The Economics of Aging David A.Wise(1) Population aging, early retirement, limited but increasing retirement saving, more expensive medical practice patterns, and an established national entitlement to income and health care support after age 65 -- all of these factors largely define the economic environment of the United States (and much of the world) at the beginning of the 21st century. Over the past 30 years, life expectancy has increased from age 71 to age 77, while the most common age of retirement has decreased from age 65 to age 62. Retiring at age 62, the typical American retiree today faces another 20 years of living, consuming and, at one time or another, and in many cases regularly, needing expensive health care services. These trends already have placed significant financial pressure on the public and employer-sponsored programs that provide income and health care support to older Americans. Meanwhile, the massive demographic bulge in the population -- the baby boom generation -- begins turning age 62 in 2008. Going forward, the number of Americans age 62 and older is projected to double from 40 million today to 80 million 30 years from now, while the working age population is projected to grow by just 12 percent over the same period. Compounding the demographic situation is the continuing rise in medical costs. National health care expenditures have grown from $250 billion annually in 1980 to $1.4 trillion today, and show little sign of slowing down. The combination of economic, labor market, health and demographic trends points to any number of social and economic challenges in the decades ahead. Understanding the complexities of this situation, and the relationships between demographics, policy, behavior, economics, and health -- this is the substantive aim of the NBER Program on the Economics of Aging. Begun in 1986, the Aging Program has developed primarily around large, coordinated research projects that simultaneously address several interrelated issues in the economics of aging. Extensive funding for the program has been provided by the National Institute on Aging (NIA), both through multiple research grants and through a Center grant, which provides centralized infrastructure support to the program effort. NIA also has supported our efforts to engage new investigators in studying issues in aging, and at least a dozen graduate students and post-doctoral research fellows become engaged in the program each year through NIA fellowships. Many more become engaged as research assistants on project grants. A number of smaller "exploratory" projects on issues in aging are supported through the Center, as well as projects that integrate related components of the overall research effort. More than 100 papers are completed annually by participants in the NBER program. Some of these also appear in a series of books published by the University of Chicago Press.(2) The Economic Circumstances of Older Americans Personal Retirement Accounts A major theme of the Aging Program since its inception has been to better understand the economic circumstances of older Americans. A key fact from early project work was the very small amount of financial assets of most retirees in the United States in the early 1980s and the overwhelming reliance on Social Security, and in some cases firm pension plans, for financial support in retirement. But over the last two decades, there has been a dramatic transformation in the magnitude of saving that is taking place in personal retirement accounts, such as IRAs and 401(k) plans. Now about 85 percent of contributions to retirement plans are to personal accounts. In decomposing trends in plan eligibility, participation given eligibility, participant contributions, and aggregate wealth accumulation in personal retirement accounts, and in projecting the future of these trends, James Poterba, Steven Venti and I have confirmed the potential of 401(k) plans to significantly alter the financial circumstances of individuals retiring in the future . Because more individuals will have had more years of participation in 401(k)-type savings plans, they will reach retirement with increasing accumulations of financial assets. For many, their personal retirement accounts will contribute as much or more in retirement than Social Security. The most recent in a long series of studies on this topic shows that the ratio of retirement plan assets to wage and salary earnings has grown more than five fold since 1975. This represents a fundamental transition in the composition of post-retirement financial support in the United States. Despite these aggregate trends, its clear that there is wide variation in saving behavior across the population. For example, Venti and I have found that saving rates vary substantially at all income levels, and that these variations lead to vastly different levels of asset accumulation over a working career . What explains this variation in behavior? Part of the answer is simply choice: some people choose to save a lot, and others do not. But that choice is made in the context of one's social and economic environment, as well as the public and employer policies that relate to individual saving decisions. In a series of studies, James Choi, David Laibson, Brigitte Madrian, Andrew Metrick, and Dennis G. Shea find that the "default" provisions of 401(k) plans make a huge difference in whether and how much people save in their 401(k) plans . Many more employees participate when there is automatic enrollment; and they contribute more to their plans, on average, when the default contribution rate of the program is higher. Recent research by Esther Duflo and Emmanuel Saez provides complementary evidence of increased participation in retirement plans by individuals who received a financial incentive to attend a program information session, as well as by individuals who did not receive the incentive, but who worked in departments where others received the incentive . Thus the influence of peer behavior was found to be a significant factor in plan participation decisions. Related studies from the Aging Program have considered more specific aspects of retirement saving. Studies of pre-retirement withdrawals from 401(k) plans find little effect on the total dollar accumulations in these plans, as a large fraction of job changers don't withdraw assets from their personal accounts and a large fraction of assets that are withdrawn are "rolled over" into other personal retirement accounts . Studies of whether the assets in retirement accounts have replaced saving that would have otherwise taken place in other forms conclude that the large majority of personal retirement saving is new saving that would not have occurred without these plans . Studies of the potential offsetting decline in defined benefit pension plan coverage conclude that the growth of personal retirement accounts dwarfs any displacement of assets in traditional plans . And, studies of alternative measures of saving emphasize the implications of not counting capital gains as part of saving in the NIPA personal saving rate, while the expenditure of money that has accumulated in the form of capital gains is still counted as dis-saving (or spending) . As a result, the NIPA-measured saving rate can be very low-about 2 percent now--while the retirement plan contribution rate (as a percentage of wage and salary earnings) has been over 8 percent. Looking ahead, our research agenda has evolved to focus on the risks associated with different forms of retirement saving, and how recent trends may have changed the risk exposure of individuals in providing for their retirement. The different risk characteristics of fixed assets (like 401(k) accounts), as compared with annuitized assets (like Social Security and traditional pension plans) is one piece of this work. Another is the increased exposure to market fluctuations that is associated with personal retirement accounts. The extreme case of company stock as a retirement investment has been explored recently by Olivia S. Mitchell and Stephen P. Utkus; they confirm the risk of such investments, and identify policy tools that might encourage greater diversification . Poterba, with various coauthors, also has looked at the allocation of investments in personal retirement accounts, focusing particularly on the mix between debt and equity holdings . Among other findings, his research shows that the aggregate allocation between stocks and bonds in individual accounts is broadly similar to the allocation one finds in defined benefit plans, which are managed by financial professionals. But there is much more variation across individual retirement accounts. For instance, just over 45 percent of households with tax-deferred accounts appear to hold only equities, and 22 percent hold only debt. These results provide a starting point from which to consider the market risk of personal accounts. Social Security, Housing, Annuities, and Bequests As the primary source of retirement income support in the United States, Social Security defines the economic circumstances of many older Americans. Many members of the Aging Program are engaged in analyses of Social Security, as well as on the potential design and implications of various Social Security reform possibilities. In this report, I have focused on projects supported by the National Institute on Aging as part of NIA research grants. One such project, directed by Jeff B. Liebman, looks at how alternative Social Security reforms would be likely to affect lower-income households. Social Security is widely recognized as a redistributive program, replacing a greater fraction of earnings for those at lower income levels. Liebman's research, however, points to many other redistributive aspects of Social Security -- from people with shorter life expectancies to people with longer life expectancies, from single workers and dual-earning couples to one-earner couples, and from long-career workers to short-career workers. Because of these other factors, about 20 percent of Social Security participants in the top income quintile receive a larger net transfer from Social Security than the average transfer for people in the lowest income quintile . Liebman also finds that Social Security reforms that blend the current system with an investment-based component could give most Social Security beneficiaries higher expected benefits than the current system, and lower the percentage of widowed, divorced, and never married women with benefits below the poverty line from 26 percent to 9 percent . Kathleen McGarry has also looked at poverty among the elderly, noting that reforms to the Supplemental Security Income Program could have a significant effect in reducing elderly poverty . She also finds that a surprising number of potential SSI recipients do not apply for benefits. Aside from Social Security (and for some, an employer-provided pension), housing equity is the major asset of a large fraction of current retirees. Despite the value of these housing assets, Venti and I find that housing equity is rarely used to support general non-housing consumption during retirement . We find that in the absence of a precipitating event (such as divorce, the death of a spouse, or the entry of a family member into a nursing home), families are unlikely to sell their homes, downsize, or remortgage. And even among those experiencing major life changes, discontinuing ownership is the exception rather than the rule. A related study by Gary V. Engelhardt, Jonathan Gruber, and Cynthia Perry finds that the living arrangements of widows and divorcees are more sensitive to economic circumstances than the living arrangements of couples . They estimate that a 10 percent cut in Social Security benefits would lead more than 600,000 single-resident elderly households to move into shared living arrangements. The role of bequests in the financial circumstances of older Americans also has been considered in a number of recent studies. One study by Michael D. Hurd and James Smith finds that the distribution of bequests is highly skewed, so that the typical baby-boom person will receive a very modest inheritance . This is partly because of the skewed distribution of wealth and partly because of the tendency of the wealthy to have fewer children. But it is also attributable to anticipated dis-saving: it is estimated that households aged 70-74 will bequeath just 39 percent of their wealth, consuming the rest before they die. Jeff Brown and Scott Weisbenner also have explored the magnitude of assets that are passed from one generation to another through bequests and other intergenerational transfers . They find that about one-fifth of current household wealth (on average) was obtained as a result of transfers and bequests, while four-fifths resulted from individual decisions about how much income to save. But, as in the Hurd and Smith study, they find a heavy concentration of transfer wealth among a relative smaller number of households. Focusing on the allocation of bequests among siblings, McGarry and Audrey Light find that 80 percent of older parents plan to make equal bequests. Among those planning to divide their estates unequally, about half point to the inequality as compensation for a child taking care of them in their old age, and half point to differences in the needs of different children. Aging Program research is also exploring how assets are used at older ages, and how consumption changes at retirement. Recent work by Hurd and Susann Rohwedder, for example, finds a reduction in both anticipated and actual spending at retirement . Brown, Amy Finkelstein, Poterba, Mitchell, and others are studying issues in annuity pricing, the differences in mortality experience between annuitants and the population at large, the potential for good inflation-adjusted annuity products, the differing characteristics of individual and joint-life annuity products, the differences in pricing between mandatory and voluntary annuity products, and the redistributive effects of annuities from those with shorter to those with longer life expectancies . As more assets are being accumulated in personal retirement accounts, the question of whether, under what circumstances, and how much those assets might be annuitized is an increasingly important one. An important finding of this work is the higher longevity of those who purchase annuities, relative to the population as a whole, and the need to price annuities higher because of this differential. Finally, a broad view of the financial circumstances of older Americans is presented in a recent study by Victor R. Fuchs . Fuchs takes what he calls "a holistic approach" to the financial problems of the elderly, focusing simultaneously on expenditures that are self-financed and those financed by transfers from the young (under age 65). He finds that about 35 percent of the elderly's full income was devoted to health care; 65 percent to other goods and services. He also finds that 56 percent of full income was supported by transfers from the young; compared with 44 percent from the elderly themselves. He also points to future trends which may stimulate the need for more saving and more work prior to retirement. Retirement Policies and Labor Market Behavior Retirement Policy in the United States A second major theme of the Aging Program is the relationship between retirement policies and labor market behavior, as well as the determinants of work and retirement decisions more generally. Over the years, the strong relationship between the economic incentives of retirement policies and the ages at which individuals retire from the labor force has been confirmed in multiple studies, using multiple data sources, and applying multiple research methodologies. The most recent have been conducted by Courtney Coile and Gruber , Alan L. Gustman and Thomas L. Steinmeier , and Andrew A. Samwick and me.(3) These studies point to the younger retirement that occurs, when younger retirement is encouraged by the economic structure of the benefit programs. Recent work by Courtney Coile has extended this line of analysis to the joint retirement decisions of couples, finding for example that the economic incentives in a wife's retirement plan can have a significant effect on the retirement decisions of both husband and wife . Gustman and Steinmeier also have explored joint retirement decisions, and find much stronger interdependence when the spouses say they value spending time together . Many other studies have looked at other determinants of retirement. A recent study by McGarry finds that changes in retirement expectations are driven to a much greater degree by changes in health than by changes in income or wealth . Gustman and Steinmeier find that the dramatic stock market rise in the 1990s had an effect in increasing retirement, while it lasted, but any continuing effects since the decline in the market are much more modest . A study by Hurd, James Smith, and Julie M. Zissimopoulos finds that those who have worse survival expectations retire sooner, and collect retirement benefits sooner, although the majority of workers claim Social Security benefits as soon as they are eligible, regardless of their survival expectations . Leora Friedberg finds that computer users retire later than non-users . And a review of the literature by Gruber and Madrian (including a number of their own studies) concludes that health insurance availability is another important determinant of retirement . This collection of studies makes clear the complexity of interrelated health, economic, social, and job circumstances that contribute to individual retirement decisions. Social Security and Retirement Around the World Beyond the analyses of retirement behavior in the United States, we also have been engaged in a major cross-national project on social security systems and retirement around the world. This project, now in its third phase, has brought together a team of investigators from Belgium, Canada, Denmark, Italy, France, Germany, Japan, the Netherlands, Spain, Sweden, the United Kingdom, and the United States. For each phase of the project, a set of parallel studies has been conducted in each country; and these studies are then integrated together to allow comparisons across countries. Both the individual studies and the integrated analyses are published in a series of volumes by the University of Chicago Press.