Showing posts with label Interest. Show all posts
Showing posts with label Interest. Show all posts

The Bag Holder and the Bag

SUBHEAD: The Fed may be eager to send Trump on the road to perdition with shit sandwiches and a hair shirt.

By James Kunstler on 10 March 2017 for Kunstler.com -
(http://kunstler.com/clusterfuck-nation/bag-holder-bag/)


Image above: Detail of he 1798 painting "The Assassination of Julius Caesar" by Vincenzo Camuccini". Beware the Ides of March" is a quote from Shakespeare's 1601 play "Julius Caesar" spoken by the soothsayer's to Caesar, warning of his death.  From (http://www.vox.com/2015/3/15/8214921/ides-of-march-caesar-assassination).

Can you see those swans coming in for a landing on Pond USA? They’re not exactly black swans, because you knew they were out there circling, but they’re dark enough against the twilight’s last gleaming to give you the heebie jeebies.

Troubles and portents of more trouble are stacking up as we approach the Ides of March zone of financial turmoil.

You must surely surmise that a debt ceiling impact, a Federal Reserve interest rate hike, and the election of a Dutch anti-EU leader all scheduled for that one day are a good start on the greater unravel to follow.

Glowering in the spotlight at center stage will be President Donald Trump, designated bag-holder of the Deep State and its myrmidons. And what’s in that bag he’s holding?

Just a couple of shit sandwiches and a hair shirt for his journey down the lonely road to exile. But getting rid of Trump would only leave the Deep State with a bigger problem: itself. That is, an economy and a society that can’t be governed by any means.

I think many professional observers-of-the-scene are missing something in this unspooling story: the Deep State is actually becoming more impotent and ineffectual, not omnipotent. Case in point:

RussiaGate — come on, let’s finally call it that — the popular idea that Russia hacked the 2016 presidential election. It’s popular because it’s such a convenient excuse for the failure of a corrupt, exhausted, and brain-dead Democratic establishment.

But all the exertions of the Deep State to put over this story since last summer were negated this week by two events.

First, there was former NSA Director James Clapper’s appearance on NBC’s Sunday Meet the Press show with Chuck Todd featuring the following interchange:
CHUCK TODD:
Does intelligence exist that can definitively answer the following question, whether there were improper contacts between the Trump campaign and Russian officials?
JAMES CLAPPER:
We did not include any evidence in our report, and I say, “our,” that’s N.S.A., F.B.I. and C.I.A., with my office, the Director of National Intelligence, that had anything, that had any reflection of collusion between members of the Trump campaign and the Russians. There was no evidence of that included in our report.
CHUCK TODD:
I understand that. But does it exist?
JAMES CLAPPER:
Not to my knowledge.
And so what to make of the RussiaGate histrionics served up by CNN, The New York Times, the WashPo, NPR, and sundry tools as Senator Chuck Schumer (D–NY)? What I make of it is a growing civil war in the government itself, and perhaps something arguably like sedition.

Second matter: this week’s release of Wikileaks’ Vault-7 trove of purloined government documents.

These seem to suggest that US Intel agencies have acquired the ability to spoof any activity on any sort of computer or program that makes it impossible to track the identity of any hacker and, what’s more, gives US Intel a tool to make any party appear culpable for any given case of hacking — meaning that if so called computer hacking “footprints” had been discovered linking Russia to the Hillary-DNC-Podesta emails, those footprints could have been engineered by US Intel itself… meaning further that any so-called “evidence” of Russian election hacking could not be proven one way or the other.

Now, this might be too fine a point for the RussiaGate partisans, but I don’t see how it fails to moot the issue. The partisans are still finding other ways to propagandize. On Thursday evening, NPR ran a story about Russia breaking a missile agreement with this wrap-up from correspondent David Welna:
WELNA: Still unclear is how President Trump, an admirer of Russian President Vladimir Putin, might respond to Moscow’s defiance. David Welna, NPR News, Washington.
That lapse of newsmanship is the kind of thing that makes me (a still-registered Democrat) want to support the defunding of NPR.

All this hugger-mugger may be further mooted by the financial disorders of Spring 2017. Don’t underestimate the Federal Reserve’s eagerness in sending Trump on the road to political perdition with his shit sandwiches and hair shirt.

The Fed’s board of governors knows full well that their interest rate hike could sink even the carefully fabricated Potemkin appearance of a healthy economy.

It would also create more dire debt-servicing problems for the US Treasury when and if the debt ceiling problem ever gets resolved. They’re holding a hand grenade in the old USA bunker and they’re getting ready to pull the pin. Just watch.

