Corruption

Why are we so rich and the poor so poor? Econophile takes a look at Kenya as a laboratory of bad ideas and how to fix it.

The sad, stark fact is that oil is now too expensive to permit further expansion of economies and populations. Expensive oil upsets the cost structure of virtually every system we need to run modern life: transportation, commerce, food production, governance, to name a few. In particular expensive oil destroys the cost structures of banking and finance because not enough new wealth can be generated to repay previously accumulated debt, and new credit cannot be extended without a reasonable expectation that more new wealth will be generated to repay it. Through the industrial age, our money has become an increasingly abstract and complex product of debt creation. In short, a society with deeply impaired capital formation has turned to crime, corruption, fakery, and subterfuge in order to pretend that “growth” — i.e. expansion of capital — is still happening.

Public corruption, based on all the evidence, appears rampant. And the ranks of those convicted in office have swelled to absolutely unacceptable levels. State Senators as well as State Assemblymen; elected officials as well as party leaders; city council members as well as town mayors; Democrats as well as Republicans.

 

- Preet Bharara, U.S. Attorney for the Southern District of New York

It’s no surprise that New York is exceedingly corrupt. It’s a huge city, with a ton of wealth and massive income inequality. That’s basically the primary breeding ground for wide-scale corruption. However, it also comes as no surprise that the situation has gotten a lot worse in recent years. After all, NYC is the headquarters of some of the largest financial institutions in the world. As such, some of the worst actors in the recent financial collapse call the city home. The whole world watched as these criminals and shysters not only evaded criminal charges, but were also rewarded trillions of dollars of public support for their efforts. The example was set. Crime pays, and now the entire city seems to be following their lead.

• Republican Civil War Erupts: Business Groups v. Tea Party (BBG)
• Budget fight leaves Boehner 'damaged' but still standing (Reuters)
• Madoff Was Like a God, Wizard of Oz, Lawyers Tell Jury (BBG) - just like Bernanke
• Republicans press U.S. officials over Obamacare snags (Reuters)
• Brilliant: Fed Unlikely to Trim Bond Buying in October (Hilsenrath)
• More brilliant: Fed could taper as early as December (FT)
• Russia Roofing Billionaires Seen Among Country’s Youngest (BBG)
• Ford's Mulally won't dismiss Boeing, Microsoft speculation (Reuters)
• China reverses first-half slowdown (FT)
• NY Fed’s Fired Goldman Examiner Makes Weird Case (BBG)

Doug Casey first met Ron Paul 30 years ago. In this wide-ranging interview, Casey discusses how the "born libertarian's" ideas have changed in that time...

Time runs out on Italian and Spanish banks. But the truth is fatal.

• Spot the pattern: Senate Leaders Nearing a Deal (Politico), Senators say debt, shutdown deal is near (USA Today), Senate Leaders in Striking Distance of a Deal (WSJ), U.S. senators hint at possible fiscal deal on Tuesday (Reuters), Senate Debt-Limit Deal Emerging (BBG)
• U.S. debt ceiling crisis would start quiet, go downhill fast (Reuters)
• Uneasy Investors Sell Billions in Treasurys (WSJ)
• BOE’s Cunliffe Says U.K. Is Not in Grip of Housing-Market Bubble (BBG)
• Letta Mixes Tax Cut With Rigor in Post-Berlusconi Italian Budget (BBG)
• Japan Seeks to Export More High-End Food  (WSJ)
• Burberry names Bailey CEO as Ahrendts quits for Apple (Reuters)
• China’s Biggest Reserves Jump Since 2011 Shows Inflow (BBG)

TedBits - Newsletter

Following his "yearslong scheme to shakedown contractors and reward allies," Kwame Kilpatrick - who served as Detroit Mayor from 2002 to 2008 - was this morning sentenced to 28 years in prison for corruption. Regarded by many as a key contributor to Detroit's eventual downfall, it seems Kilpatrick is somewhat repentant, stating, "the people here are suffering, they're hurting. A great deal of that hurt I accept responsibility for." Agents who pored over bank accounts and credit cards said Kilpatrick spent $840,000 beyond his salary during his time as mayor. Having resigned in 2008 over a sexting scandal, the scale of his corruption, prosecutors added, "exacerbated the crisis."

• Hilsenrath: Tense Negotiations Inside the Fed Produced Muddled Signals to Markets (WSJ)
• Biggest US Foreign Creditors Show Concern on Default Risk (BBG)
• Shutdown Costs at $1.6 Billion With $160 Million Each Day (BBG)
• What default? Republicans downplay impact of U.S. debt limit (Reuters)
• Top Bankers Warn on U.S. Debt Proposal (WSJ)
• India to stick with austerity despite looming election (Reuters)
• Japan's Current-Account Surplus Plunges (WSJ)
• Amazon Wins Ruling for $600 Million CIA Cloud Contract (BBG)
• German Factory Orders Unexpectedly Fall on Weak Recovery (BBG)
• Britain's Higgs, Belgium's Englert win 2013 physics Nobel prize (Reuters)
• Supreme Owner Made a Billionaire Feeding U.S. War Machine (BBG)

The last time we opined on the possibility of a Cyprus-style "bail-in" in Greece, which is essentially a legally-mandated confiscation of private sector assets held hostage by the local financial system, until such time as the balance sheet of said financial system is viable, we were joking. Well, not really joking. But not even we thought that a banking sector "bail in", in which unsecured bank liabilities, which include bonds and of course deposits, are used as a matched source of extinguishment of non-performing bad debt "assets" could spread to the broader economy, and specifically to unencumbered private sector assets. Alas, this is precisely what Greece, which is desperately to delay the inevitable and announce it needs not only a third but fourth bailout, appears keen on doing. As Kathimerini reports, the Greek Labor and Social Insurance Ministry is "seriously considering drastic measures in order to obtain the social security contributions owed by enterprises and to avoid having to slash pensions and benefits." What drastic measures? "The ministry is planning to force companies to pay up or face having their assets seized, so that the 14 billion euros of contributions due can be recouped."

If 4% of voters broke away from dysfunction and voted for independents, that "vital few" would influence 64% of all voters. Next election, join the 4% who will eventually influence the 64%. Voting for incumbents is like not voting at all: either way, you're throwing away your vote.

Crashing luxury sales in China is a hard-to-swallow concept for the industry.

This may become the most important article I’ve ever written. But whether it becomes that article or dwells in anonymity is up to you, the reader.

Italian bank holdings of Italian debt: €400 billion, an all time high. Oops.