Coal in the Global Energy Landscape

World demand could propel coal to the planet’s number one energy source by 2017, surpassing oil

By Nicolas Loris

An abundant, affordable energy resource, coal provides 30 percent of the world’s energy, 41 percent of the world’s electricity generation and factors into 70 percent of the world’s steel production.[1] While coal is by no means the only source of energy developed across the globe, it is a critical resource to driving economic growth all over the world and will continue to be so well into the future.

As the U.S. federal government is promulgating and applying regulations to significantly reduce the use of coal, the rest of the world’s use could propel coal to the planet’s number one energy source by 2017, surpassing oil.[2] The purpose of this paper is not to promote one source of energy over another—markets should drive energy production and consumption. Instead, this paper reviews coal use in other parts of the world to highlight how vital it is to current and future economic growth and improved standards of living.

China and India

Both coal production and coal use are occurring at rapid rates in two of the world’s largest and fastest growing economies. China has gone from producing 13.6 percent of the world’s coal in 1973 to 45.3 percent in 2012.[3] India is now the world’s third-largest producer of coal and is projected to surpass the United States to become the second-largest in the next five years.

China and India are first and third, respectively, in terms of top coal importing countries as well, with Japan at number two.[4] And there are no plans to curtail the use of coal in China or India: Of the 1,200 proposals for coal-fired power plants worldwide, China and India account for 818 of them.

Southeast Asia, South Asia, and East Asia

Although India and China account for much of Asia’s current and future coal use, other regions of Asia use large amounts of coal and have plans to use more in the future. There are plans to build 95 more plants, with most of them being built in Vietnam, Indonesia, and the Philippines.

Vietnam is cutting back on exports to meet its own domestic energy needs and has plans to increase coal-fired generation fivefold by 2020.[5] Although coal use has declined in recent years in Indonesia (providing 22 percent of total energy consumption), coal production more than quadrupled from 2001 to 2011.[6] Indonesia reformed its laws to increase transparency and encourage more foreign investment, and the country is now the world’s fourth-largest coal producer and the top exporter.[7]

Europe

Europe’s push to transition to renewable energy sources has been very public, but its reliance on coal receives less attention. There are plans to build 69 coal-fired power plants in Europe as well as another 47 in Turkey and 48 in Russia.[8]

As a result of the current and upcoming regulations impacting the coal industry and abundantly cheap natural gas, the U.S. is shipping more of its coal to Europe. The decommissioning of nuclear plants in Germany, Europe’s lag behind the U.S. in exploiting its shale plays, and the scaling back of renewable energy subsidies are all playing a part in Europe’s increased coal use.[9] European coal mining is also increasing because of burgeoning Asian markets.

Read more at:

http://www.heritage.org/research/reports/2013/12/coal-in-the-global-energy-landscape

Love for Sale

Ukraine Goes To The Highest Bidder

Is the EU-Ukraine Association Agreement coming back to life? Lady Catherine Ashton, Europe’s foreign affairs chief, announced that Ukrainian President Viktor Yanukovich told her that he does, in fact, plan on signing the deal. But not for free:

Mr Yanukovych pulled out of the deal last month, explaining that Kiev could not afford to sacrifice trade with Russia. While adding that he still aimed to sign the deal, he said Ukraine would need at least 20bn euros (£17bn; $27bn) a year to upgrade its economy.

Baroness Ashton said on Thursday: “It is my view that those challenges, which are real, can be addressed by the support that not only comes from the European Union institutions, but actually by showing that he has a serious economic plan in signing the association agreement also will help to bring in the kind of investment that he needs.”

It’s all about the Benjamins (or the euro-equivalent thereof). Yanukovich appears to be holding an auction, but will power slip from his hands before all the bids are in?

The Dangers of Majoritarian Democracy

How to reconcile our peoples to living in open societies

by Pedro Schwartz
In my previous column, "Overcoming the Contradictionsof Liberal Democracy: Sociobiology and Social Engineering,"  I promised to proceed with the analysis of the paradoxes of liberal democracy. The first one I explained was that the institutions of the Great Society might prove to be neither natural nor rational and could therefore be resisted or even rejected in democratic societies. My conclusion was rather disturbing: in a nutshell, "man has been civilized very much against his wishes", as Friedrich Hayek said.

