Friday, March 8, 2013

How Many Billions Of Drug-Laundered Money Does It Take To Shut Down A Bank?


The Big Sleep
by Tyler Durden 
It's an odd question, we know - especially ahead of today's Stress Tests, but given today's testimony on assessing the bank secrecy act, apparent trouble-maker Elizabeth Warren pokes and prods (correctly we would add) at the surreality that exists between the Department of Justice, The Treasury, and the financial system. David Cohen, Tom Curry, and Jerome Powell dodged bullets and blame, "does that mean essentially we have a prosecution-free zone for large banks in America?" But Warren wasn't going to be fobbed off with useless banter as she pointed out, "if you're caught with an ounce of cocaine, the chances are good you're going to go to jail...for the rest of your life. But evidently, if you launder nearly a billion dollars for drug cartels and violate our international sanctions, your company pays a fine and you go home and sleep in your own bed at night - I think that's fundamentally wrong." Indeed Ms. Warren.
Here is the transcript - note the Treasury officials never actually answer anything...
WARREN: ... As Senator Reed just pointed out, the United States government takes money laundering very seriously for a very good reason. ...
Now in December, HSBC admitted to money laundering. To laundering $881 million that we know of for Mexican and Colombian drug cartels. And also admitted to violating our sanctions for Iran, Libya, Cuba, Burma, the Sudan. And they didn't do it just one time. It wasn't like a mistake. They did it over and over and over again across a period of years. And they were caught doing it. Warned not to do it. And kept right on doing it. And evidently making profits doing it.
Now HSBC paid a fine, but no one individual went to trial. No individual was banned from banking. And there was no hearing to consider shutting down HSBC's activities here in the United States. So what I'd like is, you're the experts on money laundering. I'd like your opinion. What does it take? How many billions of dollars do you have to launder for drug lords and how many economic sanctions do you have to violate before someone will consider shutting down a financial institution like this? Mr. Cohen, can we start with you?
COHEN: Certainly Senator. No question the activity that was the subject of the enforcement action against HSBC was egregious...
WARREN: But let me just move you along here on the point Mr. Cohen. My question is,given that this is what you did, what does it take to get you to move towards even a hearing? Even considering shutting down banking operations for money laundering?
COHEN: Senator, we at the Treasury Department under OFAC and (ph) authority, we don't have the authority to shut down a financial institution...
WARREN: I understand that. I'm asking, in your opinion, you are the ones who are supposed to be the experts on money laundering. You work with everyone else, including the Department of Justice. In your opinion, how many billions of dollars do you have to launder for drug lords, before somebody says, we're shutting you down?
...
WARREN: ... And I'm asking, what does it take, even to say, here's where the line is. We're going to draw a line here, and if you cross that line, you're at risk for having your bank closed?
...
COHEN: But I'm not going to get into some hypothetical line drawing exercise.
WARREN: Well it's somewhere beyond $881 million of drug money.
COHEN: Well Senator the actions, and I'm sure the regulators can address this issue. The actions that we took in the HSBC case, we thought were appropriate in that instance.
...
WARREN: So what you're saying to me is you are responsible for these banks, and again, I read your testimony and you talk about the importance of vigorous enforcement here. But you're telling me you have no view when it's appropriate to consider even a hearing to raise the question of whether or not these banks should have to close their operations when they engage in money laundering for drug cartels?
...
WARREN: I understand that I'm over my time. And I'll just say here, if you're caught with an ounce of cocaine, the chances are good you're going to go to jail. If it happens repeatedly you may go to jail for the rest of your life. But evidently, if you launder nearly a billion dollars for drug cartels and violate our international sanctions, your company pays a fine and you go home and sleep in your own bed at night. Every single individual associated with this. I just, I think that's fundamentally wrong.

