The scale of domestic surveillance under Obama, frightens even hard core leftists

NSA collecting phone records of millions of Verizon customers daily

Under the terms of the order, the numbers of both parties on a call are handed over, as is location data and the time and duration of all calls

by Glenn Greenwald

The National Security Agency is currently collecting the telephone records of millions of US customers of Verizon, one of America's largest telecoms providers, under a top secret court order issued in April.

The order, a copy of which has been obtained by the Guardian, requires Verizon on an "ongoing, daily basis" to give the NSA information on all telephone calls in its systems, both within the US and between the US and other countries.

The document shows for the first time that under the Obama administration the communication records of millions of US citizens are being collected indiscriminately and in bulk – regardless of whether they are suspected of any wrongdoing.

The secret Foreign Intelligence Surveillance Court (Fisa) granted the order to the FBI on April 25, giving the government unlimited authority to obtain the data for a specified three-month period ending on July 19.

Under the terms of the blanket order, the numbers of both parties on a call are handed over, as is location data, call duration, unique identifiers, and the time and duration of all calls. The contents of the conversation itself are not covered.

What if Laws Applied to Everyone?

What do we do about a government that breaks the laws we have hired it to enforce? 

by Andrew P. Napolitano

What if government officials have written laws that apply only to us and not to them? What if we gave them the power to protect our freedoms and our safety and they used that power to trick and trap some of us? What if government officials broke the laws we hired them to enforce? What if they prosecuted others for breaking the same laws they broke?

What if the government enacted a law making it a crime to provide material assistance to terrorist organizations? What if that law was intended to stop people from giving cash and weapons to organizations that bomb and maim and kill? What if the government looked at that law and claimed it applied to a dentist or a shopkeeper who sold services or goods to a terrorist organization, and not just to financiers and bomb makers?

What if an organization that killed also owned a hospital or a school and the law made it a crime to contribute to the hospital or the school? What if the Supreme Court ruled that the law is so broad that it covers backslapping, advocacy and free speech? What if the court ruled that the law makes it a crime to encourage any terrorist organization to do anything – fix teeth, educate children, save lives or kill people? What if the law makes it a crime to talk to any person known to be a terrorist? What if the law is so broad that it punishes ideas and the free expression of those ideas, even if no one is harmed thereby?

Let’s get real about reversing the recession Part II

Britain has profound economic problems that can only be addressed through the wholesale renewal of production and infrastructure

by Phil Mullan 

The unemployment puzzle: why didn’t it rise further?

Probably the most popular conjunctural explanation for the ‘productivity puzzle’ relates to what’s been happening to jobs: employment didn’t fall away as much as it would normally be expected to in the recent recession. It did rise but to a lower level than many anticipated – seven to eight per cent rather than the predicted double-figures percentage. Hence sharply lower output in the recession (by over six per cent) as a ratio to relatively more workers and more working hours expressed itself as reduced productivity. And because unemployment didn’t rise as much as might have been expected during the recession, the normal start of the recovery in the productivity statistics, with firms laying off workers, didn’t happen either. 

A common rationalisation for this is that Britain has experienced an increase in ‘labour-market flexibility’ - the economists’ way of saying that people have been prepared to accept lower wages or work fewer hours. As a result, it’s been less costly for employers to keep on more workers than in previous downturns. The fall in real wages since 2008 has made it cheaper for businesses to hold on to labour.

Argentina’s crazy plan to save the economy through money laundering

Cristinanomics

BY DOUGLAS FARAH

Argentina's President Cristina Fernández de Kirchner has hit on a novel way to try to alleviate her self-inflicted economic free fall and acute shortage of hard currency -- invite money launderers from around the world to put their dollars in Argentine banks with no questions asked.

That's not, of course, the official plan. But this month's move is the latest in a series of steps that seem more rooted in magical thinking than in economic reality that have pushed Argentina ever closer to financial ruin and international pariah status. The government-sponsored amnesty to allow any amount of dollars from anywhere in the world to find a home in Argentina, with no questions asked, was passed into law last Wednesday. The justification is the need for hard currency because the current economic policies have drive up the value of the "blue-" or black-market dollar to 10 pesos while the official exchange remains pegged at 5 pesos.

