Category Archives: Economic interventionism
Economic interventionism is an action taken by a government in a market economy or market-oriented mixed economy, beyond the basic regulation of fraud and enforcement of contracts, in an effort to affect its own economy. Economic intervention can be aimed at a variety of political or economic objectives, such as promoting economic growth, increasing employment, raising wages, raising or reducing prices, promoting equality, managing the money supply and interest rates, increasing profits, or addressing market failures. The term economic intervention assumes the state and economy are inherently separate from each other, and therefore applies to capitalist market or mixed economies where government action would make an “intervention” (although this does not apply to state-owned enterprises that operate in the market).
Exposed: Harry Reid should not be allowed to manipulate Senate rules to further stifle Senators’ freedoms
On Tuesday, Senate Majority Leader Harry Reid (D-Nev.) accidentally drew back the curtain on fabricated tales of Republican obstructionism and revealed the dark secret of Democrats who have been promoting “gridlock” in the U.S. Senate for nearly a full four years. It happened so quickly anyone who blinked missed it.
Upon filing for Senate consideration of the Transaction Account Guarantee (TAG) Act, Sen. Reid immediately “filled the tree” by offering the maximum amount of amendments permitted under the rules and filed cloture on the bill before any other Senator could speak, offer debate or filibuster the bill.
Senator Reid essentially asked the Senate to consider a bill then immediately asked to end consideration on that bill, all within the space of a mere two minutes. Some have speculated this parliamentary slight-of-hand may have made history with its sheer speed.
While proclaiming the need for filibuster “reform” and complaining of its over use by the minority, Senator Reid continues to apply these tactics, limiting debate and preventing Senators of both parties from submitting their own ideas through amendments. His actions essentially produce a “majority filibuster” which prevents the voices of citizens throughout every one of the 50 states from being heard through their Senators.
Yet, even while setting a new speed record, Sen. Reid’s tyrannical control of the calendar is nothing new. Reid has spent the last four years turning such bold obstruction into regular operating procedure for the Senate – with Tuesday marking the sixth-ninth time Sen. Reid has launched a majority filibuster.
These actions are atrocious in their violation of the purpose of the Senate in our federal government and their steamrolling of two key rights of all Senators.
On the official Senate website, the Senate Historian notes: “All senators have two traditional freedoms that, so far as is known, no other legislators worldwide possess. These two freedoms are the right to unlimited debate and an unlimited opportunity to offer amendments, relevant or not, to legislation under consideration.”
Since Democrat Senate Majority Leader Harry Reid has successfully manipulated standing Senate rules to severely stifle (and in many cases, entirely eliminate) the second of these unparalleled freedoms by routinely “filling the amendment tree,” only one of those freedoms remains. With Reid’s iron-fisted control of the process — frequently preventing even Senators from his own political party from offering their own amendments — it is no wonder Senators of all stripes question the wisdom of removing their remaining freedom. In fact, it is a wonder Majority Leader Reid does not face a mutiny from within his own party.
But the story gets much, much worse. Because Reid cannot capture enough votes (despite a Democratic majority of 55 Senators) to institute his radical rules change under the existing rules (which requires 60 votes), he has proposed a method that ignores the rules entirely. Instead, Reid’s grand plan is to pretend the “Standing Rules of The Senate” simply do not exist during the first day of a new Congress – and only during the first day.
This runs into a major problem through a simple reading of Rule V, Section 2, which itself clearly states that (emphasis added): “The rules of the Senate shall continue from one Congress to the next Congress unless they are changed as provided in these rules.” Furthermore, this rule was initially adopted, at the will of the Senate itself, in recognition of the Senate’s unique place in our legislature.
For Majority Leader Harry Reid to completely ignore the rules in order to re-write the rules (something he promised he would never do) in the name of political expediency would violate matchless freedoms of every U.S. Senator while also violating the Constitution itself.
Ultimately, this boils down to three observations. One, the pervasiveness of majority filibuster and obstructionism of their own agenda has helped slow action in the Senate. Two, this atrocious behavior by the Senate Majority Leader snatches away exceptionally unique freedoms and rights of Senators from both sides of the aisle, and all deprived Senators should demand reform. And three, Majority Leader Reid’s proposal, if carried through, would irreparably depart from the rules and Constitutional provisions guiding our “most deliberative” legislative body.
