Progressive Calendar 10.20.08
From: David Shove (
Date: Mon, 20 Oct 2008 16:10:07 -0700 (PDT)
               P R O G R E S S I V E   C A L E N D A R   10.20.08

1. Health activism   10.20 7pm
2. Nader/NBC news    10.20 time?

3. N Scott Momaday   10.21 12:15pm
4. Hancock campaign  10.21 4pm
5. Lebanon/CTV       10.21 5pm
6. Planned 'hood     10.21 6pm
7. RNC court watch   10.21 6pm
8. Open harangues    10.21 6:30pm
9. Poetry/politics   10.21 7pm
10. Trade forum      10.21 7pm
11. Peace/activism   10.21 7:30pm

12. Relocalization   10.22 11:30am
13. Police brutality 10.22 4:30pm
14. RNC/raids/rights 10.22 5pm Northfield MN
15. Holy land?       10.22 7pm

16. Sue Ann Martinson - Dissent and democracy
17. Michael Hudson    - Licensed kleptocracy for years to come

--------1 of 17--------

From: Joel Albers <joel [at]>
Subject: Health activism 10.20 7pm

Health Care Activism Class
3rd session this Monday, Oct 20, 7-9PM
U of MN See below.

This class will focus on building a media campaign (framing the
issue,messaging,talking points), what this town of artists have to say
about creative approaches,all of this from the spectrum of becoming the
media yourself and organizing in your own niche, using the essentials of
Talk,Table, Phone,Flyer;  to building a large network capable of changing
the entire visual landscape of our town.  And then putting it all together
and brainstorming on what actions we can do.

Facilitator: Joel M. Albers E-mail: joel [at] Phone:

Place: Phillips Wangensteen Building room 6-224, on U of M East Bank, bldg
entrance at Washington ave near Harvard Street, walk thru concourse to
PWB,see PWB sign, take elevator to 6th floor)

--------2 of 17--------

From: PRO826 [at]
Subject: Nader/NBC news 10.20 time?

Ralph gets mainstream media coverage:
Monday 10/20, NBC Nightly News with Brian Williams, check website for
time, please share with others and on this listserv please

--------3 of 17--------

From: fordlecture [at]
Subject: N Scott Momaday 10.21 12:15pm

The Graduate School at the University of Minnesota University of Minnesota
Graduate School invites you to a free lecture by Pulitzer Prize-winning
author and poet laureate of Oklahoma N. Scott Momaday

The University of Minnesota Graduate School presents
he Guy Stanton Ford Memorial Lecture

Winner of the Pulitzer Prize and
poet laureate of Oklahoma

TUESDAY, OCT. 21, 2008, 12:15PM
Ted Mann Concert Hall
2128 4th Street S., West Bank, Minneapolis

--------4 of 17--------

From: Allan Hancock < [at]>
Subject: Hancock campaign 10.21 4pm

GP candidate in Brooklyn Center. Come anytime between the times noted.
Appreciate an RSVP so we know the number for lunch or dinner. 763-561-9758
Thanks, Allan Hancock

Tue 21 Lit Drop  4PM-7PM
Sat 25 Lit Drop 10AM-6PM lunch included
Sun 26 Lit Drop 1PM-6PM come at 12:15 for lunch
Tue 28  Phone Bank Details Pending
Thur 30 Phone Bank Details Pending
Sun 2 Lit Drop 1PM-6PM come at 12:15 for lunch
Mon 3 Lit Drop 1PM-6PM come at 12:15 for lunch

--------5 of 17--------

From: Eric Angell <eric-angell [at]>
Subject: Lebanon/CTV 10.21 5pm

St. Paul Neighborhood Network (SPNN) viewers:
"Our World In Depth" cablecasts on SPNN Channel 15 on Tuesdays at 5pm,
midnight and Wednesday mornings at 10am, after DemocracyNow!  All
households with basic cable may watch.

Tues, 10/21, 5pm & midnight and Wed, 10/22, 10am
"Tragedy in South Lebanon: The Israeli-Hezbollah War of 2006"
Author Cathy Sultan talks about her latest book and the media
under-reporting of Middle Eastern affairs.

--------6 of 17--------

From: Erin Parrish <erin [at]>
Subject: Planned 'hood 10.21 6pm

October 21: Planned Parenthood Minnesota, North Dakota, South Dakota.
Celebrate Planned Parenthood with Pulitzer prize winning presidential
historian Doris Kearns Goodwin. Celebrate 80 years of service with a
silent auction and dinner to benefit Planned Parenthood MN, ND, SD. 6 - 10
PM at the Minneapolis Hilton. All new and increased donations will be
matched by a generous challenge grant by the Roger and Nancy McCabe
Foundation. Register.

--------7 of 17--------

From: Do'ii <syncopatingrhythmsabyss [at]>
Subject: RNC court watch 10.21 6pm

RNC Court Watchers are in need of participants to help with organizing
court information, documentation and etc.  RNC Court Watchers Meetings are
every Tuesday, 6 P.M. at Caffeto's. Below is announcement for our

Preemptive raids, over 800 people arrested, police brutality on the
streets and torture in Ramsey County Jail. Police have indiscriminately
used rubber bullets, concussion grenades, tasers and chemical irritants to
disperse crowds and incapacitate peaceful, nonviolent protesters. The
RNC-8 and others are facing felonies and years in jail. We must fight this
intimidation, harassment and abuse!