In this column I will discuss the following paradoxes that also make liberal democracy an unstable system, to wit:

• That the democratic vote may result in communal decisions that nobody wants.
• That the confusion of individual liberty with the enjoyment of sufficient means for self-fulfillment leads to the corruption of democracy.
• That what is considered the normal venue for popular sovereignty—the nation—may often be the source of stifling tribalism.

I. SOME IMPERFECTIONS OF THE DEMOCRATIC VOTE

The fundamental question of politics

One of the ideas of Plato that Karl Popper most decidedly criticized was that the object of political philosophy consisted in answering the question, who should rule and how to educate those who would govern. For Popper this was the wrong question: one should rather ask, how to control government, how to set up checks and balances to divide power.1 Popper's main argument for this change of focus was the 'paradox of liberty'. If one tried to vest power on whoever was the best and the wisest, as Plato wanted, there was the danger that this person could turn out to be a tyrant. At its extreme, the popular vote could be self-destructive: what if the people democratically willed to be governed by a populist strong-man? This is not as rare as one could wish; remember Austria's vote for Hitler or Argentina's for Perón.

Here we have another paradox of the kind I am grappling with in these columns.2 The starting point of this vicious circle is the realization that a large enough body of men cannot organize itself to govern directly for the good of all. To achieve common aims, power has to be entrusted to a sufficiently small number of people. Even so, disorder would threaten if these rulers fought for power: sovereignty should be undivided. This makes it imperative to choose the sovereign well: hence the Platonic question. But what if the sovereign abused its powers? Long experience tells us how transient the qualities are that may have led to the choice of a sovereign, if choice there was. In the end, whoever exercises undivided sovereignty can impose his or her fickle will on those who selected her, or use power to exploit a minority with the connivance of the majority, or simply indulge in corruption.

It is indeed better to have a good woman or man at the helm, but in politics usually the worst get to the top. The emphasis should be elsewhere; it should lay on establishing strong enough barriers or checks to stop the prince from abusing his power. Contrary to what so many political thinkers and constitutional lawyers have said over the years, sovereignty should be divided. That is the only way to break what one could call 'the Leviathan paradox'.3

Imperfections of democracy

Many modern constitutions proclaim that sovereignty is ultimately vested on the people. In that case, the power of the people must also be divided if liberty is to endure. Democracy can therefore not be defined as the rule by majority vote. Neither does it imply that the vote of the majority is "an authoritative expression of what is right". 4 Fundamental to our living under a democratic constitution is that we accept the result of votes because we want our free institutions to function in their own limited way, even though we may not agree with this or that decision.

Read more at:

http://www.econlib.org/library/Columns/y2013/Schwartzmajoritarian.html

Crime and No Punishment

"Affluenza"

A wealthy Texas teenager who killed four pedestrians in a DUI is being let off with only probation because he was afflicted with a curious disease: ‘affluenza’. No joke. The LA Times explains exactly how this dreaded scourge works:

A psychologist testified for the defense that the teen is a product of something he called “affluenza” and doesn’t link bad behavior with consequences because his parents taught him that wealth buys privilege, the psychologist said in court, according to media reports.

That psychologist cited one instance when the boy, then 15, was caught in a parked pickup with a naked 14-year-old girl who was passed out. He was never punished, the psychologist said, noting to the court that the teenager was allowed to drink at a very young age, and even began driving at 13.

We’re not highly-paid psychiatrist-consultants, but we do think there is one surefire cure for a bad case of ‘affluenza’: jail.

We’re also not, of course, in a position to judge all of the facts in the case; there could be much going on here that doesn’t come across in the article. But the idea that someone should get better treatment because he or she is wealthy and therefore has a poor moral compass is insane and destructive. It’s hard to imagine a greater perversion of the principle of equality before the law. 

Italy's "Pitchfork Protests" Spread to Rome

Interior Minister Warns of "Drift Into Rebellion"

By Mike "Mish" Shedlock

Over the past four days "pitchfork protests" have spread to numerous cities, disrupting road and rail travel in protest of the state of the economy.

