing, and spending, and it is hoped, begins to prop up the economy. However, the Discount Rate has already been lowered to one quarter of one percent...and banks are not lowering the rates they charge consumers, nor are they even making loans to consumers, and few businesses are borrowing in order to expand. The Fed is at the end of their rope with this tool, with nowhere to go.

2. The Reserve Ratio. This is the amount of money that the Fed requires banks to physically have on-hand, in each members vaults, in case of a bank run by the public (This is currently 10%). Lowering the Ratio means that banks have more to lend…but if no one’s borrowing, and banks aren’t willing to lend, it has no effect. And lowering the ratio only puts banks in a more precarious position if the public gets nervous and decided to withdraw cash. This could be an even larger problem in Europe, where the Eurozone Reserve Ratio is a paltry 2%. No option here.

3. And then there’s “Open Market Operations,” routinely paired of late with operations called “Quantitative Easing.” In 2008 the Fed engaged in large-scale purchases of bonds from their member banks, which amounted to printing money to replace the ‘paper’ that their own member banks held. This was the first round, called “QE 1,” which was quickly followed by a second round (“QE2.”) .

Neither effort helped the economy at large. Of course, that was not the point: The Fed was trying to bail out banks that had lost trillions due to their gambling on junk mortgage derivatives. In other words, the Fed created money to replace what the banks lost. None of this had any effect in funding business expansion or employment or consumption.

So what did happen to the money infused into the banks under QE1 and QE2? Businesses that can’t sell products can’t borrow. People who are out of work can’t borrow.

The US government has been cash-strapped as a result of a huge loss in revenues – tax revenues lost because of Republican demands to protect the wealthy from taxes, combined with 20% of the American workforce having no income, or less income, than before the recession began. So the US government decided it would borrow the money back from the banks, and pay them between 3 and 4 percent. Banks made a rational decision to make these loans. For the government and the banks, it was a win-win situation: the government raised the cash it needed, and banks had a profitable investment.

So, the banks received money printed by the Fed, and then used that money to lend it back to the US Government at 4%...paid for by the American taxpayer. In essence, you, my friends, are paying interest on the money you loaned your own government. Quite a racket, eh? How much money are we talking about here? 23 TRILLION dollars. Hence, a problem of having more debt than we can reasonably foresee paying back.

No, the Fed can not dig us out of the hole they dug us into. They will give reassuring comments this afternoon, but the man behind the curtain is a charlatan.

Politicians on the Left and the Right share blame in this mess. From the left, there has been a call to spend even more, while the right screams about cutting spending. And on that note, we are in a catch-22.

The first round of Stimulus Spending was a failure. Government can not pour money into an economy, cross its fingers, and “hope it all works out.” We have heard that the economy has been slowly improving, though some inthe last few days raised the fears of another recession. Well I have news for you: we never exited the first recession.

The amount of ‘growth’ in our nations GDP the last few quarters has been less than what is needed simply to keep up with deferred maintenance; we have not stopped falling behind since the 2008 crash.

Banks and Wall Street may be sighing a bit of relief because they got through the days when Lehman Brothers and Merrill Lynch and Countrywide and AIG were melting down – but their restructuring did little to affect the national employment situation. The glimmer of hope we thought we saw was merely a brief ‘blip’ when the stimulus money hit the banks – and now its gone. Gone to pay debt, gone to overseas markets, gone everywhere except American jobs.

But the right's answer of slashing spending at every turn is just as wreckless. Unwilling to cease spending trillions of dollars on overseas adventures, slashing domestic spending means people here at home get hurt. Unemployed, sick, hungry, homeless, and hurting people do not create a vibrant economy. In my home state of New Hampshire, we are watching as over 500 jobs are being cut from hospitals as a result of budget slashing…this, in an industry (health care) that has the best prospects for job growth in the years ahead as our population ages. In Wisconisin and New Hampshire, we see efforts to end union benefits: not to prop up the economy, but to impoverish and punish and reduce the compensation that workers get. That's not a way to instill consumer confidence and stimulate purchases from hurting businesses.

Has anyone else noticed the explosion of home auctions, homes for sale, and "Business Closed" signs around? I sure have, and here in NH we are told that our unemloyment rate is only half that of the rest of the nation!

There are no easy answers ahead. Unless and until corporate profits are required to be shared with the labor producing them rather than hoarded by 6- and 7-figure paycheck Executives....and unless and until banks are forced to engage in lending to consumers and businesses rather than the government...unless and until the government matches revenues with expenditures…we are in for a long period – perhaps an entire generation – of economic unrest.

Tuesday, August 02, 2011

Iowa's Ignorance and HIV

In 1998, Iowa politicians enacted a law that criminalized potential HIV transmission as a Class B felony. The sentence designates the ‘carrier’ as a felon, imposes a sentence of up to 25 years in prison, and assigns him lifelong sex-offender status, even if the contact was consensual. Under the law, a person aware of his or her positive HIV status does not actually have to transmit the HIV virus, they only have to engage in intimate contact with another person.

The penalty exceeds that for manslaughter.

Since the law was enacted, 26 people have been convicted under the law; nine people currently sit behind bars. The cost to taxpayers is an estimated annual cost of $31,500 per inmate, plus medical costs of $24,000 annually per inmate.

