California Free Press

Water Main Breaks Cause Major Problems in San Diego and Nationwide

by John Lawrence

In the best of all possible worlds water main breaks would not happen. Local government would replace old water mains with new ones on a regular basis. That means that money for this and other infrastructure needs would be allocated systematically and appropriately. If we had our priorities straight, money for infrastructure would take precedence over money for football stadiums and convention centers. But in San Diego and in fact throughout the US this rational approach is to be seen rarely if at all. The Romans gave their citizens bread and circuses to keep them in line. Here in fact only circuses seem to be necessary.

Instead of replacing creaky water mains on a regular basis, water main breaks occur on a regular basis. The most recent one occurred only a few days ago on Shelter Island, home of posh restaurants and yacht clubs. Oh, how the patrons were inconvenienced! Last Friday the rupture left most of Shelter Island without functional plumbing through the late morning and the entire afternoon. The failed 63-year-old concrete pipeline began drenching the roadway in the 2300 block of Shelter Island Drive about 9 a.m., according to the San Diego Water Department. Workers determined that a corroded connector attaching two segments of the 12-inch-diameter main was the problem.

On January 14 a water main break in Little Italy shut down businesses there. Nearly 20 restaurants, six apartments and five other businesses were without water for most of the day. Fox News reported:

Trolley service between the Santa Fe Depot and Middletown Street was temporarily suspended, Metropolitan Transit Services officials said.

Several businesses along India Street were flooded with several inches of water.

“Not much you can do when you have water flowing in everywhere…about six inches up to my leg so I got soggy socks right now,” said Craig Mann, area manager for Burger Lounge restaurant.

Mitigation crews dried the inside of the business and checked for potential water and mold damage.

“None of the water got into the food production areas, it’s only on the ground so on that end it’s only superficial,” Mann said. “The health department has been on the street checking with the businesses … cleaning and sanitizing. We should be back open tomorrow.”

Well, this is par for the course. A lot of inconvenience because there are no adults in charge of repairing and replacing our infrastructure. They only tend to the fantasy land business of new football stadiums and new convention centers which translates into supporting billionaires in tights crashing into each other (giving each other concussions) and supporting the hotel and restaurant industry by guaranteeing a regular flow of tourist dollars. People who actually live in San Diego are given short shrift. Repairing infrastructure is not as romantic, and we live in a fairy land where spectator sports and giving money to billionaires is more important than taking care of the needs of the hoi polloi.

In the US a water main breaks every two minutes. That's a lot of water wasted. Besides, the cost of fixing a problem after it occurs is much more than that of fixing it in advance. We're penny wise and pound foolish. Not too smart. But then hoopla and fol de rol take precedence over rational thinking and orderly planning. We will be entertained at all costs, even the cost of being inconvenienced or perhaps even killed by falling bridges and pot holed roadways.

On September 3, 2014 there was an enormous water main break in San Diego's Birdland community in Serra Mesa when an 18 inch cast iron pipe broke. Roughly 2,600 customers had water service disrupted including four hospitals, among them Sharp Memorial, Sharp Mary Birch and Sharp Mesa Vista.  At Rady Children's Hospital, the outage in water service happened while one surgery was underway. Water was also out at Juvenile Hall. Some cars parked on the road had water up to their bumpers. What a mess, eh?

The biggest and costliest water main break over the past eight years was on Polk Street in North Park on March 1, 2010. An estimated 24 million gallons flooded from a cast iron pipe into the street and surrounding homes. In all, the city paid about $1.4 million to make repairs, house people and settle property claims related to the main break.

Elsewhere in San Diego County a family was flooded out of their home after a water main break in Vista on September 24, 2014. Damage to the house was estimated at $100,000 with another $25,000 for furniture and furnishings. Vista firefighters gave the family a Target gift to help defray expenses.

On October 16, 2014 a massive sinkhole opened when a 30 inch water main broke in Oceanside. All northbound lanes on El Camino Real between Oceanside Blvd and Mesa Drive were shut down. A large storm drain pipe that runs atop the busted 30-inch water main was also damaged. It took about a week to open all lanes. A similar problem with a similar sinkhole happened on North River Road the previous year.

Since 2010, San Diego has paid at least $3.9 million for issues related to water main breaks. In 2013 alone, taxpayers shelled out $33,459 just for the cost of water that spilled into the street as a result of main breaks. The city estimates 6.6 million gallons gushed from ruptured mains in 2013. By comparison, that’s enough water for the average San Diegan for 205 years, according to the city’s estimated average daily use of 88 gallons per day.

As significant delivery lines are nearing the end of their service life across San Diego, mains are breaking at a pace of more than 100 a year, according to an analysis of city data by inewsource. Those breaks plus tens of thousands of leaks have sent an estimated 360 million gallons of water rushing or seeping into streets, homes and businesses between 2004 and 2012. And this at a time when water is getting scarcer and scarcer. We can't afford any more to waste water in this way.

San Diego has paid out at least $10 million to settle claims and pay contractors for repairs to private property that was damaged by water main breaks during the past eight years. More than $350,000 of that was to house people forced from their homes by the breaks.