North Korean "Insanity" Part of Geopolitical Game

The ball, it would seem, is in Denis Rodman’s court

By Jen Alic 
North Korean leader Kim Jong-un may be colorful, but he isn’t crazy.
There is logic behind the intensified war rhetoric, and while it may be convenient for the American public to believe that they are about to be attacked unprovoked by the unhinged dictator of an eerily isolated country, the truth of the matter is that the US and its allies have been doing some offensive posturing that has Pyongyang very much on edge.  
North Korea on Tuesday threatened to attack the US and South Korea with “lighter and smaller nukes”. This threat has prompted South Korea to threaten to strike North Korea’s military command if “provoked” and the UN to move closer to slapping new sanctions on Pyongyang’s banking sector and diplomats.
The sanctions resolution was introduced by the US and China and specifically targets North Korean bankers and overseas cash mules. It also targets diplomats and seeks to lend added strength to air and sea cargo inspections going in and out of North Korea.
While mainstream media outlets are wont to describe North Korea’s rhetoric as increasingly bold, the threats and recent tests of long-range rockets and nuclear weapons are not the result of bravado, rather of fear.
The US and its East Asia allies (namely South Korea and Japan) have been preparing for an offensive on North Korea ever since the death of Kim Jong-il. They see a window of opportunity in the instability of the fragile succession. 
Pyongyang has no choice now but to rattle its sabers--and rattling them at traditionally quiet South Korea is the most effective strategy. This is where North Korea can do the greatest damage, and if it feels that a US offensive is imminent, South Korea will come under attack. At the same time, an attack on South Korea will be the final justification for an all-out US-led offensive on North Korea.
Right now, Pyongyang is hedging its bets on whether the US is willing to sacrifice its ally to this conflict.

The Right to Self-Defense

Kings and tyrants have taken this right away

by Andrew P. Napolitano
In all the noise caused by the Obama administration’s direct assault on the right of every person to keep and bear arms, the essence of the issue has been drowned out. The president and his big-government colleagues want you to believe that only the government can keep you free and safe, so to them, the essence of this debate is about obedience to law.
To those who have killed innocents among us, obedience to law is the last of their thoughts. And to those who believe that the Constitution means what it says, the essence of this debate is not about the law; it is about personal liberty in a free society. It is the exercise of this particular personal liberty – the freedom to defend yourself when the police cannot or will not and the freedom to use weapons to repel tyrants if they take over the government – that the big-government crowd fears the most.
Let’s be candid: All government fears liberty. By its nature, government is the negation of liberty. God has given us freedom, and the government has taken it away. George Washington recognized this when he argued that government is not reason or eloquence but force. If the government had its way, it would have a monopoly on force.
Government compels, restrains and takes. Thomas Jefferson understood that when he wrote that our liberties are inalienable and endowed by our Creator, and the only reason we have formed governments is to engage them to protect our liberties. We enacted the Constitution as the supreme law of the land to restrain the government. Yet somewhere along the way, government got the idea that it can more easily protect the freedom of us all from the abuses of a few by curtailing the freedom of us all. I know that sounds ridiculous, but that’s where we are today.

When Postmodern Art Attacks Western Civilization

Honoring envious losers


By Bill Frezza
Most people don’t give much thought to how our cultural institutions shape our world view, and the impact this has on politics, but I’m one of those who do. This can make it problematic to attend a modern art museum with me, a task my wife, a genuine and sophisticated art lover, approaches with a mixture of caution and bravado. While I’ve learned to stifle my public outbursts and gesticulations, her uncanny ability to read my mind invariably generates a burst of frisson best resolved by leaving the museum to take her to an expensive lunch.
It’s not the fraud that I mind—more power to any artist who can con a patron into paying outrageous sums of money for something as banal as a black stripe on a blank white canvas or a rusty bicycle hanging from a rope. There is no harm in separating a fool from his money as long as it’s not mine.
I can even accommodate myself to the widespread and concerted effort to destroy the very idea of artistic talent evident in most contemporary art, giving talentless frauds the opportunity to pursue lucrative careers and teaching positions. The world will still be filled with beauty and genius even if the public is snookered into believing a million dead and rotting flies glued to a canvas merits display in the Boston Museum of Fine Art. (I kid you not. Since being drawn to that stinking canvas by the odor some years ago I have never again set foot in the MFA.)

Thursday, March 7, 2013

Recent Oil Discovery off Lebanese Coast Draws Naval Powers to East Med

Eastern Mediterranean will probably be either the safest place in the world in which to sail or the most volatile


