Necessary Symmetry Between What You Pay and What You Receive

medium |  Symmetry, symmetry everywhere — Belief and worship requires an entry fee — The Gods do not like cheap signaling.

Note: I am posting these excerpts from SKIN IN THE GAME as I am ending the grueling Greek-Orthodox lent period which, for the most part, allows no animal products. This diet is particularly hard to keep in the West where people use butter and dairy products. But once you fast, you feel entitled to celebrate Easter; it is like the exhilaration of fresh water when one is thirsty. You’ve paid a price. Your holiday is different from that of others who stole it.

Fasting is one of the human sacrifices that make like different from an experience machine — or, worse, a hedonic, pleasure-seeking mercenary pursuit. Recall our brief discussion of the theological necessity of making Christ man –he had to sacrifice himself. Time to develop the argument here.

The main theological flaw in Pascal’s wager is that belief cannot be a free-option. It entails a symmetry between what you pay and what you receive. Things otherwise would be too easy. Accordingly, the skin in the game rules that hold between humans also hold in the rapport with the gods.

To summarize, in a Judeo-Christian place of worship, the focal point, where the priest stands, symbolizes Skin in the Game. The notion of belief without tangible proof is not existent in history.

The strength of a creed did not rest on “evidence” of the powers of its gods, but evidence of the skin in the game on the part of its worshippers.[1]

Student Debt Bubble Ruins Lives While Sucking Life Out of the Economy

nakedcapitalism |  The Financial Times has a generally good update on the state of the student debt bubble in the US. The article interesting not just for what it says but also for what goes unsaid. I’ll recap its main points with additional commentary. Note that many of the underlying issues will be familiar to NC readers, but it is nevertheless useful to stay current.

Access to student debt keeps inflating the cost of education. This may seem obvious but it can’t be said often enough. Per the article:

While the headline consumer price index is 2.7 per cent, between 2016 and 2017 published tuition and fee prices rose by 9 per cent at four-year state institutions, and 13 per cent at posher private colleges.

It wasn’t all that long ago that the cost of a year at an Ivy League college was $50,000 per year. Author Rana Foroohar was warned by high school counselors that the price tag for her daughter to attend one of them or a liberal arts college would be around $72,000 a year.

Spending increases are not going into improving education. As we’ve pointed out before, adjuncts are being squeezed into penury while the adminisphere bloat continues, as MBAs have swarmed in like locusts. Another waste of money is over-investment in plant. Again from the story:

A large chunk of the hike was due to schools hiring more administrators (who “brand build” and recruit wealthy donors) and building expensive facilities designed to lure wealthier, full-fee-paying students. This not only leads to excess borrowing on the part of universities — a number of them are caught up in dicey bond deals like the sort that sunk the city of Detroit — but higher tuition for students.

And there is a secondary effect. As education cost rise, students are becoming more mercenary in their choices, and in not a good way. This is another manifestation of what John Kay calls obliquity: in a complex system, trying to map a direct path will fail because it’s impossible to map the terrain well enough to identify one. Thus naive direct paths like “maximize shareholder value” do less well at achieving that objective than richer, more complicated goals.

The higher ed version of this dynamic is “I am going to school to get a well-paid job,” with the following results, per an FT reader:

BazHurl
After a career in equities, having graduated the Dreamy Spires with significant not silly debt, I had the pleasure of interviewing lots of the best and brightest graduates from European and US universities. Finance was attracting far more than its deserved share of the intellectual pie in the 90’s and Noughties in particular; so at times it was distressing to meet outrageously talented young men and women wanting to genuflect at the altar of the $, instead of building the Flux Capacitor. But the greater take-away was how mediocre and homogenous most of the grads were becoming. It seemed the longer they had studied and deferred entry into the Great Unwashed, the more difficult it was to get anything original or genuine from them. Piles and piles of CV’s of the same guys and gals: straight A’s since emerging into the world, polyglots, founders of every financial and charitable university society you could dream up … but could they honestly answer a simple question like “Fidelity or Blackrock – Who has robbed widows and orphans of more?”. Hardly. In short, few of them qualified as the sort of person you would willingly invite to sit next to you for fifteen hours a day, doing battle with pesky clients and triumphing over greedy competitors. All these once-promising 22 to 24 year old’s had somehow been hard-wired by the same robot and worse, all were entitled. Probably fair enough as they had excelled at everything that had been asked of them up until meeting my colleagues and I on the trading floors. Contrast this to the very different experience of meeting visiting sixth formers from a variety of secondary schools that used to tour the bank and with some gentle prodding, light up the Q&A sessions at tour’s end, fizzing with enthusiasm and desire. Now THESE kids I would hire ahead of the blue-chipped grads, most days. They were raw material that could be worked with and shaped into weapons. It was patently clear that University was no longer adding the expected value to these candidates and in fact was becoming quite the reverse. 