Join the RNC Court Solidarity Meeting this coming Tuesday at Caffetto's to
find out how you can make a difference in the lives of many innocent

Caffetto's Coffeehouse and Gallery (612)872-0911 708 W 22nd Street,
Minneapolis, MN 55405
Every Tuesday @ 6:00 P.M to 7:00 P.M
participate and help organize RNC court solidarity.
For more information, please contact: rnccourtwatch [at]

--------8 of 17--------

From: patty <pattypax [at]>
Subject: Open harangues 10.21 [ed head]

Tuesday, Oct. 21, it is Open Discussion time at the Conversational Salon.
We come together to give all of us a chance to open our minds and talk and
listen to what others have to say, and leave with more knowledge and open
minds.  Hope you can make it. Thanks, patty

Remember:  Jesus was a community organizer and Pontius Pilot was a

Pax Salons ( )
are held (unless otherwise noted in advance):
Tuesdays, 6:30 to 8:30 pm.
Mad Hatter's Tea House,
943 W 7th, St Paul, MN

Salons are free but donations encouraged for program and treats.
Call 651-227-3228 or 651-227-2511 for information.

--------9 of 17--------

From: Richard Broderick <richb [at]>
Subject: Poetry/politics 10.21 7pm

Tuesday, October 21, 7 p.m.

"Call and Answer," a panel discussion on the topic of poetry and politics
moderated by Rich Broderick and featuring award-winning poets Ed Bok Lee,
Anya Achtenberg, Tim Nolan, Wang Ping and Joyce Sutphen, with a special
musical appearance by Prudence Johnson. October 21, 7 p.m., the Black Dog
Cafe, 308 Prince St., at the corner of Broadway and Fourth in Lowertown,
St. Paul.

What is the proper relationship - if any - between politics and poetry? Is
it possible for poets to honor the imperatives of poetic inspiration as
well as the insights of political consciousness to create poetry that is
both relevant and artful? Why aren't American poets, as in other parts of
the world, expected to play the role of public conscience and public
intellectuals? How have political ideas - and their reactions to political
events - shaped the poetry of each panelist? What, if anything, can poets
do to make their voices heard on the great issues confronting us today?

These and other questions will be examined by the panelists, drawing upon
examples from their own works. Admission is free. For directions and
further information, call 651-228-9274 or visit
/ .

"How come we've listened to the great criers... and now/We're silent as
the sparrows in the little bushes?" From "Call and Answer," by Robert Bly.

--------10 of 17--------

From: Minnesota Fair Trade Coalition <aranney [at]>
Subject: Trade forum 10.21 7pm

We hope that you join us tomorrow evening for a forum on the impacts of
trade in Minnesota. Our speakers along with students, activists and
community allies will be discussing some of the many costly impacts unfair
trade has had in our world. From racism, to agriculture, small farms,
labor rights, our jobs and the future of our jobs, we'll hope to provide
folks with a comprehensive picture of what free trade really means in the
21st century.

We'll also discuss how to further push trade as an election issue, and
what alternatives we have ahead of us as we move forward with a fair trade

Here are the details:

Where: the event will be at Augsburg College (2211 Riverside Ave.,
Minneapolis, MN 55454) it will be held at the Christensen Center in the
East Commons.

When: Tomorrow, Tuesday, October 21st from 7-8:30pm

Again, this event is free and open to the public. We'll have fair trade
coffee and snacks thanks to Peace Coffee and Equal Exchange and we'll be
providing important materials about how to insert trade into the
elections, including trade voter guides and how to bird-dog the
candidates. For more information on this event, stop by our website

--------11 of 17--------

From: Julie Bates <julie [at]>
Subject: Peace/activism 10.21 7:30pm

The Carol Connolly Reading Series
Readings by Writers
This month's featured readers are contributors to
COST OF FREEDOM: The Anthology of Peace & Activism from Howling Dog

Tuesday, OCTOBER 21, 2008
7:30 PM at the historic University Club of St Paul
420 Summit Ave, St Paul
Hosted by Carol Connolly
Free and open to the public


Alliance Exposed, is founder of Inner City Outreach, which provides new
clothing for the poor and homeless.

LEIGH HERRICK, poet, writer, and collaborator, has performed in the
Minnesota Fringe Festival; Open Book's Tellabration; and Spirit in the
House Festival. Her essays, music and poetry have been widely published in
a variety of electronic and print journals, including The Texas Observer.
Her poetry CD is Just War. A member of Phi Beta Kappa, she is a two-time
Pushcart Prize nominee and the recipient of numerous poetry awards.

STEFANIE HOLLMICHEL is a writer who keeps a blog called So Many Books, has
Masters in English Literature, and is a student in Library and Information
Science. She works as a techie for Tubman-Chrysalis. CHANTE WOLF spent 12
years in the U.S. Air Force, serving in Saudi Arabia during Desert
Shield/Storm. She holds degrees in Anthropology and Women's Studies, and
is now pursuing photography as she works to preserve the planet and to
challenge many Americans' perception of war and its never ending costs.

--------12 of 17--------

From: Lydia Howell <lhowell [at]>
Subject: Relocalization 10.22 11:30am

from Wanda,Ragin' Granny:The presentation on Fossil Fuel Decline and the
Energy Gap - Why Relocalization is Inevitable given by Jon Freise
Wednesday was excellent.  I knew a lot about the subject already but was
impressed by the presentation and learned a few new things. One idea came
up - as we don't want to invest in the stock market - what local
businesses might be good to invest in (like the co-op).  What local
businesses need to be developed?

There is discussion of having Jon give the presentation in other
neighborhoods and/or training other presenters to do it.  He can be
reached at jon_freise [at]

same place.
Community Room at the NEC
(2nd floor of the Mississippi Market on the SW corner of Selby and Dale.
Direct bus via #21 or #65. Please do not park in the store parking lot).
Neighborhood Energy Connection
624 Selby Avenue
Saint Paul, MN  55104

--------13 of 17--------

From: Ted Dooley Law Office <teddooley [at]>
Subject: Police brutality 10.22 4:30pm

NLG-MN chapter endorses the Protest Against Police Brutality Rally
sponsored by 2008 Social Justice Award recipients Communities United
Against Police Brutality(CUAPB).  Please see below the notice posted by
CUAPB and please join us in Saint Paul on October 22.