By Claude Salhani 
The discovery a few years ago of an important deposit of oil and gas reserves in the waters just off the Lebanese, Israeli and Cypriot coasts has raised the interest of foreign militaries who have in recent weeks become attracted to the region, adding ingredients at sea to an already explosive atmosphere on land.
From China to Iran, not forgetting Turkey, Israel, the United States, Britain, and France, all the principal actors in the region are now present in the waters of the Eastern Mediterranean.
In addition to the important oil fields under the sea waiting to be exploited, the bloody civil war that has been raging in next door Syria for the past two years has brought renewed interest in these troubled waters.
Russia, primarily, is very concerned by what the future holds for the Assad regime in Damascus as the Syrian Mediterranean port of Tartous serves as the Russian Mediterranean Fleet’s main port of call, where the Russians continue to hold onto an important facility established back in the days of the Soviet Union. For Russia, whose northern Baltic ports freeze over during the long cold winter months, having access to a friendly port for its Med fleet is a matter of national security. To reiterate just how important the Eastern Mediterranean Sea plays in Russian affairs, Moscow has just dispatched a naval task force comprised of about 10 vessels, including its only aircraft carrier, the Admiral Kuznetzov, to the region.
The Chinese, who much like the West are quickly discovering their addiction to oil in order to keep those million of cars that the new middle class is buying up faster than the Koreans and Japanese can manufacture them, are starting to be drawn into this great game of nations, albeit the aquatic version. In recent months units of the Chinese Navy have been seen in the vicinity.
The Iranians, who have always aspired to become a regional force to be reckoned with, have announced last January that they too will be dispatching naval forces to the Eastern Mediterranean.
European powers, France, Britain and to a lesser degree, the Italians and the Germans have all sent naval forces to the region, some as part of the UNIFIL (United Nations Interim Forces in Lebanon) some unilaterally.
The US, who traditionally have maintained an impressive array of naval forces comprised of units of the Sixth Fleet, had decided to reduce its naval presence in the Eastern Med, but in view of the increased traffic, especially by Russia, China and probably the most worrisome of all for the Western allies, the Islamic Republic of Iran, has now changed its mind and will continue to retain an important naval force in the Med.

The Biggest Bubble in Human History?

What kind of liquor do they drink?
by Bill Bonner
Dow up 125 points yesterday, to a new all-time record.
Why? What's behind it? The economy is not so hot. Why the red-hot stock market?
China is back in the news. A new report from CBS's "60 Minutes" documents the extent of the ghost cities in China – miles and miles of empty highway, office towers, apartments and malls. Analysts are talking about the biggest real estate bubble in history!
Is China a bubble? We don't know.
Does it matter? Well... yes... maybe. If China melts down or blows up the demand for oil and other resources goes down. The Chinese have pumped vast sums of money into development projects. That money helped to keep people on the job... and also kept the ships full of stuff, going back and forth across the world's oceans.
Trouble in China is trouble everywhere – particularly in Australia (which has been selling itself by the ton to the Chinese) and in Europe (which sells its precious, high-touch products by the boatload). Drive around Beijing and you see German autos, Italian shoes, Swiss watches and French perfumes.
But why worry? The Chinese can print money too! When China does something, it tends to do it to excess. That's why there are so many empty buildings in the Middle Kingdom and why it might have created the biggest real estate bubble in history.
China overdoes it when it comes to central bank stimulus measures too. Arguably, no central bank has done more than the People's Bank of China when it comes to pumping up the economy.
M2 money supply in China is roughly twice GDP. In developed economies the ratio between M2 and GDP is usually below one. In emerging market countries, M2 is usually 1 to 1.5 times GPD.
That's why bad news for China... like bad news for the U.S. economy... could be good news for the stocks. The Chinese feds will pump more money. Stocks will go up!
The New York Times reports:
The Dow Jones industrial average, which measures the performance of 30 blue-chip companies, closed with a gain of more than 125 points Tuesday, surpassing its previous record close of 14,164.53, which it achieved nearly five and a half years ago, as well as its record intraday high, set around the same time, of 14,198.10.
Of course, a few things have happened since October 2007. The housing market collapsed, the financial system went into meltdown, the European Union started to fray and politicians dragged the United States through an on-off-on-again fiscal imbroglio.

The Conservative Case Against More Prisons

Higher incarceration rates aren't making us safer—and there are better, smaller-government alternatives
By VIKRANT P. REDDY AND MARC A. LEVIN
Since the 1980s, the United States has built prisons at a furious pace, and America now has the highest incarceration rate in the developed world. 716 out of every 100,000 Americans are behind bars. By comparison, in England and Wales, only 149 out of every 100,000 people are incarcerated. In Australia—famously founded as a prison colony—the number is 130. In Canada, the number is 114.