The Federal Reserve is making unemployment worse and the average American poorer

The Fed's Zero Interest Rate Policies Amount To A War On Jobs

By Marc A. Miles

It is easy to conclude that Federal Reserve policy has failed.  Despite record low rates generated by massive purchases of government and mortgage back securities, economic growth is stuck below 2.5 percent and unemployment remains far from pre-recession levels.

In fact it is much worse.  The Fed’s policy has actually retarded job creation.

Fewer Job Opportunities

Understanding this perverse employment outcome requires simply understanding employers’ incentives. To expand production employers either hire more workers or invest in new machinery and technology. The decision is influenced strongly by the relative cost of the two. If the relative cost of workers falls, the employer hires more people and spends less on investments. Conversely, a higher relative cost of workers encourages slower hiring.

Abstract Immigrants

Unlike inanimate objects, people have cultures and not all cultures are compatible

Admitting people with incompatible cultures is an irreversible decision with incalculable consequences.

By Thomas Sowell

One of the many sad signs of our times is the way current immigration issues are discussed. A hundred years ago, the immigration controversies of that era were discussed in the context of innumerable facts about particular immigrant groups. Many of those facts were published in a huge, multi-volume 1911 study by a commission headed by Senator William P. Dillingham.

That and other studies of the time presented hard data on such things as which groups’ children were doing well in school and which were not; which groups had high crime rates or high rates of alcoholism, and which groups were over-represented among people living on the dole.

China And The Biggest Territory Grab Since World War II

So China’s claim to the South China Sea, if permitted to stand, will mark the end of the open architecture of the Post-War world

Filipinos protest in front of the Chinese Consulate in Los Angeles, as part of a global protest over an escalating territorial row in the South China Sea. The territorial row centres on Scarborough Shoal, a tiny rocky outcrop in the South China Sea which the Philippines says is part of its territory because it falls within its exclusive economic zone. China, however, claims virtually all of the South China Sea, which is believed to sit atop huge oil and gas reserves, as its historical territory, even waters close to the coasts of other Asian countries.

By Gordon G. Chang
On June 1^nd , the New York Times reported that China’s mapping authority, Sino-maps Press, issued a new map of the country showing 80% of the South China Sea as internal Chinese water. 

What’s at issue?  Each year, more than half of the world’s annual merchant tonnage passes through the South China Sea as well as a third of the global trade in crude oil and over half of LNG trade.

Beijing’s assertion of sovereignty over that body of water does not necessarily mean it will close the South China Sea off to international commerce.  Yet that would be the next step.  Given its extremely broad view of its right to regulate coastal traffic, Beijing will undoubtedly define the concept of “innocent passage” narrowly and require vessels entering that sea to obtain its permission beforehand and similarly require aircraft flying over it to do the same.  The South China Sea, bordered by eight nations, has long been considered international water.

Can We Get It Back?

Booming economic growth was always the foundation of America

By Peter Ferrara

As Stephen Moore and Julian L. Simon reported in their underappreciated work, It’s Getting Better All the Time: 100 Greatest Trends of the Last 100 Years, the American standard of living (real per capita GDP) grew by seven times from 1900 to 2000. That was the foundation of modern America, and the modern world.

Moreover, it was accomplished with Americans staying in school much longer, and retiring earlier, over the course of that century, which means they worked much less over their lives on average. The average work week, in fact, declined by 50% from 1900 to 1950.

The Fundamental Transformation of America
As a result of that booming economic growth, the typical home that most Americans own today is far superior, bigger, less crowded, and stocked with modern conveniences. By 2000, the average new house in America was 50% bigger than even in the 1960s, with 2-3 times as many rooms per person as in 1900. Moore and Simon add:

It is hard for us to imagine, for example, that in 1900 less than one in five homes had running water, flush toilets, a vacuum cleaner, or gas or electric heat. As of 1950 fewer than 20 percent of homes had air conditioning, a dishwasher, or a microwave oven. Today between 80 and 100 percent of American homes have all of these modern conveniences.

The Forgotten Scandal

True remorse should start with George Zimmerman

By Arnold S. Trebach

Our Attorney General and his boss in the Oval Office have started a combined remorse and charm offensive, which is certainly welcome in light of their numerous scandalous transgressions in recent months. Actually of course those transgressions go back for years. Messrs. Obama and Holder have recently declared that they want to rethink how they can improve their approach to dealing with investigations of reporters who are seeking information from officials. That might help resolve only one of the scandals in which this villainous administration is now involved. Still in the forefront of the public mind are the Benghazi horrors and the IRS depredations.