And for many grads, an investment in higher education now has a negative return on equity. A 2014 Economist article points out that the widely cited studies of whether college is worth the cost or not omit key factors that skew their results in favor of paying for higher education.

Navient: Student Loans Designed to Fail

NYTimes |  Ashley Hardin dreamed of being a professional photographer — glamorous shoots, perhaps some exotic travel. So in 2006, she enrolled in the Brooks Institute of Photography and borrowed more than $150,000 to pay for what the school described as a pathway into an industry clamoring for its graduates.

“Brooks was advertised as the most prestigious photography school on the West Coast,” Ms. Hardin said. “I wanted to learn from the best of the best.”

Ms. Hardin did not realize that she had taken out high-risk private loans in pursuit of a low-paying career. But her lender, SLM Corporation, better known as Sallie Mae, knew all of that, government lawyers say — and made the loans anyway.

In recent months, the student loan giant Navient, which was spun off from Sallie Mae in 2014 and retained nearly all of the company’s loan portfolio, has come under fire for aggressive and sloppy loan collection practices, which led to a set of government lawsuits filed in January. But those accusations have overshadowed broader claims, detailed in two state lawsuits filed by the attorneys general in Illinois and Washington, that Sallie Mae engaged in predatory lending, extending billions of dollars in private loans to students like Ms. Hardin that never should have been made in the first place.

“These loans were designed to fail,” said Shannon Smith, chief of the consumer protection division at the Washington State attorney general’s office.

New details unsealed last month in the state lawsuits against Navient shed light on how Sallie Mae used private subprime loans — some of which it expected to default at rates as high as 92 percent — as a tool to build its business relationships with colleges and universities across the country. From the outset, the lender knew that many borrowers would be unable to repay, government lawyers say, but it still made the loans, ensnaring students in debt traps that have dogged them for more than a decade.

While these risky loans were a bad deal for students, they were a boon for Sallie Mae. The private loans were — as Sallie Mae itself put it — a “baited hook” that the lender used to reel in more federally guaranteed loans, according to an internal strategy memo cited in the Illinois lawsuit.

The attorneys general in Illinois and Washington — backed by a coalition of those in 27 other states, who participated in a three-year investigation of student lending abuses — want those private loans forgiven.

You Cannot Fire the Elite or the Deep State by Voting

charleshughsmith |  Let's review the central institutions of the nation:

1. Healthcare: a failed system doomed to bankrupt the nation.

2. Defense: a failed system of cartels and Pentagon fiefdoms that have saddled the nation with enormously costly failed weapons systems like the F-35 and the LCS.

3. Higher Education: a bloated, failed system that is bankrupting an entire generation while mis-educating them for productive roles in the emerging economy. (I cover this in depth in The Nearly Free University and the Emerging Economy and Get a Job, Build a Real Career and Defy a Bewildering Economy.)

4. Foreign policy: Iraq: a disaster. Afghanistan: a disaster. Libya: a disaster. Syria: a disaster. Need I go on?

5. Political governance: a corrupt system of self-serving elites, lobbyists, pay-to-play, corporate puppet-masters, and sociopaths who see themselves as above the law.

In Why Our Status Quo Failed and Is Beyond Reform, I explain why the only possible output of these systems is failure.

The sole output of America's Establishment/Ruling Elite is self-serving hubris.

In the open market, failed leadership has consequences. Customers vanish and the enterprise goes bankrupt, or shareholders and employees rally to fire the failed leadership.

In our state-cartel system, failed leadership only tightens its grip on the nation's throat. The Deep State can't be fired, nor does it ever stand for election. The two political parties are interchangeable, as are the politicos who race from fund-raiser to fund-raiser.

It's tempting to blame the individuals who inhale the wealth and power of our failed system, but it's the system, not the individuals, though a more corrupt, craven, self-serving lot cannot easily be assembled.

In broad brush, the Establishment and its Ruling Elite are still fighting World War II. The solution to the Great Depression and fascism was to cede complete control of the economy, the media and the social order to the central state.

Tens of millions of people were aggregated into vast industrial corporations or the Armed Forces. Everyone heard the same "news" and had the same limited choices of work and consumption.

It was easier for the federal government to control a handful of cartel-corporations and unions, and this cemented the state-cartel system that remains dominant today.