See also:
Ea O Ka Aina: Making the internet safe for anarchy 5/1/12


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In praise of cash

SUBHEAD: Cash might be grungy, unfashionable and corruptible, but it is still a great public good.

By Brett Scott on 1 March 2017 for Aeon.co -
(https://aeon.co/essays/if-plastic-replaces-cash-much-that-is-good-will-be-lost)


Image above: Bundles of Somaliland's own currency are laid out by a money-changer on a street in Hargeisa, capital of the unrecognized breakaway republic of Somaliland in northwestern Somalia. From (https://www.northcountrypublicradio.org/news/npr/160117706/somaliland-a-pocket-of-stability-in-a-chaotic-region).

I recently found myself facing a vending machine in a quiet corridor at the Delft University of Technology in the Netherlands.

I was due to speak at a conference called ‘Reinvent Money’ but, suffering from jetlag and exhaustion, I was on a search for Coca-Cola.

The vending machine had a small digital interface built by a Dutch company called Payter. Printed on it was a sentence: 
‘Contactless payment only.’
I touched down my bank card, but rather than dispensing Coke, it beeped a message: ‘Card invalid.’ Not all cards are created equal, even if you can get one – and not everyone can.

In the economist’s imagining of an idealised free market, rational individuals enter into monetary-exchange contracts with each other for their mutual benefit.

One party – called the ‘buyer’ – passes money tokens to another party – called the ‘seller’ – who in turn gives real goods or services.

So here I am, the tired individual rationally seeking sugar. The market is before me, fizzy drinks stacked on a shelf, presided over by a vending machine acting on behalf of the cola seller.

It’s an obedient mechanical apparatus that is supposed to abide by a simple market contract: 
If you give money to my owner, I will give you a Coke.
So why won’t this goddamn machine enter into this contract with me? This is market failure.

To understand this failure, we must first understand that we live with two modes of money. ‘Cash’ is the name given to our system of physical tokens that are manually passed on to complete transactions. This first mode of money is public.

We might call it ‘state money’. Indeed, we experience cash like a public utility that is ‘just there’.

Like other public utilities, it might feel grungy and unsexy – with inefficiencies and avenues for corruption – but it is in principle open-access. It can be passed directly by the richest of society to the poorest of society, or vice versa.

Alongside this, we have a separate system of digital fiat money, in which our money tokens take the form of ‘data objects’ recorded on a database by an authority – a bank – granted power to ‘keep score’ of them for us.

We refer to this as our bank account and, rather than physically transporting this money, we ‘move’ it by sending messages to our banks – for example, via mobile phones or the internet – asking them to edit the data.

Money ‘moves’ to your landlord if your two respective banks can agree to edit your accounts, reducing your score and increasing your landlord’s score.

This second mode of money is essentially private, running off an infrastructure collectively controlled by profit-seeking commercial banks and a host of private payment intermediaries – like Visa and Mastercard – that work with them.

The data inscriptions in your bank account are not state money. Rather, your bank account records private promises issued to you by your bank, promising you access to state money should you wish. Having ‘£500’ in your Barclays account actually means ‘Barclays PLC promises you access to £500’.

The ATM network is the main way by which you convert these private bank promises – ‘deposits’ – into the state cash that has been promised to you. The digital payments system, on the other hand, is a way to transfer – or reassign – those bank promises between ourselves.

This dual system allows us the option to use private digital bank money when buying pizza at a restaurant, but we can always resort to public state money drawn out of an ATM if the proprietor’s debit card system crashes.

This choice seems fair.

At different times, we might find either form more or less useful. As you read this, though, architects of a ‘cashless society’ are working to remove the option of resorting to state cash. They wish to completely privatise the movement of money tokens, pushing banks and private-payments intermediaries between all interactions of buyers and sellers.

The cashless society – which more accurately should be called the bank-payments society – is often presented as an inevitability, an outcome of ‘natural progress’. This claim is either naïve or disingenuous. Any future cashless bank-payments society will be the outcome of a deliberate war on cash waged by an alliance of three elite groups with deep interests in seeing it emerge.

The first is the banking industry, which controls the core digital fiat money system that our public system of cash currently competes with. It irritates banks that people do indeed act upon their right to convert their bank deposits into state money.

It forces them to keep the ATM network running. The cashless society, in their eyes, is a utopia where money cannot leave – or even exist – outside the banking system, but can only be transferred from bank to bank.

The second is the private payments industry – the likes of Mastercard – that profits from running the infrastructure that services that bank system, streamlining the process via which we transfer digital money between bank accounts. They have self-serving reasons to push for the removal of the cash option.

Cash transactions are peer-to-peer, requiring no intermediary, and are thus transactions that Visa cannot skim a cut off.