This is the essence of the current debate between totalitarian forms of government and conservatives: whether existing rules can be ignored for political or popular expediency, or whether the rules must be followed in order to protect the unique freedoms and force compromise which truly moves our nation forward.
Regardless of what reforms are needed in the Senate, the rules are the rules – and those rules must be followed in order to bring about credible, positive and lasting improvement.
Published November 22, 2012
BUENOS AIRES, Argentina – Argentina is running out of wiggle room in a billion-dollar showdown over foreign debts left unpaid since the country’s world-record default a decade ago, and the stakes couldn’t be higher for President Cristina Fernandez.
She risks triggering another historic debt default if she doesn’t agree to pay the so-called “vulture funds” she blames for much of Argentina’s troubles.
Fed up with Argentina’s refusal to honor its debts despite losing in appellate court, U.S. District Judge Thomas Griesa in New York said he is determined to make Argentina pay at least something to the plaintiffs.
His idea is to tap into the money Argentina already pays to other bondholders, by making banks that process the payments divert some of the money to the plaintiffs. U.S. financial institutions would become his enforcers, either helping to satisfy the judgment or “aiding and abetting” a crime.
The unprecedented idea was broadly upheld on appeal last month and Griesa tried to push the case closer to resolution late Wednesday by lifting a legal stay, and issuing an order directing Argentina to make a first round of payments into an escrow account on Dec. 15, when the country is scheduled to make payments to the other bondholders.
The idea has sent jitters through the legal departments of the most powerful financial institutions in the United States.
The U.S. Federal Reserve and the Clearing House, a trade group representing the world’s largest commercial banks, warned that Griesa’s remedy could have severe consequences for the backbone of the U.S. financial system, which automatically moves an average of $2.6 trillion a day in half a million transfers between more than 7,000 banks.
The Federal Reserve’s legal brief, filed Sunday, said the entire system depends on transfers being “immediate, final and irrevocable” when processed. Requiring intermediaries to identify, stop and divert payments according to court orders “would impede the use of rapid electronic funds transfers in commerce by causing delays and driving up costs.”
The plaintiffs dismissed the concerns, saying that the only bank at risk would be Argentina’s “paying agent,” the Bank of New York Mellon, which should be held responsible by the court if it doesn’t guarantee compliance.
Still, the Federal Reserve’s filing pleased Fernandez so much that she cited it in a speech Monday night.
“When an Argentine says something, the President of the Argentines or the economy minister, well, everyone comes out to criticize them, but now it’s (Federal Reserve Chairman Ben) Bernanke talking, honey, and everyone shuts their little mouth,” she said.
As with so many other things involving Argentina, these debts date back to the bloody dictatorship that ruled from 1976-1983. The military junta tripled the country’s foreign debts. By 2001, the burden had become unsustainable and the economy collapsed. Argentina’s $95 billion default still stands as a world record.
Sovereign debt is supposed to be paid no matter who runs a country, but Fernandez has always considered this defaulted debt to be illegitimate, forced onto the Argentines by dictators acting in concert with international financial speculators. She and her late husband and predecessor Nestor Kirchner, who took office in 2003, have never made any payments on the defaulted bonds.
Instead, they offered new bonds paying less than 30 cents for each dollar owed in default, and by 2010, 93 percent of the original bondholders agreed to the swaps. The debt relief granted by these “exchange bondholders” enabled Argentina to climb out of a deep economic crisis, and many analysts have described it as a model for Greece and other debt-burdened countries to consider.
Hold-outs led by NML Capital Ltd., an investment fund owned by U.S. billionaire Paul Singer, refused the swaps, insisting on payment in full plus interest, even though some bought the defaulted debt for pennies on the dollar after Argentina’s economy collapsed. Singer’s lawyers have traveled the world since then seeking to embargo Argentine assets, even getting its navy ship Libertad seized in Ghana as collateral. But they have never collected.
The judge’s solution to all this is to force Argentina to pay the holdouts an equal amount each time it makes a payment to the exchange bondholders.
This prompted an outcry from a group of exchange bondholders who collectively own $20 billion in the restructured Argentine debt. They said they “already suffered tens of billions of dollars in losses,” and that it’s not fair to harm their already diminished returns so that a few holdouts can earn up to 200 percent on their original investments.