Granny Goodness and Her Walmart Fascism ARE Perpetual Austerity and Inequality

truthdig  |  Thomas Frank’s writing about electoral politics and its impact on American culture has been published for decades in such venues as Harper’s Magazine and The Wall Street Journal, and in his 2004 book, “What’s the Matter with Kansas?” In his latest book, “Listen Liberal: Whatever Happened to the Party of the People?,” the journalist and political analyst tackles the question of what changed within the Democratic Party to make it become a “liberalism of the rich.”

“The Democratic Party itself has changed,” Frank told Truthdig Editor in Chief Robert Scheer during an episode of “Scheer Intelligence” earlier this year. “What’s changed about them is the social class that they answer to, that they respect, that they come from.”

The trend has gotten worse.

“Democrats look at Wall Street, and they see people like themselves,” he said in an interview with Scheer during the Democratic National Convention in July. 

On Tuesday night, Frank joined Scheer at the University of Southern California to discuss “Listen, Liberal” and his analysis of Hillary Clinton during this election cycle, from her public views on inequality in United States to her promises to tamp down greed on Wall Street. 

Frank offered critiques of the Democratic Party’s abandonment of the average working-class American, the Clintons—who signed off on welfare reform that proved discriminatory—and the two-party system. He said:

Hillary has changed her position on issues many, many times over the years, and some of the things she’s done that her husband did that she had a hand in—she was a close adviser to her husband as president—have been disastrous, had catastrophic effects on people—welfare reform, for example. Every time Hillary says—and she says it a lot—that her whole life has been about protecting children, there’s an enormous counterexample, which is welfare reform, or what they called reform. They abolished the welfare system in this country, Hillary and her husband did. This is one of the cruelest things [...] It was a New Deal program that they abolished. It was a cruel thing, it was more or less an overtly racist thing, and to do that to the poorest and weakest members of society—at the time, it just turned my stomach. And it’s a little creepy that Hillary sees fit to represent herself as the great defender of poor women and children because she manifestly is not. And that’s one of many contradictions in Hillary Clinton’s record.

If you read the biographies of Hillary Clinton, if you watch a speech by Hillary Clinton, if you watch the presentation of her life story that they had at the Democratic National Convention, Hillary’s story is all about virtue. She is good with a capital G. When she gave her acceptance speech at the convention, she was wearing all white. She likes to dress in all white; she is Joan of Arc. That is how she sees herself. Her favorite saying that she quoted at the convention, it’s this Methodist thing: Do all the good you can, all the ways you can, to all the people you can, for as long as ever you can. She’s good, she’s so good, she’s so virtuous, her heart’s in the right place, and every biography of her emphasizes this intense sense of her goodness, her virtues—her overpowering, 100-proof virtue. ... She is intensely good. And yet, look at Libya, look at the welfare system in this country.

meanwhile, out in the rural precincts, nottinghams stay wilding - especially on peasant women!!!

NYTimes |  On Wednesday, the Vera Institute of Justice and a program called the Safety and Justice Challenge released a report that found that the number of women in local jails in the United States was almost 14 times what it was in the 1970s, a far higher growth rate than for men, although there remain far fewer women than men in jails and prisons.

The study found that the number of women held in the nation’s 3,200 municipal and county jails for misdemeanor crimes or who are awaiting trial or sentencing had increased significantly — to about 110,000 in 2014 from fewer than 8,000 in 1970.

(Over all, the nation’s jail population increased to 745,000 in 2014 from 157,000 in 1970.)

Much of the increase in the number of jailed women occurred in counties with fewer than 250,000 people, according to the study, places where just 1,700 women had been incarcerated in 1970. By 2014, however, that number had surged to 51,600, the report said.

And even as crime rates declined nationally, the trend toward jailing women in rural counties continued: Incarceration rates for women in sparsely populated counties rose to 140 per 100,000 in 2014 from 79 per 100,000 in 2000, the study found. During the same period, incarceration rates for women in the nation’s largest counties decreased to 71 per 100,000 from 76 per 100,000.

“Once a rarity, women are now held in jails in nearly every county — a stark contrast to 1970, when almost three-quarters of counties held not a single woman in jail,” the report said.

The counties with the highest rates of jailed women are nearly all rural and include Nevada County, Calif.; Floyd County, Ga.; and St. Charles Parish, La. Each has a population of fewer than 100,000 people but a rate of incarceration for women of more than 280 per 100,000, according to the Vera Institute.

a lot of people get a basic fact wrong about criminal justice

WaPo |  The bipartisan congressional effort to reform federal criminal penalties has stalled, with little prospect of progress until autumn at the earliest. If you fear that Congress’ inaction could undermine the nation’s recent progress toward reversing mass incarceration, it may be helpful to reflect upon an underappreciated fact about American criminal justice: The number of people in prison has little to do with what happens in Washington.