Protest Against Police Brutality
Wedsday October 22, 2008 4:30pm
Kellogg Park, Kellogg and Wabasha, St. Paul
National Day of Protest Against Police Brutality

From mass police brutality during the RNC to the everyday brutality
against people of color and poor people in the streets and in the jails,
something has got to be done to end their reign of terror.

Come out and demand REAL solutions:
-We need a real civilian review authority that holds cops accountable and
isnt just a rubber stamp agency!
-End beatings and abuse in the jails and prosecute brutal jailers!
-No more bogus charges against police brutality victims.  Prosecute brutal
Drop ALL charges against RNC arrestees.  Dissent is not a crime!
-Fire cops who lie in police reports or in court!
We must let the authorities know that we will no longer be silent in the
face of police brutality!

NLG-MN Privacy Policy National Lawyers Guild - Minnesota 3547 Cedar Avenue
South Minneapolis, MN 55407 (612) 326-4315

Organized by my dear friend, Michelle Gross. I look forward to seeing all
my friends and allies who stand for grassroots democracy and social
justice there. --Michael Cavlan

--------14 of 17--------

From: Bill McGrath <billmcgrath52 [at]>
Subject: RNC/raids/rights 10.22 5pm Northfield MN

Twin Cities Preemptive House Raids and Police Reaction to RNC
Demonstrations:  What about the Bill of Rights?

A public forum sponsored by Northfield People for Peace and Goodwill (PPG)
Wednesday night, Oct. 22: Evening has 3 phases

 5 p.m. to 7 p.m. Chapati Indian Restaurant, 212 Division, Northfield

Rhoda Gilman: St. Paul author and historian specializing in Minnesota
history. Her topic: "The Patriot Act, and the 2002 Minnesota Version of
the Patriot Act."

Neala Schleunig: West side of St. Paul. Topic: "Observations regarding the
police raid on the Smith Avenue Convergence Center. Plus remarks
concerning instruments of terrorism that can be found in practically
everybody's home."

Tom Hilber: East side St. Paul. Printer, teacher, machinist, salesman,
social worker, mayoral candidate, musician. "First and fourth amendments
to the U.S. Constitution."

Anya Achtenberg: St. Paul. Professional fiction writer, poet; Teacher;
Writing for social change workshops. "Putting tactics of our activist
community into context of what is really happening."

Karen Engelsen: Communications director. During RNC, she gave medical
treatment to injured protesters. "Is the federal government preparing for
large-scale civic disorder?"

Elizabeth Dickinson:  Activist and professional writer who lives on St.
Paul's West Side. Green Party candidate for mayor of St. Paul, 2005. "Why
do police seem to target people who are committed to peace and

20 minutes for question/answer
 7 p.m. to 8:45 p.m. Public Library, 210 Washington, Northfield.

Erin Stalnaker: Lives in Mike Whalen's house on Iglehart Avenue, St. Paul,
and was an eyewitness to the house raid. "What were the police looking for
(officially), and what did they actually find?"

Andy Driscoll: Lives in the Second Ward area represented by St. Paul
Councilman Dave Thune. An investigative journalist, Andy is host of a news
analysis program, "Truth to Tell," on KFAI radio. His topic is "Who were
the heroes and villains during the RNC?"

Pam Ellison: St. Paul. Previously ran for congress and later for governor,
as candidate of the Independence Party. "What can I do about government
threats to our freedoms, rights and privacy? I'm only one person."

Mikael Rudolph: Professional mime artist and activist. "Understanding the
2008 RNC protests through the viewing of videos made by citizen

Grace Kelly: Lives in Merriam Park area of St. Paul. Citizen journalist,
legal observer. Her topic: "Who might have damaged the Macy window, the
cop car and the dumpster?"

20 minutes for question/answer

 9 p.m. to 11 p.m. Contented Cow British Pub, 302 Division, Northfield.

John Kolstad: MPLS business owner & musician who ran for state senate
in 2000. "Why do police take cameras, cell phones, laptops and
notebooks away from journalists?"

Farheen Hakeem: Community organizer and teacher from Minneapolis.
Candidate for MN legislature. "Why police raid houses, and what can
citizens do about it?"

Colleen Fixsen: Lives in Mac-Groveland area of St. Paul. She works in
a jail. "Should the blocking of an intersection be considered a form
of terrorism?"

Jay Wilkinson: Lives in Mac-Groveland area of St. Paul. His topic:
"Will the RNC have any lasting effects on the Twin Cities?"

John Kobler: Student and business agent for the Teamsters. "Which
methods of dissent are apt to be effective in the future?"

Alan Muller: Director of environmental group, and part-time resident
of Red Wing. "Who should be held accountable for what happened in the
streets during the 2008 RNC?"

20 minutes for question/answer       Info: billmcgrath52 [at]
(507) 645-7660

--------15 of 17--------

From: "wamm [at]" <wamm [at]>
Subject: Holy land? 10.22 7pm

"How Holy is the Holy Land:" Dr. Tom Chisholm

Wednesday, October 22, 7:00 p.m. Kenwood Isles, Party Room, 1425 West 28th
Street, Minneapolis. A comparison of the Israeli political and cultural
apartheid policies regarding outsiders (principally Palestinian) and those
of the United States regarding immigrants from Central America. Dr. Tom
Chisholm of Chippewa Falls, Wisconsin recently visited the Middle East.
Sponsored by: the WAMM Middle East Committee. FFI: Call 612-871-2229.