The city maintains that it is too expensive to do the routine inspections of water lines to see which ones are perilously close to collapse and need replacing. The city has inspected only about 5 1/2 of its 505 miles of large transmission pipelines since 2005, and none of its 2,958-mile network of smaller distribution pipelines. The city doesn’t know exactly where the biggest problems are. So they just throw up their hands and fix them when they break down regardless of the damage, inconvenience and property loss to San Diego citizens. Here's a hint: replace all the 100 year old cast iron pipes first. The city needs to replace rupture prone cast iron pipes with PVC which is not as apt to rupture. Only about 51 miles of the most rupture-prone cast iron pipes have been replaced since 2007. There are 129 miles to go.

Here's an idea - smart pig technology, the kind that is used to inspect oil pipelines to see where the problems are:

Smart Pigs or Pipeline Inspection Gauges are large pieces of machinery pulled together with powerful technology that help with the maintenance of transmission pipelines. These pipeline pigging devices are major components to pipeline safety and accident prevention. These inspection tools provide data on the condition of pipelines which help gauge the health and integrity of the pipes. In a time where environmental protection is key and of global concern, smart pigs are the peacekeepers of the delicate relationship between pipelines and Mother Earth (and regulators). In addition, these smart pipeline pigs make sure that transmission of the product doesn't stop due to pipeline integrity issues, which can be disasterous [sic] to the bottom line.

The same technology used in oil pipelines could be used in water pipelines obviating the necessity of digging up the pipeline in order to inspect it.

There are not many paid lobbyists lobbying for replacing old cast iron pipelines before they rupture like there are lobbying for new football stadiums and additions to convention centers. The wheelers and dealers will lobby the city to get their way first. Somehow there is always money available for such purposes while money for infrastructure is located in the pauper's economy of vanishing funds. Glitz and glamour predominate over levelheaded prudence as befits America's finest city and second happiest place on earth (next to Disneyland). But hey, at least there's no measles.

Banking Idea

Rich Buckley, Livermore, CA                                                           

from The Independent                                    

Let's steal North Dakota's banking idea. Attorney and author Ellen Brown, may have stumbled upon a UC budget solution for Napolitano and Gov. Brown in her book, "The Public Bank Solution: From Austerity to Prosperity." Their public owned bank spins off handsome profits to North Dakotans.

                                                                                                                                                                                                                                                             

North Dakota has a state constitution that requires state tax money receipts to be placed in a public owned bank, which the state owns. They run the bank like a real bank, you can take out a loan for private use. North Dakotans seem to receive an annual net benefit to help subsidize its other government services.

There is a rule I think surfaces as self-evident when evaluating banking systems: not only must you follow the money, but you must task yourself to also follow the wealth.

Jump back in time to before the Rothschild banking family came to America to start our current privately owned Federal Reserve that drains our wealth ..... "Robert L. Owen, former chairman, Committee on Banking and Currency, United States Senate, explains the matter on page 98 of Senate Document No. 23. He states that when associates of the Rothschild’s asked (Ben) Franklin how he accounted for the prosperous conditions prevailing in the colonies, he replied : “That is simple — In the Colonies we issue our own money. It is called Colonial Script — We issue it in proper proportion to the demands of trade and industry.”

"Robert L. Owen remarked that not very long after the Rothschilds heard of this they realized the opportunity to exploit the situation with considerable profit to themselves. The obvious thing to do was to have a law passed prohibiting the Colonial officials from issuing their own money and make it compulsory for them to obtain the money they required through the medium of the Banks."....and therein remains our captivity to this day! The Rothchild Family controlled Federal Reserve constantly drains wealth from its nation clients. Greenland just last year exited this international banking system, withdrawing from the European Community, and formed their own bank. Greece seems to have realized the same thing as voters there just last week rejected the European Community and its 50% unemployment austerity reality.

Maybe Californians can partly escape from this centuries old Rothchild banking captivity scheme still enslaving us in endless debt while draining our wealth. Let's form our own public owned bank in California.

California collects annually about $112-billion at the state level. That ought to start the ball rolling; not all this money gets paid back out immediately.

It is not unreasonable to see that a California state owned (public owned) bank, similar to North Dakota's would likely kick back into the public trough enough profit to subsidize all of the UC System tuition hikes...maybe with a little left over for community colleges to boot. Let's try it!

If you agree perhaps notify your state legislators and Governor Brown.

Extreme Weather Watch: 2014 Hottest Year on Record

by John Lawrence

It's official: NOAA and NASA have confirmed that 2014 was the hottest year on record. Despite the fact of Arctic cold winters on the US east coast, the average earth surface temperature was the hottest on record. Those cold temperatures were more than made up for elsewhere. The fact that the three hottest years on record are 2014, 2010 and 2005 points in the direction that climate change is indeed a reality, a reality that is only getting worse as time goes on.

The 10 warmest years have all occurred since 1997, a reflection of the relentless planetary warming that scientists say is a consequence of human activity. Climate change deniers have pointed to 1998 as the year they say the earth stopped warming. Despite the fact that 1998 was the hottest year on record up to that point, that record has since been broken ... many times!

Oceans were unusually warm everywhere except Antarctica fueling extreme Pacific ocean storms. Since the year 2000 there have been seven major typhoons in the Phillipines, the country most exposed to deadly storms in the world. These storms have cost between $193 million and $2.86 billion in damages and clean-up each.