Prisons, of course, are necessary. In The Scarlet Letter, Nathaniel Hawthorne observed that “The founders of a new colony, whatever Utopia of human virtue and happiness they might originally project, have invariably recognized it among their earliest practical necessities to allot a portion of the virgin soil… as the site of a prison.” As long as there are people, there will be conflict and crime, and there will be prisons. Prisons, however, are not a source of pride. An unusually high number of prison cells signals a society with too much crime, too much punishment, or both.

There are other ways to hold offenders—particularly nonviolent ones—accountable. These alternatives when properly implemented can lead to greater public safety and increase the likelihood that victims of crime will receive restitution. The alternatives are also less costly. Prisons are expensive (in some states, the cost of incarcerating an inmate for one year approaches $60,000), and just as policymakers should scrutinize government expenditures on social programs and demand accountability, they should do the same when it comes to prison spending. None of this means making excuses for criminal behavior; it simply means “thinking outside the cell” when it comes to punishment and accountability.

This argument is increasingly made by prominent conservatives. Bill Bennett, Jeb Bush, Newt Gingrich, Ed Meese, and Grover Norquist have all signed the Statement of Principles of Right On Crime, a campaign that advocates a position on criminal justice that is more rooted in limited-government principles. They are joined as signatories by the conservative criminologist John Dilulio and by George Kelling, who helped usher in New York City’s successful data-driven policing efforts under Mayor Rudolph Giuliani. Some groups, like Prison Fellowship Ministries, approach the issue from a socially conservative perspective. Others, like the American Legislative Exchange Council and the State Policy Network, have fiscal concerns top of mind. Regardless, a sea change is underway in sentencing and corrections policy, and conservatives are leading it.

An Enemy of the State

Mark Leier, Bakunin: A Biography


By KIRKPATRICK SALE
Mark Leier sets out to rescue not only Mikhail Bakunin, the great anarchist thinker, but the whole anarchist tradition, which he argues is a pertinent political force today: “The current interest in anarchism,” he writes, “is not misplaced or irrelevant.” He certainly accomplishes the former and does much to dispel the multiple canards that have surrounded this man, many of them fabricated by Marx and the Marxists, but I don’t think he makes much of a case for the latter.

Bakunin, aptly called “the hairy Russian giant,” was born to a noble family of only modest means in a village north of Moscow in 1814. As the firstborn male, he was destined for a military career and at 15 was sent to a rigid, anti-Western military school, where he chafed at the arbitrary discipline and the narrow curriculum—much less encompassing than the homeschooling he had experienced before. He gradually learned to resist the system in minor ways and soon lost all interest in formal studies, reading instead in philosophy, history, and languages (none of which were in the official curriculum), getting himself expelled from school in 1834 for poor grades and assigned to barracks on the Polish frontier. He liked that no better, went AWOL after a year, and eventually, in 1836, landed in Moscow, gravitating to a circle of students and intellectuals, most of whom were sharply critical of the repressive tsarist regime.

Bakunin spent the next four years, supported apparently by loans that he couldn’t repay and occasional handouts from his family, voraciously reading—English and French Romantics and German philosophers, in particular—and writing for little Russian magazines. This provided the basis for his later theories, but he was not yet an anarchist and like many of his circle saw his task as developing a critique of the tsarist state—though not too openly or the police would be on him. When he left Russia to go to study at the University of Berlin in 1840, pursuing his deep interest in Hegel in particular, he was a highly regarded writer, “in the vanguard,” Leier says, “of progressive Russian thinkers.”

Western Europe around this time was surging with ideas about freedom and justice and political reform that would lead to the 1848 revolutions, and Bakunin’s thoughts took a new turn. He became a convinced atheist and began to think about ways of obtaining liberty in a new kind of state (“Liberty today stands at the head of the agenda of history”). By 1842, he was arguing that “the passion for destruction is at the same time a creative passion,” by which he did not advocate violence and terror, as he is sometimes accused of, but only meant that if there was going to be movement toward democracy and freedom, the reactionary state had to be done away with. He was developing a revolutionary position, arguing that it was impossible to reform the state: what’s needed “is not only a particular constitutional or politico-economic change, but a total transformation of that world condition.”

Publishing this kind of material did not sit well with the German government, and the paper he published it in was shut down, leading Bakunin to flee to Switzerland. But the Swiss government told the Russians that he was there and hanging around in revolutionary circles, so the Russian ambassador ordered him to return home. When he refused, the tsarist regime ordered him stripped of his noble rank and sentenced him to hard labor in Siberia, whereupon he fled again, to Paris, in 1844.

