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Europe is now on the very edge of an economic abyss. And Germany is finding that it cannot survive as a smug island of fiscally conservative prosperity while the rest of Europe goes down the tubes. It is anybody’s guess whether Europe’s leaders will shift course in time. If they fail, it won’t be pretty. The fact that Germany’s fate is now more closely linked to that of its neighbors actually offers a ray of hope.

Until last week, Germany had been the safe haven. As speculators pulled money out of other countries, in a bondholders’ equivalent of a run on the bank, German government debt was oversubscribed, causing interest rates on German bunds (government bonds) to fall below 2 percent. The spread between German rates and the rates that “weaker” countries had to pay to sell their bonds was treated as a precise barometer of market confidence in a given nation’s debt.

For the Germans, this was a huge windfall. My friend Sony Kapoor, who directs the progressive think tank Re-Define in Brussels, calculated that Germany’s cheaper borrowing costs due to the panicky bond-market flight from nations like Greece, Italy, Spain, Portugal and Ireland saved the Germans some $26.7 billion in interests costs between 2009 and 2011, and another $20 billion in low-interest bonds already locked in for the future. (It is no accident that the word Schadenfreude — translated as joy at another’s misfortune — is a uniquely German coinage.)

But then on Thursday, as Americans were taking a day off for Thanksgiving, the unthinkable happened. Germany had trouble selling its bonds. The bond market, in its panic, was fleeing even the safest haven. Europe is now approaching a Lehman Brothers moment, where nobody trusts anybody else’s promise to repay a debt.

Not to be joyful at another’s misfortune — the crisis will keep cycling back to haunt the United States — but the fact that contagion has now reached German shores is more than poetic justice. The European Central Bank, with its concern for fiscal discipline and price stability über alles, operates with a deeply Teutonic soul. It is the tribal successor to the German Bundesbank, the most risk-averse and inflation-phobic of all central banks. This view, however, is no virtue when the greater peril is general panic and deep deflation.

In 1873, the British financial journalist Walter Bagehot pointed out that the Bank of England kept the banking system functioning by serving as a lender of last resort in times of crisis. This is what the European Central Bank refuses to do.

Or, to be more precise, the ECB, despite its qualms, is now shoveling money at commercial banks but will not support national bond markets. That tells you something about who really runs the show — bankers. This double standard also reflects German policy preferences. Better to teach a lesson to nations in fiscal distress, even if the consequence is to drag down the entire European economy. But now that turkey of a policy has come home to roost. (more…)

If anyone still questioned who owns Washington, the Congressional supercommittee charged with reducing projected deficits by $1.2 trillion seems determined to end any doubts. According to press accounts, both the Republicans and Democrats on the committee support a plan to reduce average Social Security benefits by 3 percent.

While whacking our parents and grandparents with a big cut in Social Security benefits apparently draws bipartisan support, the supercommittee will not even score a plan to tax Wall Street financial speculation. No committee member from either party is prepared to make a simple request to the Joint Tax Committee of Congress that would allow a speculation tax to be one of the items considered in the mix.

It’s hard to know which part of this picture is worse. The plan to cut Social Security benefits at a time when seniors are more dependent than ever on them is incredibly pernicious. The people who would see their benefits cuts under this proposal paid for their benefits contributing to Social Security over their entire working career.

Most retirees have little other than Social Security to support them in their retirement. In large part, this is due to the economic mismanagement of the supercommittee types. If they or their friends, like former Federal Reserve Board Chairman Alan Greenspan, actually had been doing their jobs, we would not have had the huge housing bubble that wrecked the economy. The collapse of this bubble caused most of the wealth that retirees and near retirees had accumulated in their home to disappear, leaving them with nothing other than Social Security to sustain them in retirement. Now, they want to cut Social Security as well.

This particular cut is especially pernicious since it will hit the oldest and poorest beneficiaries hardest. A person who is in their 90s and has been getting benefits for 30 years would see a reduction in benefits of close to 9 percent under the new cost-of-living adjustment formula apparently supported by members of the committee.

The benefit cut is being justified by claiming that the current cost-of-living adjustment exceeds the true rate of inflation. In fact, the Bureau of Labor Statistics index that measures the cost of living of the elderly indicates that the current adjustment understates the rate of inflation experienced by retirees. There should be no doubt, this is a proposal for cutting Social Security benefits; it has nothing to do with making the cost-of-living adjustments accurate.

While the supercommittee has plenty of time to think of ways to make life more miserable for seniors, it won’t even countenance the idea of taxing Wall Street speculation. In spite of the repeated pledges that everything is on the table, taxing Wall Street speculation is absolutely off the table.