The third – perhaps ironically – is the state, and quasi-state entities such as central banks. They are united with the financial industry in forcing everyone to buy into this privatised bank-payments society for reasons of monitoring and control.

The bank-money system forms a panopticon that enables – in theory – all transactions to be recorded, watched and analyzed, good or bad.

Furthermore, cash’s ‘offline’ nature means it cannot be remotely altered or frozen. This hampers central banks in implementing ‘innovative’ monetary policies, such as setting negative interest rates that slowly edit away bank deposits in order to coerce people into spending.

Governments don’t really mention that monetary policy agenda. It isn’t catchy enough. Rather, the key weapons used by the alliance are more classic shock-and-awe scare tactics. Cash is used by criminals! People buy drugs with cash! It’s the black economy! It supports tax evasion!

The ability to present control as protection relies on constant calls to imagine an external enemy, the terrorist or Mafiosi. These cries of moral panic are set in contrast to the glossy smiling adverts about digital payment.

The emerging cashless society looms like a futuristic sunrise, cleansing us of these dangerous filthy notes with rays of hygienic, convenient, digital salvation.

Signs say ‘Card only’. Who is Card? Card is a glamorous socialite, welcomed into stores. Card is superior.

Supporting this core alliance are auxiliary corps of establishment academics, economists and futurists, living life in leafy suburbs, flying business class to speak at technology conferences, attended to by a wall of sycophantic media pundits and innovation journalists preaching the gospel of cashlessness.

The Curse of Cash (2016) by Kenneth Rogoff, economics professor at Harvard, was long-listed for the Financial Times and McKinsey Business Book of the Year award, undoubtedly accompanied by invitations to financial industry-sponsored conference parties in five-star hotel lobbies.

The psychological assault is working. The Netherlands – where I face my vending machine – has become one key front in the war on cash. Here cash is becoming viewed like an illegal alien on the run, increasingly excluded from the formal economy, drawing dirty looks from shop assistants. Signs say ‘Card only’.

Who is Card? Card is a glamorous socialite, welcomed into stores. Card is superior. Look at the bank adverts showcasing their accessories for Card. Nobody is building accessories for Cash.

The frontlines, though, are now creeping to poorer countries. India’s recent so-called ‘demonetization’ was a brutal overnight retraction of rupee notes by the prime minister Narendra Modi to bring discipline to the ‘black economy’. It was an exercise that necessitated choking the poorest Indians, who depend on cash and who often lack access to bank accounts.

Originally cast in popular terms as an attempt to stem corruption, the message was later ironically altered to cast cashlessness as a way to create economic progress for India’s poor.

This message is given humanitarian credentials by the UN-based Better Than Cash Alliance, which promotes ‘the shift from cash to digital payments to reduce poverty and drive inclusive growth’, and which counts Visa, Mastercard and Citi Foundation as key partners.

The Modi action was also preceded by the initiation of the Cashless Catalyst program, ‘an alliance between the Government of India and USAID, to expand digital payments in India’, backed by a panoply of digital payments companies. These official alliances of states, corporations and public academics are impressive.

In India, well-heeled urban elites who applauded Modi’s actions from the sidelines can safely point to Rogoff’s Financial Times-nominated book of the year to justify it.

Rogoff, though, has appeared spooked, writing articles stating that he was advocating removing cash only from advanced economies with advanced banking systems. Oh damn.

Highly influential and politically powerful Harvard economist releases a global anti-cash book and is concerned when poorer nations take him seriously?

The attempt to present the cashless bank-payments society as a benefit to marginalized people is tenuous at best. If you’re a vulnerable denizen of the informal economy, an off-the-grid hustler, or a low-income precarious worker, banks and payments intermediaries have little interest in prioritizing you.

The bank-payments society will not process the activity that takes place in the peripheral cracks that form the basis of your livelihood.

Indeed, it is intended to shut down those spaces. That might be characterised as ‘progress’, but equally we might say you’re being firewalled out of the economy in an act of economic cleansing.

Under the guise of destroying the ‘shadow economy’, the underclass, the unwatched, the eccentric and the untamed will be coercively corralled into the hands of the state-corporate mainstream.

I have no special love of cash. I don’t really care for nostalgic reveries on the beautiful aesthetics of the banknote, or its texture and cultural importance within a market system, though I understand this is important to many.

I also don’t really care about the pedantic history of cash, whether it was the Tang or Song dynasty in China who first issued notes. What I care about is the unaccountable callousness of this vending machine, the one that has just blocked me from engaging in free trade.

Old vending machines didn’t do this. They had a little slot for coins, one that allowed even a ragged beggar to convert his tiny income into sustenance. Look closely at the machine. It’s actually two machines. The Payter device fused into its body does not work for the cola seller. It works for payments corporations.