It was a lively, political city at that time—George Sand, Marx, Louis Blanc, Proudhon were all there—and Bakunin fit in with the growing passion for revolution, giving speeches, writing articles, making a name. But as an anarchist, not a socialist: socialists were “more or less authoritarians” who wanted “to organize the future according to their own ideas” whereas he was for liberty and against authority.

11 Years Later, Senate Wakes Up to War on Terror’s ‘Battlefield America’

Is perpetual war OK with everybody?


BY SPENCER ACKERMAN
Sen. Rand Paul’s filibuster will inevitably fail at its immediate objective: derailing John Brennan’s nomination to run the CIA. But as it stretches into its sixth hour, it’s already accomplished something far more significant: raising political alarm over the extraordinary breadth of the legal claims that undergird the boundless, 11-plus-year “war on terrorism.”

The Kentucky Republican’s delaying tactic started over one rather narrow slice of that war: the Obama administration’s equivocation on whether it believes it has the legal authority to order a drone strike on an American citizen, in the United States. Paul recognized outright that he would ultimately lose his fight to block Brennan, the White House counterterrorism chief and architect of much of the administration’s targeted-killing efforts.

But as his time on the Senate floor went on, Paul went much further. He called into question aspects of the war on terrorism that a typically bellicose Congress rarely questions, and most often defends, often demagogically so. More astonishingly, Paul’s filibuster became such a spectacle that he gothawkish senators to join him.

“When people talk about a ‘battlefield America’,” Paul said, around hour four, Americans should “realize they’re telling you your Bill of Rights don’t apply.” That is a consequence of the September 2001 Authorization to Use Military Force that did not bound a war against al-Qaida to specific areas of the planet. “We can’t have perpetual war. We can’t have a war with no temporal limits,” Paul said.

This is actually something of a radical proposition. When House Republicans attempted to revisit the far-reaching authorization in 2011, chief Pentagon attorney Jeh Johnson conveyed the Obama administration’s objections. Of course, many, many Republicans have been content with what the Bush administration used to call a “Long War” with no foreseeable or obvious end. And shortly before leaving office in December, Johnson himself objected to a perpetual war, but did so gingerly, and only after arguing that the government had the power to hold detainees from that war even after that war someday ends.

French unemployment rises again to highest since 1999

France may be joining the wrong side of the euro zone team

By Ingrid Melander and Vicky Buffery
France's jobless rate hit its highest level in more than 13 years in the last quarter of 2012, underscoring the challenge the government faces over its pledge to reverse the upward trend by year-end.
Thursday's official data prompted a renewed government plea for action at European level to spur growth as the euro zone's No. 2 economy shows increasing signs of languishing behind a more resilient Germany.
The rise to 10.6 percent is the sixth consecutive quarterly increase in the jobless rate in the French economy, which contracted 0.3 percent in the final three months of 2012.
It brings unemployment to its highest since the second quarter of 1999 and is the latest bad news for a government that has admitted it will fall far short of growth and public deficit targets this year. Other data published on Thursday showed a widening trade deficit.
"It is an uncomfortable truth for (President) François Hollande and another sign that France may be joining the wrong side of the euro zone team," said Julien Manceaux, economist at ING Financial Markets, forecasting that unemployment would climb as high as 11.5 percent this year.
The European Commission sees French unemployment hitting 10.7 percent this year, nearly twice the level of Germany's 5.7 percent and not much better than Italy's 11.6 percent, but still far less than in Spain and Greece.
Hollande took power last May promising to halt a relentless rise in unemployment which has left one in four youths out of work and vowing to restore France's industrial competitiveness.
The president's approval ratings have slumped to around 30 percent since then as his government battles against a tide of factory closures. After backtracking last month on growth and deficit targets, he conceded the unemployment goal would now be harder to reach.
France's trade deficit widened to 5.9 billion euros in January from 5.4 billion in December, with a large chunk of the worsening data due to a drop in the sale of Airbus aircraft from 26 in December to 18, other data showed on Thursday.