The pitchfork movement started with a loose group of Sicilian farmers concerned about rising taxes and cuts to agricultural state funds, then evolved into a nationwide umbrella grouping of truckers, small businessman, the unemployed, low-paid workers, rightwing extremists and ultras football supporters according to IBTimes.

Pitchfork Protests Spread to Rome
Reuters reports Italy's 'pitchfork protests,' in fourth day, spread to Rome. 

 Italy's "pitchfork" protests spread to Rome on Thursday when hundreds of students clashed with police and threw firecrackers outside a university where government ministers were attending a conference.

Truckers, small businessmen, the unemployed, students and low-paid workers have staged four days of rallies in cities from Turin in the north to Sicily in the south in the name of the "pitchfork" movement, originally a loosely organized group of farmers from Sicily.

"There are millions of us and we are growing by the hour. This government has to go," said Danilo Calvani, a farmer who has emerged as one of the leader of the protests.

Interior Minister Angelino Alfano told parliament the unrest could "lead to a spiral of rebellion against national and European institutions."

The protests are fuelled by falling incomes, unemployment above 12 percent and at a record 41 percent among people below 25, and graft and scandals among politicians widely seen as serving their own rather than the country's interests.

The protesters' precise aims remain vague beyond demanding the government be replaced and parliament dissolved. Targets range from tax collection agency Equitalia and high fuel prices to privileged elites and the euro.

Mario Borghezio, an outspoken Northern League member of the European Parliament, on Thursday used the protests to attack the euro and European Central Bank chief Mario Draghi.

"The wind of revolt that is blowing in Italy today is the direct result of the euro and the wrong choices made by the EU and the ECB," he said during the ECB chief's testimony to the European Parliament.

Russia’s Return to the Middle East

Nature Abhors a Vacuum

U.S. fatigue and distraction in the Middle East has made ample room for Russia to step in as the new patron, power-broker and custodian of the region. Washington should think twice about welcoming this development.

By MICHAEL WEISS

Russia is back. At least that’s what they say—especially the Russians. 2013 marks the year that the Kremlin reasserted its power abroad in ways not seen since the collapse of the Soviet Union, and nowhere has this reassertion been more obvious than in the Middle East. From Syria to Egypt to Iran to Israel, Moscow is now seen to be moving in on America’s turf, usurping the only superpower’s traditional role as safeguard of a region that, whether or not it cares to admit it, has always looked to the United States to solve its problems. But now a new patron has arrived in the neighborhood with the offer of advanced weaponry and a cold disregard for how dictatorial regimes choose to conduct their “internal” affairs. Unlike Washington, this patron has shown a willingness to stand by its friends in extremity and is more than happy to wage diplomatic war with the West if those friends’ survival is ever called into question. Russia’s restoration in the Middle East has been built upon America’s abdication.

Without a doubt, the crowning ceremony was the Kremlin’s deft ownership of international diplomacy on the 18-month crisis in Syria, one that has so far killed more than 120,000 people, including by the repeated use of chemical weapons, and yet has remarkably culminated in the re-legitimization of the person responsible for it, Bashar al-Assad.  The Syrian civil war— particularly the White House’s inept and improvisational response to it—has accidentally transformed Putin into a major power-broker for the post-Arab Spring Middle East. (This is no small feat considering that Sunni Muslim antipathy toward Russia is at a record high because of Syria.)  It has turned Moscow into the new hub for geopolitical influencing in the region, the world capital where the Egyptian general staff, the Saudi intelligence chief, the Israeli prime minister and even now the U.S.-backed Syrian opposition all feel they must pay call in order to get things done. And while it’s true that Russia hasn’t the GDP, military reach, or reputation to completely hobble U.S. influence in the Middle East, it doesn’t need to do that to pose a threat to U.S. interests. Putin’s objective is to offer himself as a steady alternative to a fickle Obama: a partner in arms deals and Security Council obstruction who won’t run away or downgrade a relationship over such trivia as human rights, mass murder or coups d’état. Putin has apologized for and facilitated the worst humanitarian catastrophe of the 21^st century under the guise of international law and a respect for state sovereignty. This is an invaluable friend for a dictator to have in his corner.