--------16 of 17--------

Date: Mon, 20 Oct 2008 00:42:46 -0500
From: Sue Ann Martinson <mart1408 [at]>
Dissent and Democracy

Remember the Boston Tea Party? That was property damage, wasn't it?  All
that tea overboard?

About a six weeks ago the Twin Cities, especially St. Paul, experienced a
military occupation.  If you were not involved in protesting, you might
not have known how bad it was with heliocopters buzzing above your head
and militarized law enforcement on horses, on bikes, and in ninja turtle
outfits - also called robo cops.

And why should you care?  You didn't get beaten up.  It was only those
nasty anarchists, wasn't it?  And that is what they want the public to

What relationship do the militarized police with their pre-emptive raids
and violence have to do with the incremental and systematic loss of our
civil liberties in this country? What is the role of dissent in America?
Why do we do it?

First came the PATRIOT Act.  Then the renewal of the PATRIOT Act.  And in
between and continuing, the many Executive Orders from the White House
giving the President of the United States powers that undermine the civil
liberties established in the Constitution. In addition, in July of 2008
the FISA Amendment Act became a law. It allows the government to conduct
intrusive surveillance without ever telling a court who it intends to spy
on, what phone lines or emails it intends to monitor, where its
surveillance targets are located, and why it is conducting surveillance.

Elaine Cassel, in her book The War on Civil Liberties: How Bush and
Ashcroft Have Dismantled the Bill of Rights has a chapter entitled
"Terrorism, Patriotism, and Homeland Security: The Legal Foundation for
the War at Home."  It begins with this quotation from George W. Bush in
September of 2001:  "Our war on terror begins with Al Qaeda, but it does
not end there. It will not end until every terrorist group of global reach
has been found, stopped, and defeated."

The founders of this country, after the Boston Tea Party, went on to
establish a new country and Constitution.  No, it did not happen just like
that - it took over a decade before the Constitution was accepted.  But we
have held it sacred all these years - until now, when, according to Bush,
it is "just a piece of paper," easy to shred. (Stop throwing the
Constitution in my face, it's just a goddamned piece of paper! ­Bush in
2005 over the renewal of the PATRIOT Act)

How did a group of young people (the age range is about 16 to 25), some
who call themselves "anarchists," most of whom are nonviolent, become a
"terrorist group of global reach" worthy of being stopped and defeated?

What is anarchy as a political philosophy?  According to Wikipedia (an
online encyclopedia):

"Anarchists are those who advocate the absence of the state, arguing that
common sense would allow for people to come together in agreement to form
a functional society allowing for the participants to freely develop their
own sense of morality, ethics or principled behaviour.  The rise of
anarchism as a philosophical movement occurred in the mid 19th century,
with its idea of freedom as being based upon political and economic
self-rule. This occurred alongside the rise of the nation-state and
large-scale industrial capitalism, and the corruption that came with their
successes. "

The term anarchism derives from the a Greek word meaning "without rulers."
There are different types of anarchism, with no single defining position
that all anarchists hold, beyond their rejection of compulsory government.

Is the current anarchist movement global?  Well, yes, it is.  In this day
and age, it could not be anything else.  Is it mostly young people?  Yes,
although Dorothy Day, founder of the Catholic Worker movement, was an
anarchist, and so is Noam Chomsky, linguist and political analyst and
dissenter, who has been called the most important public intellectual in
the world today.

To provide some perspective, here is a quotation from "Bill of Rights
Under Bush: A Timeline" by Phil Leggiere (writing for QuestionAuthority on
the MondoGlobo website):

October, 2007: "The Violent Radicalization and Homegrown Terrorism Act
passes the House of Representatives 400 to 6. . . . The act proposes the
establishment of a commission composed of members of the House and Senate,
Homeland Security and others, to 'examine and report upon the facts and
causes of violent radicalization, homegrown terrorism, and ideologically
based violence in the United States' and specifically the role of the
internet in fostering and disseminating extremism. According to the bill
the term `violent radicalization' means the process of adopting or
promoting an extremist belief system for the purpose of facilitating
ideologically based violence to advance political, religious, or social
change, while the term 'ideologically-based violence' means the use,
planned use, or threatened use of force or violence by a group or
individual to promote the group or individual's political, religious, or
social beliefs."

This bill is not current.  It was never passed in the Senate, where it had
only one cosponsor, Norm Coleman of Minnesota, nor did it become law.

However, contained in it is the justification for attacking unarmed
civilians who were exercising their civil liberties, their right to
express their opposition to the government as represented by the
Republicans at the Republican National Convention.

A key word in the above description is "violence."  The protestors in St.
Paul did not use violence.  They were unarmed.  The real violence was
perpetrated by the military law enforcement.  Video after video, photo
after photo, attests to this violence on the part of the police against
unarmed civilians and the many media representatives they arrested,
independent and mainstream media alike.

Even more alarming however, is the justification in this bill against
"homegrown terrorism" for prosecution of "thought crimes."  It was opposed
on these grounds by the ACLU, the Center for Constitutional Rights, and
other civil liberties groups.  Yet it is exactly on the grounds of a
"belief system" that the preemptive raids were made before the RNC, as
well as serving for the basis of the so-called crimes of the RNC8.  They
are charged with "intent" to commit terrorist acts, not the actual acts.

In addition, in examining the following statement, it would seem that the
Republicans, and George W. Bush is still the Republican president, were
practicing the following:

''ideologically-based violence' means the use, planned use, or threatened
use of force or violence by a group or individual to promote the group or
individual's political, religious, or social beliefs. '

They were promoting the beliefs of the Republican Party (and the
neo-conservatives who control it). The law enforcement officers were
mercenaries hired with $50 million dollars to ensure they could promote
their beliefs, which includes the use of force against anyone who
disagrees with them. However, the rent-a-cops and their superiors still
need to be held accountable for their individual and collective acts of
violence. They cannot hide behind the State. Still, while objecting to
their brutality, it is important to recognize their role as hired

Democracy is on the line in this country.