However, in my mind, the remorse and charm of our leaders ought to be focused on the horrors that they have purposely visited upon one of our decent minority citizens, George Zimmerman. Dealing with his tragic situation will take not only charm and remorse but also guts and courage.

Unlike the other scandals, wherein many of the facts are still unclear, most of the important facts concerning the Zimmerman-Martin tragedy are well known already.

There is no doubt that George Zimmerman killed Trayvon Martin. There is no doubt that Zimmerman claimed he acted out of fear for his life and in self-defense, an issue at the heart of the legal case.

There is no doubt that Zimmerman has persisted in that claim of self-defense. There is also no doubt that the reports of the front-line police officers who responded to the scene of the incident tended to support Zimmerman’s claim of self-defense. There is no doubt that Bill Lee, then the Police Chief of Sanford, reviewed all of the evidence and on the basis of that evidence and extensive experience, concluded that there was insufficient evidence to hold Zimmerman. The same was true of the conclusions of the experienced and competent State Attorney, Norman Wolfinger. Part of the evidence they reviewed included the lie detector test that Zimmerman willingly took while in police custody. He passed that objective test. In other words, these experienced police and prosecutorial officials concluded that the suspect was innocent of any criminal behavior.

Is Democracy in Retreat?

No, but further advances depend on the liberal democracies' getting their houses in order 

by LILIA SHEVTSOVA

The decline of democracy and popular disenchantment with democratic institutions have recently become hot topics in academic and think tank circles. Freedom House, in its annual Freedom in the World report released in January, cites a seventh consecutive year of decline in freedom around the world but cautions that the decline is not a precipitous one and thus shouldn’t be exaggerated. Joshua Kurlantzick’s book, Democracy in Retreat: The Revolt of the Middle Class and the Worldwide Decline of Representative Government, and essay in Foreign Policy “One Step Forward, Two Steps Back”, by comparison, offer a starker view of a ”consistent” decline of democracy. Kurlantzick identifies the key culprit for the decline: The middle class, contrary to the expectations of Samuel Huntington and Seymour Martin Lipset, isn’t showing all that much of a longing for freedom these days.

Interestingly, the democratic societies of today feel democratic “retreatism” and the absence of a policy vector much more acutely than they did from the 1960s through the early 1970s, the last period of democratic stagnation and crisis. True, at that time, Western civilization could not afford a prolonged spell of depression and pessimism; the existence of the Soviet Union and the world Communist system forced the West to focus intently on the struggle for the preeminence of its principles. The West constantly needed to flex its muscles and look for ways to reassert itself.

Today the decline of democracy seems more palpable. At the very least, democracy seems to have lost its energy, or has allowed that energy to flow into populist channels. The excitement following the Arab Awakening in 2011 has been replaced by concern that Islamist movements have hijacked whatever democratic prospects existed in those countries. This is especially true of Egypt, and in Syria, the tragedy unfolding on a daily basis and the impact of that tragedy on Syria’s neighbors have also dampened democratic hopes in the region. With only a few exceptions (Georgia, Moldova, and Kyrgyzstan), Eurasia has become a region known for its rising anti-democratic behavior and policies; Russia has experienced the worst deterioration in human rights since the collapse of the USSR. Repression in China has actually increased in recent years—and China presents its own model as an alternative to Western democracy.

At the same time, Western democracies are consumed with their own challenges, most notably the economic crisis, felt in many countries, but most severely in Greece and Spain.. Despite its Nobel Peace Prize last year, the European Union, Western civilization’s most ambitious project in the 20^th century, is a source of concern and disappointment (with notable exceptions, including the Nordic states in particular). The United States is increasingly turning inward, pulling out of Iraq and Afghanistan and showing great reluctance to get more involved in Syria.

Bonjour Tristesse

The Economic and Political Decline of France

By Mathieu von Rohr

France is in the grip of a crisis. As both its economy and European influence weaken, scandal has hobbled its political elite. The country needs drastic overhaul, but President Hollande does nothing but waver and hesitate.

Judging by the imperial magnificence of the Elysee Palace, France has never ceased to be a world power. Rooms with five-meter (16-foot) ceilings, gilded chandeliers, candelabras and elaborate stucco work are guarded by members of the Republican Guard, who parade in front of the palace gates with their plumes of feathers and bayonets.