How Mandela’s Worshippers Are Rewriting History

They’ve airbrushed out the true destroyers of Apartheid: the black masses.

By BRENDAN O’NEILL

In the seven days since the death of Nelson Mandela, many a Western right-winger has found himself accused of rewriting history. For politicians like David Cameron of Britain’s Conservative Party to gush and blub over Mandela is outrageous, critics claim, considering his party was hardly a friend to the cause of anti-Apartheid in the 1970s and 80s. All this ‘right-wing fawning’ for Madiba – as every white liberal in Christendom has rather embarrassingly taken to calling Mandela – is nauseating, we’re told, given it is coming from some of the same organisations and people who either backed or were ambivalent about Apartheid just 30 years ago. These people are trying to ‘rewrite’ the past, says South Africa-born Labour MP Peter Hain. It’s like Pontius Pilate paying tribute to Jesus Christ, says one melodramatic observer.

It is true that the history of South Africa is being rewritten in the wake of Mandela’s death. But it isn’t being rewritten by right-wing opportunists scrambling for a feel of Mandela’s holy hem. Rather, it’s the mainstream canonisation of Mandela, indulged by everyone from Barack Obama to the NGO industry to the entire sphere of liberal commentary and campaigning, which is warping the truth about what happened in South Africa.

It is the secular beatification of Mandela, the increasingly unhinged cult of global mourning for this ‘great liberator’, the transformation of Mandela into a Christ-like ‘saviour’ of black South Africans from the horrors and deprivations of Apartheid, which is doing far graver harm to historical truth than someone like Cameron could ever achieve. For it is airbrushing from history the true destroyer of Apartheid, which was not Mandela, or even his African National Congress, far less those white folk with consciences who refused to buy certain oranges at the Hampstead branch of Waitrose in the 1980s, but rather South Africa’s teeming, convulsing black masses.

The mainstream story of Mandela that has been foisted on us by Washington downwards over the past week is built on a fallacy: that Mandela liberated South Africa; that he was, in the words of one observer, ‘the man who brought down Apartheid’; that he was a Jesus-like figure whose ‘colossal moral strength’ transformed South Africa from a racist hellhole into a new nation with ‘majority black rule’. By this religious-style reading, Mandela, simply by conjuring up his inner moral resources, remade an entire nation and boosted the fortunes of its sad, benighted inhabitants.

Read more at:

http://www.spiked-online.com/newsite/article/mandelas_cult_like_worshippers_rewriting_history/14410#.Uq6AEdLPaqg

Culture of Death

Belgian Senate Approves Child Euthanasia

By WALTER RUSSELL MEAD

Yesterday the Belgium Senate approved, by a vote of 50-17, a bill allowing terminally ill children to opt for euthanasia. As long as the child meets the normal Belgium standards for euthanasia (terminal; in great pain; conscious of this decision; has parental and medical approval), there will no longer be any age limit on the practice. The BBC has more:

During the Senate debate, supporters of the bill said it would empower doctors and terminally-ill children to make a difficult decision.

“There is no age for suffering and, next to that, it’s very important that we have a legal framework for the doctors who are confronted with this demand today and for the minors, for the capable minors, who are suffering today, and who I think should have the freedom to choose how they cope with their suffering,” said Senator Jean-Jacques de Gucht, of the Open Flemish Liberals and Democrats.

This story shows just how quickly allowing limited mercy killing for terminally ill adults can lead to wider political and social consequences. It’s now common knowledge that euthanasia cases skyrocketed in Belgium after it was legalized for adults—the number of cases increased by 25 percent from 2011 to 2012—and that legality manufactures demand. It’s less often acknowledged that legalizing euthanasia can give cover to people who want to pressure relatives into it for financial or other reasons.

Consider the Netherlands, where doctors are never prosecuted for euthanizing children under age 12, even though that is still legally forbidden. There the illness doesn’t have to be terminal—just very painful—and the Royal Dutch Medical Association says the pain doesn’t even have to be physical.  That same association has recently come out in favor of euthanizing infants and newborns, a practice which has already been goingon for several years.