The remarkable thing about 2014 is that the heat record did not occur during an El Nino year which is the type of weather system that usually produces heat records. The next time there is an El Nino, records will probably be blown away.

According to the New York Times:

[Scientists] expect the heat to get much worse over coming decades, but already it is killing forests around the world, driving plants and animals to extinction, melting land ice and causing the seas to rise at an accelerating pace.

“It is exceptionally unlikely that we would be witnessing a record year of warmth, during a record-warm decade, during a several decades-long period of warmth that appears to be unrivaled for more than a thousand years, were it not for the rising levels of planet-warming gases produced by the burning of fossil fuels,” Michael E. Mann, a climate scientist at the Pennsylvania State University, said in an email.

As heat records continue to pile up, climate change deniers will have an increasingly tough time explaining their position. Berkely Earth has shown that the rise in average world land temperatures is approximately 1.5 degrees C in the past 250 years, and about 0.9 degrees in the past 50 years.

As a result of recent calculations, many scientists now say that sea levels are likely to rise perhaps three feet by 2100 — an increase that, should it come to pass, would pose a threat to coastal regions the world over. A rise of three feet would inundate low-lying lands in many countries rendering some areas uninhabitable. It would cause coastal flooding of the sort that now happens once or twice a century to occur every few years. It would cause much faster erosion of beaches, barrier islands and marshes. It would contaminate fresh water supplies with salt.

Coastal cities like New York, Miami, London, Cairo, Bangkok, Venice and Shanghai could be inundated. Many areas of the US east coast would be subject to punishing storm surges on a yearly basis. Melting ice in Greenland seems to be accelerating which is an ominous sign because, if Greenland's ice disappears, that alone could raise sea levels worldwide by 20 feet. The fact that 2014 saw seven straight months of record high ocean temperatures from May to November bodes ill for polar glaciers.

Sea levels have varied by hundreds of feet in the past but that was before humans evolved.

With the waxing and waning of ice ages, driven by wobbles in the earth’s orbit, sea level has varied by hundreds of feet, with shorelines moving many miles in either direction. “We’re used to the shoreline being fixed, and it’s not,” said Robin E. Bell, a scientist at the Lamont-Doherty Earth Observatory of Columbia University.       

But at all times in the past, when the shoreline migrated, humans either had not evolved yet or consisted of primitive bands of hunter-gatherers who could readily move. By the middle of this century, a projected nine billion people will inhabit the planet, with many millions of them living within a few feet of sea level.

Melting glaciers will also affect the world's fresh water supply.The Himalayas supply water to 1.5 billion of the earth's people through three major rivers: the Indus, the Ganges and the Yangtze. Glaciers in the Andes Mountains supply the Amazon River, and glaciers in the Alps provide the water for the Rhine, the Rhone and the Danube. Shipping across Europe wouldn't be possible without adequate water flows in these rivers.

The drought in California is the worst in over 1200 years. Record wildfires were experienced in Washington State including the largest wildfire in the state's history with 400 square miles of land burned and 300 structures lost. Major floods and hurricanes occurred throughout the world. 2015 promises more of the same.

Will Republicans provide the funds to deal with emergencies that extreme weather events will cause in the next two years while they are controlling Congress and to a large extent the fate of the nation? I don't think so. Adaptation and mitigation will be ignored. The red states stand to lose the most as tornadoes wreak havoc in Tornado Alley. People there may be left to their own devices as Republicans in Congress, climate change deniers all, will also not be very charitable in putting up funds to assist those who have experienced weather related extreme events.

 

Redefining the American Dream

by John Lawrence

The American Dream is the ideological underpinning of the middle class. Now that the middle class is disappearing, it no longer makes sense as historically defined. Thom Hartmann (Rebooting the American Dream) and Hedrick Smith (Who Stole the American Dream) have defined the American Dream as a good job at good wages plus benefits. They bemoan the fact that this has pretty much gone by the wayside in today's world. Well, it's time to get over it because the conditions that gave rise to middle class prosperity in America from 1945 to 1980 are not coming back.

The era in which the economic rewards from rising productivity were widely shared between workers and owners is over. Those good jobs resulted from the fact that unions put pressure on corporations. Private sector union membership reached a peak of about 35 percent of the labor force in the 1950s. Today union membership, especially in the private sector, has fallen off to less than 10%. The decline of the middle class mirrors the decline in union membership. Today in a globalized economy, corporations employ workers wherever in the world they can get them for cheapest.

During the heyday of the middle class, it was possible to own a house, a car, eat out once a week, take a vacation once a year, send a child to college without going into debt, have health care and a pension that would pay out monthly benefits for life - all in a one job family in which the wife could stay home with the children and make pies and cakes. Then Reagan was elected President in 1980 and the War on the Middle Class began. Taxes that had been progressive during the middle class era became regressive. Instead of the transfer of tax money from rich to poor, the opposite started to occur. According to Thom Hartmann this was the single biggest factor in impoverishing the middle class.

When we had heavily regulated and taxed capitalism in the post-war era, the largest employer in America was General Motors, and they paid working people what would be, in today's dollars, about $50 an hour with benefits. Reagan began deregulating and cutting taxes on capitalism in 1981, and today, with more classical "raw capitalism," what we call "Reaganomics," or "supply side economics," our nation's largest employer is WalMart and they pay around $10 an hour.