(4) These volumes have been supplemented by publications that describe the overall results .(5) The first phase of the project mapped out the detailed provision of social security programs into measures of retirement incentives comparable across countries. The studies demonstrated a very strong correspondence across countries between the social security incentives to retire and the age at which older workers withdraw from the labor force. The second phase of the project applied micro-data from each country to estimate more formally the relationship between social security provisions and retirement in each country. The models emphasized the effect on retirement of the age of eligibility for retirement programs, and measures of the incentive to leave the labor force once a person is eligible. The model simulations confirmed very large effects of program provisions on retirement decisions in every country. The third phase of the project (just finished) has used the retirement model estimates from phase two to describe the fiscal implications of various illustrative social security reforms. The first simulation predicts the effect of delaying all program benefit eligibility ages by three years. The second reform is a common social security system in all countries. The third reform is an adjustment of each country's program to an actuarially fair level with benefit payment rates adjusted on an actuarial basis for earlier or later retirement. While the simulations were conducted for each of the countries in the project, the character of the findings can be illustrated by looking at the case of Germany, which has not (until recently) reduced retirement benefit rates for those qualifying for early retirement. The findings suggest that implementing actuarially fair adjustments to retirement benefits in Germany would lead to an increase in the average retirement age of about 3 years, for both men and women. Combining the impact of such a reform on retirement behavior, benefit payments, contributions to the social security system, and other taxes paid as a result of retention in the labor force -- there is an estimated fiscal benefit to the illustrative policy change of over 80,000 Euros per worker, or about 1.2 percent of GDP in Germany. Continuing work on the project will consider the relationship between social security system provisions and the well-being of the elderly, as well as the young; the more complicated relationships between health, functional disability, social security provisions, and retirement; and the relationship between social security system provisions and the employment of the young. All of the new work is being done in the context of an evolving retirement policy environment worldwide, a policy evolution driven in large part by a growing awareness that social security programs are not sustainable under demographic trends which are compounded by program inducements for older workers to leave the labor force at younger and younger ages. Socioeconomic Circumstances, Health, and Health Disparities There is a dramatic and well documented correlation between socioeconomic measures, such as education, income, and wealth, on the one hand, and health measures, such as self-reported health status and mortality, on the other. What leads those with more income, education, wealth, and other measures of social status to be in better health, on average; and what leads those in better health to have more economic resources? Many potential causal links have been explored in NBER research, and the subject is a key aspect of our research agenda going forward. In a series of studies, Angus Deaton and Christina Paxson have explored the multiple facets of the relationship between health and economic circumstances, using data from a number of countries, and making clear that there is no simple causal relationship . Indeed the nature of the relationship may be quite different across geographic regions with different living standards, health conditions, racial composition, population density, inequality, and other factors. Most recently, the focus of this work has been on economic inequality, independent from economic status, as a potential determinant of inequalities in health. One approach of this investigation has focused on long-term historical trends in income inequality in the United States and United Kingdom, finding that the long-term decline in mortality rates over the last half century occurred most rapidly when income inequality was rising -- just the opposite of what one might expect if income inequality were an important causal factor of poorer health. The project also has looked at relative deprivation (low income relative to a reference group) as a potential influence on health, developing a relative deprivation model of health determination, along with empirical analyses to test the model. In the empirical work, relative deprivation as a measure of inequality also appears to have little effect on health outcomes. The general conclusion of this line of research is that while the direction of the causal relationship between health and wealth may be in doubt, the relationship is not determined by economic inequality. Studies by Anne C. Case and Duflo have looked at the relationship between socioeconomic status and health from a somewhat different angle, focusing on the health effects of the expanded pension program in South Africa. This program dramatically elevated the economic resources of many extended families in South Africa, and not just the individuals directly eligible for the pension. Case finds a large causal effect of income on health status in poorer populations -- an effect that works at least in part through sanitation and living standards, in part through nutritional status, and in part through the reduction of depression and psychosocial stress . Duflo finds larger effects on the health of family members when a woman is the recipient of the pension than when a man is the recipient, suggesting differences in how income is allocated within households . Research by Case, Darren Lubotsky, and Paxson has focused on the childhood origins of the relationship between socioeconomic status and health . Using numerous data sources, they find that health is positively related to household income even in childhood. The relationship between household income and children's health status becomes more pronounced as children grow older, as the adverse health effects of lower income accumulate over children's lives. Thus, part of the intergenerational transmission of socioeconomic status may work through the impact of parents' long-run average income on children's health. Fuchs, Mark McClellan, Jon Skinner, and others have studied the geographic, income, and racial distribution of medical utilization . One study explores the flow of Medicare benefits to high-income and low-income neighborhoods in 1990 and 1995. The authors find that Medicare spending per capita for the lowest income groups grew much more rapidly than Medicare spending in either high income or middle income neighborhoods. Thus, disparities in health care access and health care utilization may be decreasing over time. Another set of studies looks at the potential impact of insurance coverage as a determining factor in health care utilization and access to care. For example, a question addressed in several studies is whether managed care has limited access to care. Paul Heidenreich, Mark McClellan, Craig Frances, and Laurence Baker find that patients in geographic settings with a high share of managed care patients, following a heart attack, are more likely to received appropriate treatment with beta-blockers and aspirin, but less likely to undergo coronary angiography . In a similar study, Daniel Altman, David Cutler, and Richard Zeckhauser find almost no difference between treatment intensity among individuals enrolled in HMO plans and those enrolled in indemnity insurance plans in the same health care markets .(6) The reason HMOs cost less, they conclude, is not because HMOs provide less care. Instead, about half of HMO cost savings is attributable to lower incidence of disease among HMO enrollees; and about half results from HMOs paying lower prices for the same treatments. Where managed care may make a difference, however, is in the medical practice patterns used in geographical regions that have more or less managed care penetration, and in the spillover effects of cost containment on the provision of unreimbursed care. According to Cutler, one implication of the expansion of managed care -- and indeed the cost containment strategies in all health insurance plans -- is increased financial pressure on hospitals and associated limitations on "charity" care. This has led to more division of patients across hospitals according to their ability to pay. Low or non-paying patients increasingly are directed toward safety net hospitals, and fewer resources are available to these hospitals to provide un-reimbursed care. In other words, hospitals that have traditionally provided more care to uninsured patients are being doubly affected: first by having responsibility for an even larger portion of uninsured care; and second by getting less reimbursement from insured patients. Many other components of NBER research in the Aging Program relate to the theme of socioeconomic status, health and health disparities. Rob Jensen has been engaged in a project on the effects of the macro economy on health circumstances in Russia and Eastern Europe. McClellan has looked at the effects of adverse health events on work and earnings. Daniel L. McFadden has developed a new research project on the dynamics of health and wealth, building on methodological work done in cooperation with Peter Adams, Hurd, Angela Merrill, and Tiago Ribeiro.(7) With Hurd and Merrill, McFadden also has looked at the quantitative importance of various predictors of mortality, including income, wealth and education . All of these investigations relate to the causal links between socioeconomic circumstances and health; the Aging Program plays a significant role in integrating them in a coordinated programmatic way. Health, Health Care, and Health Policy Health, Disability and Mortality Many have worried that increasing longevity would create a new burden of health and long-term care needs for an increasingly sick and disabled elderly population. While population aging has created additional health and long-term care needs, the potential cost has been moderated -- at least in the short run -- by a significant long-term decline over time in the functional limitations of older people. This trend has been documented in numerous data sources. However, much less is known about the rate, acceleration, character, causes, and consequences of the decline. Thus the study of disability has become a new high priority area of research in the Aging Program. In some initial work on this topic, David Cutler has conducted an overview of the evidence on disability decline, and potential causal explanations.(8) He quantifies the rate of disability decline at 1 percent or more per year for the past several decades. Among the potential explanations of disability decline that Cutler cites are medical care improvements, improved health behaviors, increasing use of assistive devices and improvements in living conditions that increase independence with functional limitations, higher levels of education and improved socioeconomic status, reductions in disease exposure, and social supports. He and I are engaged in an ongoing research effort to better understand disability decline, its causes, the potential of interventions to extend it, and the cost implications of the decline for Medicare expenditures. A related project deals with the role of health behaviors as a determining factor of health and functional ability. Dora L. Costa also has been studying trends in chronic illness, functional disability, and mortality. Her focus has been on longer-term historical trends, and the historical underpinnings of more recent health trends. For example, Costa finds that functional disability (disability in walking, difficulty in bending, paralysis, blindness, and deafness) in the United States has fallen at an average annual rate of 0.6 percent among men age 50 to 74 from the early twentieth century to the early 1990s . Another recent study by Costa looks at the socioeconomic and demographic determinants of frame size using a data set of Civil War soldiers . Costa finds that changes in frame size explain about three-fifths of the mortality decline among white men between 1915 and 1988 and predict even sharper declines in older age mortality between 1988 and 2022. Another study finds that the immediate effects of reduced infectious disease rates and reduced mortality from acute disease account for 62 percent of the 20thcentury increase in survival rates, and the long-term effects account for another 12 percent of the increase . This line of research has provided a valuable historical perspective on more recent health and disability trends. Alan M. Garber, Jay Bhattacharya, and Thomas E. MaCurdy also have initiated a new project on disability decline, focusing on medical care for the disabled elderly. This work will explore the individual patterns of disability decline (and improvement), the persistence of disability status of individuals over time, the inter-temporal links between disabilities and chronic diseases, and the medical utilization and expenses of individuals before and after the development of disability, and as individual functional ability evolves over time. Trends in Treatment, Utilization, and Costs A diversity of health care and health policy issues have been studied as part of the Aging Program in recent years. These include studies of trends in utilization, the composition of medical care costs in different health insurance programs, the persistence of individual health care expenditures over time, the role of technology change in medical practices as a key factor in medical expenditure growth, the increasingly disproportionate spending on medical care at older ages, the effectiveness of medical technology in treating various health conditions, the effects of different policy provisions in containing health care costs, and the differences in access to medical care across the population. One line of research, involving Garber, MaCurdy, McClellan, and others, has focused on the one-third of Medicare expenditures that are spent on patients near the end of life.(9) In recent years, hospice care and other out-of-hospital treatment has decreased the proportion of the population that dies in the hospital, a trend that might have been expected to reduce costs. Instead, while there has been a decline in hospitalization rates over the 1988-95 period, the use of intensive care and intensive inpatient procedures has continued to increase, offsetting any potential cost savings. Another set of studies has looked at trends in the treatment of specific health conditions, such as acute myocardial infarction or liver disease or ventricular arrhythmia.(10) Illustrative of the findings, a study of implantable cardioverter-defibrillators finds that their use, at a cost of up to $50,000 for the procedure and treatment of complications, grew more than 10-fold among Medicare beneficiaries between 1987 and 1995. Increasing use of bypass surgery and angioplasty, the more intensive approaches to heart attack treatment, also have increased rapidly, raising overall expenditure on heart attack treatment, despite a drop in the cost of any particular approach to treatment. The increasing technological intensity of medicine dominates almost all other sources of health care cost growth, including demographics, decreasing mortality, decreasing hospitalization rates, decreasing chronic illness rates, and other factors. Complementing these studies of treatment trends are a collection of studies on the incremental benefits of intensive treatment, and the changing productivity of medical care.