But never fear. While both Belgium and the Netherlands are busy allowing euthanasia for people who aren’t even old enough to consent to sex by their own laws, the Royal Dutch Medical Association has launched another campaign: stamping out circumcision, which is a “violation of children’s rights.”

Everyday Monsters in Havana

A Moment of Zen in the Midst of Chaos

Please click on the image to watch the video

After the violent arrest of her husband, Antonio Rodiles, at the Human Rights Conference sponsored by Estado de Sats, Ailer Gonzalez chose a moment of non-violence in the midst of the madness. As children, still in their uniforms and taken out of school to spend the day harassing human rights advocates swirled around her, Ailer sat quietly under the Havana sun…

Note: At the beginning of the video in the bottom left Antonio’s mother (green dress and cane) can be seen walking back to the house after the arrest with one of the conference participants who then turns back to talk to Ailer. The other adults in video are primarily plainclothes State Security agents working for the Ministry of the Interior. The flag the children are waving (other than Cuba’s) is Venezuela’s.

Funeral Spice

Relish the accidental comedy in a humorless world

By Mark Steyn

‘I don’t want to be emotional but this is one of the greatest moments of my life,” declared Nelson Mandela upon meeting the Spice Girls in 1997. So I like to think he would have appreciated the livelier aspects of his funeral observances. The Prince of Wales, who was also present on that occasion in Johannesburg, agreed with Mandela on the significance of their summit with the girls: “It is the second-greatest moment in my life,” he said. “The greatest was when I met them the first time.” His Royal Highness and at least two Spice Girls (reports are unclear) attended this week’s service in Soweto, and I’m sure it was at least the third-greatest moment in all of their lives. Don’t ask me where the other Spice Girls were. It is a melancholy reflection that the Spice Girls’ delegation was half the size of Canada’s, which flew in no fewer than four Canadian prime ministers, which is rather more Canadian prime ministers than one normally needs to make the party go with a swing.

But the star of the show was undoubtedly Thamsanqa Jantjie, the sign-language interpreter who stood alongside the world’s leaders and translated their eulogies for the deaf. Unfortunately, he translated them into total gibberish, reduced by the time of President Obama’s appearance to making random hand gestures, as who has not felt the urge to do during the great man’s speeches. Mr. Jantjie has now pleaded in mitigation that he was having a sudden hallucination because he is a violent schizophrenic. It has not been established whether he is, in fact, a violent schizophrenic, or, as with his claim to be a sign-language interpreter, merely purporting to be one. Asked how often he has been violent, he replied, somewhat cryptically, “A lot.”

Still, South African officials are furiously pointing fingers (appropriately enough) to account for how he wound up onstage. “I do not think he was just picked up off the street. He was from a school for the deaf,” Hendrietta Bogopane-Zulu, the Deputy Minister for Persons with Disability, assured the press. But the Deaf Federation of South Africa said it had previously complained about his nonsensical signing after an event last year. Mr. Jantjie was paid a grand total of $85 for his simultaneous translation of the speeches of the U.N. secretary-general, six presidents, the head of the African Union, and a dozen other dignitaries. Ms. Bogopane-Zulu notes that the going rate for signing in South Africa is $125 to $165. So she thinks a junior official may simply have awarded the contract to the lowest bid.

Venezuela’s Playbook: The Communist Manifesto

Τhe Titanic called Venezuela might stay afloat for longer than you think

BY STEVE HANKE

It seems as though each passing day brings yet another piece of bad economic news coming out of Venezuela. For months, I have been tracking the decline of Venezuela’s economy and its currency, the bolivar. As if a collapsing currency, and the resulting inflation and empty shelves weren’t bad enough, Venezuela is now struggling with massive blackouts. Forget the Whig interpretation of history; Venezuela supports the schoolboys’ interpretation: “it’s just one damn thing after another.”