If allowed to stand, this kind of remedy will make it impossible for other countries to get critical debt relief, they argued.
The holdouts’ response: “Those parties made a business judgment to accept assurances of prompt payment rather than being forced to litigate against the Republic around the world, as the plaintiffs have been forced to do at tremendous expense.”
Argentina, meanwhile, has told the judge that its responsibility ends once it delivers the cash to the Bank of New York Mellon, which in turn pays the exchange bondholders. This bank, in turn, said it would suffer lawsuits from all sides if it did anything other than process the payments as intended.
There was no immediate indication from Argentina’s government late Wednesday about how it would respond to Griesa’s ruling.
The judge said he was taking the action precisely because of “inflammatory declarations” made by Argentine officials, who have vowed not to pay a cent to NML Capital Ltd.
“It is the view of the District Court that these threats of defiance cannot go by unheeded, and that action is called for,” Griesa wrote.
Argentina is running out of options. Anything short of full payments could trigger holders of all sorts of Argentine bonds to demand immediate payment in full.
“In reality, what I think they’re looking for is to provoke a technical default,” the president said Monday night. “What’s a technical default? It’s when you pay, but not in the right time, or manner, or place. For example, you don’t pay in New York so that they don’t seize the money.”
The exchange bondholders warned that if this happens, “the injunction will have turned a relatively minor default into a cataclysmic default that will further unsettle the already fragile global economy.”
Fernandez sought to calm matters, noting that Argentina has $45.3 billion in reserves and a much lighter debt burden than it did years ago.
But if Argentina pays the plaintiffs the $1.43 billion they are demanding, Moody’s Investors Service said it could set a legal precedent for other holdouts who together claim nearly $12 billion in unpaid debts.
A default, meanwhile, could put more pressure on an economy already suffering from capital flight and dangerously high inflation. Argentine debt is already rated by Moody’s as junk, so the government has few other places to turn for financing.
The holdouts blamed all this “emergency litigation and anxiety” on Argentina’s “unrelenting bad faith,” and predicted that if it is finally given no other alternative, it will submit to the courts’ will.
“There is no reason to believe — and common sense rejects — the notion that Argentina would harm its reputation and credit, and unnecessarily allow tens of billions of dollars of debt to accelerate, simply to avoid paying the plaintiffs $1.43 billion,” they said.
By Julien Toyer MADRID | Tue Jun 5, 2012 5:44am EDT
(Reuters) – Spain said on Tuesday that credit markets were closing to the euro zone’s fourth biggest economy as finance chiefs of the Group of Seven major economies were to hold emergency talks on the currency bloc’s worsening debt crisis.
Treasury Minister Cristobal Montoro sent out the dramatic distress signal in a radio interview about the impact of his country’s banking crisis on government borrowing, saying that at current rates, financial markets were effectively shut to Spain.
“The risk premium says Spain doesn’t have the market door open,” Montoro said on Onda Cero radio. “The risk premium says that as a state we have a problem in accessing markets, when we need to refinance our debt.
The country, which enjoyed rapid growth after it joined the euro at its launch in 1999, is beset by bank debts triggered by the bursting of a real estate bubble, aggravated by overspending by its autonomous regions.
The risk premium investors demand to hold Spanish 10-year debt rather than the German equivalent hit a euro era high of 548 basis points on Friday, on concerns that Spain’s fragile banking system and heavily indebted regions will eventually force it to seek a Greek-style bailout.
Montoro said Spanish banks should be recapitalized through European mechanisms, departing from the previous government line that Spain could raise the money on its own and prompting the Madrid stock market to rise.
But his comments on Spain’s borrowing sent the euro down after the 17-nation European currency earlier hit a one-week high against the dollar on expectations that a conference call of G7 finance ministers and central bankers may hasten bold action.
The European Central Bank holds its monthly rate-setting meeting on Wednesday and European Union leaders meet on June 28-29 to discuss their strategy for overcoming the two-year-old crisis which has already seen Greece, Ireland and Portugal forced to accept international bailouts.