You see, the cola seller has one bank account, but there are many people with many accounts at different banks approaching the vending machine. Those banks need to identify which of their account holders wishes to transfer how much money to which account at which other bank.

The device is there to deliver my card information into the transmission lines of the card payments networks, where it will be – in theory – routed to facilitate the transfer of money tokens from my account into the seller’s account, for a small fee.

This is no longer a deal between me and the seller. I am now dealing with a complex of unknown third parties, profit-seeking money-passers who stand between us to act as facilitators of the money flow, but also as potential gatekeepers.

If a gatekeeper doesn’t want to do business with me, I can’t do business with the seller. They have the ability to jam, monitor or place conditions upon that glorious core ritual of capitalism – the transfer of money for the transfer of goods.

This innocuous device exudes mechanical indifference, reporting only to invisible bosses far away, running invisible algorithms in invisible black boxes that don’t like me.

If we are going to refer to bank payments as ‘cashless’, we should then refer to cash payments as ‘bankless’. Because that’s what cash is, and right now it is the only thing standing between us and a completely privatised money system.

As in the case of previous privatisations, we’ll hear suited TV pundits arguing that if the digital payments companies don’t work for people they will be outcompeted by better private systems.

Yeah right.

When did you last see a credible competitor to the likes of Mastercard and Visa? They preside over huge network systems, subject to intense network effects. It’s in no shopkeeper’s interest to use a competitor to Visa when it’s so utterly dominant already.

The most we can hope for, then, is a benign oligopoly of payments corporations, heavily exposed to the geopolitical aspirations of the states they reside within.

The Chinese state encouraged the creation of China UnionPay precisely because they don’t want US payment megacorps installing themselves as gatekeepers into transactions made by Chinese citizens.

The new bank-payments society doesn’t actually solve the old problems – crime just goes digital, your account gets hacked rather than your wallet stolen

When mounting a defence, there are always two options. You either block an incoming attack, or you launch a strategic counterstrike, sometimes summed up as ‘offence is the best defence’.

In the former strategy, you focus on pointing out that the arguments against cash are either exaggerated, inaccurate or incomplete.

Exaggeration and inaccuracy are both present in anti-cash tirades, but incompleteness is crucial. For example, let’s say we agree that criminals prefer cash. Does that translate into ‘We should ban cash’?

Banning everything that criminals favored would almost certainly lead to a constrained, suffocating existence for everyone.

Congratulations, we ended crime, but only at the expense of ending privacy and free creative space too.

The end of crime comes accompanied by an overbearing surveillance state, always standing next to you, reaching into your most private moments, treating you like a small child that cannot be trusted. Enjoy your life.

The second mode of defence-as-offence involves attacking the proposed alternative.

We point out that the new bank-payments society, firstly, does not actually solve the old problems – crime just goes digital, and your account gets hacked rather than your wallet stolen – and, even worse, causes a whole range of new problems that were not explicitly mentioned in Mastercard’s marketing material. Let me reveal the fine-print written in invisible ink: Did we mention that in removing the ability to transact with cash we can now see everything you do and can also censor you?

Cheer up, if you have nothing to hide, you have nothing to fear!

Oh yes, I can use scare tactics too. I can point out that removing cash takes us one step closer to potentially realizing the most powerful and automated state-corporate financial control complex the world has ever seen.

Very few people either seem to understand this, or care. Like a slow-boiled frog, we don’t seem to notice the process of locking ourselves into daily dependence on an alienating, unaccountable infrastructure that makes us increasingly subservient to bureaucratic processes we cannot see.

Maybe I need to turn up the shock-and-awe. Maybe I can drum up an argument about how, in a cashless society, terrorists could target the electrical grid to bring entire regional economies to a halt.

No. My main defence of cash will be simple and intuitive. As unsexy and analogue as cash is,
  • it is resilient. 
  • It is easy to use. 
  • It requires little fancy infrastructure. 
  • It is not subject to arbitrary algorithmic glitches from incompetent programmers.
And, yes, it leaves no data trail that will be used to project the aspirations and neuroses of faceless technocrats and business analysts into my daily existence.

It comes with criminals, but hey, it’s good old friendly normal capitalism rather than predictive Minority Report surveillance-capitalism.

And ask yourself this: do you really want to live in the latter society without the ability to buy drugs? Believe me, you’ll need something to dull the existential pain.

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Scientific education and stupidity

SUBHEAD: Cause and effect - scientific education may be a cause of political stupidity.