Venezuela’s downward economic spiral began in earnest when Hugo Chavez imposed his “unique” brand of socialism on Venezuela. For years, the country has sustained a massive social spending program, combined with costly price and labor-market controls, as well as an aggressive foreign aid strategy. This fiscal house of cards has been kept afloat—barely—by oil revenues.

But, as the price tag of the regime has grown, the country has dipped more and more into the coffers of its state-owned oil company, PDVSA, and (increasingly) relied on the country’s central bank to fill the fiscal gap. This has resulted in a steady decline in the bolivar’s value — a decline that only accelerated as news of Chavez’s failing health began to emerge.

Hugo Chavez died on March 5, 2013 — sending shockwaves through the Venezuelan economy. Not surprisingly, in the months since his hand-picked successor, Nicolas Maduro, took the reins as Venezuela’s new president, the Venezuelan house of cards has begun to collapse.

The black market exchange rate between the bolivar (VEF) and the U.S. dollar (USD) tells the tale. Indeed, the bolivar has lost 64.5% of its value on the black market since Chavez’s death.

This, in turn, has brought about very high inflation in Venezuela. At present, the implied annual inflation rate is actually in the triple digits, coming in at a whopping 297%.

How the Paper Money Experiment Will End

We are now in a situation that looks like a dead end for the paper money system

by Philipp Bagus

A paper currency system contains the seeds of its own destruction. The temptation for the monopolist money producer to increase the money supply is almost irresistible. In such a system with a constantly increasing money supply and, as a consequence, constantly increasing prices, it does not make much sense to save in cash to purchase assets later. A better strategy, given this senario, is to go into debt to purchase assets and pay back the debts later with a devalued currency. Moreover, it makes sense to purchase assets that can later be pledged as collateral to obtain further bank loans. A paper money system leads to excessive debt.

This is especially true of players that can expect that they will be bailed out with newly produced money such as big businesses, banks, and the government.

We are now in a situation that looks like a dead end for the paper money system. After the last cycle, governments have bailed out malinvestments in the private sector and boosted their public welfare spending. Deficits and debts skyrocketed. Central banks printed money to buy public debts (or accept them as collateral in loans to the banking system) in unprecedented amounts. Interest rates were cut close to zero. Deficits remain large. No substantial real growth is in sight. At the same time banking systems and other financial players sit on large piles of public debt. A public default would immediately trigger the bankruptcy of the banking sector. Raising interest rates to more realistic levels or selling the assets purchased by the central bank would put into jeopardy the solvency of the banking sector, highly indebted companies, and the government. It looks like even the slowing down of money printing (now called “QE tapering”) could trigger a bankruptcy spiral. A drastic reduction of government spending and deficits does not seem very likely either, given the incentives for politicians in democracies.

So will money printing be a constant with interest rates close to zero until people lose their confidence in the paper currencies? Can the paper money system be maintained or will we necessarily get a hyperinflation sooner or later?

There are at least seven possibilities:

1. Inflate. Governments and central banks can simply proceed on the path of inflation and print all the money necessary to bail out the banking system, governments, and other over-indebted agents. This will further increase moral hazard. This option ultimately leads into hyperinflation, thereby eradicating debts. Debtors profit, savers lose. The paper wealth that people have saved over their life time will not be able to assure such a high standard of living as envisioned.

2. Default on Entitlements. Governments can improve their financial positions by simply not fulfilling their promises. Governments may, for instance, drastically cut public pensions, social security and unemployment benefits to eliminate deficits and pay down accumulated debts. Many entitlements, that people have planned upon, will prove to be worthless.

3. Repudiate Debt. Governments can also default outright on their debts. This leads to losses for banks and insurance companies that have invested the savings of their clients in government bonds. The people see the value of their mutual funds, investment funds, and insurance plummet thereby revealing the already-occurred losses. The default of the government could lead to the collapse of the banking system. The bankruptcy spiral of overindebted agents would be an economic Armageddon. Therefore, politicians until now have done everything to prevent this option from happening.

The Grand Illusion

Social Security Is NOT a Government Insurance Program

By Gary North

I received this email from a self-professed fan. But in his note, he felt obliged to add this:

I do take one strong exception to your statement that Social Security is the largest Ponzi scheme ever. Social Security is an insurance policy. We pay real money to receive real benefits. It currently has over 2 trillion dollar surplus. And, if we simply remove the cap so that the wealthy continue to pay in at the same rate as everyone else, it will be solvent for all time.