In order for a tax bill to be considered by Congress, it must be scored by the Joint Tax Committee (JTC). While many members, including some very senior members from both houses, have requested a score from the JTC of a bill taxing financial speculation, the supercommittee has the JTC completely tied up meeting its requests. By refusing to include a financial speculation tax (FST) in its scoring request, the supercommittee is preventing this idea from even being included in the discussion. (more…)

The Very Serious People in Washington are busy trying to find creative ways to cut Social Security and Medicare and take other benefits from middle-class and moderate-income families. The refrain here is that we just can’t afford this level of generosity any more.

There are two parts of this story that should drive the rest of us crazy. And it is difficult to determine which one is the more infuriating.

The first is that we know that many people in this country are fabulously rich. And as Elizabeth Warren beautifully reminded us, none of them did it on their own. But Professor Warren is actually far too generous in her account.

While some number of the wealthy may have succeeded by working hard and being smart or creative, many of the very wealthy got their money directly or indirectly through the big hand of the government tilting the playing field in their direction. Their hard work involved rigging the rules to ensure that they ended up on top.

Nowhere is this better seen than on Wall Street, which is chock full of multimillionaires and billionaires who got to the top by taking advantage of items like “too big to fail insurance” for their banks, gambling with government insured deposits, ripping off state and local governments on pension management fees and, of course, the trillion dollars in bailout bucks given at interest rates that were way below market levels. These people know the role of government very well, even if they pretend this is all about a free market. (more…)

As the debate heats up over Elizabeth Warren to head the Consumer Financial Protection Bureau, I took a step out on my own. I got a divorce. I am no longer a wholly owned subsidiary of Wells Fargo Bank.

First Wells Fargo acquired the bank I’d been banking in. Then Wells Fargo acquired my mortgage. The roof over my head and the little savings accounts where my kids manage their newspaper money were just parts of Wells Fargo’s diversified portfolio. So we left.

I opened a new account at a community bank near me. It has exactly the same tools for on-line banking, check-cards and so forth that I’ve come to expect, and better interest rates on every product from checking to CDs to my kids’ little savings accounts. I’m even better off with ATMs. (more…)

By Robert Kuttner
Co-Founder and Co-Editor of The American Prospect

My friend, the late Mike Harrington, used to describe his politics as “on the left wing of the possible.” It’s a fine aspiration. But if anything, economic problems have become more politically intractable since Mike died in 1989.

Scanning the various economic ills afflicting our Republic and its citizens, it’s evident that nearly all of the solutions lie beyond what is currently deemed thinkable in mainstream politics — beyond the left edge of the possible.

It’s not that my own views and values have become more radical in two decades. What has changed is that the American political center has shifted further to the right, while the twin assault on the good society by the private financial system and the organized right has become more intense.

There are only two possibilities: either we act to expand the boundaries of the possible, or we suffer the consequences.

Consider these five prime economic challenges:

Economic Recovery and the Budget. We are told by Beltway solons of both parties that the prime malady harming the economy is the budget deficit. But nobody can explain how fiscal austerity will promote economic recovery. On the contrary, the more we cut, the more we retard economic recovery and the more we remove the cushions that make the recession slightly more bearable for regular people. (more…)

By Michael Winship
Former senior writer at Bill Moyers Journal on PBS

“More cheese, less sleaze!”

That was the funniest group chant at Tuesday’s rally of several hundred union and other progressive activists outside the Manhattan headquarters of Fox News.

Several “cheeseheads” were in attendance, their noggins topped by the now familiar wedge-shaped, orange hatwear made popular by Green Bay Packer fans. On Tuesday they were out in the twilight chill expressing their opposition not to lactose intolerance but Wisconsin Governor Scott Walker’s intolerance of organized labor. (Unadorned by cheddar, I briefly spoke at the gathering as president of an AFL-CIO affiliated union, the Writers Guild of America, East.)

Governor Walker continues his obdurate opposition to the state’s public employee unions’ right to collective bargaining, despite a willingness on their part to concede pension and health givebacks he claims would help close Wisconsin’s alleged deficit. Meanwhile, there has been a decided increase on the sleaze end of the cheese vs. sleaze quotient, as evidenced in part by the prank phone call to the governor in which an online newspaper editor impersonating right wing billionaire David Koch elicited from Walker a proposed scheme to lure back, then double cross Democratic state senators who have prevented a quorum by retreating to Illinois. Further, when asked about planting troublemakers amongst the protesters, Walker told the trickster that he and his team had “thought about that” but decided not to. Apparently, all the really good disrupters are tied up in the Middle East. (more…)

By Les Leopold
Author, “The Looting of America”

January’s reported unemploymentrate remains stubbornly high at 9.0 percent. The Bureau of Labor Statistics’ U6 jobless rate, which stands at 16.1 percent, is more accurate, since it counts “discouraged workers” who’ve given up looking for a job. Right now, more than 28 million Americans are without work or have been forced into part-time work. It will take more than 22 million new jobs to bring the official unemployment rate down to 5 percent (our current definition of full-employment).