This is how quickly capitalism reorients itself when the brakes of regulation and taxes are removed - this huge change was done in less than 35 years.

The deunionization of America, a globalized work force and regressive taxation have all combined to decrease the middle class and undermine the American Dream. There is no use trying to get the conditions back that supported that dream. It ain't going to happen. However, it is possible to develop a new Weltanschauung or world view that doesn't have anything to do with trying to recreate the conditions that led to middle class prosperity in the past. This involves letting go of many of the assumptions that were productive in the past but today are completely dysfunctional.

One of these assumptions is that, if we prepare ourselves as students for a job, some benign employer will hire us. Under this assumption it's the employer's job to provide jobs for us, the employees. I call this employee consciousness wherein most people aspire to be employees, to work for somebody else. Today most employers have no responsibility whatsoever to their employees. Employees are hired "at will" which means they can get rid of you for no reason at all. So rather than get laid off at the age of 50 because some whippersnapper can do a better job than you can at half your pay rate, you're better off being self-employed from the start of your career. Create your own job. It'll be harder at first, but, as the years go by, you'll be much better off especially if you gear yourself from the very beginning to be your own boss and not delegate the job of bossing you to someone else.

Another assumption is that a college education is essential to a middle class lifestyle. No longer true. Today a college education is just a precursor to a lifetime of debt. Instead of starting off life debt free which was the case for most college students from World War II until Reagan's election, college students today start off life with a debt equal to a first mortgage. Better to start a career just out of high school and not waste four years in college for what amounts to a worthless piece of paper.

There are many jobs that can be done with just training acquired either at high school or during the high school years that end up paying more than those that require a college degree and which can be easily outsourced. Think local service type jobs rather than jobs with national or global pretensions. Plumbers, electricians and many other service jobs are more remunerative in the long run than jobs for which you need a college degree, and, instead of being laid off at the age of 50, you will have an asset - your business - which is salable at the age of 50.

The only good non-self-employed jobs are unionized jobs in the public sector. For instance New York City sanitation workers make around $90,000 a year. Becoming a garbage man is the most coveted job in the city. Over 90,000 people applied last year for the job of carting away NYC's garbage, but they only hire about 500 a year. It's actually harder to become a sanitation worker in New York City than it is to get into Harvard. Starting salary is about $34,000, but with overtime it averages about $47,000 the first year. After 5.5 years the salary jumps to an average of $89,000. This compares with an average salary for New York teachers which is $68,000.

Since sanitation workers also operate New York City's snow plows, there is ample opportunity for overtime pay. They also get 10% more for night shifts, double time for Sundays, 25 vacation days a year and unlimited sick leave. Sanitation workers in NYC have a very good health care plan and excellent pension benefits. And it's all because they have a very strong union. You can retire in 20 years. 71% of all government workers in New York state are unionized. That's the difference that unionization has made, and it explains the lack of wage growth in the deunionized private sector.

For those unwilling or unable to be self-employed or unable to win the lottery to become a NYC sanitation worker, consider a two year associate's degree from a community college which by the way President Obama wants to be free. Good luck with that. If wishes were horses, then beggars would ride. There's a wave of people with two year degrees in applied science earning as much or more in their first year after graduation than four year college graduates. According to collegemeasures.org, these two year degrees from a technical college are worth more in the job market than bachelor's degrees. In Texas the earnings difference between 2-year technical college graduates vs those with a bachelor's degree was on average $11,000. In Virginia it was $2000 and in Colorado it was $7000.

In Colorado the community college tuition is about $3600 per year, but the median wage for graduates in their first year of employment is $53,000, a significant cost/benefit advantage over four year colleges. Red Rock Community College near Denver has a water quality management program which almost guarantees graduates a good job since the City of Denver needs 1800 water quality workers in the next few years.

That portion of the American Dream that promised a lifetime pension after working for 30 years has been totally vitiated. The defined benefit pension which promised a fixed monthly amount for life has been replaced by the defined contribution pension or 401(k) in which the employee funds and manages his own retirement account. This might as well be called the undefined benefit pseudo pension as there is no guarantee that the amount of money in your account on retirement will last a lifetime. So what good is it if you find at the age of 85 that you've run out of money. We'll be seeing a lot of 85 year olds reduced to living on the streets since corporations have pulled the rug out from under the defined benefit plans. Now the employee, not the corporation, takes all the risk in the stock market.

401(k)s are do-it-yourself pensions. You invest your own money in the stock market in the hopes that your expertise in managing your portfolio will result in an adequate pension. Unfortunately, most employees have little expertise in that area. Hedrick Smith writes:

[The advent of 401(k)s] was a monumental transformation for the American middle class. "When the 401(k)s came in, there was a sea change, a huge shift in who was paying for retirement,"observed Brooks Hamilton. "In the old system, employers put up most of the money - 89%. The employees contributed 11%. Those figures are from the Department of Labor. Fast-forward to the 401(k) system and today, employees are paying more than half - 51% - and the companies, 49%. So there was a huge shift in costs from employers to employees - hundreds of billions of dollars."