In some policy areas, including health care, military affairs and the economy, the most consequential political decisions are made in the nation’s capital. But in the criminal justice system, states, cities and counties are the central players. For every federal law enforcement agent, about a half-dozen state highway patrol officers, county sheriffs and city police patrol the streets. Similarly, less than one-seventh of the country’s prison inmates are in federal facilities.

Because the federal prison system is so small, even dramatic congressional reforms in federal criminal penalties would have only a modest impact on the level of incarceration in the United States. Democratic presidential candidate Bernie Sanders was thus making an empty promise when he pledged to reduce the number of prisoners in the United States below that of China: Not even granting presidential pardons to every single federal prisoner would achieve this goal.

sheriff of nottinghamism at epidemic levels...,

HuffPo |  How are your local courts and jails funded? If your community is like most of America, chances are the criminal justice system itself has become a revenue collection service - with problematic results.

Every state except Alaska, North Dakota, and DC has increased civil and criminal fees since 2010. Many charge for services that are constitutionally required and were once free. As states and local governments have felt the pinch from the 2008 economic crash, they have turned to fines and fees to fill in budget gaps.

The most famous example is in Ferguson, Missouri. The U.S. Justice Department’s investigation of the Ferguson Police Department exposed how the department collects fines and fees not for the sake of public safety, but to raise money for city government. The FPD revenue targets in 2015 accounted for 20% of the city’s operating budget.

Or listen to Jared Thornburg, in Westminister, Colorado. He was ticketed for making an illegal left turn. But because he had lost his job after a serious workplace injury, he couldn’t pay the ticket. He found a new job - but the day before he started, he was arrested for not paying the fines, which had escalated from $165 to $306. He was sentenced to 10 days in jail, which cost that city $70 per night. As Jared points out, “It cost the taxpayers more than what my fine was for and it just wasted 10 days of my life.”

It adds up to what Bill Mauer, from the Institute of Justice, calls “taxation by citation.” This reliance on fines and fees to cover fiscal gaps brings along with it four main problems.

popular puerto rican opposition to debt enslavement is meaningless...,

sprottmoney |  Where's all the news - where are all the headlines? A major event has taken place yesterday and another event is about to unfold tomorrow. Puerto Rico is going to default on its debt and the US government is A-OK with it.

Once again, the American taxpayers have been on the short end of the stick. This story is receiving little to no press and it is truly baffling given the ramifications and meaning behind it. Perhaps this is exactly why it is receiving so little attention.

The story of the Puerto Rican default is just another example of the crumpling system of the elites. The establishment is desperately trying to keep this broken fiat system together for as long as they possibly can, sucking maximum profits from it before it implodes.

The U.S. Senate has done its part in this farce, as they passed the bailout bill with overwhelming support yesterday, ensuring that Puerto Rico, like Greece, can put off its consequences of overspending for the time being and continue to stagnate. It's another stellar example of extend and pretend by the elites.

Tomorrow, the government of Puerto Rico was supposed to be paying back $2 billion in debt repayments - no small sum of money, but a drop in the bucket when you look at the massive $70 billion that they owe in debt payments.

Fortunately and unfortunately for them, they are being given a "free" pass by the U.S. government this time. I say unfortunately, because the trade-off for them is their freedom and liberty. As part of the bailout deal, the elites will install overseers that will monitor the Puerto Rican government. Essentially, they are giving up their free will.

Despite this being a major story, don't expect to hear much about it. The elites don't want to embolden other states or countries to default on their debt as well. The illusion of debt and fiat money must be maintained at all cost, or they risk completely losing the crumbling empire they have built around them. 

puerto rico must fail because it never produced anything but puerto ricans...,

ourfiniteworld |  There are many who believe that the use of energy is critical to the growth of the economy. In fact, I am among these people. The thing that is not as apparent is that growth in energy consumption is dependent on the growth of debt. Both energy and debt have characteristics that are close to “magic,” with respect to the growth of the economy. Economic growth can only take place when growing debt (or a very close substitute, such as company stock) is available to enable the use of energy products.

The reason why debt is important is because energy products enable the creation of many kinds of capital goods, and these goods are often bought with debt. Commercial examples would include metal tools, factories, refineries, pipelines, electricity generation plants, electricity transmission lines, schools, hospitals, roads, gold coins, and commercial vehicles. Consumers also benefit because energy products allow the production of houses and apartments, automobiles, busses, and passenger trains. In a sense, the creation of these capital goods is one form of “energy profit” that is obtained from the consumption of energy.