(11) A recent study of angioplasty by Cutler and Robert S. Huckman is representative of this work . The use of angioplasty has spread dramatically over the 20 years since its introduction. It has raised the cost of treatment for coronary artery disease. However, because it now sometimes substitutes for bypass surgery, a more expensive procedure, there is some offset in costs with the same or better health outcomes as bypass surgery. And where angioplasty has replaced non-intensive medical management, the value of the technology is likely enough to justify the cost. Indeed many of the analyses of medical productivity by NBER investigators find that the increasing use of intensive procedures has done a lot to improve health, on average, although the procedures may be less effective in marginal patients. Health Insurance, Hospital Organization, and Health Policy Reform In large part as a response to rising costs, the health insurance and health policy environment in the United States has continued to evolve. Cutler has explored the decline in health insurance coverage among working families in the United States in the 1990s, finding that coverage declined primarily because fewer workers took up coverage when offered it, not because fewer workers were offered insurance or were eligible for it .(12) Project estimates suggest that increased costs to employees can explain the entire decline in take-up rates in the 1990s. Kessler and McClellan have been engaged in a project on the effects of hospital organizational form on medical productivity. A recent study from this project finds that areas with a for-profit hospital have about 2.4 percent lower hospital expenditures, but virtually the same patient health outcomes . Kessler and McClellan attribute this to the likely spillover effects of for-profit hospitals on their nonprofit and public counterparts: the competition from for-profit hospitals may limit the ability of non-profits to behave inefficiently. In another study, Kessler, McClellan, and Henry Hansmann compare the responsiveness of hospitals to reductions in demand, finding that for-profit hospitals respond most rapidly, followed in turn by public and religiously affiliated non-profit hospitals, while secular non-profits are distinctly the least responsive ownership form . Matthew Eichner, McClellan, and I have considered the incentives, characteristics, and potential limitations of medical savings accounts (MSAs) as an alternative approach to firm health insurance provision.(13) Under these plans, a specified amount of money is deposited each year in an employee MSA, and these funds are available to support non-catastrophic medical care expenses as needed. Unused assets in the MSA account are treated as long-term retirement saving. A catastrophic insurance plan covers any expenditures above this deductible. Such schemes are designed to provide consumers -- and their health care providers -- incentives not to spend money on care which offers only low marginal benefit. Our research has considered both the desirable incentive features of MSA plans and the potential limitations that might result for individuals with long-term continuing health care expenditures. We find that only a small fraction of households have continuing medical expenditures year after year at a level that would overwhelm their MSA balances. Indeed our most recent work on the project shows how MSA plans might work in conjunction with other personal retirement accounts as a means of financial preparation for retirement. Based on actual medical histories, our simulations suggest that more than half of plan enrollees participating in an equity-invested MSA program over a working career would accumulate MSA balances of over three times the amount contributed to the plans. And very few would accumulate less than 100 percent of their contributions, even after paying for non-catastrophic health care costs. Thus a key finding from the project is that MSA plans may not only be effective in containing health care costs; they may also work in conjunction with other programs to increase pre-retirement saving. Cutler also has considered the dynamics of international health policy reform.(14) One study finds that as new and expensive medical technologies have developed over time, the policy commitment to equal access to care has become ever more expensive. Historically, countries have dealt with rising costs by maintaining equal access and restricting total spending. Today, many countries are considering a move away from spending controls and toward incentive-based medical care reform -- possibly inducing more cost-effective health care decisions, but also greater reductions in care among those less able to afford the incentive-based cost-sharing provisions of the plans. Database Development in Aging Many NBER investigators have been involved in the development of data on older people in the United States and abroad. The Health and Retirement Survey (HRS) began about a decade ago and now provides longitudinal information on the health and economic circumstances of about 25,000 older Americans from 1992 to the present. NBER affiliates Charles Brown, Alan L. Gustman, Hurd, and Mitchell are members of the HRS management team; David O. Meltzer, John Rust, and Jonathan S. Skinner are on the HRS Steering Committee; and Cutler, David I. Laibson, and I are on the NIA Data Monitoring Committee for the HRS. The HRS project has developed and applied numerous survey innovations, including the use of bracketing questions to minimize non-response, the use of experimental modules for continuous database development, the inclusion of data on expectations, the linkage of survey data to administrative records from the Social Security Administration and the Centers for Medicaid and Medicare Services, and the inclusion and coding of pension and health plan data obtained directly from firms. Many participants in the Aging Program have assisted in developing, analyzing, and improving these innovative components. Daniel L. McFadden has been a leader in the study of survey response bias and in the development of internet survey methodologies. A major accomplishment of this work has been to implement an experimental internet survey method for data collection, administered through an internet virtual laboratory, or IVLab, developed explicitly for the project. The IVLab has confirmed the value of internet-based questioning as a low-cost survey methodology that enables cost-effective experimentation with questionnaire formatting and survey content -- experimentation that is generally cost-prohibitive using other survey approaches. McFadden's work also has been at the cutting edge in exploring how the format, sequencing, and context of questioning affects responses, and how to effectively correct (or at least correctly interpret) biases that result from these survey limitations. In addition to the methodological advances made through the IVLab, McFadden and colleagues have completed both a pilot and a larger-scale version of an internet-based survey of older Americans, called the Retirement Perspectives Survey (RPS). The content of the RPS survey draws heavily on the asset and health components of HRS, but with substantially more variation in questionnaire format, sequencing, cues and context. These experimental treatments have enabled the research team to test order effects and other framing effects on subject responses. The larger-scale RPS survey also includes both mail-out and internet versions of the survey, so investigators can begin to assess how both sample selection and response biases differ between them, as well as between these experimental surveys and the HRS itself. The analysis of survey response bias has continued to be a key element of this work. For example, a recent study by Li Gan, Hurd, and McFadden looks at people's mortality expectations, which are very close to actual mortality risks on average, but which have problematic characteristics, such as unrealistic focal point responses . The methodological research being done by Hurd, McFadden, and others is helping to explain these anomalies, correct for them whenever possible, and appropriately interpret research that uses these data. Yet another exciting area of database development has been in the development of international data on aging. Axel Börsch-Supan is the coordinator of the Survey of Health, Aging, and Retirement in Europe (SHARE). SHARE is a coordinated data collection effort in Denmark, France, Germany, Greece, Italy, the Netherlands, Spain, and Sweden. It evolved in part from the HRS, and from the NBER project on social security systems and retirement around the world, and a number of NBER investigators (in addition to Börsch-Supan) are advisors to the SHARE project. In other parts of the world, Anne C. Case, Angus Deaton, and others have been involved in designing surveys and conducting research on the effects of the pension system in South Africa. Aging Program investigators also have been involved, peripherally at this point, in discussions with a larger consortium of research and data sites in developing regions throughout Africa and parts of Asia (the INDEPTH network). Duflo is involved in database development in areas of poor health in various regions of India. And Jensen has extended his research and database development work on health and economic circumstances in Russia and Eastern Europe to developing countries in Asia, including India and Pakistan. For almost two decades, the NBER Aging Program has focused widespread attention on population aging, and the health and economic circumstances of individuals as they age. It has also worked well in integrating a wide range of related research projects into a cohesive program, including regular interaction among members of the research team, extensive dissemination of research findings in both academic publications and non-technical reports, external involvement in promoting aging-related research and data resource development in aging, organizing international collaborations and cross national comparisons of aging issues, sponsoring regular workshops and conferences on the economics of aging, and inspiring the collaborative engagement of both senior scholars and new investigators in the study of aging issues. 1. Wise is Director of the NBER's Program on the Economics of Aging and the Stambaugh Professor of Political Economy at Harvard University's Kennedy School of Government. The numbers in brackets throughout this report refer to NBER Working Papers. This report has been prepared with the intensive help of Richard Woodbury. 2. These volumes include The Economics of Aging (1989), Issues in the Economics of Aging (1990), Topics in the Economics of Aging (1992), Studies in the Economics of Aging (1994), Advances in the Economics of Aging (1996), Inquiries in the Economics of Aging (1998), Frontiers in the Economics of Aging (1998), Themes in the Economics of Aging (2001), and Perspectives on the Economics of Aging (forthcoming). 3. A. Samwick and D.A. Wise, "Option Value Estimation with Health and Retirement Survey Data," in S. Ogura, T. Tachibanaki, and D.A. Wise, eds., Labor Markets and Firm Benefit Policies in Japan and the United States, Chicag University of Chicago Press, forthcoming. 4. J. Gruber and D.A. Wise, eds., Social Security and Retirement Around the World, University of Chicago Press, 1999; J. Gruber and D.A. Wise, eds., Social Security Programs and Retirement around the World: Micro-Estimation, Chicag University of Chicago Press, forthcoming. 5. J. Gruber and D.A. Wise, "Social Security and Retirement Around the World: Introduction and Summary," in S. Polacheck and J. Robst, eds., Research in Labor Economics, Vol 18, JAI Press Inc., 1999; J. Gruber and D.A. Wise, "Social Security, Retirement Incentives, and Retirement Behavior: An International Perspective," in A.J.Auerbach and R.D. Lee, eds., Demographic Change and Fiscal Policy, Cambridge: Cambridge University Press, 2001; J. Gruber and D.A. Wise, "An International Perspective on Policies for an Aging Society," in S. Altman and D. Schactman, eds., Policies for an Aging Society: Confronting the Economic and Political Challenges, Baltimore: Johns Hopkins Press, 2002; J. Gruber and D.A. Wise, "Different Approaches to Pension Reform from an Economic Point of View," in M. Feldstein and H. Siebert, eds., Social Security Pension Reform in Europe, Chicag University of Chicago Press, 2002. 6. See also D.M. Cutler and J. Seinfeld, "Managed Care Enrollment and Care for the Poor," working paper, 2003. 7. P. Adams, M.D. Hurd, D.L. McFadden, A. Merrill, and T. Ribeiro. "Healthy, Wealthy, and Wise? Tests for Direct Causal Paths between Health and Socioeconomic Status," Journal of Econometrics, 2003. 8. D.M. Cutler, "Declining Disability Among the Elderly," Health Affairs, 2001. 9. A.E. Barnato, A.M. Garber, C.R. Kagay, and M.B. McClellan, "Trends in the Use of Intensive Procedures at the End of Life," in A. Garber, ed., Frontiers in Health Policy Research, Vol. 4, Cambridge, MA: MIT Press, 2001; J. Geppert and M. McClellan, "Trends in Medicare Spending near the End of Life," in D. Wise, ed., Themes in the Economics of Aging, Chicag University of Chicago Press, 2001; A.M. Garber, T.E. MaCurdy and M.B. McClellan, "Medical Care at the End of Life: Diseases, Treatment Patterns, and Costs," in A.M. Garber, ed., Frontiers in Health Policy Research, Vol. 2, Cambridge, MA: MIT Press, 1999. 10. J.H. Best, J. Geppert and D. L. Veenstra, "Trends in Expenditures for Medicare Liver Transplant Recipients," Liver Transplantation, 2001; N. Every, A.M. Garber, P. Heidenreich, M. Hlatky, D. Kessler, M.B. McClellan, J.P. Newhouse and O. Saynina, "Technological Change in Heart Attack Care in the United States: Causes and Consequences," in M.B. McClellan and D.P. Kessler, eds., Technological Change in Health Care: A Global Analysis of Heart Attack, Ann Arbor, MI: University of Michigan Press, 2002; P. Heidenreich and M.B. McClellan, "Trends in Heart Attack Treatment and Outcomes, 1975-95: Literature Review and Synthesis," in D.M. Cutler and E.R. Berndt, eds., Medical Care Output and Productivity, Chicag University of Chicago Press, 2001; P. Heidenreich and M.B. McClellan, "Trends in Treatment and Outcomes for Acute Myocardial Infarction: 1975-1995, American Journal of Medicine, 2001; D. Kessler and M.B. McClellan, "A Global Analysis of Technological Change in Health Care: The Case of Heart Attacks," Health Affairs, 1999; M.B. McClellan, "Biomedical Research and Then Some: the Causes of Technological Change in Heart Attack Care," in K. Murphy and R.H. Topel, eds., The Value of Biomedical Research, Chicag University of Chicago Press, forthcoming; A.M. Garber, M. Hlatky, M.B. McClellan, K. McDonald, and O. Saynina, "Utilization and Outcomes of the Implantable Cardioverter Defribrillators: 1987-1995, American Heart Journal, 2001. 11. D.M. Cutler and M.B. McClellan, "Productivity Change in Health Care," Amercian Economic Review, 2001; D.M. Cutler and M.B. McClellan, "Is Technological Change in Medicine Worth It?" Health Affairs, 2001; J.M. Brooks, M.B. McClellan, and H.S. Wong, "The Marginal Benefits of Invasive Treatments for Acute Myocardial Infarction: Does Insurance Coverage Matter?," Inquiry, 2000; A. Brown and A.M. Garber, "A Concise Review of the Cost-Effectiveness of Coronary Heart Disease Prevention," Medical Clinics of North America, 2000; W. Browner, C. Frances, B. Massie, M.B. McClellan, H. Noguchi, and M.G. Shlipak, "Comparison of the Effects of Angiotensin Converting-enzyme Inhibitors and Beta Blockers on Survival in Elderly Patients with Reduced Left Ventricular Function after Myocardial Infarction," American Journal of Medicine, 2001; C. Frances, M.G. Shlipak, H. Noguchi, P.Heidenreich, and M.B. McClellan, "Does Physician Specialty Affect Survival of Elderly Patients with Myocardial Infarction?, Health Services Research, 2000; A.M. Garber, "Advances in Cost-Effectiveness Analysis of Health Interventions," in A. Culyer and J.P. Newhouse, eds., Handbook of Health Economics, North-Holland, 2000. 12. See also M. Chernew, D.M. Cutler and P. Keenan, "Rising Medical Costs and the Decline in Insurance Coverage," working paper, 2003. 13. M. Eichner, M.B. McClellan and D.A. Wise, "Individual Expenditures and Medical Savings Accounts: Can They Work?" in S. Ogura, T. Tachibanaki, and D.A. Wise (eds.), Labor Markets and Firm Benefit Policies in Japan and the United States, Chicag University of Chicago Press, forthcoming; M. Eichner and D.A. Wise, "Little Saving and Too Much Medical Insurance: Medical Savings Accounts Could Help," in D. Wise, ed., Personal Saving, Personal Choice, Stanford: Hoover Institution Press, 1999. 14. D.M. Cutler, "Equality, Efficiency, and Market Fundamentals: The Dynamics of International Medical Care Reform," Journal of Economic Literature, 2002; D.M. Cutler, "The Third Wave in Health Care Reform," in S. Ogura, T. Tachibanaki and D.A. Wise, eds., Aging Issues in the United States and Japan, Chicag University of Chicago Press, 2001; D.M. Cutler, "Supplementing Public Insurance Coverage with Private Coverage: Implications for Medical Care Systems," in S. Ogura, T. Tachibanaki, and D.A. Wise, eds., Labor Markets and Firm Benefit Policies in Japan and the United States, Chicag University of Chicago Press, forthcoming .