BOOSTING GROWTH?
Industry Minister Arnaud Montebourg said worsening unemployment and bleak fourth-quarter GDP data across the euro zone, including in the bloc's powerhouse Germany, should push the European Union to take steps to boost growth.
"Europe and the euro zone are sinking. This is why the government is fighting, with the European Commission, for growth measures to be taken," he told France Info radio.
The Socialist government has already taken steps to boost competitiveness with measures to ease labour costs and a deal signed with mainstream unions in January to make hiring and firing laws more flexible to help companies weather downturns.
Hard-left unions oppose the agreement, saying it threatens job security, and led several thousand marchers in street protests in towns across France on Tuesday.
On Thursday, workers at tyremaker Goodyear, rallied in a Paris suburb against job cuts at a plant in the northern French city of Amiens, clashing with policemen, hurling paintballs and tyres.
The fourth-quarter headline unemployment figure, based on measurement criteria of the International Labour Organisation, was up 0.3 percentage points from the third quarter.
The total number of unemployed in mainland France was 2.9 million in the fourth quarter, national statistics office INSEE said. Just over a quarter of 15-24 year-olds were unemployed.
According to monthly figures issued last week by the labour ministry, which are not calculated according to ILO measures, mainland jobless totalled 3.17 million in January, the highest since July 1997 and close to the all-time high of 3.196 million.
Despite the bleak economic data, yields on long-term, fixed-rate French bonds largely fell at an auction on Thursday, underscoring the resilience of the country's bond market amidst renewed concerns over euro zone partners Italy and Cyprus. 

Wednesday, March 6, 2013

Sharing is not really caring


Eric Holder: Some Banks Are So Large That It Is Difficult For Us To Prosecute Them
While it is widely assumed that the too-big-to-fail banks in the US (and elsewhere) are beyond the criminal justice system - based on simple empirical fact - when the Attorney General of the United States openly admits to the fact that he is "concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them," since, "it will have a negative impact on the national economy, perhaps even the world economy," one has to stare open-mouthed at the state of our union. It appears, just as the proletariat assumed, that too-big-to-fail banks are indeed too-big-to-jail.
GRASSLEY: On the issue of bank prosecution, I'm concerned that we have a mentality of too-big-to-jail in the financial sector of spreading from fraud cases to terrorist financing and money laundering cases -- and I cite HSBC. So I think we're on a slippery slope. 
HOLDER: The concern that you have raised is one that I, frankly, share. And I'm not talking about HSBC now. That (inaudible) be appropriate.
But I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy. And I think that is a function of the fact that some of these institutions have become too large.
Again, I'm not talking about HSBC. This is just a -- a more general comment. I think it has an inhibiting influence -- impact on our ability to bring resolutions that I think would be more appropriate. And I think that is something that we -- you all need to -- need to consider. So the concern that you raised is actually one that I share. 

Looking for marriage in all the wrong places

The state, and above all a state that seeks self-limitation, needs the family to flourish

By Spengler 
Two mutually incompatible arguments are advanced to defend gay marriage. The first states that marriage is a good thing provided by the state, such that gay people have the same right to it as anyone else. The second states that marriage is a bad thing, and that bringing gay people into the institution of marriage will destroy it from the inside. 
Michelangelo Signorile, a prominent gay activist, urges people in same-sex relationships to "demand the right to marry not as a way of adhering to society's moral codes but rather to debunk a myth and radically alter an archaic institution". They should "fight for same-sex marriage and its benefits and then, once granted, redefine the institution of marriage completely, because the most subversive action lesbians and gay men can undertake ... is to transform the notion of 'family' entirely". 
Signorile is quoted in a new book by the distinguished legal philosopher Robert P George and two of his students. They contend that marriage is an institution quite different from the domestic arrangement that advocates of gay marriage have in mind. Gay marriage as such isn't the issue, argue the authors: it an attempt to do away with the traditional view of marriage as a comprehensive union, and replace it with a view marriage as an especially intense sort of emotional bond. 
Signorile might be tardy in his plan to "redefine the institution of marriage". Hedonistic heterosexuals have been hacking away at the traditional concept of marriage for years. Whether gay marriage becomes law or not, the institution of marriage in the United States may erode so quickly that it will cease to perform its social function, that is, rearing a new generation of Americans. 