In the Georgetown Journal of International Affairs: Dynamics of Dissent
issue (Summer/Fall 2008), Roland Bleiker writes "The Politics of Change:
Why Global Democracy Needs Dissent." In this article he addresses the fact
that with the onset of globalization we have no mechanisms for
establishing a new, global form of democracy. Institutions are not in
place to deal with the new globalization. "Given the absence of a global
institution that could facilitate and implement democratic ideas, dissent
becomes an even more crucial tool in the global society.  Dissent is often
the only way for disenfranchized people to contribute to global affairs. .
. ."

While Bleiker maintains that "Order is a necessary precondition for
democracy, the rule of law, the provision of human rights, and human
civilization itself," he also notes that "many injustices, from domestic
abuse to torture and genocide, occur not from a lack of order but under an
unjust order." He cites fascism and the concentration camps in Nazi
Germany as an example of "meticuous infatuation with order - which
envisioned a racially 'pure' state and was determined to pursue a racial
agenda with all requisite action."

He goes on to say that "Dissent can occasionally be required to challenge
oppressive orders and to promote a more just global society." The more
oppressive the order, the more dissent is required.

Is the violence of the RNC a direct reaction to 911, perpetrated against
anyone who dares to dissent and referring back to Bush's quote, about war
that "will not end until every terrorist group of global reach has been
found, stopped, and defeated'? Yes, it is, and it is also an obsession
that has become an unjust order.

Underlying it all are the concerns of global regulation, corporate
domination of the economy at the expense of human rights, and the
interconnections we have recently so dramatically seen with all the
world's markets.

Coming back to the RNC and the young people, they inherit a global society
in a way we never did. Globalization will not go away; it is with us to
stay. It is their future, their world. What they face as a future is
overwhelming between the need to stop global warming and to find a way to
create a just world.  So to say they are global is correct. Are they a
threat? Yes, to an order that promotes the bottom line over human rights
and human civilization and denies the effects of global warming.

I provided jail support at the RNC. I hugged those young people when they
got out of jail. I gave them what support I could. I bought them some food
when they ran out. When I asked what I could do, that's what I was told to
do - give them hugs. Although I felt a bit stereotyped as a
grandmother-type, they were right. "Give us support, and let us do what we
need to do," is the message I got.

Protest is the positive voice of the people, so I will continue to join my
voice, my way of protest, with their voices.

Sue Ann Martinson Minneapolis, Minnesota October 18, 2008

---------17 of 17--------

Licensed Kleptocracy for Years to Come
The ABCs of Paulson's Bailout
October 20, 2008

Treasury Secretary Paulson's bailout speech on Monday, October 13, poses
some fundamental economic questions: What is the impact on the economy at
large of this autumn's unprecedented creation and giveaway of financial
wealth to the wealthiest layer of the population? How long can the
Treasury's bailout of Wall Street (but not the rest of the economy!)
sustain a debt overhead that is growing exponentially? Is there any limit
to the amount of U.S. Treasury debt that the government can create and
turn over to its major political campaign contributors?

In times past, national debt typically was run up by borrowing money from
private lenders and spent on goods and services. The tendency was to
absorb loanable funds and bid up interest rates on the one hand, while
spending led to inflationary price increases for goods and services. But
the present giveaway is different. Instead of money being borrowed or
spent, interest-yielding bonds are simply being printed and turned over to
the banks and other financial institutions.  The hope is that they will
lend out more credit (which will become more debt on the part of their
customers), lowering interest rates while the money is used to bid up
asset prices - real estate, stocks and bonds. Little commodity price
inflation is expected from this behavior.

The main impact will be to reinforce the concentration of wealth in the
hands of creditors (the wealthiest 10 percent of the population) rather
than wiping out financial assets (and debts) through the bankruptcies that
were occurring as a result of "market forces". Is it too much to say that
we are seeing the end of economic democracy and the emergence of a
financial oligarchy - a self-serving class whose actions threaten to
polarize society and, in the process, stifle economic growth and lead to
the very bankruptcy that the bailout was supposed to prevent?

Everything that I have read in economic history leads me to believe that
we are entering a nightmare transition era. The business cycle is
essentially a financial cycle. Upswings tend to become economy-wide Ponzi
schemes as banks and other creditors, savers and investors receive
interest and plow it back into new loans, accruing yet more interest as
debt levels rise. This is the "magic of compound interest" in a nutshell.
No "real" economy in history has grown at a rate able to keep up with this
financial dynamic. Indeed, payment of this interest by households and
businesses leaves less to spend on goods and services, causing markets to
shrink and investment and employment to be cut back.

Banks cannot make money ad infinitum by selling more and more credit -
that is, indebting the non-financial economy more and more. Government
officials such as Treasury Secretary Paulson or Federal Reserve Chairman
Bernanke are professionally unable to acknowledge this problem, and it
does not appear in most neoclassical or monetarist textbooks. But the
underlying mathematics of compound interest are rediscovered in each
generation, often prompted by the force majeur of financial crisis.

A generation ago, for instance, Hyman Minsky gained a following by
describing what he aptly called the Ponzi stage of the business cycle. It
was the phase in which debtors no longer were able to pay off their loans
out of current income (as in Stage #1, where they earned enough to cover
their interest and amortization charges), and indeed did not even earn
enough to pay the interest charges (as in Stage #2), but had to borrow the
money to pay the interest owed to their bankers and other creditors. In
this Stage #3 the interest was simply added onto the debt, growing at a
compound rate. It ends in a crash.