NSA Busted Conducting Industrial Espionage In France, Mexico, Brazil, China and All Around the World Submitted by George Washington on 10/21/2013 12:46 -0400 Brazil China Copenhagen Department Of Commerce France Global Economy Japan Mexico national security New York Times Newspaper Saudi Arabia SPY SWIFT Toyota Treasury Department Wall Street Journal in Share 0 U.S. Conducts Industrial Espionage Globally Le Monde has revealed that the NSA gathered more than 70 million French phone calls in a single month . France’s largest English-language newspaper – The Local – reports : Le Monde said the documents gave grounds to think the NSA targeted not only people suspected of being involved in terrorism but also high-profile individuals from the world of business or politics. *** French Prime Minister Jean-Marc Ayrault “I am deeply shocked…. It’s incredible that an allied country like the United States at this point goes as far as spying on private communications that have no strategic justification, no justification on the basis of national defence ,” he told journalists in Copenhagen. Der Spiegel notes : The NSA has been systematically eavesdropping on the Mexican government for years. *** In the space of a single year, according to the internal documents, this operation produced 260 classified reports that allowed US politicians to conduct successful talks on political issues and to plan international investments . The NSA was recently revealed to have been spying on Brazil’s largest oil company . Guardian columnist Seumas Milne correctly notes : #NSA - #GCHQ about power not security : hacked # Mexico president for political/ investment edge , leak shows, like #Brazil …. The NSA was also recently busted spying on Chinese technology company Huawei . German companies are concerned that the NSA has conducted espionage in that country. And the leaders of Latin American countries have also expressed disgust at the industrial espionage. The NSA is also spying on the biggest financial payments systems such as VISA and Swift. In a slide leaked by Edward Snowden, “economic” was one of the main justifications for spying. The top U.S. spy’s justification for such financial spying is: “We collect this information for many important reasons: for one, it could provide the United States and our allies early warning of international financial crises which could negatively impact the global economy. It also could provide insight into other countries’ economic policy or behavior which could affect global markets .” (Top financial experts say that the NSA and other intelligence agencies are also using the information to profit from this inside information . And the NSA wants to ramp up its spying on Wall Street … to “protect” it.) The Spying Has Been Going On For Decades It is true that the spying is about power, and not security. Proof here , here and here . But this has actually been going on for decades . It has long been clear that the U.S. spying program is being used for industrial espionage. The New Statesman wrote about it in 1988. Die Zeit in 1999. The New York Times reported in 1995: Each morning, they gave Mickey Kantor, the United States trade representative, and his aides inside information gathered by the Central Intelligence Agency’s Tokyo station and the electronic eavesdropping equipment of the National Security Agency, sifted by C.I.A. analysts in Washington. Mr. Kantor received descriptions of conversations among Japanese bureaucrats and auto executives from Toyota and Nissan who were pressing for a settlement, and read about the competing pressures on Japan’s Trade Minister, Ryutaro Hashimoto. When the negotiations came to a climax in Geneva, the intelligence team was in place at the Intercontinental Hotel, working alongside Mr. Kantor’s negotiators, offering assessments of how far the Japanese side could be pressed. *** Spying on allies for economic advantage is a crucial new assignment for the C.I.A. now that American foreign policy is focused on commercial interests abroad . President Clinton made economic intelligence a high priority of his Administration, specifically information to protect and defend American competitiveness, technology and financial security in a world where an economic crisis can spread across global markets in minutes. *** At the Treasury Department, the trade representative’s office and the Commerce Department, officials say they now receive a torrent of information from the C.I.A. BBC reported in 2000: A report published by the European Parliament in February alleges that Echelon twice helped US companies gain a commercial advantage over European firms . Duncan Campbell, the British intelligence expert and journalist who wrote the report, raises the prospect that hundreds of US Department of Commerce “success stories”, when US companies beat off European and Japanese commercial opposition, could be attributed to the filtering powers of Echelon. *** The European consortium Airbus lost a $6bn contract with Saudi Arabia after NSA found Airbus officials were offering kickbacks to a Saudi official. The paper said the agency “lifted all the faxes and phone-calls between Airbus, the Saudi national airline and the Saudi Government” to gain this information. *** The US firm Raytheon used information picked up from NSA snooping to secure a $1.4bn contract to supply a radar system to Brazil instead of France’s Thomson-CSF. *** Former CIA director James Woolsey , in an article in March for the Wall Street Journal, acknowledged that the US did conduct economic espionage against its European allies , though he did not specify if Echelon was involved. BONUS: Government Has Contemplated Seizing Pension Money for Over a Decade Top Economic Advisers Forecast War and Unrest Average: 5 Your rating: None Average: 5 ( 8 votes)
Lack of Privacy Destroys the Economy Submitted by George Washington on 10/01/2013 15:54 -0400 Barack Obama Bill Gates Cato Institute Estonia Gross Domestic Product Hong Kong national security Niall Ferguson Steve Jobs The Economist Tyler Durden in Share 1 Edward Snowden said yesterday: The success of economies in developed nations relies increasingly on their creative output, and if that success is to continue we must remember that creativity is the product of curiosity, which in turn is the product of privacy . He’s right. Anonymity and privacy increase innovation. Anyone who has ever played a musical instrument knows that you need time to experiment and try new things in the privacy of your home – or your band’s garage – in order to improve. If every practice was at Carnegie Hall in front of a big crowd, you would be too self-conscious to experiment and try something new. Same with every other field. Think of an artist painting in the middle of a major museum. Or a beginning programmer (think of a young Bill Gates or Steve Jobs) whose code is being livecast all over the Internet. Or a brilliant inventor (such as a leaner Elon Musk) whose first rough sketch is being dissected in real time. As 4Chan’s founder noted : Zuckerberg’s totally wrong on anonymity being total cowardice. Anonymity is authenticity. It allows you to share in a completely unvarnished, raw way,” Poole said, adding that the internet allows people to “reinvent themselves” as if they were moving home or starting a new job. “The cost of failure is really high when you’re contributing as yourself,” he said. Moreover, trust is key for a prosperous economy . It’s hard to trust when your government, your internet service provider and your favorite websites are all spying on you . In addition, the destruction of privacy by the NSA directly harms internet companies, Silicon Valley, California … and the entire U.S. economy (Facebook lost 11 millions users as of April mainly due to privacy concerns … and that was before the Snowden revelations) And as we noted last December: Personal freedom and liberty – and freedom from the arbitrary exercise of government power – are strongly correlated with a healthy economy, but America is descending into tyranny. Authoritarian actions by the government interfere with the free market , and thus harm prosperity. U.S. News and World Report notes : The Fraser Institute’s latest Economic Freedom of the World Annual Report is out, and the news is not good for the United States. Ranked among the five freest countries in the world from 1975 through 2002, the United States has since dropped to 18th place. The Cato institute notes : The United States has plummeted to 18th place in the ranked list, trailing such countries as Estonia, Taiwan, and Qatar. *** Actually, the decline began under President George W. Bush. For 20 years the U.S. had consistently ranked as one of the world’s three freest economies, along with Hong Kong and Singapore. By the end of the Bush presidency, we were barely in the top ten. And, as with so many disastrous legacies of the Bush era, Barack Obama took a bad thing and made it worse. But the American government has shredded the constitution, by … spying on all Americans, and otherwise attacking our freedoms . Indeed, rights won in 1215 – in the Magna Carta – are being repealed . Economic historian Niall Ferguson notes , draconian national security laws are one of the main things undermining the rule of law: We must pose the familiar question about how far our civil liberties have been eroded by the national security state – a process that in fact dates back almost a hundred years to the outbreak of the First World War and the passage of the 1914 Defence of the Realm Act. Recent debates about the protracted detention of terrorist suspects are in no way new. Somehow it’s always a choice between habeas corpus and hundreds of corpses. Of course, many of this decades’ national security measures have not been taken to keep us safe in the “post-9/11 world” … indeed, many of them started before 9/11 . And America has been in a continuous declared state of national emergency since 9/11, and we are in a literally never-ending state of perpetual war. See this , this , this and this . *** So lawlessness infringement of our liberty is destroying our prosperity. Put another way, lack of privacy kills the ability to creatively criticize bad government policy … and to demand enforcement of the rule of law. Free speech and checks and balances on the power of government officials are two of the main elements of justice in any society. And a strong rule of law is – in turn – the main determinant of GDP growth . Tyler Durden of Zero Hedge points out (edited slightly): Though often maligned (typically by those frustrated by an inability to engage in ad hominem attacks), anonymous speech has a long and storied history in the United States . Used by the likes of Mark Twain (aka Samuel Langhorne Clemens) to criticize common ignorance, and perhaps most famously by Alexander Hamilton, James Madison and John Jay (aka publius) to write the Federalist Papers, we think ourselves in good company in using one or another nom de plume. Particularly in light of an emerging trend against vocalizing public dissent in the United States, we believe in the critical importance of anonymity and its role in dissident speech. Like the Economist magazine, we also believe that keeping authorship anonymous moves the focus of discussion to the content of speech and away from the speaker – as it should be. We believe not only that you should be comfortable with anonymous speech in such an environment, but that you should be suspicious of any speech that isn’t. Average: 4.92857 Your rating: None Average: 4.9 ( 14 votes)
U.S. Treasury now openly 'cooking the books' to fudge debt numbers in desperate move before collapse Friday, August 02, 2013 by: J. D. Heyes Learn more: http://www.naturalnews.com/041457_US_Treasury_national_debt_creative_accounting.html#ixzz2fuBqjzO7 (NaturalNews) On the surface, it appears as though the federal government is finally making progress on the national debt. But in reality, when you apply some common sense and a little logic, it becomes obvious that what is really going on is no small amount of creative math. In case you didn't know it, the "official" national debt has been the same for more than 70 days. How is that possible, considering the national debt climbs about a million dollars a minute ? According to CNSNews.com , which has analyzed the ongoing U.S. Treasury debt data, the federal debt has been stuck at exactly $16,699,396,000,000.00 for more 70 days, as of July 29. That's about $25 million below the congressionally authorized legal limit of $16,699,421,095,673.60: The portion of the federal debt subject to the legal limit set by Congress first hit $16,699,396,000,000.00 at the close of business on May 17. At the close of every business day since then, it has also been $16,699,396,000,000.00, according to the official accounting published by the Treasury Department. We should exceed the debt limit in the next 25 minutes, but... Mind you, if the debt had increased by a penny more at any time during that period, it would have exceeded the statutory limit and would have become a violation of the law. Treasury says that hasn't happened, however - despite the fact that, as of this writing, USDebtClock.org has the nation's debt at well above that statutory limit (in excess of $16.884 trillion). There's more. "Even though the government's official accounting of the debt has not budged for 70 days, the Treasury has continued to sell bills, notes and bonds at a value that exceeds the value of the bills, notes and bonds it was redeeming," CNS News reported. Indeed, according to the Daily Treasury Statement for May 17, the department, by then, had redeemed $4,776,995,000,000.00 since the start of the fiscal year, Oct. 1, 2012. As of that date, Treasury had already sold off $5,354,508,000.000.00 in new bills, bonds and notes so far. "That represented a net increase in publicly circulating U.S. government debt instruments of $577,513,000,000.00 for the fiscal year," CNS News said. In addition: As of July 26, according to the latest Treasury statement, the Treasury had already redeemed approximately $6,128,368,000,000.00 in bills, notes and bonds during this fiscal year. But, at the same time, according to the statement, the Treasury had sold an additional $6,759,148,000,000.00 bills, note and bonds - for a net increase of $630,780,000,000.00 for the year. That means the value of U.S. Treasury debt instruments in public circulation has risen by $53.267 billion since May 17, though Treasury says the debt had not budged a single penny over the same time. How is that possible? How can the value of extant U.S. Treasury securities climb by more than $53 billion over 70 days when the government's debt, which is subject to legal limitations, remained the same? Not a peep from Congress or the White House on Treasury's creative math "On May 17, the day the debt began its long stay at $16,699,396,000,000.00, Treasury Secretary Lew sent a letter to House Speaker John Boehner," CNS News reported. "In the letter, Lew said the Treasury would begin implementing what he called 'the standard set of extraordinary measures' that allows the Treasury to continue to borrow and spend money even after it has hit the legal debt limit." Meanwhile, the real national debt continues to skyrocket - even as lawmakers pretend to be "gearing up" for "another debt ceiling fight" this fall. Incredibly, this report from Business Insider said, "Analysts don't expect that the nation's debt limit will need to be raised before mid-October or mid-November, but House Republicans and the White House are already trading familiar words about the process." Apparently the mainstream media, along with members of Congress and the White House, are fine with permitting this creative use of math at the Treasury Department to artificially hold down the nation's debt until lawmakers are "ready" to discuss it - sometime after the summer recess. Sources: http://cnsnews.com https://fms.treas.gov http://www.usdebtclock.org https://www.fms.treas.gov Learn more: http://www.naturalnews.com/041457_US_Treasury_national_debt_creative_accounting.html#ixzz2fuC7pa2F