By John Michael Greer on 13 July 2016 for the Archdruid Report -
(http://thearchdruidreport.blogspot.com/2016/07/scientific-education-as-cause-of.html)

http://www.islandbreath.org/2016Year/07/160718tyson.jpg
Image above: Niel Degrasse Tyson defends Scientology and Bush administration science record for the DailyBeast. From (http://www.thedailybeast.com/articles/2015/03/31/neil-degrasse-tyson-defends-scientology-and-the-bush-administration-s-science-record.html).

While we’re discussing education, the theme of the current series of posts here on The Archdruid Report, it’s necessary to point out that there are downsides as well as upsides to take into account.

The savant so saturated in abstractions that he’s hopelessly inept at the business of everyday life has been a figure of fun in literature for many centuries now, not least because examples of the type are so easy to find in every age.

That said, certain kinds of education have more tightly focused downsides. It so happens, for example, that engineers have contributed rather more to crackpot literature than most other professions.

Hollow-earth theories, ancient-astronaut speculations, treatises arguing that the lost continent of Atlantis is located nearly anywhere on Earth except where Plato said it was—well, I could go on; engineers have written a really impressive share of the gaudier works in such fields.

In my misspent youth, I used to collect such books as a source of imaginative entertainment, and when the jacket claimed the author was some kind of engineer, I knew I was in for a treat.

I treated that as an interesting coincidence until I spent a couple of years working for a microfilming company in Seattle that was owned by a retired Boeing engineer.

He was also a devout fundamentalist Christian and a young-Earth creationist; he’d written quite a bit of creationist literature, though I never heard that any of it was published except as densely typed photocopied handouts—and all of it displayed a very specific logic: given that the Earth was created by God on October 23, 4004 BCE, at 9:00 in the morning, how can we explain the things we find on Earth today?

That is to say, he approached it as an engineering problem.

Engineers are trained to figure out what works. Give them a problem, and they’ll beaver away until they find a solution—that’s their job, and the engineering profession has been around long enough, and had enough opportunities to refine its methods of education, that a training in engineering does a fine job of teaching you how to work from a problem to a solution.

What it doesn’t teach you is how to question the problem. That’s why, to turn to another example, you get entire books that start from the assumption that the book of Ezekiel was about a UFO sighting and proceed to work out, in impressive detail, exactly what the UFO must have looked like, how it was powered, and so on. “But how do we know it was a UFO sighting in the first place?” is the one question that never really gets addressed.

It’s occurred to me recently that another specific blindness seems to be hardwired into another mode of education, one that’s both prestigious and popular these days: a scientific education—that is to say, a technical education in the theory and practice of one of the hard sciences.

 The downside to such an education, I’d like to suggest, is that it makes you stupid about politics.

Plenty of examples come to mind, and I’ll be addressing some of the others shortly, but the one I want to start with is classic in its simplicity, not to mention its simple-mindedness. This is the recent proposal by astronomer Neil deGrasse Tyson, which I quote in full:

Earth needs a virtual country: #Rationalia, with a one-line Constitution: All policy shall be based on the weight of evidence— Neil deGrasse Tyson (@neiltyson) June 29, 2016

That might be dismissed as just another example of the thought-curtailing properties of Twitter’s 140-character limit—if a potter makes pots, what does Twitter make?—except that Tyson didn’t say, “here’s the principle behind the constitution, details to follow.” That’s his proposed constitution in its entirety.

More precisely, that’s his sound bite masquerading as a constitution. An actual constitution, as anyone knows who has actually read one, doesn’t just engage in a bit of abstract handwaving about how decisions are to be made. It sets out in detail who makes the decisions, how the decision-makers are selected, what checks and balances are meant to keep the decision-makers from abusing their positions, and so on.

If Donald Trump, say, gave a speech saying, “We need a new scientific method that consists solely of finding the right answer,” he’d be mocked for not knowing the first thing about science. A similar response is appropriate here.

That said, Tyson’s proposal embodies another dimension of cluelessness about politics. Insisting that political decisions ought to be made exclusively on the basis of evidence sounds great, until you try to apply it to actual politics. Take that latter step, and what you’ll discover is that evidence is only tangentially relevant to most political decisions.

Consider the recent British referendum over whether to leave the European Union. That decision could not have been made on the basis of evidence, because all sides, as far as I know, agreed on the facts.

Those were that Britain had joined the European Economic Community (as it then was) in 1973, that its membership involved ceding certain elements of national sovereignty to EU bureaucracies, and that EU policies benefited certain people in Britain while disadvantaging others. None of those points were at issue.

The points that were at issue were values on the one hand, and interests on the other.

By values I mean judgments, by individuals and communities, about what matters and what doesn’t, what’s desirable and what isn’t, what can be tolerated and what can’t. These can’t be reduced to mere questions of evidence. A statement such as “the free movement of people across national borders is good and important” can’t be proved or disproved by any number of double-blind controlled studies.