This was the flip side of the magic of compound interest - the belief that
people can get rich by "putting money to work". Money doesn't really work,
of course. When lent out, it extracts interest from the "real" production
and consumption economy, that is, from the labor and industry that
actually do the work. It is much like a tax, a monopoly rent levied by the
financial sector. Yet this quasi-tax, this extractive financial rent (as
Alfred Marshall explained over a century ago) is the dynamic that is
supposed to enable corporate, state and local pension funds to pay for
retirement simply out of stock market gains and bond investments - purely
financially and hence at the expense of the economy at large whose
employees are supposed to be gainers. This is the essence of "pension-fund
capitalism," a Ponzi-scheme variant of finance capitalism. Unfortunately,
it is grounded in purely mathematical relationships that have little
grounding in the "real" economy in which families and companies produce
and consume.

Paulson's bailout plan reflects a state of denial with regard to this
dynamic. The debt overhead is self-aggravating, becoming less and less
"solvable" and hence more of a quandary, that is, a problem with no
visible solution. At least, no solution acceptable to Wall Street, and
hence to  Paulson and the Democratic and Republican congressional leaders.
The banks and large swaths of the financial sector are broke from having
made bad gambles in the belief that money could be made to "work" under
conditions that shrink the underlying industrial economy and stifle wage
gains, eroding the market for consumer goods. Debt deflation reduces sales
and business activity in general, and hence corporate earnings. This
depresses stock market and real estate prices, and hence the value of
collateral pledged to back the economy's debt overhead. Negative equity
leads to bankruptcy and foreclosures.

By increasing America's national debt from $5 trillion earlier this year
to $13 trillion in almost a single swoop by taking on junk loans and other
bad investments rather than letting them to under as traditionally has
occurred in the "cleansing" culmination of business crashes ("cleansing"
in the sense of clean slates for debts that cannot reasonably be paid),
Paulson's bailout actions increase the interest payments that the
government must pay out of taxes or by borrowing (more printing) yet more
money. Someone must pay for bad debts and junk loans that are not wiped
off the books. The government is now to take on the roll of debt collector
to "make a profit for taxpayers" by going around and kneecapping the
economy - which of course is comprised primarily of the "taxpayers"
ostensibly being helped.

It is a con game. Financial gains have soared since 1980, but banks and
institutional investors have not used them to finance tangible capital
formation. They simply have recycled their receipt of interest (and
credit-card fees and penalties that often amount to as much as interest)
into yet new loans, extracting yet more interest and so on. This financial
extraction leaves less personal and business income to spend on consumer
goods, capital goods and services. Sales shrink, causing defaults as the
economy is less able to pay its stipulated interest charges.

This phenomenon of debt deflation has occurred throughout history, not
only over the modern business cycle but for centuries at a time. The most
self-destructive example of financial short-termism is the decline and
fall of the Roman Empire into debt bondage and ultimately into a Dark Age.
The political turning point was the violent takeover of the Senate by
oligarchic creditors who murdered the debtor-oriented reformers led by the
Gracchi brothers in 133 BC, picking up benches and using them as rams to
push the reformers over the cliff on which the political assembly was
located. A similar violent overthrow occurred in Sparta a century earlier
when its kings Agis and Cleomenes sought to annul debts so as to reverse
the city-state's economic polarization. The creditor oligarchy exiled and
killed the kings, as Plutarch described in his Parallel Lives of the
Illustrious Greeks and Romans. This used to be basic reading among
educated people, but today these events have all but disappeared from most
people's historical memory. A knowledge of the evolution of economic
structures has been replaced by a mere series of political personalities
and military conquests.

The moral of ancient and modern history alike is that a critical point
inevitably arrives at which economies either adopt hard creditor-oriented
laws that impoverish the population and plunge downward socially and
militarily, or save themselves by alleviating the debt burden. What is
remarkable today is the almost total failure of political leaders to
provide an alternative to  Paulson's bailout of Wall Street from the Bear
Stearns bankruptcy down through the government takeover of Fannie Mae and
Freddie Mac to last week's giveaway to the banks. Nobody is even warning
where this destructive decision is leading. Governments ostensibly
representing "free market" philosophy are acting as the lender of last
resort - not to households and business non-financial debtors, and not to
wipe out the debt overhang in a Clean Slate, but to subsidize the excess
of financial claims over and above the economy's ability to pay and the
market value of assets pledged as collateral.

This attempt is necessarily in vain. No amount of money can sustain the
exponential growth of debt, not to mention the freely created credit and
mutual gambles on derivatives and other financial claims whose volume has
exploded in recent years. The government is committed to "bailing out"
banks and other creditors whose loans and swaps have gone bad. It remains
in denial with regard to the debt deflation that must be imposed on the
rest of the economy to "make good" on these financial trends.

Here's why the plan for the government to recover the money is whistling
in the dark: It calls for banks to "earn their way out of debt" by selling
more of their product - credit, that is, debt. Homeowners and other
consumers, students and car buyers, credit card users and their employers
- the "taxpayers" supposed to be helped - are to pay the repayment money
to the banks, instead of using it to purchase goods and services. If they
charge only 6 per cent per year, they will extract $93 billion in interest
charges - $42 billion to pay the Treasury for its $700 billion, and
another $51 billion for the Federal Reserve's $850 billion in "cash for
trash" loans.

If you are going to rob the government, I suppose the best strategy is
simply to brazen it out. To listen to the mass media, there seemed no
alternative but for Congress to ram the plan through just as Wall Street
lobbyists had written, to "save the market from imminent meltdown,"
refusing to hold hearings or take testimony from critics or listen to the
hundreds of economists who have denounced the giveaway.