Spy Agencies Are Doing WHAT? Submitted by George Washington on 09/23/2013 10:32 -0400 Apple FBI Global Economy Israel national security Obama Administration Obamacare President Obama SPY Steve Jobs SWIFT Wall Street Journal in Share 1 Revelations about the breathtaking scope of government spying are coming so fast that it's time for an updated roundup: The government is spying on essentially everything we do . It is not just "metadata" ... although that is enough to destroy your privacy The government has adopted a secret interpretation of the Patriot Act which allows it to pretend that " everything " is relevant ... so it spies on everyone . For example, the NSA "oversight" court believes the mere claim that terrorists use the phone system is enough to show that all phone records are relevant NSA whistleblowers say that the NSA collects all of our conversations word-for-word It's not just the NSA ... Many other agencies, like the FBI and IRS – concerned only with domestic issues - spy on Americans as well. The Drug Enforcement Administration has had direct access to ATT phone records for 25 years The information gained through spying is shared with federal, state and local agencies , and they are using that information to prosecute petty crimes such as drugs and taxes . The agencies are instructed to intentionally "launder" the information gained through spying, i.e. to pretend that they got the information in a more legitimate way ... and to hide that from defense attorneys and judges The Department of Health and Human Services will also have access to vast quantities of sensitive federal data on Americans as part of Obamacare (here's the underlying Government Accountability Office report ) The NSA not only shares our information with other American agencies, it also gives personal, sensitive unfiltered information on Americans to Israel and other foreign nations And it's not only governments. Private A id=_GPLITA_3 title="Click to Continue by Text-Enhance" href="http://www.washingtonsblog.com/2013/07/mass-spying-being-used-to-make-some-people-rich.html#" data-mce-href="http://www.washingtonsblog.com/2013/07/mass-spying-being-used-to-make-some-people-rich.html#"contractors can also view all of your data (and the government isn’t keeping track of which contractors see your data and which don’t ). And because background checks regarding some contractors are falsified, it is hard to know the types of people that might have your information. Indeed, private contractors are involved in spying on behalf of governments world-wide It's not just your computer and your phone. It is well-documented that the government may be spying on us through cars and buses, streetlights, at airports and on the street, via mobile scanners and drones, through our smart meters , and in many other ways Top counter-terror experts say that the government’s mass spying doesn't keep us safe Indeed, they say that mass spying actually hurts U.S. counter-terror efforts (more here and here ) They say we can, instead, keep everyone safe without violating the Constitution ... more cheaply and efficiently than the current system There is no real oversight by Congress , the courts , or the executive branch of government. And see this and this . Indeed, most Congress members had no idea what the NSA is doing . Even staunch defenders of the NSA - and congress members on the intelligence oversight committees - now say they've been kept in the dark A Federal judge who was on the secret spying court for 3 years says that it's a kangaroo court Even the current judges on the secret spying court now admit that they're out of the loop and powerless to exercise real oversight . When these judges raised concerns about NSA spying, the Justice Department completely ignored them A former U.S. president says that the spying program shows that we no longer have a functioning democracy The chairs of the 9/11 Commission say that NSA spying has gone way too far Top constitutional experts say that Obama and Bush are worse than Nixon ... and the Stasi East Germans While the government initially claimed that mass surveillance on Americans prevented more than 50 terror attacks, the NSA’s deputy director John Inglis walked that position back all the way to saying that – at the most – one (1) plot might have been disrupted by the bulk phone records collection alone. In other words, the NSA can't prove that stopped any terror attacks. The government greatly exaggerated an alleged recent terror plot for political purposes ( and promoted the fearmongering of serial liars ). The argument that recent terror warnings show that NSA spying is necessary is so weak that American counter-terrorism experts have slammed it as "crazy pants" You're much more likely to be killed by brain-eating amoeba , lightning or a toddler than by terrorism. Even President Obama admits that you're much less likely to be killed by terrorists than a car accident . So the government has resorted to lamer and lamer excuses to try to justify mass surveillance Experts say that the spying program is illegal , and is exactly the kind of thing which King George imposed on the American colonists ... which led to the Revolutionary War A Harvard law school professor - and director of theBerkman Center for Internet Society at Harvard University - says : "The NSA has mounted a systematic campaign against the foundations of American power: constitutional checks and balances, technological leadership, and market entrepreneurship . The NSA scandal is no longer about privacy, or a particular violation of constitutional or legislative obligations. The American body politic is suffering a severe case of auto-immune disease: our defense system is attacking other critical systems of our body ". The top counter-terrorism Czar under Clinton and Bush says that revealing NSA spying programs does not harm national security The feds are considering prosecuting the owner of a private email company - who shut down his business rather than turning over records to the NSA - for refusing to fork over the information and keep quiet. This is a little like trying to throw someone in jail because he's died and is no longer paying taxes Whistleblowers on illegal spying have no "legal" way to get the information out Spying started before 9/11 ... and various excuses have been used to spy on Americans over the years Governments and big corporations are doing everything they can to destroy anonymity Mass spying creates an easy mark for hackers . Indeed, the Pentagon now sees the collection of "big data" as a "national security threat" ... but the NSA is the biggest data collector on the planet, and thus provides a tempting mother lode of information for foreign hackers Mass surveillance by the NSA directly harms internet companies, Silicon Valley, California … and the entire U.S. economy . For example, Facebook lost 11 millions users as of April mainly due to privacy concerns (and that was before the Snowden revelations). And see these reports from Boingboing and the Guardian IT and security professionals are quite concerned about government spying Some people make a lot of money off of mass spying. But the government isn't using the spying program to stop the worst types of lawlessness The NSA spying program is unambiguously being used for industrial espionage , by spying on large foreign corporations , and the biggest financial payments systems such as VISA and Swift. Indeed, in a slide leaked by Edward Snowden, "economic" was one of the main justifications for spying The top U.S. spy's justifications for such financial spying is not very reassuring : "We collect this information for many important reasons: for one, it could provide the United States and our allies early warning of international financial crises which could negatively impact the global economy. It also could provide insight into other countries' economic policy or behavior which could affect global markets ." Top financial experts say that the NSA and other intelligence agencies are using the information to profit from this inside information The Wall Street Journal reported that the NSA spies on Americans’ credit card transactions . Many other agencies are doing the same . In fact, virtually all U.S. intelligence agencies – including the CIA and NSA – are going to spy on Americans’ finances . The A id=_GPLITA_5 title="Click to Continue by Text-Enhance" href="http://www.washingtonsblog.com/2013/07/mass-spying-being-used-to-make-some-people-rich.html#" data-mce-href="http://www.washingtonsblog.com/2013/07/mass-spying-being-used-to-make-some-people-rich.html#"IRS will also be spying on Americans’ shopping records, travel, social interactions, health records and files from other government investigators Polls show that the public doesn’t believe the NSA … and thinks that the government has gone way too far in the name of terrorism While leaker Edward Snowden is treated as a traitor by the fatcats and elites, he is considered a hero by the American public . Members of the Executive, Legislative and Judicial branches of government have all praised the debate on spying which Snowden's leaks started The heads of the intelligence services have repeatedly been caught lying about spying. And even liberal publications are starting to say that Obama has been intentionally lying about spying . The government claimed that most spying programs ended in 2011, when - in fact - they were expanded that year Obama says he'll rein in spying ... but his words and deeds indicate that he won't . Indeed, Obama appointed the fox to guard the chicken coop . No wonder only 11% of Americans trust Obama to actually do anything to rein in spying A huge majority of Americans wants the director of intelligence - Clapper - prosecuted for perjury . One of the chairs of the 9/11 Commission agrees While the Obama administration is spying on everyone in the country – it is at the same time the most secretive administration ever ( background ). That’s despite Obama saying he’s running the most transparent administration ever The NSA treats the American people with contempt . For example, Spiegel notes : "The authors of the draw a comparison with "1984," ... revealing the agency's current view of smartphones and their users. "Who knew in 1984 that this would be Big Brother …" the authors ask, in reference to a photo of Apple co-founder Steve Jobs. And commenting on photos of enthusiastic Apple customers and iPhone users, the NSA writes: "… and the zombies would be paying customers ? Worse, the intelligence agencies often view normal, true-blue Americans as potential terrorists (and see this ) A Congressman noted that - even if a mass surveillance program is started for good purposes - it will inevitably turn into a witch hunt There are indications that the spy agencies aren't just passively gathering information, but are actively using it in mischievous ways Surveillance can be used to frame you if someone in government happens to take a dislike to you Government spying has always focused on crushing dissent … not on keeping us safe An NSA whistleblower says that the NSA is spying on – and blackmailing – top government officials and military officers (and see this ) High-level US government officials have warned for 40 years that mass surveillance would lead to tyranny in America A top NSA whistleblower says that the only way to fix things is to fire all of the corrupt government officials who let it happen . As the polls above show, the American public is starting to wake up to that fact Average: 5 Your rating: None Average: 5 ( 34 votes)
NSA Spying Directly Harms Internet Companies, Silicon Valley, California … And the Entire U.S. Economy Submitted by George Washington on 07/31/2013 13:47 -0400 Apple Brazil China European Union fixed France Germany Golden Goose GOOG Google Japan Nancy Pelosi national security New York Times None Obama Administration Securities and Exchange Commission SPY Transparency Twitter United Kingdom Mass surveillance by the NSA may directly harm the bottom of line of Internet companies, Silicon Valley, California … and the entire national economy. Money News points out : The company whose shares you own may be lying to you — while Uncle Sam looks the other way. Let’s step through this. I think you will see the problem. Fact 1: U.S. financial markets are the envy of the world because we have fair disclosure requirements, accounting standards and impartial courts. This is the foundation of shareholder value. The company may lose money, but they at least told you the truth. Fact 2: We now know multiple public companies, including Microsoft (MSFT), Google (GOOG), Facebook (FB) and other, gave their user information to NSA. Forget the privacy implications for a minute. Assume for the sake of argument that everything complies with U.S. law. Even if true, the businesses may still be at risk. Fact 3: All these companies operate globally. They get revenue from China, Japan, Russia, Germany, France and everywhere else. Did those governments consent to have their citizens monitored by the NSA? I think we can safely say no. Politicians in Europe are especially outraged. Citizens are angry with the United States and losing faith in American brand names. Foreign companies are already using their non-American status as a competitive advantage. Some plan to redesign networks specifically to bypass U.S. companies. By yielding to the NSA, U.S. companies likely broke laws elsewhere. They could face penalties and lose significant revenue. Right or wrong, their decisions could well have damaged the business. Securities lawyers call this “materially adverse information” and companies are required to disclose it. But they are not. Only chief executives and a handful of technical people know when companies cooperate with the NSA. If the CEO can’t even tell his own board members he has placed the company at risk, you can bet it won’t be in the annual report. The government also gives some executives immunity documents, according to Bloomberg. Immunity is unnecessary unless someone thinks they are breaking the law. So apparently, the regulators who ostensibly protect the public are actively helping the violators. This is a new and different investment landscape. Public companies are hiding important facts that place their investors at risk. If you somehow find out, you will have no recourse because regulators gave the offender a “get out of jail free” card. The regulatory structure that theoretically protects you knowingly facilitates deception that may hurt you, and then silences any witnesses. This strikes to the very heart of the U.S. financial system. Our markets have lost any legitimate claim to “full and fair disclosure.” Every prospectus, quarterly report and news release now includes an unwritten NSA asterisk. Whenever a CEO speaks, we must assume his fingers are crossed. *** Every individual investor or money manager now has a new risk factor to consider. Every disclosure by every company is in doubt. The rule of law that gave us the most-trusted markets in the world may be just an illusion. In a subsequent article, Money News wrote : Executives at publicly traded companies are lying to shareholders and probably their own boards of directors. They are exposing your investments to real, material, hard-dollar losses and not telling you. The government that allegedly protects you, Mr. Small Investor, knows all this and actually encourages more of it. Who lies? Ah, there’s the problem. We don’t know. Some people high in the government know. The CEOs themselves and a few of their tech people know. You and I don’t get to know. We just provide the money. Since we don’t know which CEOs are government-approved liars, the prudent course is to assume all CEOs are government-approved liars. We can no longer give anyone the benefit of the doubt. If you are a money manager with a fiduciary responsibility to your investors, you are hereby on notice. A CEO may sign those Securities and Exchange Commission filings where you get corporate information with his fingers crossed. Your clients pay you to know the facts and make good decisions. You’re losing that ability. For example, consider a certain U.S. telecommunications giant with worldwide operations. It connects American businesses with customers everywhere. Fast-growing emerging markets like Brazil are very important to its future growth. Thanks to data-sharing agreements with various phone providers in Brazil, this company has deep access to local phone calls. One day someone from NSA calls up the CEO and asks to tap into that stream. He says OK, tells his engineers to do it and moves on. A few years later, Edward Snowden informs Brazilian media that U.S. intelligence is capturing these data. They tell the Brazilian public. It is not happy. Nor are its politicians, who are already on edge for entirely unrelated reasons. What would you say are this company’s prospects for future business in Brazil? Your choices are “slim” and “none.” They won’t be the only ones hurt. If the U.S. government won’t identify which American company cheated its Brazilian partners, Brazil will just blame all of them. The company can kiss those growth plans good-bye. This isn’t a fantasy. It is happening right now. The legality of cooperating with the NSA within the United States is irrelevant. Immunity letters in the United States do not protect the company from liability elsewhere. *** Shouldn’t shareholders get to know when their company’s CEO takes these risks? Shouldn’t the directors who hire the CEO have a say in the matter? Yes, they should. We now know that they don’t. The trust that forms the bedrock under U.S. financial markets is crumbling. If we cannot believe CEOs when they swear to tell the truth, if companies can hide material risks, if boards cannot know what the executives