The cost to the incarcerated is the destruction of their life for the crime of being human and having an illness.

Last year, the Iowa legislature defeated an effort to repeal the law, considered the most backwards and punitive (I would add ‘medieval’) in the country. Of course, this is Iowa, a state where right-wing fundamentalists are well-organized in the electoral processes and have handed presidential caucus victories to Pat Robertson in 1988 and Mike Huckabee just four years ago. Reason and Science need not apply...

Supporters of the law have a well-honed mantra that follows this general pattern:

“HIV/AIDs is a deadly disease that is a death sentence. When you know you have it and you are intimate with someone, you are infecting them, and committing an assault on them that is as dangerous as any other form of slow murder.”

In reality, much of the support for this law comes from those who look down on all sexual activity in general, and consider homosexuality in particular to be an abomination. Puritanical theology is the root of their desire to punish these people, not health. Nonetheless, in the battle of legislative processes, and insuring under the US Constitution that no excessive punishments be imposed for ‘crimes,’ it is important to address their stated reasoning above…and certainly time to educate the legislators and the public. I have been wanting to post this for a while, and the Iowa law was the tipping point.

1. HIV is not AIDs. Say that out loud. Again. HIV (Human Immunodeficiency Virus) is a virus that attacks the immune system, as do thousands of viruses. The HIV virus may lead to AIDs as a long-term complication of the viral attack, but HIV is not AIDs any more than blindness or neuropathy is the same thing as diabetes. One may cause the other, but they are not the same thing.

2. HIV is not a death sentence. Gay activists often (appropriately) refer to the 1980s as a health holocaust, as entire neighborhoods were decimated. But times have changed significantly, and thousands of men and women live normal healthy lives for decades with the HIV virus under control. In other words, HIV is now a manageable medical condition, not the end of life.

3. As viruses go, transmission of the HIV virus is very, very difficult. It is not transmitted by close contact, or sharing food or drinking glasses, or by breathing on each other, or by kissing (unlike many other viruses). It is not transmitted through saliva, sweat, or urine. Unlike many prevalent STDs such as syphilis, gonorrhea, herpes, HPV, and genital warts (none of which carry the penalties imposed in Iowa), it is not transmitted through oral sex.

Repeat: in the 30+ year history of HIV, there is not one single scientific case study that has documented transmission via fellatio. Period. In order to be on the ‘safe side,’ many doctors and government-funded clinics will publicly state that this is a ‘hypothetical’ route of transmission. But as for documenting a single case – it doesn’t exist…and privately, the medical community knows this. In July 2002 a study was concluded in Spain of serodiscordant couples (one HIV positive, One HIV Negative), where they evaluated for risks of HIV transmission through unprotected oral sex. In over 19,000 unprotected oral-genital contacts with HIV-infected partners, there was not a single case of seroconversion to HIV. (http://hivinsite.ucsf.edu/insite?page=pr-rr-05)

Even vaginal and anal transmission of the virus is unlikely. According to the Guidelines for the Management and Post Exposure Prophylaxis of Individuals who Sustain Nonoccupational Exposure to HIV, ANCAHRD/CTARC Bulletin, February 2001, the risk of transmission as a result of receptive anal sex is approximately three per cent. Other experts place the risk as low as 1 in 1300. (http://aids.about.com/od/hivaidsstats/f/infectionrisk.htm)

4. HIV positive individuals who have their virus controlled with medication can not transmit the HIV virus. (http://www.aidsmap.com/page/1429357/)

“…Swiss HIV experts have produced the first-ever consensus statement to say that HIV-positive individuals on effective antiretroviral therapy…are sexually non-infectious… After review of the medical literature and extensive discussion [the] Swiss Federal Commission for HIV / AIDS resolves that, “An HIV-infected person on antiretroviral therapy with completely suppressed viraemia (“effective ART”) is not sexually infectious, i.e. cannot transmit HIV through sexual contact.”

The statement officially defines a ‘suppressed viraemia’ (or “Undetectable Viral Load,” the common US parlance) as a viral load that has been suppressed to less than < 40 copies/ml for at least six months. (For comparison, someone not controlled on medication may have a viral load of 500,000 to over 1 million copies/ml). At the time this statement was made, that was the most sensitive that HIV tests could detect; today, these tests can detect viral loads of only 20 copies/ml, which means someone declared to have an Undetectable Viral Load has even fewer copies of the virus in their system than the limit established by the original Swiss statement. Finally, the Commission specifically stated that “courts will have to take into account the fact that HIV-positive people on antiretroviral treatment…cannot transmit HIV sexually in criminal HIV exposure and transmission cases….Unprotected sex between a positive person on antiretroviral treatment…and an HIV-negative person, does not comply with the criteria for an “attempt at propagation of a dangerous disease” according to section 231 of the Swiss penal code nor for “an attempt to engender grievous bodily harm” according to section122, 123 or 125.”

Iowa politicians, take note.

The current law in Iowa, then, locks someone up in a cage for up to 25 years and brands them a sex offender for engaging in normal human activity that has no chance of endangering someone else…simply because of their ‘status’ as a branded individual. The law is not based in science or humanity or health, but expresses a punitive, uneducated, and fearful attitude towards what they do not wish to understand.