The man in charge, on the other hand, seems lonely and small in his palace. He is surrounded by court ushers who make sure that glasses and writing sets are perfectly arranged, and when he enters a conference room, they call out grandly "Monsieur le Président de la République!", to give his attendants time to stand up for him.

François Hollande never intended to become a king, but rather a "normal president," as he put it, and now he has to play one nonetheless. He occasionally seems like an actor who has somehow ended up in the wrong play.

Outside, throughout the country, unemployment reaches new highs each month, factories are shut down daily, hundreds of thousands take to the streets to protest gay marriage, and the French are increasingly outraged over a barrage of new political scandals as the country hovers on the cusp of waning global relevance. Yet this roar of dissatisfaction doesn't permeate the walls of Hollande's world. Here, it is quiet, very quiet.

Shortly after moving into his new official residence, Hollande warned his staff that in a palace it is easy to feel protected, and he insisted that he did not want to be "locked in." But that is precisely what is happening, as evidenced by the documentary film "Le Pouvoir" (The Power), which recently debuted in French theaters and whose creators accompanied Hollande during the brutal first eight months of his presidency.

Elite in a Bubble

They paint an image of a likeable man who seems to spend a lot of time rewriting speeches prepared by his staff. As you watch him in the movie, you start to wonder: Does he do all the important things when no one's watching or does he really spends most of his time on the unimportant? However, the main subject of the film is not the president, but rather the reality bubble in the country's top echelons. Not just Hollande, but also most of his cabinet ministers, still reside in Parisian city palaces that predate the French Revolution, and perhaps that's a problem.

Are central bankers losing control?

In the meantime the debasement of paper money continues

by DETLEV SCHLICHTER

The last couple of weeks have been very interesting. Remember that, certain regional differences aside, Japan has, for the past two-plus decades, been the global trendsetter in terms of macroeconomic deterioration and monetary policy. It was the first to have a major housing and banking bubble, the first to see that bubble burst, to respond with years of 1 percent interest rates, then zero rates, then various rounds of quantitative easing. The West has been following Japan each step on the way – usually with a lag of about ten years or so, although it seems to be catching up of late. Now Japan is the first developed nation to go ‘all-in’, to implement a no-holds-barred money-printing regime to (supposedly) ‘stimulate’ the economy. This is called Abenomics, after Japan’s new prime minister, Shinzo Abe, the new poster-boy of policy hyper-activism. I expect the West to follow soon. In fact, the UK is my prime candidate. Wait for Mr. Carney to start his new job and embrace ‘monetary activism’. Carnenomics anybody?

But here is what is so interesting about recent events in Japan. At first, markets did exactly what the central bankers wanted them to do. They went up. But in May things took a remarkable and abrupt turn for the worse. In just eight trading days the Nikkei stock market index collapsed by 15%. And, importantly, all of this started with bonds selling off.

Are markets beginning to realize that all these bubbles have to pop sometime and that sometime may as well be now? Are markets beginning to refuse to dance to the tune of the central bankers and their printing presses? Are central bankers losing control?

 ‘Sell in May and go away’

Let’s turn back the clock for a moment, if only just a bit. Let’s revisit April 2013 for a moment. At the time I spoke of central bankers enjoying a kind of ‘policy sweet spot’: they were either pumping a lot of liquidity into markets or promising to do so if needed, and all of them were keeping rates near zero and promising to keep them there. Some started to consider ‘negative policy rates’. Yet, despite all this policy accommodation, official inflation readings remained remarkably tame – indeed, inflation marginally declined in some countries – while all asset markets were on fire: government bonds, junk bonds, equities, almost all traded at or near all-time highs, undeniably helped in large part by super-easy money everywhere. Even real estate in the US was coming back with a vengeance. And then, in early April, central bankers got an extra bonus: Their nemesis, the gold market, was going into a tailspin. I am sure Mr. Bernanke was sleeping well at the time: financial assets were roaring, happily playing to the tune of the monetary bureaucracy, seemingly falling in line with his plan to save the world with new bubbles, while the cynics and heretics in the gold market, the obnoxious nutters who question today’s enlightened policy pragmatism, were cut off at the knees.

But then came May and everything sold off.