PayPal’s Private Governance

Government bureaucracy has fewer incentives to be responsive to the needs of market participants

by EDWARD STRINGHAM
The nine most terrifying words in the English language are, "I'm from the government and I'm here to help."                                             – Ronald Reagan
Markets have a long history of generating rules and enforcement mechanisms from within (endogenously) rather than requiring market participants to wait for the State. Instead of attributing the success of markets to government bureaucrats and elected officials, we should instead thank PayPal founders like Peter Thiel, Max Levchin, and other providers of private governance who help make markets work.  
PayPal was founded in 1999 to facilitate payments between any two parties with an email address. No costly credit card accounts or merchant terminals were needed. What PayPal did not foresee was the degree of fraud it would be subjected to. Fraudsters from all over the world would hack into accounts and transfer small amounts of money out of each one. By 2001 PayPal had gross revenue of $14 million per year, but was losing $10 million per month to fraudsters. At first the company went to the government to stop the fraud and recover the money. But in short order PayPal realized that relying on the government to solve its problems was hopeless. 
Instead, PayPal gave the FBI evidence, but noticed that the government was not exactly up to date on the latest technology and would ask the company questions like, “What’s a banner ad?,” according to one PayPal executive who spoke with me. The government had little ability to identify who the anonymous fraudsters were, and when PayPal identified them there was a “dispute between the FBI office in San Jose and San Francisco over which of them had jurisdiction over Kazakhstan.” The government simply lacked the expertise to do anything to protect this new kind of market. And one can only wonder what perverse incentives lead the FBI to quibble about jurisdictions before actually solving the case.

An Infinite Amount of Money

In the long run you'll be all dead

By John Mauldin 
The three major blocs of the developed world are careening toward a debt-fueled denouement that will play out over years rather than in a single moment. And contrary to some opinion, there is no certain ending. There are multiple paths still available to Europe and especially the US, though admittedly none of them are bright and carefree. There are very few paths available to Japan, as they have skipped too far down the yellow brick road of debt. None of Japan’s remaining paths have good endings. In the US, even as numerous voices declaim on the crisis that awaits if we don’t act, there is seemingly no collective will to actually do anything as yet. Perhaps it will take… a crisis. In Europe, the peripheral countries can already be said to be in crisis.
This week we will look at the mindset that ignores warning signs, and reflect on a hard-to-believe comment from Mayor Bloomberg of New York. It is a teaching moment that does not bode well for my hopeful outcome in the US. Meanwhile in Europe, the risks have been heightened with the recent vote in Italy. We must remember that Italy is the world’s third-largest issuer of bonds – its problems matter on the world stage. While it may all be molto divertente for those of us sitting on the sidelines, the potential consequences
An Infinite Amount of Money
I am often asked, “How can anyone not see the problems of growing debt in the US? Why can’t we get a consensus to change?”
Part of the problem is that too many in power just don’t see the impending crisis that you and I see, or at least they don’t see the need to act now. That is changing – or so I thought until I read a most inexplicable statement by the billionaire entrepreneur mayor of NYC, Michael Bloomberg. This is the sort of thing that causes me to despair. Here we have a supposedly (well, relatively) fiscally conservative politician, someone who is no stranger to financial circles, giving us these off-the-cuff remarks last week, commenting on whether sequestration will affect the NYC budget:
“It depends on how long,” Mr. Bloomberg said on his weekly WOR radio show with John Gambling. “If it lasts a few weeks, no. If it [lasts longer], yeah. We get 10 or 12 percent of our budget from the federal government, not all of that is going to be cut back, but there would be effects – not good effects. But in the context of, ‘Is anything going to change tomorrow? Are we going to run out of money tomorrow?’ I’m sure I’ll get that question at the [next] press conference. No.”
Furthermore, while saying the federal deficit does indeed need to be curtailed, Mr. Bloomberg argued the United States could owe “an infinite amount of moneyand there is no specific amount that would cause the country to default.