It’s a value that some people hold and others don’t, as is the statement “the right of people to self-determination must be protected from the encroachments of unelected bureaucrats in Brussels.” Those values are in conflict with each other, and it was in large part over such values that the Brexit election was fought out and decided.

By interests I mean the relative distribution of costs and benefits. Any political decision, about any but the most trivial subject, brings benefits and has costs, and far more often than not the people who get the benefits and the people who carry the costs are not the same. EU membership for Britain was a case in point.

By and large, the affluent got the majority of the benefits—they were the ones who could send their children to German universities and count on border-free travel to holidays in Spain—and the working poor carried the majority of the costs—they were the ones who had to compete for jobs against a rising tide of immigrants, while the number of available jobs declined due to EU policies that encouraged offshoring of industry to lower-wage countries.

What made the Brexit referendum fascinating, at least to me, was the way that so many of the pro-EU affluent tried to insist that the choice was purely about values, and that any talk about the interests of the working poor was driven purely by racism and xenophobia—that is to say, values.

As I’ve noted here in numerous posts, the affluent classes in the industrial world have spent the last four decades or so throwing the working poor under the bus and then rolling the wheels back and forth over them, while insisting at the top of their lungs that they’re doing nothing of the kind.

Wage earners, and the millions who would be happy to earn a wage if they could find work, know better. Here in America, for example, most people outside the echo chambers of the affluent remember perfectly well that forty years ago, a family with one working class income could afford a house, a car, and the other amenities of life, while today, a family with one working class income is probably living on the street.

Shouting down open discussion of interests by insisting that all political decisions have to do solely with values has been a common strategy on the part of the affluent; the outcome of the Brexit referendum is one of several signs that this strategy is near the end of its shelf life.

In the real world—the world where politics has to function—interests come first. Whether you or I are benefited or harmed, enriched or impoverished by some set of government policies is the bedrock of political reality.

Evidence plays a role: yes, this policy will benefit these people; no, these other people won’t share in those benefits—those are questions of fact, but settling them doesn’t settle the broader question. Values also play a role, but there are always competing values affecting any political decision worth the name; the pursuit of liberty conflicts with the pursuit of equality, justice and mercy pull in different directions, and so on.

To make a political decision, you sort through the evidence to find the facts that are most relevant to the issue—and “relevant,” please note, is a value judgement, not a simple matter of fact.

Using the relevant evidence as a framework, you weigh competing values against one another—this also involves a value judgment—and then you weigh competing interests against one another, and look for a compromise on which most of the contending parties can more or less agree.

If no such compromise can be found, in a democratic society, you put it to a vote and do what the majority says. That’s how politics is done; we might even call it the political method.

That’s not how science is done, though. The scientific method is a way of finding out which statements about nature are false and discarding them, under the not unreasonable assumption that you’ll be left with a set of statements about nature that are as close as possible to the truth. That process rules out compromise.

If you’re Lavoisier and you’re trying to figure out how combustion works, you don’t say, hey, here’s the oxygenation theory and there’s the phlogiston theory, let’s agree that half of combustion happens one way and the other half the other; you work out an experiment that will disprove one of them, and accept its verdict. What’s inadmissible in science, though, is the heart of competent politics.

In science, furthermore, interests are entirely irrelevant in theory. (In practice—well, we’ll get to that in a bit.) Decisions about values are transferred from the individual scientist to the scientific community via such practices as peer review, which make and enforce value judgments about what counts as good, relevant, and important research in each field.

The point of these habits is to give scientists as much room as possible to focus purely on the evidence, so that facts can be known as facts, without interference from values or interests. It’s precisely the habits of mind that exclude values and interests from questions of fact in scientific research that make modern science one of the great intellectual achievements of human history, on a par with the invention of logic by the ancient Greeks.

One of the great intellectual crises of the ancient world, in turn, was the discovery that logic was not the solution to every human problem. A similar crisis hangs over the modern world, as claims that science can solve all human problems prove increasingly hard to defend, and the shrill insistence by figures such as Tyson that it just ain’t so should be read as evidence for the imminence of real trouble.

Tyson himself has demonstrated clearly enough that a first-rate grasp of astronomy does not prevent the kind of elementary mistake that gets you an F in Political Science 101. He’s hardly alone in displaying the limits of a scientific education; Richard Dawkins is a thoroughly brilliant biologist, but whenever he opens his mouth about religion, he makes the kind of crass generalizations and jawdropping non sequiturs that college sophomores used to find embarrassingly crude.