The reason debt is needed is because while energy products can indeed produce a large “energy profit,” this energy profit is spread over many years in the future. In order to actually be able to obtain the benefit of this energy profit in a timeframe where the economy can use it, the financial system needs to “bring forward  some or all of the energy profit to an earlier timeframe. It is only when businesses can do this, that they have money to pay workers. This time shifting also allows businesses to earn a financial profit themselves. Governments indirectly benefit as well, because they can then tax the higher wages of workers and businesses, so that  governmental services can be provided, including paved roads and good schools.

no american taxpayer bailout of puerto rico...,

utopiathecollapse |  Puerto Rico’s debt crisis moved into a more perilous phase for residents, lawmakers and bondholders Monday after the Government Development Bank failed to repay almost $400 million. The missed principal payment, the largest so far by the island, is widely viewed on Wall Street as foreshadowing additional defaults this summer, when more than $2 billion in bills are due.

Together with the spread of the Zika virus, the risk of cascading defaults is putting new urgency on bipartisan negotiations in Washington over legislation granting the U.S. territory new powers to restructure more than $70 billion in debt. The Centers for Disease Control and Prevention reported last week the first U.S. death related to the mosquito-borne Zika virus—a Puerto Rican man in his 70s who died in late February.

In a letter to Congress, Treasury Secretary Jacob Lew warned on Monday that a U.S. “taxpayer-funded bailout may become the only legislative course available” if the proposed restructuring legislation isn’t approved. The island’s debt is held by mutual funds, hedge funds, bond insurers and individual investors, who were attracted in part by tax benefits and high yields. The default Monday casts serious doubt on the commonwealth’s ability to make other future payments, which “means that other defaults are very likely on other Puerto Rico credits,” said Paul Mansour, head of the municipal credit research group at investment management firm Conning.

Monday’s developments are the latest sign that a long-running economic crisis has reached an acute stage, embroiling financial markets and Congress. Benchmark Puerto Rican bond prices fell to near record lows Monday, with some investors paying less than 65 cents on the dollar for general obligation bonds maturing in 2035, an unusually low price.

as goes lake karibe, so goes zambia...,

NYTimes |  Even as drought and the effects of climate change grew visible across this land, the Kariba Dam was always a steady, and seemingly limitless, source of something rare in Africa: electricity so cheap and plentiful that Zambia could export some to its neighbors.

The power generated from the Kariba — one of the world’s largest hydroelectric dams, in one of the world’s largest artificial lakes — contributed to Zambia’s political stability and helped turn its economy into one of the fastest growing on the continent.

But today, as a severe drought magnified by climate change has cut water levels to record lows, the Kariba is generating so little juice that blackouts have crippled the nation’s already hurting businesses. After a decade of being heralded as a vanguard of African growth, Zambia, in a quick, mortifying letdown, is now struggling to pay its own civil servants and has reached out to the International Monetary Fund for help.

the shadow world of the economic hitman..,

peakprosperity |  If you're hoping to have a 'feel good' day today, we're about to owe you an apology.

John Perkins, author of The New Confessions of an Economic Hit Man, is someone we've been trying to get on the program for some time. He tells a dark story of an elite cabal working in the shadows to subjugate governments as it pursues ever-greater control of the planet's resources.

What's most frightening about this story is how credible it is. Anybody paying attention to world developments will have a hard time dismissing Perkins' claims out-of-hand; and a harder time not being sickened at how on the mark his claims may likely prove to be:

Economic hitmen – I'm a former one, actually – created the world's first truly global empire. It's really a corporate empire, not an American empire although the U.S. government certainly supports it. We work many different ways, but perhaps the most common is that we will identify a country that has resources that corporations want, like oil.

We arrange huge loans of that country from the World Bank or one of its sisters. Yet, the money never actually goes to the country. It is primarily there to make the our companies -- that build the infrastructure projects like the power plants, and the industrial parks, highways, and ports -- very rich.

In addition, a few wealthy families make a lot of money off of these programs. They own the industries and commercial centers.

But the majority of the people do not benefit at all. They do not have enough money to buy much electricity. They cannot get jobs in industrial parks because the industrial parks do not hire many people. They lose out because a lot of money is diverted from healthcare, education, and other social services to try to pay the interest on the debt.