Please don’t wait around for John Paulson to create those jobs. He might have raked in a record $5 billion in 2010, but his job isn’t about employing people to make things or provide services. He’s a hedge fund manager. Paulson (a spiritual but not a blood relation of Henry, Bush’s Treasury Secretary) leads the list of America’s top “earners” for the year. If you divide his 2010 take by the standard work year of 2,080 hours, you’ll find that this ubermensch had a wage of $2.4 million an HOUR.

SEC goes after Goldman from Marketplace on Vimeo.

The robber barons of old earned their moniker by commandeering railroad, meatpacking, oil and steel monopolies. Paulson’s was a different kind of theft — but theft it was. In fact, he barely evaded prison for his role in Goldman Sachs’ Abacus deal, which suckered investors into buying securities that were explicitly designed to fail. Paulson colluded with Goldman Sachs to build a synthetic collateralized debt obligation (CDO) that bet on the very worst kinds of mortgage securities. Goldman got the fees and Paulson got a billion dollars for betting against those securities. The investors, trusting GS’s sales pitch, had no idea that Paulson was allowed to pick the most toxic securities to mix into the stew. As Paddy Hirsch of American Public Media’s “Marketplace” points out in this entertaining video , it’s like a gambler and a bookie colluding to field a horse they’ve groomed to lose. Eventually, GS was flushed out into the open by an angry mob of CDO investors and forced to cough up a record $550 million in penalties for “not disclosing the role of Paulson and Co. Inc. in the portfolio selection process and that Paulson’s economic interests were adverse to the CDO investors.” (more…)

By Jonathan Tasini
Union Leader/Organizer, Author, Strategist

Sometimes, I wonder whether we all live in a grand farce. But, actually, it’s a real-life story about a robbery of the people that continues every day — and today is no different. The robbers grow richer.

From the Wall Street Journal, a story headlined: “On Street, Pay Vaults to Record Altitude”:

When it comes to paychecks, Wall Street’s law of gravity is back in full force: What goes down must come back up.

In 2010, total compensation and benefits at publicly traded Wall Street banks and securities firms hit a record of $135 billion, according to an analysis by The Wall Street Journal. The total is up 5.7% from $128 billion in combined compensation and benefits by the same companies in 2009.

The increase was fueled by a revenue rebound as the financial crisis recedes in the rearview mirror…

“Things are shifting back to where they were before,” said J. Robert Brown, a law professor at the University of Denver who studies compensation and corporate-governance issues.[emphasis added]

And:

Bank of America Chief Executive Brian Moynihan got a 67% bump in his total compensation for 2010, the company said Monday. Goldman Sachs Group Inc. tripled the salary of Chairman and CEO Lloyd C. Blankfein and increased his stock-based bonus 40% to $12.6 million.
In some respects, this is reaffirming news — reaffirming in that, for those of us who have argued that nothing much has changed, this is concrete evidence.

Let me make three points here. (more…)

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

America’s two economies are getting wider apart.

The Big Money economy is booming. According to a new Commerce Department report, third-quarter profits of American businesses rose at an annual record-breaking $1.659 trillion — besting even the boom year of 2006 (in nominal dollars). Profits have soared for seven consecutive quarters now, matching or beating their fastest pace in history.

Executive pay is linked to profits, so top pay is soaring as well.

Higher profits are also translating into the nice gains in the stock market, which is a boon to everyone with lots of financial assets.

And Wall Street is back. Bonuses on the Street are expected to rise about 5 percent this year, according to a survey by compensation consultants Johnson Associates Inc.. (more…)

By Jonathan Tasini
Labor Activist

In the last two days, I’ve written about the phony deficit/debt “crisis” here and here, using excerpts from my new e-book, “It’s Not Raining, We’re Getting Peed On: The Scam of the Deficit Crisis”. Today, as the Catfood Commission unveiled its final report, I’ll continue by looking at some of the people behind pushing the phony “crisis” within an excerpt from the next chapter, “The Peter Peterson Principle: Pee On The People”.

From the book:

We have a national disease. It is highly contagious. It attacks our brains, and sometimes our hearts, making us vulnerable to human parasites–the kind of parasites who never see a limit to how much wealth they can pocket for themselves.

Most of our elected officials are hopelessly infected by it and are unlikely to ever recover (or, at least, until we have full public financing of elections that ends legalized corruption).

The traditional media–uninformed, lazy, and always desperate to be part of the insider crowd–is a widespread carrier of the disease.

And, then, we, the people, exposed virtually every day to the blather by our politicians and media, are then infected by the same disease.

It’s called Elititis Expertitis. (more…)