The Microeconomics of Inflation

... or how I know this ends in tears

By Martin Sibileau

A week later and everyone is a bit more nervous, with the speculation that US sovereign debt purchases by the Federal Reserve will wind down and with the Bank of Japan completely cornered.

In anticipation to the debate on the Fed’s bond purchase tapering, on April 28th (see here) I wrote why the Federal Reserve cannot exit Quantitative Easing: Any tightening must be preceded by a change in policy that addresses fiscal deficits. It has absolutely nothing to do with unemployment or activity levels. Furthermore, it will require international coordination. This is also not possible. The Bank of Japan is helplessly facing the collapse of the country’s sovereign debt, the European Monetary Union is anything but what its name indicates, with one of its members under capital controls, and China is improvising as its credit bubble bursts.

In light of this, we are now beginning to see research that incorporates the problem of future higher inflation to the valuation of different asset classes. One example of this, in the corporate credit space was Morgan Stanley’s “Credit Continuum: Debt Cost and the Real Deal” published on May 17^th, 2013. Upon reading it, I was uncomfortable with the notion that inflation is the simple reflection of the change in a price index, which implies the thesis of the neutrality of money. For instance, the said research note discusses how standard financial metrics compare vis-à-vis a rate of inflation.

Why is this relevant? The gap between current valuations in the capital markets (both debt and credit) and the weak activity data releases could mistakenly be interpreted as a reflection of the collective expectation of an imminent recovery. The question therefore is: Can inflation bring a recovery? Can inflation positively affect valuations?

I am not going to comment on others’ views or recommendations, but on the underlying method. A price index is a mental tool that has no relation to reality. In the real world, we trade driven by relative prices. To infer economic behaviour off changes in a price index is a mistake. The impact of inflation is more complex. For this reason and in anticipation of future debates on this topic, I offer you today a microeconomic analysis of such impact, on value.

Framework

I suggest that a good way (but certainly not the only one) to assess the impact of inflation on the valuation of a firm is to think of the same within the typical free-cash flow approach. After all, what matters is not how inflation can affect a certain component of its capital structure, but how the entire value of a firm is impacted, before the same can be shared among the different contributors to the said capital structure (i.e. equity, debt holders, etc.)

Simplifying, as far as I can recall from the times when I worked in the area of Private Equity,  the way to calculate the free cash flow of a firm for a determined period is to obtain its operating margin, add to it depreciation & amortization costs and subtract capital expenditures, changes in net working capital and taxes. I show the formula below:

The old demons are not ancient history

How to Confront Chinese Power Peacefully

By PATRICK J. BUCHANAN

As America grew in the 1800s from a republic of a few millions, whose frontier stopped at the Mississippi, into a world power, there were constant collisions with the world’s greatest empire.

In 1812, we declared war on Britain, tried to invade Canada, and got our Capitol burned. In 1818, Andrew Jackson, on an expedition into Spanish Florida to put down renegade Indians harassing Georgia, hanged two British subjects he had captured, creating a firestorm in Britain.

In 1838, we came close to war over Canada’s border with Maine; in 1846, over Canada’s border with the Oregon Territory.

After the Civil War, Fenians conducted forays into Canada to start a U.S.-British battle that might bring Ireland’s independence.

In 1895, we clashed over the border between Venezuela and British Guiana.

War was avoided on each occasion, save 1812. Yet all carried the possibility of military conflict between the world’s rising power and its reigning power. Observing the pugnacity of 21st-century China, there appear to be parallels with the aggressiveness of 19th-century America.

China is now quarreling with India over borders. Beijing claims as her national territory the entire South and East China seas and all the islands, reefs and resources therein, dismissing the claims of half a dozen neighbors.

Beijing has bullied Japan and the Philippines and told the U.S. Navy to stay out of the Yellow Sea and Taiwan Strait.

In dealing with America, China has begun to exhibit an attitude that is at times contemptuous.

Erdogan's Grip on Power Is Rapidly Weakening

The prime minister is doing all he can to portray the protests as an attack on Turkey

By Özlem Gezer, Maximilian Popp and Oliver Trenkamp

For a decade, Prime Minister Recep Tayyip Erdogan has had a tight grip on power. But it suddenly looks to be weakening. Thousands have taken to the streets across the country and the threats to Erdogan's rule are many. His reaction has revealed him to be hopelessly disconnected.

