Year in Review: The Top 10 News Stories of 2011

From this Blogger's perspective, here are the top 10 news stories of 2011. Each was chosen based on their potential on-going long-term effects on humanity. In no particular order, they are:

1) The Arab Spring: Erupting in Tunisia and spreading across the Arab world, the entire year was characterized by protests and political changes in Northern Africa and the Middle East. Regime changes in Tunisia, Egypt, and Libya, as well as on-going protests in a dozen nations (currently (most serious in Syria and Yemen) represent serious winds of change throughout the geo-political sphere. A timeline of protests throughout the Arab world can be found at The Guardian

2) Weather Extremes and Global Warming: Once a matter of debate, the vast majority of the world’s climatologists agree that global warming is happening at an even faster rate than expected, with significant changes in the ocean temperatures and subsequent weather patterns. According to the National Oceanic and Atmospheric Administration, there were an all-time record of twelve weather disasters costing more than $1 billion each in 2011 (for a total of 45 billion dollars in damage). The previous record was nine such disasters in 2008. Weather events included a blizzard across much of North America on February 2, record wilfires in the US west, a tornado outbreak that levelled Joplin, Missouri, Hurricane Irene (which uncharacteristically inundated and devastated inland communities in Vermont and Upstate New York), and a foot-and-half snowfall at Halloween in the northeast US. Elsewhere, record high temperatures were recorded in Iraq and Kuwait, an all-time record low volume of Arctic sea was recorded, record floods inundated Australia and Asia, and the worst droughts in three decades affected Africa.

3) Osama bin Laden Killed: A decade after he masterminded the 9/11 attacks on New York City’s World Trade Center, Osama bin Laden was killed in a surgical strike on his hideout in Pakistan. This represented the most visible and significant victory in the global fight against terrorism and the al Qaeda organization.

4) New York State Enacts Marriage Equality: Four days after its scheduled adjournment for the season, the New York State Senate gave its approval to Marriage Equality by a larger-than expected margin of 33-29 when four Republicans broke rank and joined the majority of Democrats, making New York the seventh and largest jurisdiction in the US to permit same-sex marriage. Full story at Tully's Page

5) Occupy Wall Street and Police Brutality: Beginning on September 17 in New York City, the “Occupy Wall Street” movement in many ways inaugurated an American version of the Arab Spring. Spreading to other cities across the nation, thousands of Americans from all walks of life took to the streets to protest persistent unemployment, indebtedness, foreclosures and economic injustice in raw juxtaposition to the trillions of bailouts received by Wall Street financial houses and executives. The movement elicited a brutal response by police forces, and the use of pepper spray against peaceful protesters, young women, and veterans became a national outrage. The movement propelled Time magazine to name “The Protester” as it’s Person of the Year.

6) Federal Reserve Bailouts Revealed: For almost 100 years, the Federal Reserve System, which serves as the nations Central Bank, operated without an audit or significant political oversight. In the aftermath of the bank bailouts commencing in 2008, Congress began looking into the Fed’s activities using taxpayer dollars. In all, it was revealed that over 16 trillion in secret unpaid loans were made to both American and foreign banks. Sen. Bernie Sanders

7) Earthquake, Tsunami, and Nuclear Meltdown in Japan: On March 11, an 8.9 Magnitude earthquake rocked Japan, the worst earthquake in modern history. Over 16,000 people died from the quake and the tsunami that followed. When the Fukushima Daiichi power plant site in Fukushima was inundated by a 49-foot high tsunami wave, the nuclear reactors could not be cooled, began to overheat, and meltdowns began at three of the reactors. What followed was a release of radioactive cesium, evacuation of the surrounding area, and subsequent government and industry cover-ups of the extent of radiation. Fukushima Radiation

8) John Wheeler Murdered: On New Year’s Eve, after the death of 100,000 fish and 5,000 blackbirds in Arkansas, John P. Wheeler, a decades-long government expert in toxic chemicals, was found murdered in a dump as he was en route to Washington DC. The kills and murder came in the wake of the US Government’s Pine Bluffs Arsenal "disposal” of mustard and nerve gas in the area, as well as active “fracking” by energy companies. The incidences awakened a national concern for the environmental effects of these activities, and was the single most visited and cited webpage on this site: John Wheeler

9) Milton Hershey Rejects HIV Positive Student: In an almost incomprehensible burst of ignorance, prejudice, and chutzpah, the highly-vaunted Milton Hershey School (a private, tuition-free boarding school), issued a statement coinciding with World AIDs Day explaining their refusal to admit a student due to his HIV positive status, in direct violation of the federal Americans with Disabilities Act (ADA). Outrage was swift, and brought additional publicity to continuing ignorance about HIV transmission. Milton Hershey

10) European Debt Crisis: Beginning in Greece, the ability of some Eurozone member nations to repay their government debts created continental – and global – concern. Ireland, once seen as the “Celtic Tiger” for its explosive, high-tech-driven growth found itself enacting austerity measures and slashing government spending; Italy, Portugal, and Spain found themselves in a similar condition. The downgrading of these nations bonds began a record weakening of the Euro against the US Dollar that continued throughout the year. A weakened Euro makes it more difficult for the Eurozone members to purchase American goods, endangering the US recovery.