None of this is helped by the habit, increasingly common in the scientific community, of demanding that questions having to do with values and interests should be decided, not on the evidence, but purely on the social prestige of science.

I’m thinking here of the furious open letter signed by a bunch of Nobel laureates, assailing Greenpeace for opposing the testing and sale of genetically engineered rice. It’s a complicated issue, as we’ll see in a moment, but you won’t find that reflected in the open letter. Its argument is simple: we’re scientists, you’re not, and therefore you should shut up and do as we say.

Let’s take this apart a step at a time. To begin with, the decision to allow or prohibit the testing and sale of genetically engineered rice is inherently political rather than scientific. Scientific research, as noted above, deals with facts as facts, without reference to values or interests.

“If you do X, then Y will happen”—that’s a scientific statement, and if it’s backed by adequate research and replicable testing, it’s useful as a way of framing decisions. The decisions, though, will inevitably be made on the basis of values and interests.

“Y is a good thing, therefore you should do X” is a value judgment; “Y will cost me and benefit you, therefore you’re going to have to give me something to get me to agree to X” is a statement of interest—and any political decision that claims to ignore values and interests is either incompetent or dishonest.

There are, as it happens, serious questions of value and interest surrounding the genetically engineered rice under discussion. It’s been modified so that it produces vitamin A, which other strains of rice don’t have, and thus will help prevent certain kinds of blindness—that’s one side of the conflict of values.

On the other side, most seed rice in the Third World is saved from the previous year’s crop, not purchased from seed suppliers, and the marketing of the GMO rice thus represents yet another means for a big multinational corporation to pump money out of the pockets of some of the poorest people on earth to enrich stockholders in the industrial world.

There are many other ways to get vitamin A to people in the Third World, but you won’t find those being discussed by Nobel laureates—nor, of course, are any of the open letter’s signatories leading a campaign to raise enough money to buy the patent for the GMO rice and donate it to the United Nations, let’s say, so poor Third World farmers can benefit from the rice without having to spend money they don’t have in order to pay for it.

These are the issues that have been raised by Greenpeace among others. To respond to that with a straightforward display of the logical fallacy called argumentum ad auctoritatem—“I’m an authority in the field, therefore whatever I say is true”—is bad reasoning, but far more significantly, it’s inept politics.

You can only get away with that trick a certain number of times, unless what you say actually does turn out to be true, and institutional science these days has had way too many misses to be able to lean so hard on its prestige.

I’ve noted in previous posts here the way that institutional science has blinded itself to the view from outside its walls, ignoring the growing impact of the vagaries of scientific opinion in fields such as human nutrition, the straightforward transformation of research into marketing in the medical and pharmaceutical industry, and the ever-widening chasm between the promises of safety and efficacy brandished by scientists and the increasingly unsafe and ineffective drugs, technologies, and policy decisions that burden the lives of ordinary people.

There are plenty of problems with that, but the most important of them is political. People make political decisions on the basis of their values and their perceived interests, within a frame provided by accepted facts.

When the people whose job it is to present and interpret the facts start to behave in ways that bring their own impartiality into question, the “accepted facts” stop being accepted—and when scientists make a habit of insisting that the values and interests of most people don’t matter when those conflict, let’s say, with the interests of big multinational corporations that employ lots of scientists, it’s only a matter of time before whatever scientists say is dismissed out of hand as simply an attempt to advance their interests at the expense of others.

That, I’m convinced, is one of the major forces behind the widening failure of climate change activism, and environmental activism in general, to find any foothold among the general public.

These days, when a scientist like Tyson gets up on a podium to make a statement, a very large percentage of the listeners don’t respond to his words by thinking, “Wow, I didn’t know that.” They respond by thinking, “I wonder who’s paying him to say that?”

That would be bad enough if it was completely unjustified, but in many fields of science—especially, as noted earlier, medicine and pharmacology—it’s become a necessary caveat, as failures to replicate mount up, blatant manipulation of research data comes to light, and more and more products that were touted as safe and effective by the best scientific authorities turn out to be anything but.

Factor that spreading crisis of legitimacy into the history of climate change activism and it’s not hard to see the intersection.

Fifteen years ago, the movement to stop anthropogenic climate change was a juggernaut; today it’s a dead letter, given lip service or ignored completely in national politics, and reduced to a theater of the abusrd by heavily publicized international agreements that commit no one to actually reducing greenhouse gas emissions.

Much of the rhetoric of climate change activism fell into the same politically incompetent language already sketched out—“We’re scientists, you’re not, so shut up and do as you’re told”—and the mere fact that they were right, and that anthropogenic climate change is visibly spinning out of control around us right now, doesn’t change the fact that such language alienated far more people than it attracted, and thus helped guarantee the failure of the movement.