The rooftops of Istanbul can be seen in the background and next to them is a gigantic image of Recep Tayyip Erdogan. Turkey's powerful prime minister is watching over the city -- and is also monitoring the work of the political party he controls. At least that seems to be the message of the image, which can be found in a conference room at the headquarters of Erdogan's Justice and Development Party (AKP).

These days, though, Istanbul is producing images that carry a distinctly different meaning -- images of violent protests against the vagaries of Erdogan's rule. And it is beginning to look as though the prime minister, the most powerful leader Turkey has seen since the days of modern Turkey's founder Mustafa Kemal Atatürk, might be losing control.

As recently as mid-May, Erdogan boasted during an appearance at the Brookings Institute in Washington D.C. of the $29 billion airport his government was planning to build in Istanbul. "Turkey no longer talks about the world," he said. "The world talks about Turkey."

Just two weeks later, he appears to have been right -- just not quite in the way he had anticipated. The world is looking at Turkey and speaking of the violence with which Turkish police are assaulting demonstrators at dozens of marches across the country. Increasingly, Erdogan is looking like an autocratic ruler whose people are no longer willing to tolerate him.

Gold, money and everything else

More Than Meets the Eye

by Aristotle

Part 1 --- Stormclouds Gather...

The estimable economist Milton Friedman stated his forgettable opinion in 1974 that OPEC would collapse and oil would never get up to $10 per barrel. In all fairness to Professor Friedman, we must recognize his position as coming from a staunch monetarist, emphasizing money supply as the "true religion" for the Federal Reserve to keep the US Dollar as good as Gold. At times, he half-seriously argued for the abolition of the Federal Reserve in light of the simple monetary policy guidelines that could serve in its stead, with the economy returning to a state of self-regulation. (In the past sound-money days, economic hardships were far from unnatural, and they were not necessarily attributable to acts of government. However, modern attempts to centrally manage the economy ensures that any blame for systemic difficulties today may be clearly laid at government's feet.)

Milton's mistake was two-fold. First was his knowledge that Arabian oil could be produced for one dime of real money, and that inevitable competition among OPEC members would surely keep the price close to cost of production. Second, and most importantly, Milton failed to account for the possibility that the government would abandon such reasonable monetary management to keep the dollar nearly as good as Gold. This fact was NOT lost, however, on the oil producing countries. Ask yourself, what would YOU do if your business or trading partners suddenly started offering you payment with Monopoly money instead of "real" money? Would you shun real money as though it were the plague, and embrace Monopoly money as the greatest thing since sliced bread? If you would, then I have got a job for you!! Bring your shovel and some work-clothes, you have been hired for life...

Upon the 1971 declaration by the United States that redemption of dollars for Gold would be terminated, the entities in receipt of dollars for balance of trade settlements had no difficulty recognizing this as an outright default on payment contracts. The scramble was on to make sense of this new payment system in which the dollar was no longer a THING of value (a small amount of Gold), but was now reduced to a CONCEPT of value; an undefined unit with which the world would denominate the amount of value in contracts for goods and services. The problem ever since has been in coming to terms with the meaning of value for this shifting and undefined unit, and its vulnerability for mismanagement and abuse.

Jelle Zijlstra, who became head of the Bank for International Settlements, said while with the Bank of the Netherlands in regard to the 1971 severing of Gold from the dollar, "When we left the pound, we could go to the dollar. But where could we go from the dollar? To the moon?"

As I continue this tale, I hope it becomes clear that not only have we gone to the moon, but that Gold is going there also.

Part 2 --- A Transition: Things Are what they Are...

Do you see the world as it is? Or, do you see the world as you are? A tough obstacle, to be sure, as our experiences weigh heavily on our perceptions, and many people have no practical earthly experience with real money. There is hope..."the Truth is out there!" as a popular show is quick to proclaim. Albert Einstein puts an interesting slant on this theme: "My religion consists of a humble admiration of the illimitable superior spirit who reveals himself in the slight details we are able to perceive with our frail and feeble mind."

Resentment against Erdogan explodes

Mr Erdogan may well be wondering whether he is the victim of his own success

The Economist 

It all began with a grove of sycamores. For months a tight band of environmentalists had been protesting against a government-backed project to chop the trees down in order to make room for a mall and residential complex in Istanbul’s Taksim Square. Last week they organised a peaceful sit in, camping, singing and dancing by the threatened trees. 