So, instead of painting yourself as one of the few intellectual right-wing extremists out there, why don't you use your obvious intellect and be honest about Social Security instead of parroting Fox News talking points?

It never ceases to amaze me that there is anyone out there who still believes any of this. At the age of 17, in 1959, I was taught the truth in a high school civics class. The program is not funded in terms of any insurance program.

First, the Supreme Court of the United States in 1960 declared that the Social Security program is not an insurance program. The case was Fleming v. Nestor. On the Social Security website, we read this.

There has been a temptation throughout the program's history for some people to suppose that their FICA payroll taxes entitle them to a benefit in a legal, contractual sense. That is to say, if a person makes FICA contributions over a number of years, Congress cannot, according to this reasoning, change the rules in such a way that deprives a contributor of a promised future benefit. Under this reasoning, benefits under Social Security could probably only be increased, never decreased, if the Act could be amended at all. Congress clearly had no such limitation in mind when crafting the law. Section 1104 of the 1935 Act, entitled "RESERVATION OF POWER," specifically said: "The right to alter, amend, or repeal any provision of this Act is hereby reserved to the Congress." Even so, some have thought that this reservation was in some way unconstitutional. This is the issue finally settled by Flemming v. Nestor.

In this 1960 Supreme Court decision Nestor's denial of benefits was upheld even though he had contributed to the program for 19 years and was already receiving benefits. Under a 1954 law, Social Security benefits were denied to persons deported for, among other things, having been a member of the Communist party. Accordingly, Mr. Nestor's benefits were terminated. He appealed the termination arguing, among other claims, that promised Social Security benefits were a contract and that Congress could not renege on that contract. In its ruling, the Court rejected this argument and established the principle that entitlement to Social Security benefits is not contractual right.

http://www.ssa.gov/history/nestor.html

Second, there is no money in the Social Security Trust Fund. There is merely a stack of IOUs issued by the Treasury Department. The SSA says of these assets,

By law, income to the trust funds must be invested, on a daily basis, in securities guaranteed as to both principal and interest by the Federal government. All securities held by the trust funds are "special issues" of the United States Treasury. Such securities are available only to the trust funds.

There is no money in this fund. The government has spent every dime.

The Bailout

$14 Billion Up in Smoke

by eric peters

In Washington, they always try to announce unpleasantness during the off-hours (weekends, holidays and such) so that – hopefully – the stink will be less noticed.

In Detroit, too.

The recent announcement of the accession of Mary Barra as the new CEO of General Motors just happened to be exactly coincident with the announcement that the federal government has divested itself of its remaining partial ownership of GM.

This is good news.

The bad news – according to the Center for Automotive Research – is that $14 billion in taxpayer dollars went up in smoke as a result of the government’s “investment” in GM.

Now, this is supposedly mitigated by the recovery of GM – and the existence of all the associated jobs (and consumer spending and tax revenue) that would have disappeared had GM not been crash-carted by the federal government. That is, had the violence of the state not been used to forcibly compel ordinary Americans to subsidize the failure of a big corporation and thereby immunize it from the moral hazard (having to face up to the consequences of poor decisions) that face them – you and me – in the course of their ordinary, individual lives.

But it’s a false premise.

Why is it assumed that, had GM not been crash-carted, a zero-sum game would have ensued? Certainly, there were parts of GM that were sound. Had the corporation gone on the block, these worth-something parts would not have been thrown away. Do people throw away machine tools? Physical plants? Of course not. They are sold – and re-used.

Productively.

Consider the analogy of a guy who owns a car he can no longer afford to fix. Perhaps he is not competent to fix it. In any case, he realizes it is time for him to bow out – and hand the keys to someone who can fix it (or who can afford to have it fixed). The car is not thrown away because it needs a brake job (or even a new engine). A free exchange takes place – and both parties are benefited. The in-over-his-head former owner walks away from something he isn’t able to deal with – cash in hand, which he can use for other productive purposes. The new owner has less cash in hand, but holds title to a new (to him) car that he will repair and which, once repaired, will be of more value to him than the cash he parted with.