In the end, the principal is never paid down. We go back and say Since you cannot pay your debts, sell your resource real cheap to our corporations without any environmental restrictions or social regulations. Or privatize, and sell off your electric utilities;,your water and sewage systems, and your schools, your jails -- all of your public sector businesses -- to our corporations.

These leaders are very aware that if they do not accept these deals; if we economic hitmen fail to bring them around, the jackals are likely to show up. These are people that will either assassinate those leaders or overthrow their governments.

DNC Chair and Granny's main Fury Debbie Wasserman Schultz backs parasitic payday lenders...,

thinkprogress |  Payday lenders fearing modest federal regulations will cut into their vast profit margins have a new, high-profile ally in Washington: The chairwoman of the Democratic Party.

Rep. Debbie Wasserman Schultz (D-FL) is co-sponsoring legislation to delay and permanently muffle pending Consumer Financial Protection Bureau (CFPB) rules to rein in small-dollar lenders that are currently able to levy triple-digit annual interest rates on the nation’s poorest, the Huffington Post reports.

The bill would force a two-year delay of the CFPB’s rules, which are still being drafted. Last spring, the agency set out a framework for its rulemaking process that indicates it is taking a more modest approach than industry critics would prefer. But the bill Wasserman Schultz signed onto would both delay those rules further, and permanently block them in any state that enacts the sort of ineffectual, industry-crafted regulatory sham that Florida adopted in 2001.

That bill featured “compromise language heavily influenced by industry players,” the Florida Alliance for Consumer Protection notes. Rather than a model for robust oversight that still allows low-income people to access emergency credit when they need it, the group describes the Florida approach as a series of “well-disguised loopholes” that preserve the industry’s abusive patterns.

Those patterns are indisputable. While concerns about how current payday lending customers will meet emergency financial needs under the CFPB rules are sensible enough — no one can be certain how the financial industry will respond to restrictions on the current model, though advocates for the CFPB’s modest approach are confident lenders will still issue such loans at a healthy profit — there is no disputing the data motivating the agency to act.

The industry often notes that a slim majority of all borrowers repay their debt on time, an indicator that many customers are taking an expensive deal and getting back on their feet quickly. But those people aren’t where lenders make money. A full 80 percent of all payday loans are renewals or rollovers of a previous loan. And the real cash comes from customers who get trapped in the near-endless “debt trap” reborrowing cycles. While only 22 percent of borrowers end up rolling their loan over seven or more times, loans in such misery cycles account for 62 percent of the industry’s business. Trapping people in lengthy repay cycles is literally the primary source of industry income.

one nation, under water...,

dailyimpact | I was there when a furniture-store owner I’ll call Chuck introduced, to a certain British-ruled, sub-tropical, behind-the-times island, the concept of hire-purchase — or, in American, rent-to-own. He started selling furniture on credit, for a small down payment and a contract to repay the balance at an astronomical interest rate. His policy scandalized everyone on the island who was rich enough not to need credit for such purposes; and was insanely popular with everyone else.

The establishment railed against what he was doing as somehow immoral, even illegal. Some legislators tried to declare it, and ban it, as “usury” (a quaint, antique sin, now regarded as about as serious as not eating fish on Friday). They decried hire purchase as a practice that would corrupt the moral fiber of poor people, which they seemed to think was somehow improved by not having furniture. They did not feel, however, that the large mortgages they held on their villas had in any way corrupted them.

Despite their disdain, the lower classes got their tables and chairs and Chuck got very rich indeed and was soon a welcome guest in the homes of the island’s rich and famous.

It was hard to follow or to credit the arguments against selling products on credit. Indeed, the upper classes — on the island as elsewhere in the world — soon abandoned all compunctions about selling on credit when they realized that selling things to people who could not afford them made them and their bankers, obscenely rich.

Since the innocent days of yesteryear, when having a mortgage was embarrassing, borrowing money was evidence of a character flaw and declaring bankruptcy was the secular equivalent of eternal damnation, debt in America has become a vast cancerous growth that now threatens the very life of its host. Let’s set aside for now the scary dimensions of public debt  (now $19 trillion and rising) and corporate debt (over $14 trillion and rising) , and focus just on the debt of individual Americans (now over $12 trillion).

Total individual debt is almost back to where it was in late 2008 when the Great Recession began. For five years after the last crash it declined, not because people were paying their debts but because foreclosures and bankruptcies were obliterating them. Since 2013 overall debt has been increasing again, but changing in nature.

the land of the thief and the home of the slave...,

libertyblitzkrieg |  What a cute little Banana Republic this America has become. Our government can’t put a single bank executive in jail for destroying the global economy, but when a mere peasant is caught not paying back his student debt, a team of U.S. Marshals arrive at his door to arrest him at gunpoint.