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.

New Powers for The Federal Reserve?

The Federal Reserve System is arguably one of the most powerful (and least understood) institutions in America. Treasury Secretary Paulson's recent suggestions that "The Fed" should be granted even more power is a dangerous step.

And what's even more scary is that so many editorial writers are saying that Paulson's plan does not go far enough...so the 'debate' so far has centered on whether we give the Fed "New Power," or "Lots of New Power."

I would suggest we give it NO new powers at all, and reign in some of the power it currently wields over our lives.

By way of background: There are many tools available to an administration to jump-start or safeguard an economy. Over the years, the federal government has tried direct government spending (FDR's Civilian Conservation Corps), borrowing (every adminstration since then), giving tax rebates and cuts to consumers, deregulating business, cutting business taxes, increasing direct aid to low-income people (Bush's extension of unemployment benefits, Social Security) and building transportation infrastructure. Some presidents have attmpted policies that were dismal failures (Nixon's gas rationing in the 1970s). And of course, it is certainly arguable that Government should *not* attempt to regulate the economy at all, but should get out of the way and stop messing it up natural markets.

What all of the above approaches have in common is that they are *highly* political. They require the chaos of Congressional, Presidential, and Bureaucratic action to happen. They involve log-rolling, and compromise, and committees and all sorts of political machinations. And if you're looking for results, that's not a very effective way to run an economy.

The Federal Reserve System was designed to function quite differently.

The philosophy behind the Fed is to masage the economy through a professional banking system. The Feds, rather than responding to voters, have historically responded to numbers, and made objective decisions. This is the body that sets the Discount Rate (the interest rate at which they lend money to member banks, thus influencing general interest rates). They determine the ratio of deposits that banks must keep on hand in case of a 'run' on the bank. And in New York, the Fed buys and sells government bonds in order to inject cash into the economy or withdraw it to slow down easy credit. By all accounts, The Fed is a conservative, staid, professional group of bankers that responds to bottom lines, not the whims of voters who want goodies for their district or the passion of politicians seeking reelection.

In fact, the Fed is very, very insulated from politics. Their 7 member Board of Governors is appointed by the President with the consent of the Senate, but they each serve 14 year terms. One is up for reappointment every 2 years, which effectvely means that even a two-term president can not realistically change the makeup of the majority of Governors. Even if he could, it wouldnt matter that much, because the Regulatory functions of the Fed reside in something called the "Open Market Committeee," which consists of the 7 Governors plus 5 regional, private Fed Bank presidents (there are 12 District Fed banks. Each is a private bank, with its own Board of Directors). By design, there is NO Federal Reserve Bank in Washington, DC. All in all, it is a very decentralized system, independent from most government oversight, which operates within the banking community. Unless there is a crisis, they only meet once every 6 weeks (which they did during the Great Depression, and right after 9/11)

Under Ben Bernanke, the Fed has taken some 'wild' steps. In one case, it called two meetings only 3 days apart from each other. It has dropped the discount rate precipitously. It has stepped in to private markets to arrrange a takeover of Bear Stearns by Citicorp at a price of $2/share, destroying shareholders values (and their pensions). Fortunately, that deal that is unravelling now that Morgan Stanley has offered $10 a share. Bear Stearns is a private investment house, not a bank, and the Fed had no direct authority in the matter. .

And now, Secretary Paulson has made some 'minor' suggestions to give the Fed more such authority. His proposal would give sweeping new authority to Fed to collect data and regulate private investment houses in prder to 'stabilize markets.'

But the Fed was designed to stabilize the value of *currency* by regualting member banks. It was never meant to make decisions about business practices of non-banks, or regulate private stock transactions or financing instruments.

And that's a big, big change, and a problem for a country that calls itself a democracy.

The Fed has always walked a fine line: It's greatest strength is that it is non-political, so it can be an effective and efficient institution in protecting the economy. But its greatest weakness is that it is undemocratic, and unresponsive to the voters. It exists on its own, high above the fray. Therefore, it was given very limited authority. Paulson's plans destroy that balance.

First, it takes an institution which is the nations *only* non-political approach to the economy and drops it squarely in the middle of the political arena by giving it regulatory authority over private businesses outside of its own banking system. The political pressure on the Fed to 'save' certain companies 'assets' at the expense of others will be enormous.

Second, it gives increased regulatory authority over private transactions to an institution that is essentially unanswerable to the political process. In other words, we are creating a new branch of government, with power and authority, that is not answerable to voters, or to congress, or to any democratic process whatsoever; the Fed would become Power without any check or balance, Authority without any accountability to the citizens.

If Investment houses need to be regulated, an agency (The Securities and Exchange Commisson) is already in place. If Predatory lenders need to be more tightly regulated, all 50 state legslatures have the authority to do that, and Fraud statutes exist that can be used or strengthened through the legislative process. If poor business decisions cause a business to go under, taxpayers should not be forced to prop it up (Why is it that failing businesses always want taxpayer money to help them when they fail, but they never feel that their profit should be distributed to taxpayers when theymake a profit? Hmmm........)

Paulson's plan is not a 'small step.' This is the continuing eviscerating of the Republic's Constitution.



But then, we should have come to expect that from this administration.