they hire are actually doing, any pretense of “fair markets” is gone. When nothing is private, people and businesses soon cease to trust each other. Without trust, modern financial markets cannot function properly. If U.S. disclosure standards are no better than those in the third world, then every domestic stock is overvalued. Our “rule of law” premium is gone. This means a change for stock valuations — and it won’t be bullish. CNN reports : Officials throughout Europe, most notably French President Francois Hollande, said that NSA spying threatens trade talks. *** For the Internet companies named in reports on NSA surveillance, their bottom line is at risk because European markets are crucial for them. It is too early assess the impact on them, but the stakes are clearly huge. For example, Facebook has about 261 million active monthly European users, compared with about 195 million in the U.S. and Canada, and 22% of Apple’s net income came from Europe in the first quarter of 2013. *** In June 2011, Microsoft admitted that the United States could bypass EU privacy regulations to get vast amounts of cloud data from their European customers. Six months later, BAE Systems, based in the United Kingdom, stopped using the company’s cloud services because of this issue. *** The NSA scandal has brought tensions over spying to a boil. German prosecutors may open a criminal investigation into NSA spying. On July 3, Germany’s interior minister said that people should stop using companies like Google and Facebook if they fear the U.S. is intercepting their data. On July 4, the European Parliament condemned spying on Europeans and ordered an investigation into mass surveillance. The same day, Neelie Kroes, the EU’s chief telecom and Internet official, warned of “multi-billion euro consequences for American companies” because of U.S. spying in the cloud. *** Transparency is an important first step. Its absence only exacerbates a trust deficit that companies already had in Europe. And trust is crucial. Google’s chief legal officer recognized this on June 19 when he said, “Our business depends on the trust of our users,” during a Web chat about the NSA scandal. Some companies have been aggressive in trying to disclose more, and others have not. But unless the U.S. government loosens strictures and allows greater disclosure, all U.S. companies are likely to suffer the backlash. *** The Obama administration needs to recognize and mitigate the serious economic risks of spying while trying to rebuild its credibility on Internet freedom. The July 9 hearing of the Privacy and Civil Liberties Oversight Board is a start, but much more is needed. More disclosure about the surveillance programs, more oversight, better laws, and a process to work with allied governments to increase privacy protections would be a start. The European customers of Internet companies are not all al Qaeda or criminals, but that is essentially how U.S. surveillance efforts treat them. If this isn’t fixed, this may be the beginning of a very costly battle pitting U.S. surveillance against European business, trade, and human rights. The Atlantic notes : Most communications flow over the Internet and a very large percentage of key Internet infrastructure is in the United States. Thus, foreigners’ communications are much more likely to pass through U.S. facilities even when no U.S. person is a party to a particular message. Think about a foreigner using Gmail, or Facebook, or Twitter — billions of these communications originate elsewhere in the world but pass through, and are stored on, servers located in the U.S. *** Foreigners … comprise a growing majority of any global company’s customers . *** From the perspective of many foreign individuals and governments, global Internet companies headquartered in the U.S. are a security and privacy risk. And that means foreign governments offended by U.S. snooping are already looking for ways to make sure their citizens’ data never reaches the U.S. without privacy concessions. We can see the beginnings of this effort in the statement by the vice president of the European Commission, Viviane Reding, who called in her June 20 op-ed in the New York Times for new EU data protection rules to “ensure that E.U. citizens’ data are transferred to non-European law enforcement authorities only in situations that are well defined, exceptional and subject to judicial review.” While we cheer these limits on government access, the spying scandal also puts the U.S. government and American companies at a disadvantage in ongoing discussions with the EU about upcoming changes to its law enforcement and consumer-privacy-focused data directives, negotiations critical to the Internet industry’s ongoing operations in Europe. Even more troubling, some European activists are calling for data-storage rules to thwart the U.S. government’s surveillance advantage. The best way to keep the American government from snooping is to have foreigners’ data stored locally so that local governments – and not U.S. spy agencies — get to say when and how that data may be used. And that means nations will force U.S.-based Internet giants like Google, Facebook, and Twitter, to store their user data in-country, or will redirect users to domestic businesses that are not so easily bent to the American government’s wishes. So the first unintended consequence of mass NSA surveillance may be to diminish the power and profitability of the U.S. Internet economy. America invented the Internet , and our Internet companies are dominant around the world. The U.S. government, in its rush to spy on everybody, may end up killing our most productive golden goose. San Diego Union-Tribune writes : California and its businesses have a problem. It’s called the National Security Agency. *** The problem for California is not that the feds are collecting all of our communications. It is that the feds are (totally unapologetically) doing the same to foreigners, especially in communications with the U.S. California depends for its livelihood on people overseas — as customers, trade partners, as sources of talent. Our leading industries — shipping, tourism, technology, and entertainment — could not survive, much less prosper, without the trust and goodwill of foreigners . We are home to two of the world’s busiest container ports, and we are a leading exporter of engineering, architectural, design, financial, insurance, legal, and educational services. All of our signature companies — Apple, Google, Facebook, Oracle, Intel, Hewlett-Packard, Chevron, Disney — rely on sales and growth overseas. And our families and workplaces are full of foreigners; more than one in four of us were born abroad, and more than 50 countries have diaspora populations in California of more than 10,000. *** News that our government is collecting our foreign friends’ phone records, emails, video chats, online conversations, photos, and even stored data, tarnishes the California and American brands. *** Will tourists balk at visiting us because they fear U.S. monitoring? Will overseas business owners think twice about trading with us because they fear that their communications might be intercepted and used for commercial gain by American competitors? Most chilling of all: Will foreigners stop using the products and services of California technology and media companies — Facebook, Google, Skype, and Apple among them — that have been accomplices (they say unwillingly) to the federal surveillance? The answer to that last question: Yes. It’s already happening. Asian governments and businesses are now moving their employees and systems off Google’s Gmail and other U.S.-based systems, according to Asian news reports. German prosecutors are investigating some of the American surveillance. The issue is becoming a stumbling block in negotiations with the European Union over a new trade agreement. Technology experts are warning of a big loss of foreign business. John Dvorak, the PCMag.com columnist, wrote recently, “Our companies have billions and billions of dollars in overseas sales and none of the American companies can guarantee security from American spies. Does anyone but me think this is a problem for commerce?” *** It doesn’t help when our own U.S. Sen. Dianne Feinstein is backing the surveillance without acknowledgment of the huge potential costs to her state. It’s time for her and House Minority Leader Nancy Pelosi, who has been nearly as tone-deaf on this issue, to be forcefully reminded that protecting California industry, and the culture of openness and trust that is so vital to it, is at least as important as protecting massive government data-mining. Such reminders should take the force not merely of public statements but of law. California has a robust history of going its own way — on vehicle standards, energy efficiency, immigration, marijuana. Now is the time for another departure — this one on the privacy of communications. *** We need laws, perhaps even a state constitutional amendment, to make plain that California considers the personal data and communications of all people, be they American or foreign, to be private and worthy of protection. And see this . The bigger picture is that a country’s economic health is correlated with a strong rule of law more than any other factor . Yet America has rapidly fallen into a state of lawlessness , where fundamental rights – such as protection against mass spying by the government – have been jettisoned . The government is spying on just about everything we do . Even the government’s attempted denials of this fact confirm it . BONUS: Cheat-Sheet On Spying Average: 5 Your rating: None Average: 5 ( 18 votes)
A Short History Of Currency Swaps (And Why Asset Confiscation Is Inevitable) Submitted by Tyler Durden on 05/05/2013 14:55 -0400 Belgium Ben Bernanke Central Banks Creditors default EuroDollar European Central Bank Eurozone Federal Reserve Foreign Central Banks France Germany Guest Post Hungary Investment Grade Italy Lehman Mark To Market Monetary Base national security Purchasing Power Reserve Currency Sovereign Debt Sovereign Risk Sovereign Risk Sovereigns Trade Deficit World Trade Submitted by Martin Sibileau of A View From The Trenches blog , I want to offer today an historical perspective on the favorite liquidity injection tool: Currency swaps. These coordinated interventions are not a solution to the crashes, but their cause, within a game of chicken and egg. But I’ve just given you the conclusion. I need to back it now… To read this article in pdf format, click here: May 5 2013 With equity valuations no longer levitating but in a different, 4th dimension altogether, and credit spreads compressing... Which fiduciary portfolio manager can still afford to hedge? Any price to hedge seems expensive and with no demand, the price of protection falls almost daily. The CDX NA IG20 index (i.e. the investment grade credit default swap index series 20, tracking the credit risk of 125 North American investment grade companies in the credit default swap market) closed the week at 70-71bps. The index was at this level back in the spring of 2005. By the summer of 2007, any credit portfolio manager that would have wanted to cautiously hedge with this index would have seen a further compression of 75% in spreads, completely wiping him/her out. It is in situations like these, when the crash comes, that the proverbial run for liquidity forces central banks to coordinate liquidity injections. However, something tells me that this time, the trick won’t work. In anticipation to the next and perhaps final attempt, I want to offer today an historical perspective on the favorite liquidity injection tool: Currency swaps. These coordinated interventions are not a solution to the crashes, but their cause, within a game of chicken and egg. But I’ve just given you the conclusion. I need to back it now… How it all began Let me clarify: By currency swaps, I refer to a transaction carried out between two central banks. This means that currency swaps cannot be older than the central banks that extend them. On the other hand, foreign exchange swaps between corporations may date back to the late Middle Ages, when trade began to resurface in the Italian cities and the Hansastdte . Having said this, I believe that currency swaps were born in 1922, during the International Monetary Conference that took place in Geneva. This conference marked the beginning of the Gold Exchange Standard, with the goal of stabilizing exchange rates (in terms of gold) back to the pre-World War I. According to Prof. Giovanni B. Pittaluga (Univ. di Genova), there were two key resolutions from the conference, which opened the door to currency swaps. Resolution No. 9 proposed that central banks “… centralise and coordinate the demand for gold, and so avoid those wide fluctuations in the purchasing power of gold which might otherwise result from the simultaneous and competitive efforts of a number of countries to secure metallic reserves… ” Resolution No. 9 also spelled how the cooperation among central banks would work, which “…should embody some means of economizing the use of gold maintaining reserves in the form of foreign balance, such, for example, as the gold exchange standard or an international clearing system… ” In Resolution No. 11, we learn that: “…The convention will thus be based on a gold exchange standard.” (…) “ …A participating country, in addition to any gold reserve held at home, may maintain in any other participating country reserves of approved assets in the form of bank balances, bills, short-term Securities, or other suitable liquid assets …. when progress permits, certain of the participating countries will establish a free market in gold and thus become gold centers ”. Lastly, gold or foreign exchange would back no less than 40% of the monetary base of central banks. With this agreement, the stage was set to manipulate liquidity in a coordinated way to a degree the world had never witnessed before. The reserve multiplier, composed by gold and foreign exchange could be “managed” and through an international clearing system, it could be managed globally. How adjustments worked under the Gold Standard Before 1922, adjustments within the Gold Standard involved the free movement of gold. In the figure below, I show what an adjustment would have looked like, as the United States underwent a balance of trade deficit, for instance: Gold would have left the United States, reducing the asset side of the balance sheet of the Federal Reserve. Matching this movement, the monetary base (i.e. US dollars) would have fallen too. The gold would have eventually entered the balance sheet of the Banque of France, which would have issue a corresponding marginal amount of French Francs. It is worth noting that the interest rate, in gold, would have increased in the United States, providing a stabilizing/balancing mechanism, to repatriate the gold that originally left, thanks to arbitraging opportunities. As Brendan Brown (Head of Economic Research at Mitsubishi UFJ Securities International) explained ( here ), with free determination of interest rates and even considerable price fluctuations, agents in this system had the legitimate expectation that key relative prices would return to a “perpetual” level. This expectation provided “…the negative real interest rate which Bernanke so desperately tries to create today with hyped inflation expectations…” There is an excellent work on the mechanics of this adjustment published by Mary Tone Rodgers and Berry K. Wilson, with regards to the Panic of 1907 (see here ). The authors sustain that the gold flows that ensued from Europe into the United States provided the liquidity necessary to mitigate the panic, without the need of intervention. This success in reducing systemic risk was due to the existence of US corporate bonds (mainly from railroads) with coupon and principal payable in gold, in bearer or registered form (at the option of the holder) that facilitated transferability, tradable jointly in the US and European exchanges, and within a payment system operating largely out of reach from banksters outside of the bank clearinghouse systems. The official story is that the system was saved by a $25MM JPM-led pool of liquidity injected to the call loan market. How adjustments worked under the Gold Exchange Standard During the 1920s and particularly with the stock imbalances resulting from World War I, the search for sustainable financing of reparation payments began. Complicating things, the beginning of this decade saw thehyper inflationaryprocesses in Germany and Hungary. By 1924, England and the United States rolled out the Dawes Plan and between 1926 and 1928, the so called Poincaré Stabilization Plan in France. The former got Charles G. Dawes the Nobel Prize Peace, in 1925. As the figure below shows, against a stable stock of gold, fiat currency would be loaned between central banks. In the case of a swap for