Land of the thief, home of the slave, indeed.

Fox26 reports:

Believe it or not, the US Marshals Service in Houston is arresting people for not paying their outstanding federal student loans.

Paul Aker says he was arrested at his home last week for a $1500 federal student loan he received in 1987.

He says seven deputy US Marshals showed up at his home with guns and took him to federal court where he had to sign a payment plan for the 29-year-old school loan.

Congressman Gene Green says the federal government is now using private debt collectors to go after those who owe student loans.

Green says as a result, those attorneys and debt collectors are getting judgements in federal court and asking judges to use the US Marshals Service to arrest those who have failed to pay their federal student loans.

Our reliable source with the US Marshal in Houston say Aker isn’t the first and won’t be the last.

They have to serve anywhere from 1200 to 1500 warrants to people who have failed to pay their federal student loans.

Now here’s the most absurd part. Yahoo notes that:

Unfortunately, it looks like it was a lapse in communication that landed Aker in handcuffs (to be clear, he did not spend time in jail — he was escorted by Marshals to court). And, to add insult to injury, he was ordered to pay more than $1,200 in fees back to the U.S. Marshals service for the cost of arresting him. 

Yes, Federal US Marshals spent $1,200 arresting a guy for $1,500 in debt. Brilliant use of taxpayer funds. Yet somehow they still can’t find a single bank executive who did anything wrong.

FTO school: what's occurring in the economy

It's the debt, and it goes a little something like this.

A corporation has a large debt to service.

Debt is overhead, net is what is left after the debt is paid.

Debt increases as players attempt to stay in the game in an environment of declining net.

Banksters also must attempt to stay in the game. Their products also decline in price (interest).

Negative interest rates are a punishment for those who refuse debt. It's a new rule enacted to keep  the game going.

Are you now burning the furniture to stay warm? The roof and walls? Your clothes?

This cycle works more strongly for private housing and mortgage debt. Most bank assets (i.e. loans) are made against real estate (household and commercial).

Once consumers start to reduce the consumption of corporation's products,  corporations *must* cut prices in an attempt to increase sales, because they *must* service their debt.

Less profit causes corporations to layoff employees, which reduces consumption still further.

Other corporations selling the same product *must* also cut prices.

It's a race down into widespread bankruptcy and bank failure.

Once this process starts, only widespread bankruptcy, debt forgiveness, or inflation can arrest it.

This cycle is a *systemic* property of capitalism.

how warren buffett intentionally targets and preys on the least of these...,

seattletimes |  After a few years living with her sister, Rose Mary Zunie, 59, was ready to move into a place of her own.

So, on an arid Saturday morning this past summer, the sisters piled into a friend’s pickup truck and headed for a mobile-home sales lot here just outside the impoverished Navajo reservation.

The women — one in a long, colorful tribal skirt, another wearing turquoise jewelry, a traditional talisman against evil — were steered to a salesman who spoke Navajo, just like the voice on the store’s radio ads.

He walked them through Clayton-built homes on the lot, then into the sales center, passing a banner and posters promoting one subprime lender: Vanderbilt Mortgage, a Clayton subsidiary. Inside, he handed them a Vanderbilt sales pamphlet.

“Vanderbilt is the only one that finances on the reservation,” he told the women.

His claim, which the women caught on tape, was a lie. And it was illegal.

It is just one in a pattern of deceptions that Clayton has used to help extract billions from poor customers around the country — particularly people of color, who make up a substantial and growing portion of its business.

The company is controlled by Warren Buffett, one of the world’s richest men, but its methods hardly match Buffett’s honest, folksy image: Clayton systematically pursues unwitting minority homebuyers and baits them into costly subprime loans, many of which are doomed to fail, an investigation by The Seattle Times and BuzzFeed News has found.

Clayton’s predatory practices have damaged minority communities — from rural black enclaves in the Louisiana Delta, across Spanish-speaking swaths of Texas, to Native American reservations in the Southwest. Many customers end up losing their homes, thousands of dollars in down payments, or even land they’d owned outright.

Over the 12 years since Buffett’s Berkshire Hathaway bought Clayton Homes Inc., the company has grown to dominate virtually every aspect of America’s mobile-home industry. It builds nearly half the new manufactured homes sold in this country every year, making it the most prolific U.S. homebuilder of any type. It sells them through a network of more than 1,600 dealerships. And it finances more mobile-home loans than any other lender by a factor of more than seven.