The average employee has far less in his or her 401(k) than what will be needed over a lifetime especially if he or she lives into their 90s which is becoming increasingly common. The typical nest egg of those in their 60s with a 401(k) who are nearing retirement is around $79,000 according to The Center for Retirement Research at Boston College. This is far less than required to live a middle class lifestyle for the average life span.

Hedrick Smith sums up:

Retirement specialists like Brooks Hamilton and Alice Munnell question whether, in this turbulent economy, the task of financing retirement is too fraught with risk and too complicated for most average Americans, especially the millions who are gun-shy about financial markets.

So one of the advantages of employeehood, a secure retirement, has been taken away. Rather than live off a fixed sum of money at retirement, you need to do what the rich do: live on the return from your investment not the investment itself. It's up to you to acquire your own wealth from which to pay yourself a monthly stipend from the return on that wealth. That's the only way it will last as long as you need it. If you have a fixed pot of money like that which the 401(k) provides and you live off of it, you will be consuming your own seed capital. On the other hand if you own a rental which pays you $1000 a month in rent, that goes on in perpetuity and you can will that asset to your heirs. In other words you will never run out of money. Most of those depending on 401(k)s have the middle class mindset that you live off your life savings. This mindset and assumption needs to be changed. They will run out of money at some point unless they die quickly after retirement.

It is better to acquire property development skills like carpentry, plumbing, electrical etc in high school so that you can add value to a piece of property and rent it out thus acquiring a life time cash flow. You can't add value to a stock portfolio and it is subject to the vagaries of the market including bubbles and subsequent crashes. That's where self-employment in the building trades is invaluable. You can build wealth by adding value. And all the learning tools are readily available in the library or on the internet. The ancillary benefit of learning one or more trades is that you can build wealth on the side in addition to earning a living.

Thom Hartmann and Hedrick Smith are good analysts but their solutions amount to wanting the Federal government to bring back the good old days by creating good jobs at good wages. Yeah, it would be nice to have the Federal government put up $2 trillion to repair or rebuild infrastructure. It's just not going to happen. The Federal government and a lot of state governments have been captured by rich billionaires and corporations that have more economic power than most countries and they don't want it to happen. It would be nice to tax the rich and transfer money to the poor. It's not going to happen. So despite the imprecations of Bernie Sanders, Elizabeth Warren and other voices crying out in the wilderness, their solutions are just pipe dreams.

Wishing does not make it so. We're in a totally different environment than the one after World War II when veterans could go to college and buy houses with veterans' benefits. Today most jobs are being reduced to Wal-Mart type service jobs. But you can still make good money in a service job providing it's a self-employed service job and you're servicing the local economy.

Forget about STEM (Science, Technology, Engineering, Math) jobs. A few short years after graduating from college, skills in those areas will be obsolete and corporations will let you go because you will be deadwood. They want recent college graduates. Cutting edge skill sets don't benefit America as some would suggest. They only benefit American corporations which have absolutely no loyalty to their employees or in fact to America. They are doing everything they can including moving their headquarters out of the US to avoid paying taxes. Instead of being concerned about global competition and America's winning, be concerned about the local economy and contributing to it while at the same time earning a living and creating wealth for yourself. If an enterprise requires a number of workers to make it viable, form it as a cooperative and share the profits.

 

 

 

 

The Bail-In: How You and Your Money Will Be Parted During the Next Banking Crisis

by John Lawrence

There will be no more taxpayer bailouts for the Big Wall Street banks. That much has been established by the lobbied to death Dodd-Frank banking reform (yeah, right) bill. However, instead of taking money from the government (taxpayers), the principal has been established that the next source of money for profligate banks will be your deposit accounts. Yeah, that's right, the money to stabilize the banking sector during the next crisis will come out of your savings and checking accounts. To add insult to injury - since the banks pay you zero percent on your savings account in the first place - the banks have the right to confiscate your funds if they crash the economy again as they did in 2008. Remember the Great Recession? It's coming again to a bank near you.

How can they do this, you ask? Simple. When you deposit money in a checking or savings account, that money no longer belongs to you. Technically and legally, it becomes the property of the bank, and the bank just issues you what amounts to an IOU. As far as the bank is concerned, it's an unsecured debt. The way Dodd-Frank has managed to screw things around, derivatives (bets banks have made in the Wall Street casino) have priority over your checking and savings accounts when it comes to paying off their debts. And don't think that the FDIC (Federal Deposit Insurance Corporation) will save your money. The assets of the FDIC are miniscule (in the billions) compared to the valuation of outstanding derivatives (in the trillions). Your deposits are protected only up to the $250,000 insurance limit, and also only to the extent that the FDIC has the money to cover deposit claims or can come up with it.

Ellen Brown asks, "What happens when Bank of America or JPMorganChase, which have commingled their massive derivatives casinos with their depositary arms, is propelled into bankruptcy by a major derivatives fiasco?  These two banks both have deposits exceeding $1 trillion, and they both have derivatives books with notional values exceeding the GDP of the world." The answer is a Cypress style bail-in. You might recall that money was taken out of depositor's accounts during the last banking crisis in Cypress. These depositors were mainly Russian oligarchs so what the heck. Now this principle has been extended to depositors in the big Wall Street banks and actually to depositors all over the world. Now is a good time to take your money out of banks such as Bank of America, JPMorgan Chase and Citibank and deposit it in smaller banks or credit unions. Otherwise, $1 trillion of depositors' funds could go bye-bye, and that's not small change.