the Banque de France, US dollars would be available/loaned, which were supposedly backed by gold. The reserve multiplier vs. gold expanded, of course: With these transactions central banks would now be able to influence monetary (i.e. paper) interest rates. The balancing mechanism provided by gold interest rate differentials had been lost. As we saw under the Gold Standard before, an outflow of US dollars would have caused US dollar rates to rise, impacting on the purchasing power of Americans. Now, the reserve multiplier versus gold expanded and the purchasing power of the nation that provided the financing was left untouched. The US dollar would depreciate ( on the margin and ceteris paribus ) against the countriesbenefitingfrom these swaps. Inflation was exported therefore from the issuing nation (USA) to the receiving nations (Europe). The party lasted until 1931, when the collapse of the KreditAnstalt triggered a unanimous wave of deflation. How the perspective changed as the US became a debtor nation Fast forward to 1965, two decades after World War II, and currency swaps are no longer seen as a tool to temporarily “stabilize” the financing of flows, like balance of trade deficits or war reparation payments, but stocks of debt. By 1965, central bankers are already worried with the creation of reserve assets, just like they are today; with the creation of collate ral (see this great post by Zerohedge on the latter). Indeed, 48 years ago, the Group of Ten presented what was called the Ossola Report , after Rinaldo Ossola , chairman of the study group involved in its preparation and also vice-chairman of the Bank of Italy. This report was specifically concerned with the creation of reserve assets. At least back then, gold was still considered to be one of them. In an amazing confession (although the document was initially restricted), the Ossola Group explicitly declared that the problem “… arises from the considered expectation that the future flow of gold into reserves cannot be prudently relied upon to meet all needs for an expansion of reserves associated with a growing volume of world trade and payments and that the contribution of dollar holdings to the growth of reserves seems unlikely to continue as in the past…” Currency swaps were once again considered part of the solution. Under the so called “currency assets”, the swaps were included by the Ossola Group, as a useful tool for the creation of alternative reserves. Three months, during a Hearing before the Subcommittee on National Security and International Operations, William McChesney Martin, Jr., at that time Chairman of the Board of Governors of the Federal Reserve System, acknowledged a much greater role to currency swaps, in maintaining the role of the US dollar as the global reserve currency. In McChesney Martin’s words: “…Under the swap agreements, both the System (i.e. Federal Reserve System) and its partners make drawings only for the purpose of counteracting the effects on exchange markets and reserve positions of temporary or transitional fluctuations in payments flows. About half of the drawings ever made by the System, and most of the drawings made by foreign central banks, have been repaid within three months; nearly 90 per cent of the recent drawings made by the System and 100 per cent of the drawings made by foreign central banks have been repaid within six months. In any event, no drawing is permitted to remain outstanding for more than twelve months. This policy ensures that drawings will be made, either by the System or by a foreign central, bank, only for temporary purposes and not for the purpose of financing a persistent payments deficit. In all swap arrangements both parties are fully protected from the danger of exchange-rate fluctuations. If a foreign central bank draws dollars, its obligation to repay dollars would not be altered if in the meantime its currency were devalued. Moreover, the drawings are exchanges of currencies rather than credits. For instance, if, say, the National Bank of Belgium draws dollars, the System receives the equivalent in Belgian francs; and since the National Bank of Belgium has to make repayment in dollars, the System is at all times protected from any possibility of loss. Obviously, the same protection is given to foreign central banks whenever the System draws a foreign currency. The interest rates for drawings are identical for both parties. Hence, until one party disburses the currency drawn, there is no net interest burden for either party. Amounts drawn and actually disbursed incur an interest cost, needless to say; the interest charge is generally close to the U.S. Treasury bill rate…” My graph below should help visualize the mechanism: Essentially, with these currency swaps, foreign central banks that during the war had shifted their gold to the USA, became middlemen of a product that was a first-degree derivative of the US dollar, and a second-degree derivative of gold. On September 24th 1965, someone called this Ponzi scheme out. In an article published by Le Monde, Jacques Rueff publicly responded to this nonsense, under the hilarious title “ Des plans d’irrigation pendant le déluge ” (i.e. Irrigation plans during the flood). He minced no words and wrote: “… C’est un euphénisme inacceptable et une scandaleuse hyprocrisie que de qualifier de création de “liquidités internationales” les multiples operations, tells que (currency) swaps…” “C’est commetre une fraude de meme nature que de présenter comme la consequence d’une insuffiscance générale de liquidités l’insufficance des moyens dont disposent les Etats-Unis et l’Anglaterre pour le réglement de leur déficit exterieur” My translation: “…It is an unacceptable euphemism and an outrageous hypocrisy to qualify as creation of “international liquidity” multiple transactions, like (currency) swaps…”…“…In the same fashion, it is a fraud to present as the consequence of a general lack of liquidity, the lack of means available to the USA and England to settle their external deficits …” Comparing the USA and England to underdeveloped countries, Rueff added that these also lack external resources, but those that are needed cannot be provided to them but by credit operations, rather than the superstition of a monetary invention disguised as necessary and in the general interest of the public (i.e. rest of the world). With impressive prediction, Rueff warned that the problem would present itself in all its greatness, the day these two countries decide to recover their financial independence by reimbursing with their dangerous liabilities (i.e. currencies). That day, said Rueff, international coordination would be necessary and legitimate. But such coordination would not revolve around the creation of alternative instruments of reserve, demanded by a starving-for-liquidity world. That day would be a day of liquidation, where debtors and creditors would be equally interested and would share the common responsibility of the lightness with which they jointly accepted the monetary difficulties that are present ….Sadly, Rueff’s call could not sound more familiar to the observer in 2013… How adjustments work today, without currency swaps Until the end of the Gold Exchange Standard, even if the reserve multiplier suppressed the value of gold (like today), gold was still the ultimate reserve and had in itself no counterparty risk. After August 15th, 1971, when Nixon issued the Executive Order 11615 (watch announcement here ), the ultimate reserve was simply cash (i.e. US dollars) or its counterpart, US Treasuries. And unlike gold, these reserve assets could be created or destroyed ex-nihilo. When they are re-hypothecated, leverage grows unlimited and when their value falls, valuations dive unstoppable. Because (and unlike in 1907) the transmission channel for these reserves today is the banking system, when they become scarce, counterparty risk morphs into systemic risk. When Rueff discussed currency swaps, he had imbalances in mind. In the 21st century, we no longer have time to worry about these superfluous things. Balance of trade deficits? Current account deficits? Fiscal deficits? In the 21st century, we cannot afford to see the big picture. We can only see the “here and now”. Therefore, when we talk about currency swaps, the only thing we have in mind is counterparty risk within the financial system. The thermometer that measures such risk is the Eurodollar swap basis, shown below (source: Bloomberg). As the US dollar became the carry currency, the cost of accessing to it became the cornerstone of value for the rest of the asset spectrum, widely known as “risk”. In the chat below, we can see two big gaps in the Eurodollar swap basis. The one in 2008 corresponds to the Lehman event. The one in 2011 corresponds to the banking crisis in the Eurozone that was contained with a reduction in the cost of USDEUR swaps and with the Long-Term Refinancing Operations done by the European Central Bank. In both events, the financial system was in danger and banks were forced to delever. How would the adjustment process have worked, had there not been currency swaps to extend? In the figure below, I explain the adjustment process, in the absence of a currency swap. As we see in step 1, given the default risk of sovereign debt held by Eurozone banks, capital leaves the Eurozone, appreciating the US dollar. We see loan loss reserves increase (bringing the aggregate value of assets and equity down). As these banks have liabilities in US dollars and take deposits in Euros, this mismatch and the devaluation of the Euro deteriorates their risk profile Eurozone banks are forced to sell US dollar loans, shown on step 2. As they sell them below par, the banks have to book losses. The non-Eurozone banks that purchase these loans cannot book immediate gains. We live in a fiat currency world, and banks simply let their loans amortize; there’s no mark to market. With these purchases, capital re-enters the Eurozone, depreciating the US dollar. In the end, there is no credit crunch. As long as this process is left to the market to work itself out smoothly, borrowers don’t suffer, because ownership of the loans is simply transferred. This is neutral to sovereign risk, but going forward, if the sovereigns don’t improve their risk profile, lending capacity will be constrained. In the end, an adjustment takes place in (a) the foreign exchange market, (b) the value of the bank capital of Eurozone banks, and (c) the amount of capital being transferred from outside the Eurozone into the Eurozone. How adjustments work today, with currency swaps Let’s now proceed to examine the adjustment –or better said, lack thereof- in the presence of currency swaps. The adjustment is delayed. In the figure below, we can see that the Fed intervenes indirectly, lending to Eurozone banks through the ECB. Capital does not leave the US. Dollars are printed instead and the US dollar depreciates. On November 30th, of 2011, upon the Fed’s announcement at 8am, the Euro gained two cents vs. the US dollar. As no capital is transferred, no further savings are required to sustain the Eurozone and the misallocation of resources continues, because no loans are sold. This is bullish of sovereign risk. The Fed becomes a creditor of the Eurozone. If systemic risk deteriorates in the Eurozone, the Fed is forced to first keep reducing the cost of the swaps and later to roll them indefinitely, as long as there is a European Central Bank as a counterparty for the Fed , to avoid an increase in interest rates in the US dollar funding market. But if the Euro zone broke up, there would not be any “safe” counterparty –at least in the short term- for the Fed to lend US dollars to. In the presence of a European central bank, the swaps would be bullish for gold. In the absence of one, the difficulty in establishing swap lines would temporarily be very bearish for gold (and the rest of the asset spectrum). Final words Over almost a century, we have witnessed the slow and progressive destruction of the best global mechanism available to cooperate in the creation and allocation of resources. This process began with the loss of the ability to address flow imbalances (i.e. savings, trade). After the World Wars, it became clear that we had also lost the ability to address stock imbalances, and by 1971 we ensured that any price flexibility left to reset the system in the face of an adjustment would be wiped out too. This occurred in two steps: First at a global level, with the irredeemability of gold: The world could no longer devalue. Second, at a local and inter-temporal level, with zero interest rates: Countries can no longer produce consumption adjustments. From this moment, adjustments can only make way through a growing series of global systemic risk events with increasingly relevant consequences. Swaps, as a tool, will no longer be able to face the upcoming challenges. When this fact finally sets in, governments will be forced to resort directly to basic asset confiscation. Average: 4.78261 Your rating: None Average: 4.8 ( 23 votes)
The Main Driver of GDP Growth: A Strong Rule of Law Submitted by George Washington on 07/30/2012 15:39 -0500 China Corruption Gambling Germany Global Economy Gross Domestic Product Hong Kong LIBOR national security Niall Ferguson Transparency United Kingdom World Bank Economist Woody Brock says that a nation's GDP growth is based mainly on whether or not it follows the rule of law. Economist and investment adviser John Mauldin notes : I had dinner with Dr. Woody Brock this evening in Rockport. We were discussing this issue and he mentioned that he had done a study based on analysis by an institution that looks at all sorts of “fuzzy” data, like how easy it is to start a business in a country, corporate taxes and business structures, levels of free trade and free markets, and the legal system. It turned out that the trait that was most positively correlated with GDP growth was strength of the rule of law . It is also one of the major factors thatNiall Ferguson cites in his book Civilization as a reason for the ascendency of the West in the last 500 years, and a factor that helps explain why China is rising again as it emerges from chaos. One of the very real problems we face is the growing feeling that the system is rigged against regular people in favor of “the bankers” or the 1%. And if we are honest with ourselves, we have to admit there is reason for that feeling. Things like LIBOR are structured with a very real potential for manipulation. When the facts come out, there is just one more reason not to trust the system. And if there is no trust, there is no system . Dr. Brock is not alone. Economists have thoroughly documented that failure to enforce the rule of law leads to a loss of trust ... which destroys economies. This is true whether it is in the West, in Nigeria or any other country. We're Number ... What? Economic historian Niall Ferguson notes : The World Economic Forum’s annual Global Competitiveness Index and, in particular, the Executive Opinion Survey on which it’s partly based ... includes 15 measures of the rule of law, ranging from the protection of private property rights to the policing of corruption and the control of organised crime. It’s an astonishing yet scarcely acknowledged fact that on no fewer than 15 out of 15, the United States now fares markedly worse than Hong Kong . In the Heritage Foundation’s Freedom Index, too, the U.S. ranks 21st in the world in terms of freedom from corruption, a considerable distance behind Hong Kong and Singapore . Perhaps the most compelling evidence of all comes from the World Bank’s Indicators on World Governance, which suggest that, since 1996, the United States has suffered a decline in the quality of its governance in three different dimensions: government effectiveness, regulatory quality and the control of corruption . Compared with Germany or Hong Kong, the U.S. is manifestly slipping behind . Indeed - as we've extensively documented - the rule of law is now as weak in the U.S. and UK as many countries which we would consider "rogue nations". See this , this , this , this , this , this , this , this , this , this and this . This is a sudden change. As famed Peruvian economist Hernando de Soto notes : In a few short decades the West undercut 150 years of legal reforms that made the global economy possible. How Did We Slip So Fast? Of course, the repeal of the basic laws which enforced the rule of law among financial players is a part of the problem. Virtually everyone - other than those currently working for the big banks or on their payroll - is calling for reinstatement of the separation between banks and speculative gambling. Free market libertarians - like everyone else - are demanding prosecution of criminal fraud using basic fraud laws. Yet the government has made it official policy not to prosecute fraud . People have lost trust in the system, because government corruption is as widespread as Wall Street corruption ... and those in power in D.C. have the same sociopathic traits as those they supposedly regulate on Wall Street. And as Professor Ferguson notes , draconian national security laws are one of the main things undermining the rule of law: We must pose the familiar question about how far our civil liberties have been eroded by the national security state – a process that in fact dates back almost a hundred years to the outbreak of the First World War and the passage of the 1914 Defence of the Realm Act. Recent debates about the protracted detention of terrorist suspects are in no way new. Somehow it’s always a choice between habeas corpus and hundreds of corpses. Of course, many of this decades' national security measures have not been taken to keep us safe in the "post-9/11 world": many of them started before 9/11 . And America has been in a continuous declared state of national emergency since 9/11, and we are in a literally never-ending state of perpetual war. See this , this , this and this . In fact, government has blown terrorism fears way out of proportion for political purposes, and "national security" powers have been used in many ways to exempt big Wall Street players from the rule of law rather than to do anything to protect us. Is it any wonder that we're still in an economic crisis? 