Hubris has reached a level of deception hardly seen since the 19th
century's giveaways to the railroad barons. "We didn't want to be
punitive,"  Paulson explained in a Financial Times interview, as if the
only alternative was an enormous gift. Europe did not engage in any such
giveaway, yet he claimed that England and other European countries forced
his hand by bailing out their banks, and that the Treasury simply wanted
to keep U.S. banks competitive. Wringing his hands melodramatically, he
assured the public on Monday that "We regret having to take these
actions". Banks went along with the pretense that the bailout was a
worrisome socialist intrusion into the "free market," not a giveaway to
Wall Street in the plan drawn up by their own industry lobbyists. "Today's
actions are not what we ever wanted to do,"  Paulson went on, "but today's
actions are what we must do to restore confidence to our financial
system". The confidence in question was a classic exercise in
disinformation - a well-crafted con game.

Paulson depicted the government's purchase of special non-voting stock as
a European-style nationalization, but government's appointed public
representatives to the boards of European banks being bailed out. This has
not happened in America. Bank lobbyists are reported to have approached
Treasury to express their worry that their shareholdings might be diluted.
But the Treasury-Democratic Party plan invests $250 billion in government
credit in non-voting shares. If a recipient of this credit goes broke, the
government is left the end of the line behind other creditors. Its
"shares" are not real loans, but "preferred stock". As Paulson explained
on Monday: "Government owning a stake in any private U.S. company is
objectionable to most Americans - me included". So the government's shares
are not even real stock, but a special "non-voting" issue. The public
stock investment will not even have voting power! So the government gets
the worst of both worlds: Its "preferred stock" issue lacks the voting
power that common stock has, while also lacking the standing for repayment
in case of bankruptcy that bondholders enjoy. Instead of leading to more
public oversight and regulation, the crisis thus has the opposite effect
here: a capitulation to Wall Street, along lines that pave the ground for
a much deeper debt crisis to come as the banks "earn their way out of
debt" at the expense of the rest of the economy, which is receiving no
debt relief!

Paulson shed the appropriate crocodile tears on behalf of homeowners and
the middle class, whose interest he depicted as lying in ever-rising
housing and stock market prices. "In recent weeks, the American people
have felt the effects of a frozen financial system," he explained. "They
have seen reduced values in their retirement and investment accounts. They
have worried about meeting payrolls and they have worried about losing
their jobs". He almost seemed about to use the timeworn widows and orphans
cover story and beg Americans please not to unplug Granny from her life
support system in the nursing home. We need to preserve the value of her
stocks, and help everyone retire happily by restoring normal Wall Street
financial engineering to make voters rich again.

European executives who steered their banks into the debt iceberg have
been fired. England wiped out shareholders in Northern Rock last summer,
and more recently Bradford and Bingley. But in America the culprits get to
stay on. No bank stockholders are being wiped out here, despite the
negative equity into which the worst risk-taking banks have fallen or the
prosecutions brought against them for predatory lending, consumer fraud
and related wrongdoing.

Government aid will be used to pay exorbitant salaries to the executives
who drove these banks into insolvency. "Institutions that sell shares to
the government will accept restrictions on executive compensation,
including a clawback provision and a ban on golden parachutes,"  Paulson
pretended - only to qualify it by saying that the rule would apply only
"during the period that Treasury holds equity issued through this
program". The executives can stay on and give themselves the usual
retirement gifts after all, prompting Democratic Congressman Barney Frank
to complain about how weak the Treasury restrictions are. "Compensation
experts say that the provisions, though politically prudent to appease
public anger, will probably have little real impact on how financial
executives are paid in coming years. They predict banks will simply pay
higher taxes and will find other creative ways of paying their executives
as they see fit. Some say there could even be a sudden surge in
compensation as soon as the government program ends, in a few years,
leading to eye-popping numbers down the road. When Congress limited the
tax deductibility of cash salaries to $1 million, for example, it simply
led to an explosion in stock options used as compensation and even higher
total payouts.

And speaking of stock options, the government shortchanged itself here
too, despite its promises to ensure that it will shares in the gains when
banks recover. Senator Schumer went so far as to assure voters that "under
any capital injection plan that Treasury pursues, dividends must be
eliminated, executive compensation must be constrained, and normal banking
activities must be emphasized". This was mostly hot air. England and other
countries have insisted that banks not pay dividends until the government
is reimbursed. The idea is to avoid using public money to pay dividends to
existing shareholders and continued exorbitant salaries to their
mismanagers! But the terms of the U.S. bailout is made simply call for
banks not increase their dividend payouts - a policy they most likely
would follow in any case in view of their earnings crunch.

Schumer verged on the ridiculous when he proclaimed: "We must operate in
the same way any significant investor operates in these situations - when
Warren Buffett invested in Goldman Sachs and General Electric in recent
weeks, he demanded strict, but not onerous terms. The government must be
similarly protective of taxpayer interests". But Buffett obtained a much
better deal for his $5 billion investment in Goldman Sachs, including
warrants to buy its stock at a price below the going price when he helped
rescue the company. Likewise in England, the government took stock
ownership at low prices before the bailout, not at higher prices after it!
But instead of exercising its warrants at the depressed prices where bank
stocks stood at the time Paulson detailed the bailout terms, the U.S.
Treasury would be able to exercise its warrants (equal to 15 percent of
its investment) only at prices that were to be set after the banks had
time to recover with the Treasury's aid. Existing stockholders thus will
benefit more than the government - which is why bank stocks soared on news
of the bailout's terms. So the government does not appear to be a good
bargainer in the public interest. In fact, Paulson may be guilty of
deliberate scuttling of the public interest that, as Treasury Secretary,
he is supposed to defend.