On May 31st, in a predawn raid, riot police moved in. They set fire to the demonstrators’ tents and doused them with pressurised water and tear gas. Images depicting police brutality spread like wildfire across social media. Within hours thousands of outraged citizens began streaming towards Taksim Square. Backed by armoured personnel carriers and water cannons, police retaliated with even more brutish force. Tidal waves of pepper spray sent protestors reeling and gasping for air. Hundreds of demonstrators were arrested, and scores of others injured, in the clashes that ensued. Copycat demonstrations erupted in Ankara, the Turkish capital, and elsewhere across the country. Turkey’s “Tree Revolution” had begun. 

In fact the mass protests that are sweeping the country are not just about the trees, nor do they constitute a revolution. They are the expression of the long-stifled resentment felt by nearly half of the electorate who did not vote for the ruling Justice and Development (AK) party in the June 2011 parliamentary elections. These swept Recep Tayyip Erdogan, the prime minster, to power for a third consecutive term. 

The wave of unrest was completely unexpected. The protestors cut across ideological, religious and class lines. Many are strikingly young. But there are plenty of older Turks, many of them secular-minded, some overtly pious. There are gays, Armenians, anarchists and atheists. There are also members of Turkey’s Alevi Muslim minority. What joins them is the common sentiment that an increasingly autocratic Mr Erdogan is determined to impose his worldview. The secularists point to a raft of restrictions on booze; liberals to the number of journalists in jail (there are more journalists in prison than in any other country in the world). Thousands of activists of varying stripes (mainly Kurds), convicted under Turkey’s vaguely worded anti-terror laws, are also behind bars. Then there are those incensed by mega urban-development projects, including a third bridge over the Bosphorus, which will entail felling thousands of trees. Scenting the public mood, retailers announced that they had pulled out of the planned arcade in Taksim Square. “This is not about secularists versus Islamists—it’s about pluralism versus authoritarianism,” commented a foreign diplomat. 

Mr Erdogan wants to be elected president when the post comes free in August 2014. And he has made no secret of his desire to boost the powers of the presidency “a la Turca” as he put it, spurring accusations that what Erdogan really wants is to become a “Sultan”.

“Tayyip [Erdogan] istifa”, a call for the prime minister to resign, was the slogan most commonly chanted by the protestors. Not that most Turks would have known. Media bosses fearful of jeopardising their other business interests shunned coverage of the protests for nearly two days, opting instead to screen programmes about breast-reduction surgery and gourmet cooking. Faced with a public outcry, the main news channels began broadcasting live from Taksim Square. But pro-government papers continue to point the finger of blame at provocateurs and “foreign powers” bent on undermining Turkey. It seems an odd description of the thousands of housewives leaning over their balconies clanging their pots. 

What is economic growth?

... and why we won’t have any

As we are in the final stage of the global bubble, I realize that we often fail to ask the most obvious questions. In this case, as every central banker tells us that his policies are directed to obtain growth, the obvious question is…how do we define economic growth? What is economic growth?

by Martin Sibileau

As we are in the final stage of the global bubble, I realize that we often fail to ask the most obvious questions. In this case, as every central banker tells us that his policies are directed to obtain growth, the obvious question is... how do we define economic growth? What is economic growth? Yes, yes, I know that what they do is simply monetize deficits and enable the transfer of wealth between sectors and generations, but there is also an intellectual battlefield, which we should be aware of.

In the next sections, I will (extremely) briefly walk through the history of the idea of economic growth to this day. Obviously, I cannot be exhaustive and I encourage you to do further research on the works mentioned below. At the end, I examine what view policy makers have on economic growth, if any…

When did this all begin?

When did the idea of economic growth first appear? Up to the 18^th century, economic thinking was predominantly concerned with comparative statics, intellectual exercises designed to establish causes and consequences of policy making.