Ellen Brown elucidates:

According to an International Monetary Fund paper titled “From Bail-out to Bail-in: Mandatory Debt Restructuring of Systemic Financial Institutions”:

[B]ail-in . . . is a statutory power of a resolution authority (as opposed to contractual arrangements, such as contingent capital requirements) to restructure the liabilities of a distressed financial institution by writing down its unsecured debt and/or converting it to equity. The statutory bail-in power is intended to achieve a prompt recapitalization and restructuring of the distressed institution.

The language is a bit obscure, but here are some points to note:

• What was formerly called a “bankruptcy” is now a “resolution proceeding.” The bank’s insolvency is “resolved” by the neat trick of turning its liabilities into capital. Insolvent TBTF banks are to be “promptly recapitalized” with their “unsecured debt” so that they can go on with business as usual.
• “Unsecured debt” includes deposits, the largest class of unsecured debt of any bank. The insolvent bank is to be made solvent by turning our money into their equity – bank stock that could become worthless on the market or be tied up for years in resolution proceedings.
• The power is statutory. Cyprus-style confiscations are to become the law.
• Rather than having their assets sold off and closing their doors, as happens to lesser bankrupt businesses in a capitalist economy, “zombie” banks are to be kept alive and open for business at all costs – and the costs are again to be borne by us.

So as far as you, the depositor, are concerned, your money in checking and savings accounts is the bank's "unsecured debt." You will have to stand in line behind trillions of dollars of derivative payouts before your checking and savings accounts will be made whole. Both the Bankruptcy Reform Act of 2005 and the Dodd Frank Act provide special protections for derivative counterparties, giving them the legal right to demand collateral to cover losses in the event of insolvency. They get first dibs, even before the secured deposits of state and local governments. Your chances of recovering your money are about as great as the chances of a snowball in hell.

Since most poor and middle class people have a major portion of their assets in checking and savings accounts while rich people have the major portion in real estate, stocks and bonds, who do you think will be most affected by bail-ins? You guessed it: the poor and middle class will be hit the hardest. And don't think your money will be safe in a bank's safe deposit box. The banks have the right to go into your safe deposit box and take your money out of it.

Pension funds, which were the biggest suckers for Wall Street during the last banking crisis, will also be drained by Wall Street during the next one. Their funds will be subject to confiscation as bail-ins as well since many of the bonds they purchase are subject to being converted to bail-inable deposits if the banks really need the money which they no doubt will sooner or later when the derivatives bubble goes bust.

So taxpayers you can sleep soundly as taxpayer bail-outs have been taken off the table in the next banking crisis. Whew, that's a relief. But if your savings get taken over by the bank, ouch, that'll hurt even more than a widely distributed taxpayer bail-out which might add a couple of dollars to your income tax. Be careful of what you wish for. It could be even worse than what you already had.

There is a better way. Let the zombie banks go bankrupt instead of confiscating depositor funds. A better way is to create public banks and transfer funds from Wall Street. Then the gambling casino with all the attendant risks for bail-outs and bail-ins comes to an abrupt halt. Profits go to the local community or to the state in the case of North Dakota, the nations's first and oldest public bank..

On a personal note, a representative of my bank, Union Bank, called me a few weeks ago to inform me that I was only allowed five debits per month out of my savings account and that I had used up my five debits for December. So I would have to wait until January before I was allowed to take any more money out of my savings account. I was furious. "It's my money isn't it, and besides you call it a savings account. It gets zero interest." He kept repeating that I was only allowed five debits per month and said it was a Federal law.

Well, this means nothing because it's well known that all Federal banking regulations are written by lobbyists for the banking industry in the interests of the banking industry. I asked him what was the rationale for this regulation. He said, "The government doesn't want you to spend your money too fast." Hmmm. Since when does Big Brother have an interest in making sure I don't spend my money? I don't think so.

It probably has more to do with keeping your money in the bank so that the bank can meet its currency reserve requirements or possibly slow down the exodus of money from worthless savings accounts which pay no interest or even perhaps to confiscate your money for bail-ins during the next banking crisis at which time there will be undoubtedly a run on the banks 1930s style. Whoops, if you've already had your five debits, you won't be able to get your hands on your money before it's "bailed-in."

 

 

 

 

The Republican’s Magical Mystery Tour (Starting Next Week)

by Robert Reich

Sunday, December 28, 2014

According to reports, one of the first acts of the Republican congress will be to fire Doug Elmendorf, current director of the non-partisan Congressional Budget Office, because he won’t use “dynamic scoring” for his economic projections.

Dynamic scoring is the magical-mystery math Republicans have been pushing since they came up with supply-side “trickle-down” economics.

It’s based on the belief that cutting taxes unleashes economic growth and thereby produces additional government revenue. Supposedly the added revenue more than makes up for what’s lost when Congress hands out the tax cuts.

Dynamic scoring would make it easier to enact tax cuts for the wealthy and corporations, because the tax cuts wouldn’t look as if they increased the budget deficit.