The Institutions-Intensive Economy

Describing our contemporary economic world
By Arnold Kling
Today, a modern market economy with its ever-finer division of labor depends on a constantly expanding network of trade. It requires an intricate web of social institutions to coordinate the working of markets and firms across various boundaries. At a time when the modern economy is becoming increasingly institutions-intensive, the reduction of economics to price theory is troubling enough. It is suicidal for the field to slide into a hard science of choice, ignoring the influences of society, history, culture, and politics on the working of the economy.1
Ronald Coase, the world's oldest active economist, here aptly describes the economy in the age of the Internet, giving us the expression "institutions-intensive." His famous contributions to the theory of how bargaining might address externalities and how the boundaries of the firm depend on relative institutional effectiveness turn out to be preludes to the sort of economic analysis that is needed today.
Over the course of Coase's lifetime, the locus of economic activity has been shifting, from the farm to the factory floor to the office and even to "the cloud." With each step, the concept of property has become more difficult to define, the economic entities have become more difficult to locate in time and place, the proportion of wealth that is intangible has risen, and earnings have become increasingly contingent on social constructs rather than on individual attributes.
According to Bureau of Labor Statistics data, in every year between 1939 and 1956, the proportion of total employees in the nonfarm sector classified as "manufacturing production and nonsupervisory workers" was over twenty-five percent. This figure has been falling steadily, until in the last four years it has averaged just six percent.
The plunge in manufacturing production work is indicative of the declining share of economic activity that is measurable. One hundred years ago, the output of an individual farm worker was quantifiable. In principle, farm workers could be paid on the basis of specific, tangible accomplishments—pounds of apples picked, bushels of wheat harvested, etc. The same holds for pre-industrial manufacturing, where it was possible to pay for piece work.
Inside a large 20th century factory, the output of the individual worker was not as readily measured. Total output was still quantifiable, but one could not attribute a ton of steel or a shipment of refrigerators to an individual worker. Factory workers are paid to be in a particular place at a particular time. They clock in, clock out, and get paid by the hour.
In the decades following World War II, as the share of employment on the factory floor declined, what increased was clerical work. Secretaries, sales clerks, and telephone operators, like factory workers, are paid to be in a particular place at a particular time. They might receive a biweekly salary, but they are expected to work set hours.
With the advent of the Internet, work is no longer necessarily fixed in time and space. Someone can answer email on a smart phone at any time, in any location. A friend of mine in sales and support for an educational software company is typical. Because his clients span the globe, he can be called at any time of day or night. Neither they nor his boss know where he is when he picks up the phone. Usually, he is in his basement office, but sometimes he is out of town at a conference or on a family vacation. As more workers hold jobs whose contours are shaped by the Internet, the once well-defined concept of "hours worked" becomes much less precise.

The rehabilitation game

How our political class set criminals free and then cover up the consequences

By Theodore Dalrymple 
‘They pretend to pay us and we pretend to work,’ said the Soviet worker in the good old days; the British criminal could nowadays say with equal reason, ‘They pretend to punish us and we pretend to reform.’
Recent statistics show that two thirds of young criminals ordered to wear electronic tags break their court orders almost with impunity. Nothing could better reveal the hall of mirrors that the British criminal justice system long ago became than the response of Keith Vaz, the chairman of the House of Commons all-party Home Affairs Committee, to very similar news last year. ‘The public,’ he said, ‘must be convinced that community sentences are an effective form of punishment.’
In other words, the problem is not how to make community sentences work, but how to create the misleading public impression that they do. This has for decades been the ruling imperative of that great friend to the British criminal, the Home Office (and now the Ministry of Justice). It struggles might and main not to reduce criminality but to reduce the public’s supposedly neurotic fear of crime, and it does so by sowing confusion — confusion with a roseate glow.
Forked-tonguery remains the order of the day among the British political class. Who does not remember Mr Blair’s ‘Tough on crime, tough on the causes of crime’? In an interview with the Daily Telegraph this month, the Justice Secretary, Chris Grayling, said that he would like to see longer prison sentences for hardened criminals while also arguing for the use of more electronic tagging, only a matter of five days before he announced the closure of seven prisons as a cost-cutting measure and only a few more days before figures showing the uselessness of electronic tagging were issued from his own department. I’ve known burglars more honest and straightforward than British politicians: who, incidentally, are overwhelmingly the largest single cause of crime in this country.
Let me give a small example of the obfuscatory official methods used to confuse the public. For quite a long time the Home Office recorded the two-year reconviction rate of people given community sentences. Suddenly, and without warning or explanation, it started to publish the three-month ‘reoffending’ rate. Why the change?
First, criminologists say it made genuine comparison almost impossible: were things getting better, worse, or remaining the same? Nevertheless, the impression of improvement was created because the reoffending figure for the shorter period was, naturally enough, lower (10 per cent) than for the longer period (50-plus per cent). Ten per cent doesn’t sound quite so bad.
Second, and more sinister, the new terminology — reoffending rather than reconviction rate — was in effect a deliberate lie. The two rates would be the same if, and only if, the police solved every recorded crime, instead of 28 per cent of such crimes (and a much lower rate of all crimes, since not all are recorded).