This analogy is simple, but it scales.

Little Kim does Pulp Fiction

In the name of revolution and the people

By Pepe Escobar 

"Despicable human scum." "Worse than a dog." A "traitor for all ages" who "perpetrated anti-party, counter-revolutionary factional acts in a bid to overthrow the leadership of our party and state and the socialist system." Fate: a swift military tribunal, and a swift execution "in the name of revolution and the people". 

So that was the date with destiny for Jang Song-thaek, 67, uncle of North Korea's leader Kim Jong-eun (arguably 30), according to state news agency KCNA. In North Korea, the revolution is definitely not a bulgogi party. 

KCNA maintains that Jang - married to Kim Kyong-hui, the very influential sister of the late Dear Leader Kim Jong-il - admitted he wanted to stage a military coup d'etat. The inevitable follow-up is - what else - a purge (at the Central Committee's administrative department). Who said all that Cold War shtick was over? 

Jang was, in theory, young Kim's Cardinal Richelieu. And then, out of the blue, he is shown on state TV dragged out of a meeting, publicly humiliated, demonized as a drug addict and womanizer, stripped of all posts and titles (chief of the Party's administrative department, vice chairman of the National Defense Commission), accused of corruption, tried and whacked, as if this was a North Korean Pulp Fiction remake. What gives? 

Re-educate or else

Let's see the reaction from the usual suspects. South Korean President Park Geun-hye said this is a "reign of terror". Japanese Defense Minister Itsunori Onodera said this is a remix of the Cultural Revolution in China. Beijing, demonstrating trademark restraint, called it just "an internal affair". 

The most obvious interpretation is Kim telling North Korea, the Korean peninsula and the world at large "I'm in charge. And don't you mess with me." 

Now for the details. Little Kim, since he acceded to the leader's throne, was already deep into a sequential reshuffle of especially the military nomenklatura (that's according to South Korea's Unification Ministry). The most probable scenario is that Jang's slow-motion purge started a few months ago. Or even before that, because Kim Il-sung and Kim Jong-il always suspected him of social (and especially political) climbing. Some of Jang's aides had already met the Pulp Fiction treatment, but his money manager is lucky enough to be in China, taken care of by the South Koreans. 

Make no mistake: Jang was very powerful and well connected. So powerful that the inevitable "re-education" campaign to follow - either you worship Kim or he'll go medieval - will not be that easy. 

Rich Don't Pay Most of the Taxes

They Pay All of Them

By MIKE SHEDLOCK

Counting transfer payments such as foods stamps, Medicaid, Medicare, and other government welfare, Congressional Budget Office (CBO) analysis shows the top 40% pay 106% of all taxes (more than all of them). In turn the bottom 60% get money back.

Please consider The rich do not pay the most taxes, they pay ALL the taxes by CNBC reporter Jane Wells.

Buried inside a Congressional Budget Office report this week was this nugget: when it comes to individual income taxes, the top 40 percent of wage earners in America pay 106 percent of the taxes. The bottom 40 percent...pay negative 9 percent.

The key table is in Box 1 on PDF page 11 (report page 7) of Distribution of Household Income and Taxes. The report was released in December 2013 but data is for 2010.

Key Facts

·         The bottom 20% had average income of $8,100 but received $22,700 in annual assistance, netting $30,800 in after-tax income.

·         The second quintile had average income of $30,700 but received $15,200 in annual assistance, netting $43,400 in after-tax income.

·         The middle quintile received a bit more than they paid out, with $2,600 in annual assistance to be precise.

That money had to come from somewhere, and it did.

·         The highest quintile paid $52,500 more in taxes each year than they got back.

·         The second-highest quintile paid $8,800 more in taxes each than they got back.

Wells concludes ...

Fair or not, I will let you be the judge. People who make more should pay more, generally speaking. In America, they are. Yes, the rich (and almost rich) are getting richer. When it comes to individual income taxes, they're also covering the entire bill. And leaving a tip.