Incoming House Ways and Means Chairman Paul Ryan (R-Wis.) calls it “reality-based scoring,” but it’s actually magical scoring – which is why Elmendorf, as well as all previous CBO directors have rejected it.

Few economic theories have been as thoroughly tested in the real world as supply-side economics, and so notoriously failed.

Ronald Reagan cut the top income tax rate from 70 percent to 28 percent and ended up nearly doubling the national debt. His first budget director, David Stockman, later confessed he dealt with embarrassing questions about future deficits with “magic asterisks” in the budgets submitted to Congress. The Congressional Budget Office didn’t buy them.

George W. Bush inherited a budget surplus from Bill Clinton but then slashed taxes, mostly on the rich. The CBO found that the Bush tax cuts reduced revenues by $3 trillion.

Yet Republicans don’t want to admit supply-side economics is hokum. As a result, they’ve never had much love for the truth-tellers at the Congressional Budget Office.

In 2011, when briefly leading the race for the Republican presidential nomination, Newt Gingrich called the CBO “a reactionary socialist institution which does not believe in economic growth, does not believe in innovation and does not believe in data that has not been internally generated.”

The CBO has continued to be a truth-telling thorn in the Republican’s side.

The budget plan Paul Ryan came up with in 2012 – likely to be a harbinger of what’s to come from the Republican congress – slashed Medicaid, cut taxes on the rich and on corporations, and replaced Medicare with a less well-funded voucher plan.

Ryan claimed these measures would reduce the deficit. The Congressional Budget Office disagreed.

Ryan persevered. His 2013 and 2014 budget proposals were similarly filled with magic asterisks. The CBO still wasn’t impressed.  

Yet it’s one thing to cling to magical-mystery thinking when you have only one house of Congress. It’s another when you’re running the whole shebang. 

Now that Elmendorf is on the way out, presumably to be replaced by someone willing to tell Ryan and other Republicans what they’d like to hear, the way has been cleared for all the magic they can muster.

In this as in other domains of public policy, Republicans have not shown a particular affinity for facts.

Climate change? It’s not happening, they say. And even if it is happening, humans aren’t responsible. (Almost all scientists studying the issue find it’s occurring and humans are the major cause.)

Widening inequality? Not occurring, they say. Even though the data show otherwise, they claim the measurements are wrong.

Voting fraud? Happening all over the country, they say, which is why voter IDs and other limits on voting are necessary. Even though there’s no evidence to back up their claim (the best evidence shows no more than 31 credible incidents of fraud out of a billion ballots cast), they continue to assert it.  

Evolution? Just a theory, they say. Even though all reputable scientists support it, many Republicans at the state level say it shouldn’t be taught without also presenting the view found in the Bible.

Weapons of mass destruction in Iraq? America’s use of torture? The George W. Bush administration and its allies in Congress weren’t overly interested in the facts.

The pattern seems to be: if you don’t like the facts, make them up.

Or have your benefactors finance “think tanks” filled with hired guns who will tell the public what you and your patrons want them to say.

If all else fails, fire your own experts who tell the truth, and replace them with people who will pronounce falsehoods.

There’s one big problem with this strategy, though. Legislation based on lies often causes the public to be harmed.

Not even “truthiness,” as Stephen Colbert once called it, is an adequate substitute for the whole truth.

New York State Bans Fracking: California Next?

By John Lawrence

In a huge victory for the environmental movement, New York State Governor Andrew Cuomo has banned fracking. I guess President Obama is not the only one that can get things accomplished by executive order. Experts have made analyses that identified contamination threats to water, soil and air, the absence of reliable health studies or proof that drillers can protect the public, as well as diminishing economic prospects. All good reasons for the public to demand a fracking ban.

Fracking is also being delivered a death knell by market forces. Since it costs more to access oil by fracking than it does by conventionsl drilling, if the price per barrel falls below a certain point, fracking becomes uneconomical. Lo and behold, thanks to the Saudis who have been keeping production up, the cost per barrel has fallen to around $60. It has to be higher than $80. for fracking to be profitable. Hooray and Halleluja! Who would have thought that market forces, the Saudis and the environmental movement would all have combined with remarkable synergy to put an end to fracking? The movie Gasland also helped as well as high profile celebrities like Mark Ruffalo.

None other than Yoko Ono and her son Sean Lennon, son of Beatles' legend John Lennon, called for Governor Cuomo to ban fracking. It seems like high powered celebrities may have been listened to in high places where the hoi polloi had little success. Their group Artists against Fracking included such notables as Lady Gaga, Jimmy Fallon, Paul McCartney and Alec Baldwin, all of whom added their voices and names to the group along with some 200 others.

Huffington Post reported:

Conservation Commissioner Joe Martens said he'll issue the ban early next year. He said 63 percent of the state's 12 million acres with these possible gas deposits would already be off-limits because of protections for the New York City and Syracuse watersheds, other drinking water sources and certain other areas, while court rulings have recognized towns' authority to individually ban hydrofracking through zoning, further limiting financial prospects.

Acting Health Commissioner Dr. Howard Zucker said 4,500 staff hours were spent reviewing health studies about the drilling method of extracting oil and gas from deep underground by pumping huge amounts of water, sand and chemicals at high pressures to break up rock formations. It's being done in many other states, including neighboring Pennsylvania.