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Guest Post: Let's Talk About Facts, Not Fear Submitted by Tyler Durden on 10/15/2012 13:19 -0400 Via Simon Black of SovereignMan blog , Let’s step away from the noise for a moment and look at the big picture. This isn’t about doom and gloom, or fear, but objective facts. Undoubtedly, the Western hierarchy dominated by the United States is in a completely unsustainable situation. Across the West, national governments have obligations they simply cannot meet—both to their citizens and their creditors. In the UK , national government borrowing is already 22% higher than at this same point last year, a record year for borrowing. Meanwhile, the UK’s budget deficit for August hit a record high. In France , the new government of Francois Hollande passed a ‘historic’ and ‘austere’ budget that is still posting a deficit of 3% of GDP. That’s including a 75% tax on incomes exceeding one million euros. In Japan , the government is mulling legislation that will fund 40% of the budget with ‘deficit-financing’ bonds. In the United States , the government recently hit $16 trillion in debt about six weeks ago, after reaching the $15 trillion mark last November. It took 200 years to accumulate the first trillion in debt and 286 days to accumulate the most recent trillion. Each of these countries has a debt level that exceeds 90% of GDP– the historic point of no return . More importantly, each of these countries also has to borrow money simply to pay interest on money they’ve already borrowed. This is important because it makes the problems multiple. At the beginning of the 1780s, the French monarchy was spending around 30% of tax revenue to service its debt. Eight years later when the revolution began, they were spending 62%. The next 26-years in France were filled with internal civil war , external war with Austria and Prussia, hyperinflation, crime, social unrest, and Robespierre’s genocidal dictatorship. In the 19th century, the Ottoman Empire faced an even steeper financial decline . In just 11-years, the Ottoman central government went from spending 17% of its tax revenue on interest payments to spending over 52% of its tax revenue on interest payments. Then came default, in just eleven years. In the US, debt service is also rising. According to the Government Accountability Office’s figures, the US government was spending 9% of revenue to service the debt in 2002. Throughout most of the last decade, in fact, the US government spent roughly 9% of its tax revenue on debt service. But in 2009, the figure hit 9.75%, then 10.5% in 2010, then 11.5% in 2011. For the fiscal year that just closed on September 30, the Bureau of Public Debt reported cumulative interest expense of $375.8 billion on income of $2.45 trillion. This is a rate of 15.3% . See the trend? But it’s not just debt burdens that are problematic. ‘Rich’ countries in the West are also rapidly debasing their currencies, spawning tomes of regulatory impediments, restricting the freedoms of their citizens, aggressively expanding the powers of the state, and engaging in absurd military folly from Libya to the South China Sea. Once again, this is not the first time history has seen such conditions . In our own lifetimes, we’ve seen the collapse of the Soviet Empire, the tragi-comical hyperinflation in Zimbabwe, and the unraveling of Argentina’s millennial crisis. Plus we can study what happened when empires from the past collapsed. The conditions are nearly identical. Is our civilization so different that we are immune to the consequences? Probably not. And the cycle that has befallen so many great powers before us– decline, collapse, turmoil, and reset– will likely happen in our time too . But it’s not the end of the world. Not by a long shot. It’s a complete reshuffling of the deck . A brand new game with brand new rules. And the old way of doing things (like printing money backed by nothing) will be resigned to history’s waste bin. One of the things that we see frequently in history is that this transition occurs gradually, then very rapidly. Think about the Soviet Union, which you may recall. One day, they were the greatest threat to the planet. The next day, the wall came down. It happened so quickly. It’s like what Hemingway said about bankruptcy– it happens slowly at first, then all at once. Unfortunately we don’t know where we are along this path . And we won’t know until we’re over the cliff on the way down. Everything will feel normal until then. Argentina’s millennial crisis is a great example of this. Argentines woke up in December 2001 and everything still felt normal. Within a few weeks, they had defaulted on their debt, the currency collapsed, and people were out in the streets doing battle with the police. But since we don’t know precisely when things may happen, it’s a sharp idea to take responsible action that makes sense no matter what , even if all of the world’s problems are miraculously solved. Things like: - Owning gold and silver (and storing it abroad) - Acquiring agricultural property overseas. - Holding savings in a strong, stable foreign bank - Looking at healthy economies for top quality investment and business opportunities - Improving tax efficiency and asset protection with proper foreign structures - Developing relationships with like-minded people - Learning valuable skills - Traveling a bit and exploring potential relocation options - Increasing your digital privacy - Considering dual residency and nationality options All of these steps make sense no matter what happens . Yet, should the thesis hold, and we indeed find ourselves on the precipice, then you and your family will be in the best possible position. And that too is a fact. 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US Totalitarian State Wins After All: Obama Reinstates NDAA Military Detention Provision Submitted by Tyler Durden on 09/18/2012 13:23 -0400 Barack Obama FBI First Amendment Freedom of Information Act Middle East national intelligence national security New York City New York Times Obama Administration President Obama White House Just over a week ago, we wrote of the challenge to Obama's NDAA totalitarian bill. Hope remained that Chris Hedges' view of the indefinite detention as "unforgivable, unconstitutional, and exceedingly dangerous" would bolster judgment. However, as Russia Today reports , a lone appeals judge bowed down to the Obama administration late Monday and reauthorized the White House's ability to indefinitely detain American citizens without charge or due process . On Monday, the US Justice Department asked for an emergency stay on the previous Chris Hedges'-driven order, and hours later US Court of Appeals for the Second Circuit Judge Raymond Lohier agreed to intervene and place a hold on the injunction. The stay will remain in effect until at least September 28, when a three-judge appeals court panel is expected to begin addressing the issue. It would appear the total fascist takeover of Amerika is drawing nearer by the day. Some background : What is ironic, is that in the ongoing absolute farce that is the theatrical presidential debate, there hasn't been one word uttered discussing precisely the kind of creeping totalitarian control, and Orwellian loss of constitutional rights, that the biparty-supported NDAA would have demanded out of the US republic. Why? Chris Hedges said it best: The oddest part of this legislation is that the FBI, the CIA, the director of national intelligence, the Pentagon and the attorney general didn’t support it . FBI Director Robert Mueller said he feared the bill would actually impede the bureau’s ability to investigate terrorism because it would be harder to win cooperation from suspects held by the military. “The possibility looms that we will lose opportunities to obtain cooperation from the persons in the past that we’ve been fairly successful in gaining,” he told Congress. But it passed anyway. And I suspect it passed because the corporations, seeing the unrest in the streets, knowing that things are about to get much worse, worrying that the Occupy movement will expand, do not trust the police to protect them. They want to be able to call in the Army. And now they can . Via RT, Obama wins right to indefinitely detain Americans under NDAA : A lone appeals judge bowed down to the Obama administration late Monday and reauthorized the White House’s ability to indefinitely detain American citizens without charge or due process. Last week, a federal judge ruled that an temporary injunction on section 1021 of the National Defense Authorization Act for Fiscal Year 2012 must be made permanent, essentially barring the White House from ever enforcing a clause in the NDAA that can let them put any US citizen behind bars indefinitely over mere allegations of terrorist associations. On Monday, the US Justice Department asked for an emergency stay on that order, and hours later US Court of Appeals for the Second Circuit Judge Raymond Lohier agreed to intervene and place a hold on the injunction. The stay will remain in effect until at least September 28 , when a three-judge appeals court panel is expected to begin addressing the issue On December 31, 2011, US President Barack Obama signed the NDAA into law, even though he insisted on accompanying that authorization with a statement explaining his hesitance to essentially eliminate habeas corpus for the American people. “The fact that I support this bill as a whole does not mean I agree with everything in it,” President Obama wrote. “ In particular, I have signed this bill despite having serious reservations with certain provisions that regulate the detention, interrogation, and prosecution of suspected terrorists .” A lawsuit against the administration was filed shortly thereafter on behalf of Pulitzer Prize-winning journalist Chris Hedges and others, and Judge Forrest agreed with them in district court last week after months of debate. With the stay issued on Monday night, however, that justice’s decision has been destroyed. With only Judge Lohier’s single ruling on Monday, the federal government has been once again granted the go ahead to imprison any person "who was part of or substantially supported al-Qaeda, the Taliban or associated forces that are engaged in hostilities against the United States or its coalition partners" until a poorly defined deadline described as merely “the end of the hostilities.” The ruling comes despite Judge Forrest's earlier decision that the NDAA fails to “pass constitutional muster” and that the legislation contained elements that had a "chilling impact on First Amendment rights” Because alleged terrorists are so broadly defined as to include anyone with simple associations with enemy forces, some members of the press have feared that simply speaking with adversaries of the state can land them behind bars. "First Amendment rights are guaranteed by the Constitution and cannot be legislated away," Judge Forrest wrote last week. " This Court rejects the Government's suggestion that American citizens can be placed in military detention indefinitely, for acts they could not predict might subject them to detention ." Bruce Afran, a co-counsel representing the plaintiffs in the case Hedges v Obama, said Monday that he suspects the White House has been relentless in this case because they are already employing the NDAA to imprison Americans, or plan to shortly. “A Department of Homeland Security bulletin was issued Friday claiming that the riots are likely to come to the US and saying that DHS is looking for the Islamic leaders of these likely riots,” Afran told Hedges for a blogpost published this week. “It is my view that this is why the government wants to reopen the NDAA — so it has a tool to round up would-be Islamic protesters before they can launch any protest, violent or otherwise. Right now there are no legal tools to arrest would-be protesters. The NDAA would give the government such power. Since the request to vacate the injunction only comes about on the day of the riots, and following the DHS bulletin, it seems to me that the two are connected . The government wants to reopen the NDAA injunction so that they can use it to block protests.” Within only hours of Afran’s statement being made public, demonstrators in New York City waged a day of protests in order to commemorate the one-year anniversary of the Occupy Wall Street movement. Although it is not believed that the NDAA was used to justify any arrests, more than 180 political protesters were detained by the NYPD over the course of the day’s actions. One week earlier, the results of a Freedom of Information Act request filed by the American Civil Liberties Union confirmed that the FBI has been monitoring Occupy protests in at least one instance, but the bureau would not give further details, citing that decision is "in the interest of national defense or foreign policy." Josh Gerstein, a reporter with Politico, reported on the stay late Monday and acknowledged that both Forrest and Lohier were appointed to the court by President Obama . As Chris Hedges said so well last week as he sued Barack Obama: This demented “war on terror” is as undefined and vague as such a conflict is in any totalitarian state. Dissent is increasingly equated in this country with treason. Enemies supposedly lurk in every organization that does not chant the patriotic mantras provided to it by the state. And this bill feeds a mounting state paranoia. It expands our permanent war to every spot on the globe. It erases fundamental constitutional liberties. It means we can no longer use the word “democracy” to describe our political system. The supine and gutless Democratic Party, which would have feigned outrage if George W. Bush had put this into law, appears willing, once again, to grant Obama a pass. But I won’t. What he has done is unforgivable, unconstitutional and exceedingly dangerous. The threat and reach of al-Qaida—which I spent a year covering for The New York Times in Europe and the Middle East—are marginal, despite the attacks of 9/11. The terrorist group poses no existential threat to the nation. It has been so disrupted and broken that it can barely function. Osama bin Laden was gunned down by commandos and his body dumped into the sea. Even the Pentagon says the organization is crippled. So why, a decade after the start of the so-called war on terror, do these draconian measures need to be implemented? Why do U.S. citizens now need to be specifically singled out for military detention and denial of due process when under the 2001 Authorization for Use of Military Force the president can apparently find the legal cover to serve as judge, jury and executioner to assassinate U.S. citizens, as he did in the killing of the cleric Anwar al-Awlaki in Yemen? Why is this bill necessary when the government routinely ignores our Fifth Amendment rights—“No person shall be deprived of life without due process of law”—as well as our First Amendment right of free speech? How much more power do they need to fight “terrorism”? Fear is the psychological weapon of choice for totalitarian systems of power. Make the people afraid. Get them to surrender their rights in the name of national security. And then finish off the few who aren’t afraid enough. If this law is not revoked we will be no different from any sordid military dictatorship. Its implementation will be a huge leap forward for the corporate oligarchs who plan to continue to plunder the nation and use state and military security to cow the population into submission . 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