In minority communities, Clayton’s grip on the lending market verges on monopolistic: Last year, according to federal data, Clayton made 72 percent of the loans to black people who financed mobile homes.

The company’s in-house lender, Vanderbilt Mortgage, charges minority borrowers substantially higher rates, on average, than their white counterparts. In fact, federal data shows that Vanderbilt typically charges black people who make over $75,000 a year slightly more than white people who make only $35,000.

bond market boondoggle this way comes...,

NYTimes |  The fight over the island’s future is stretching from the oceanside neighborhoods of San Juan, where a growing number of wealthy investors and financial professionals have migrated in recent years to exploit generous tax breaks, to Capitol Hill. Their efforts are being closely watched by financial institutions, labor unions and policy makers on the mainland, where many ordinary investors own Puerto Rican bonds through mutual funds.

Some warn that Puerto Rico could be a test case for the rest of the country, paving the way for troubled states like Illinois to escape unsustainable debts.

Stephen J. Spencer, a restructuring expert representing Puerto Rico bondholders including some hedge funds, said letting the government renege on agreements with hedge funds and other investors would set a dangerous precedent, undermining the integrity of the bond market.

“It’s really a wealth transfer from the bondholders to the municipalities,” Mr. Spencer said.

Others fear a different precedent: A handful of wealthy investors, they argue, are trying to rewrite the social contract of an entire United States territory. Puerto Rican officials say they have already cut public services and slashed central government spending by a fifth to keep ahead of payments to the hedge funds and financiers.

“What they are doing, by getting all the resources for themselves, is undermining the viability of Puerto Rico as a commonwealth,” said Joseph E. Stiglitz, the Nobel Prize-winning economist. “They want their money now, and they want to get the rules set so that they can make money for the next 20 years.”

puerto rico tied up by cephalopod mollusc with its tentacles in the hon.bro.preznit's pants...,

thenation |  Marc Lasry is perhaps the kind of benefactor—someone who raised $500,000 for Obama’s last campaign—the president and the Democrats think they should keep happy. After all, Lasry was Obama’s choice for ambassador to France in 2013, but unfortunately “had to remove his name from consideration after a close friend was named in a federal indictment for playing in a poker ring with alleged ties to the Russian mafia.” Just last May, Lasry threw a $2,700-a-head fundraiser for Hillary Clinton, while assuring MSN viewers that she is “moving a little bit to the left.” 

Lasry’s ties to big Democratic politics go back many years. A March 2010 feature in The Wall Street Journal (titled “Avenue Capital’s Investor in Chief—He’s Prescient. He’s Well-Connected. Just Don’t Call Marc Lasry a ‘Vulture.’”) describes him lunching with then–White House chief of staff Rahm Emanuel, in part to advise Emanuel on whether banks would resume lending again in the wake of the 2008 crisis. A 2012 New York Times article said “About 50 people paid $40,000 each to crowd into an art-filled room” in Lasry’s apartment to hear Obama and Bill Clinton speak. Last decade, Lasry’s Avenue Capital even famously employed Chelsea Clinton, whose husband has more recently flopped in making bad investments in Greece while heading his own hedge fund. 

Lasry, who was once a humble UPS driver whose parents convinced him to go to law school, seems to be at heart a gambler capable of rolling the dice with anyone in the global Wall Street hedge-fund casino dice game—as well as actual casino owners, like Republican candidate and anti-Mexican bigot/misogynist Donald Trump. This partnership, which stretches back to Trump’s Atlantic City casino bankruptcy in 2009, eventually resulted in Lasry buying him out and becoming the chairman of Trump Entertainment Resorts in 2011, a post Lasry eventually resigned. 

The stories about Lasry in the business press describe him as the “don’t call him that” vulture-fund investor; the optimistic gambler who “bets” on economies like those of Spain or Greece to “recover,” and then profits from that. This 2012 Bloomberg story describes a regular poker game he has with other hedge-fund managers; one colleague assesses him as “good at figuring out what the odds are. He’s willing to take moderate risk.” 

Yet it’s pretty hard to believe that someone who is worth $1.87 billion, according to Forbes—presumably an indication of good business sense—would believe that economies that are in a “death spiral” would miraculously recover. It’s more likely that rather than believing in a Puerto Rican economy that had shown no signs of growth for so long, and whose economy was largely driven by government employment, Lasry bet that its inability to declare bankruptcy would yield a higher return once it defaulted. Avenue Capital was one of many vultures that began hovering over Puerto Rico in late 2013, when its junk-leaning bonds caused credit analyst Richard Larkin to say of the vultures, “They can smell the blood and the fear.”