Zucker said his counterparts in several other states told him they were not consulted before their high-volume hydraulic fracturing began. He said he wouldn't want his family to live near it, and suggested it could be like secondhand smoke, which studies eventually identified as harmful.

...

"If the state health commissioner doesn't want his kids living there, I don't want my kids living there and I don't want any New Yorker's kids living there," [Cuomo] said. "I am not going to put health at risk for jobs. I'm not going to make that choice."

Chesapeake Energy, once one of the biggest leaseholders in New York, last year gave up a legal battle to retain thousands of acres in the state. Norse Energy went bankrupt in 2012 after more than 100,000 acres in the state it leased were deemed off-limits to drilling. Towns and municipalities are getting into the act of banning fracking as well. Mora County, a conservative ranching community in New Mexico, is the first U.S. county to ban the practice of fracking, according to reports from the Los Angeles Times. Wells are the only source of water in Mora, which is why last month officials announced a countywide ban on fracking citing water safety concerns.

Will California Follow New York and Ban Fracking?

California is the fourth largest state producer of oil and gas. The Central Valley is also America's breadbasket. Fracking and farming are on a collision course. The battle being fought there gives new meaning to the sentiment that oil and water don't mix. Kern County is ag and oil country in California. More than 80% of the state's oil and gas is produced here. About 600 new wells are fracked each year using millions of gallons of water. This is water farmers say they need in order to produce their crops.

Almond farming is an $11 billion industry. Almonds are dependent on what's in the soil and what's in the water to grow the trees. If the groundwater is contaminated by illegal dumping of fracking contaminants, that's what goes into the almonds that you eat. Both fracking and farming are water intensive. Almonds, for example, use about 10% of the state's water supply each year. The farmers' primary concern is with the underground water suppply being contaminated. This summer the state shut down nine disposal wells in Kern County for illegally dumping almost 3 billion gallons of wastewater.

Fracking requires a huge amount of water which is why California with its water supplies in jeopardy may soon ban fracking. It takes between 100,000 and 1 million gallons of water to frack just one well. While consumers are having limits placed on their water usage, fracking companies can consume as much water as they want. It just doesn't make any sense. California is going through its worst drought in decades. Fracking not only uses up potable water supplies, it contaminates ground water in the areas in which it fracks.

Water is a dwindling precious resource. Why should Big Oil get a free pass to use millions of gallons of water to frack while California residents are being squeezed on their water usage? In 2013 and 2014 approximately 1600 wells were fracked in California, according to the Department of Gas and Geothermal Resources (DOGGR), the state agency in charge of regulating the oil and gas industry.

Jason Marshall, Chief Deputy Director of DOGGR, said "Water rights in the State of California are not regulated by the state." When asked by Jennifer London, a reporter for Al Jazeera, "Shouldn't the regulatory agency be regulating and have oversight over that?" The response was, "We can't tell somebody that they can't purchase water without some form of statutory construct." So DOGGR spouts the doggerel that they can't regulate because the legislature has not authorized them to do so. Jennifer shot back, "Then you're not regulating!"

In Sacramento the oil lobby has prevailed over the agricultural lobby with the result that frackers are taking water away from farmers. Farmers are letting their fields lie fallow for lack of water and almond trees are dying while oil corporations are fracking away.

The California Water Resources Control Board is another agency charged with protecting California's water supply. John Borkovich is the chief of groundwater monitoring, but he is clueless when Jennifer London asks him "Is Big Oil poisoning millions of gallons of water each day?" Obviously, he, as well as other politicians in California's bureaucracy, have been bought off by the oil lobby. Otherwise, he wouldn't have given such a blase answer to Jennifer's question. What me, John Borkovich, worry?

The Center for Biological Diversity is working to ban fracking in California. Fracking is taking water away from farmers who are going bankrupt since they have to leave their fields unplanted because of lack of water.

The State Water Resources Control Board issued orders to seven oil production companies last July to immediately shut down 11 waste water disposal wells “to avoid potential harm to a limited number of groundwater aquifers in Kern County.” Two of the wells have since been reinstated.

But the Center for Biological Diversity said that its own analysis of records from California’s Division of Oil, Gas and Geothermal Resources shows that the nine injection wells that remain closed have been illegally dumping oil industry wastewater into clean-water aquifers in Kern County.

In California's 2013, 2014 legistlative session 11 fracking bills were proposed. Eight called for a moratorium or ban on the practice. One was passed which will go into effect in 2015. Even though it calls for some increased oversight on fracking, it will not limit how much water fracking companies can use.

Parents in California and elsewhere are concerned over the effects of fracking on the health of their children. A new report finds more than 350,000 children attend school near fracking wells. Jennifer London reports that most of the children affected are Hispanic. Most states regulate how far from schools fracking wells have to be located but California does not. No set-back rules put children at risk. In Shafter, CA children are getting sick.

California is supposedly a leader in the environmental movement, but when it comes to fracking, they are way behind other states. Governor Jerry Brown needs to get on the ball and follow the advice of his colleague in New York State, Andrew Cuomo, and ban fracking altogether. Governor Moonbeam needs to get together with Linda Ronstadt, his former main squeeze, and other Hollywood celebrities, and get on the 'ban fracking' bandwagon. In fact they are already saying "What the frack, Governor Brown".