Given his financial experience,  Paulson had to know how deceptive his
promise was in placing such emphasis on the government's stock options,
the sweetener that has made so many executives fabulously wealthy:
"taxpayers will not only own shares that should be paid back with a
reasonable return, but also will receive warrants for common shares in
participating institutions," he explained. But the "reasonable return" is
only 5 per cent annually, just above what the government typically has to
pay, not a rate reflecting anything like what the "free market" now
charges Wall Street firms with negative equity. The government's $250
billion in preferred stock will carry a dividend that rises to 9 per cent
after five years, with no limit on how long the loan may be outstanding.

All I can say is, Wow! If only homeowners could get a similar break: a
reduction in their interest rate to just 5 per cent, rising to a penalty
rate of just 9 per cent - without the heavy penalties and late fees that
Countrywide/Bank of America charges! By contrast, German banks that
receive a public rescue will pay "a fee of at least 2 per cent annually of
the amount guaranteed. The U.K. will charge 0.50 per cent plus the cost of
default insurance on a bank's debt". A British banker wrote to me that
"the government offers 12 per cent preference shares, and ordinary shares
at an absolutely huge discount to asset value to provide the cash". But
the U.S. Government agreed to exercise its stock options at the
post-bailout price, not the price prior to rescue. It even gives up most
of these options if the banks do repay the Treasury's loan. On the excuse
of encouraging private Wall Street investors to replace government
"ownership" and "intrusion" into the marketplace, banks can "cut in half
the number of common shares the government will eventually be able to
purchase. That can be done if a bank sells stock by the end of 2009, and
raises at least as much cash as the government is investing".

These bailout terms suggest that what Wall Street wants is pretty much
what colonialist Britain achieved for so many years in India and Africa:
puppet leaders with an imperial political advisor, in America's case a
Secretary of the Treasury and a vice-regent as head of the Federal Reserve
System. But what the rest of the economy needs is a genuinely free leader
able to impose better and more equitable laws to write down debt, not
build it up and bail out more bad loans. Within the present administration
itself, Sheila Bair, head of the Federal Deposit Insurance Corporation,
complained in a Wall Street Journal interview that she didn't understand
"Why there's been such a political focus on making sure we're not unduly
helping borrowers but then we're providing all this massive assistance at
the institutional level". She described "painstaking efforts made by
lawmakers in crafting the federal Hope for Homeowners program to make sure
it limited resale profits for borrowers who received affordable home
loans," by giving the government a share of the rising sales price.

The imbalance between creditor demands and debtors' ability to pay is
indeed the problem.  Paulson claimed in his Monday address that he needed
to get to the root of the economic problem. But in his view it is simply
that the banks "are not positioned to lend as widely as is necessary to
support our economy. Our goal is to see - that they can make more loans to
businesses and consumers across the nation". As he explained in his
Financial Times interview, "for the first time you have seen an action
that is systematic, that is getting at the root causes". of the financial
crisis. But his perspective is remarkably narrow. It denies that the
problem is debt above and beyond the ability of the economy at large to
pay, and higher than the market price of property and assets pledged as

Creating a system for the banks to "earn their way out of debt" means
creating yet more interest-bearing debt for the economy at large. Mortgage
loans are what is supposed to restore high housing prices and office costs
- precisely what caused the debt meltdown in the first place.  Despite
Paulson's and Ms. Bair's characterization of the present crisis as merely
a liquidity problem, it is really a debt problem. The volume of real
estate debt, auto debt, student loans, bank debt, pension debts by
municipalities and states as well as private companies exceed their
ability to pay.

Shortly after  Paulson's Monday speech a Dutch economics professor, Dirk
Bezemer, wrote me that: "In my thinking I liken it to a Ponzi game where
in the final stages the only way to keep things going a bit longer is to
pump in more liquidity. That is a solution in the sense that it restores
calm, but only in the short run. This is what we now see happening and -
despite the 10 per cent stock market rally today - I am still bracing
myself for the inevitable end of the Ponzi game - suddenly or as a long
drawn out debt deflation". He went on to explain what he and other
associates of mine have been saying for many years now: "The actual
solution is to separate the Ponzi from the non-Ponzi economy and let the
pain be suffered in the first part so as to salvage what we can from the
second. This means bailing out homeowners but not investment banks, etc.
The qualification to this general approach is that those Ponzi game
players whose demise is a real "system threat" need support, but only with
punitive conditionalities attached. And just like Third World countries,
they won't have a choice.

The problem of "debt pollution" is being "solved" by creating yet more
debt, not by reducing its volume. Neither the Treasury nor Congress is
helping to resolve this problem. The working assumption is that giving
newly created government debt to the banks and Wall Street will lead to
more lending to re-inflate the real estate and stock markets. But who will
lend more to the one-sixth of U.S. homes already said to have fallen into
negative equity territory? As debt deflation eats into the domestic market
for goods and services, corporate sales and earnings will shrink, dragging
down stock prices. Wall Street is in control, but its policies are so
shortsighted that they are eroding the underlying economy - which is
passing from democracy to oligarchy, and indeed it seems to a bipartisan
financial kleptocracy.

Michael Hudson is a former Wall Street economist He was Dennis Kucinich.s
Chief Economic Advisor in the recent Democratic primary presidential
campaign, and has advised the U.S., Canadian, Mexican and Latvian
governments, as well as the United Nations Institute for Training and
Research (UNITAR). A Distinguished Research Professor at University of
Missouri, Kansas City (UMKC), he is the author of many books, including
Super Imperialism: The Economic Strategy of American Empire (new ed.,
Pluto Press, 2002) He can be reached via his website,
mh [at]


   - David Shove             shove001 [at]
   rhymes with clove         Progressive Calendar
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