Investors have fled peripheral euro zone sovereign debt for the relative safe haven of German Bunds and U.S. and British government bonds amid worries about Spain’s banking crisis and fears that a June 17 Greek election could lead to Athens leaving the euro, setting off a wave of contagion around the euro area.
Spain will test the market on Thursday by issuing between 1 billion euros ($1.24 billion) and 2 billion euros in medium- and long-term bonds at auction.
Emilio Botin, chairman of the nation’s biggest bank, Banco Santander told Reuters Spanish banks needed about 40 billion euros in additional capital, adding that “there is no financial crisis in Spain”. Montoro said the figures were “perfectly accessible”.
But his dramatization of the debt situation set a stark backdrop for the conference call of the United States, Canada, Japan, Germany, France, Italy and Britain, plus European Union officials, which two G7 sources said would start at 1100 GMT.
Montoro’s comments appeared aimed at pressuring the ECB and EU paymaster Germany to find ways of intervening. But the central bank has so far shunned calls to resume purchases of Spanish government bonds, and Berlin has said it is up to Madrid to decided whether to apply for assistance if it needs help.
Spain has been trying to persuade EU partners to allow direct aid from the euro zone’s rescue fund to recapitalize its banks without making it submit to the political humiliation of a full-fledged assistance programme, officials say.
The festering euro zone crisis has sparked mounting concern outside Europe, with the United States fretting that it could further harm its faltering economic recovery, and countries such as Japan and Canada fearing fallout for the global economy.
“We have reached a point where we need to have a common understanding about the problems we are facing,” Japanese Finance Minister Jun Azumi told reporters.
Ottawa and Washington both called for action after a G7 source said fears that capital flight from Spain could escalate into a full-fledged bank run had triggered the emergency talks.
“Markets remain skeptical that the measures taken thus far are sufficient to secure the recovery in Europe and remove the risk that the crisis will deepen,” White House press secretary Jay Carney told reporters.
In a sign of increasing concern about the euro area’s debt crisis, Australia’s central bank cut interest rates by 25 basis points to 3.50 percent, the lowest level in two years. It cited further weakening in Europe and a deterioration in market sentiment.
PRESSURE ON BERLIN
Pressure is building in particular on Germany, the biggest contributor to euro zone rescue funds, to back away from its prescription of fiscal austerity for the region’s weaker economies and to work harder on fostering short-term growth.
Berlin argues that it is already doing its share by encouraging above-inflation domestic wage settlements, accepting the prospect of higher-than-usual German inflation and most recently agreeing that Spain should have more time to achieve its fiscal targets.
Furthermore, Chancellor Angela Merkel opened the door on Monday to the prospect of a euro zone banking union in the medium term, saying she would discuss with EU authorities the idea of putting systemically important cross-border banks under European supervision.
A German government strategy paper seen by Reuters sets out a timetable for closer fiscal union in the euro zone, but Berlin does not expect final decisions on strengthening economic policy coordination until March 2013, with only a roadmap being agreed at this month’s summit.
A G7 source familiar with plans for the call said the group would urge more progress at this month’s EU summit, though this alone would probably disappoint global markets.
Central banking sources said the ECB could contribute by cutting its main interest rate, lowering its deposit rate to try to shake loose some 700 billion euros parked overnight in its vaults by anxious banks, or by providing a third big liquidity injection to banks.
Some analysts believe the bank is more likely to await the outcome of the Greek election and the EU summit before taking decisive action.
A G7 source said there was only a very small chance the G7 would go as far as to pledge coordinated action to curb excessive currency volatility. Japan, for one, fears a strong yen, which has been a safe haven for investors during the euro zone crisis, could help tip its economy into recession.
The G7 could also call for concerted action at the upcoming summit of the wider Group of 20 major economies in Mexico on June 18-19, the source said. The G20, which includes China, played a prominent role during the 2008-2009 financial crisis.
A G20 official in Asia said the grouping, which also includes Brazil and India, could look to put pressure on Germany to switch to stimulus mode, as part of a wider call for strong, developed economies to step up spending.
“Germany and Canada could be seen as those having fiscal capabilities among the advanced economies,” the official said.
- Merkel rejects debt sharing as Obama urges Europe action (ekathimerini.com)
- Spain wants euro zone fiscal authority (news.yahoo.com)
- Spain tries to calm investors amid market pressure (seattlepi.com)