I dare to suggest that the concern on economic growth grew before the French Revolution, when the distribution of income was first examined. My suggestion contradicts Nicholas Kaldor, who finds David Ricardo pioneering the theory of distribution. Although David Ricardo explicitly says in the preface to his “Principles of Political Economy and Taxation” that: “…To determine the laws which regulate this distribution, is the principal problem in Political Economy…”, my view is that this perspective had already been adopted by Francois Quesnay, in 1759, and was the foundation of the Physiocracy. If agriculture was the basis of economic growth, a distribution of income favouring this sector was thought to be advisable. I copied below the very same Tableau Economique, probably the first economic model (designed by Quesnay):

The idea that there was an “optimal” distribution of income triggered the investigation of what determines the same. Simultaneously and brewed by Malthus, there was another idea: Full employment requires a growing income. Perhaps this idea, which we are reminded of every two months by the minutes of the Federal Open Market Committee meeting at 2:15pm, goes all the way back to Karl Marx.

It was on these two pillars (i.e. distribution of income and the relation between employment and output) that the modern theory of economic growth was born, with the additional analysis of how capital is created.

Roy F. Harrod

The first “modern” discussion on economic growth is probably that of R. F. Harrod, titled “An Essay in Dynamic Theory”, published in 1939.

IMF Board Attacks Euro Crisis Management

Call to Speed Up Creation of Banking Union

By Markus Dettmer and Christian Reiermann

The EU's bailout of Cyprus has elicited unusually frank and vehement criticism from the finance experts grouped in the IMF's Executive Board. Their damning indictment at an IMF meeting in May reflects global skepticism, especially in emerging economies, about the euro zone's crisis management. 

Paulo Nogueira Batista, 58, is a fan of classical music, a connoisseur of German literature and an advocate of straight talking. As executive director for his native Brazil and 10 smaller countries, he is a member of the Executve Board, the highest-ranking operational decision-making body of the International Monetary Fund (IMF).

His counterparts from the United States and Europe have often witnessed the combative personality of this economist with wavy, salt-and-pepper hair, who attended a high school in Bonn for two years in his youth. Batista is one of the most persistent critics of Western dominance in the IMF.

He often derides the Washington-based organization, headed by French politician Christine Lagarde, as a "North Atlantic monetary fund," because, as he argues, Americans and Europeans are primarily interested in defending their interests and preventing emerging economies like Brazil from exerting their rightful influence in the fund. He resents the Europeans for increasingly availing themselves of the fund's assets to combat their euro crisis, even though they have enough money of their own. "The euro countries abuse their power within the IMF," Batista is fond of saying.

In mid-May, the Brazilian had yet another opportunity to sharply criticize the Europeans' behavior. The bailout package for Cyprus was up for a vote in the IMF Executive Board, a package that includes €1 billion ($1.3 billion) in IMF funds. As it turned out, there were others who shared the Brazilian's critical position.

As evidenced by written position statements and the speaking notes of participants, the event turned into a critical review of Europe's bailout policy. The IMF found itself in the dock along with the European Commission and the European Central Bank (ECB), the two other members of the so-called troika, as well as the countries of the euro zone.

Anti-Primark posing helps nobody

Blaming Western shoppers for the tragic collapse of the Rana Plaza building will make life worse for Bangladeshis

by Rania Hafez 

The collapse of the Rana Plaza building in Dhaka, Bangladesh on 24 April was a terrible tragedy. Over 1,100 workers lost their lives that day – and most were making clothes for Western retailers. But, here’s the thing: despite buying clothes here in the West, I am not responsible for what happened to the Rana Plaza building.

It may sound like a strange statement, but it’s one that has to be made. Like countless others, I shop at Primark, one of the retailers which used labourers housed at the Rana Plaza. And ever since the tragic incident in Bangladesh, I have been made to feel guilty for doing so. In a cringing act of opportunism, assorted NGOs and campaign groups,  carpet-baggers of self-righteousness one and all, are using the terrible incident in Dhaka to re-assert their moral superiority and condemn us plebeian shoppers, not only as contemptible for our cheap tastes, but also as criminal for buying affordable clothes. Ordinary British consumers have been branded culpable for the death of the garment workers in Bangladesh. It is as if we have colluded in the very destruction of the Rana Plaza. The act of buying a Primark t-shirt is enough to turn us into an accessory to murder.

Yet the tragedy in Dhaka was not caused by the British predilection for cheap clothing; the garment factories involved in this incident were not sweat shops; and the workers, although poorly paid in comparison to workers in the UK, received reasonable wages relative with Bangladeshi standards. In fact, the building itself was a large complex of shops and apartments - it even housed a bank. By many accounts, it was a combination of shoddy workmanship, the flouting of building regulations and sheer corruption that led to the building’s collapse. British shoppers were not to blame.