Of course there was a broader issue tangled up in this, and it’s the same one that’s dogging scientific pronouncements generally these days: the issue of interests. Specifically, who was expected to pay the costs of preventing anthropogenic climate change, and who was exempted from those costs?

That’s not a question that’s gotten anything like the kind of attention it deserves—not, at least, in the acceptable discourse of the political mainstream. We’ll be talking about it two weeks from now.

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The Money Cult

SUBHEAD: ZIRP and NIRP have coincided in first zero growth and now negative growth.

By Dmitry Orlov on  7 June 2016 for Club Orlov -
(http://cluborlov.blogspot.com/2016/06/the-money-cult.html)


Image above: Illustratio by Dennis Cristo of Zero Interest Rate Policy landing in catastrophic Negative Interest Rate Policy. From (http://www.silverbearcafe.com/private/10.15/recession.html).

Previously, I have written about the progression from positive interest rates to zero interest rates (since 2008) and finally to negative interest rates.

And I asked my readers a simple question: How will negative interest rates blow up the financial system? And apparently none of you knew the answer.

Now, I must confess that to start with I didn’t know the answer either, which is why I asked the question, and my first attempts at finding it were somewhat tentative. But now, having thought about it, I do seem to have found the answer, and it is that…

But first let us back up a bit and answer several preliminary questions:
  1. Why did zero interest rates become necessary?
  2. Why are negative interest rates now necessary? and,
  3. Why are negative interest rates a really excellent idea?*
* if you ignore certain unintended consequences (which is what everyone does all the time, so let’s not worry about them just yet).

1. Interest rates went to zero because economic growth went to zero. If you are just now wondering why that happened, just google “Limits to Growth” by clicking this link. (A public notice about the scheduled end of growth has been on display at your global planning office for four decades now. It is not anyone else’s fault if people of this planet don’t take an interest in their global affairs. I mean, seriously…)

Interest rates and rates of growth are related: a positive interest rate is little more than a bet that the future is going to be bigger and more prosperous, enabling people to pay off the debts with interest. This is an obvious point: if your income increases, it becomes easier to repay your debts; if it stagnates, it becomes harder; if it shrinks, it eventually becomes impossible.

Yes, you can nitpick and split hairs, and claim that there was still some growth, but in the developed economies most of this growth has been in financial shenanigans, fueled by an explosion in debt, and most of the benefits of this last bit of growth accrued to the wealthiest 1%, and did next to nothing for anyone else. Did this growth help support a large, stable and prosperous middle class? No, it didn’t.

In fact, wages in the US, which was once the world’s largest economy, have been stagnant for generations. In response, the Federal Reserve has been continuously reducing interest rates, until they hit zero in 2008. And there they have stayed ever since. But now, it turns out, that’s not good enough. If the Federal Reserve wants to keep the party going, they have to do more, because…

2. Once you are faced with a continuously shrinking economy, just holding interest rates at zero is not sufficient to forestall financial collapse. The interest rates must go negative.

Here are just a couple of particularly striking examples.

Australia has amassed a huge pile of debt—over 120% of GDP—and most of it is mortgage debt on overvalued real estate. Now that Australia’s economy, which was driven by commodity exports to China, has tanked, a lot of this debt is being turned into interest-only loans, because Australians no longer have the money to repay any of the principal.

But what if they can’t make the interest payments either? The obvious solution is to refinance their mortgages as interest-only at zero percent; problem solved!

Of course, as conditions deteriorate further, the Australians will become unable to afford taxes and utilities. Negative interest rates to the rescue! Refinance them again at a negative rate of interest, and now the banks will pay them to live in their overpriced houses.

Another example: energy (oil and gas) companies in the US have accumulated a fantastic pile of debt. All of this money was sunk into developing marginal and very expensive resources such as shale oil and deep offshore. Since then, energy prices have fallen, making all of these investments unprofitable and dramatically reducing revenue.

As a result, energy companies in the US are a few months away from having to spend their entire revenue on interest payments. The solution, of course, is to allow them to roll over their debt at zero percent, and if you want them to ever start drilling again (their production has been falling by around 10% annualized) then please make that interest rate negative.

3. Are you starting to see how this works? Whereas before you had to be careful about taking on debt, and had to have a plan for how you will repay it, with negative interest rates that is simply not a consideration. If your debt pays you, then more debt is always better than less debt. It no longer matters that the economy continuously shrinks because now you can get paid just for twiddling your thumbs!


Image above: Chart of effective Federal Interest Rate From original article.

But are there any unintended consequences of negative interest rates? Unintended consequences are hard to think about, and most people get a headache even trying. How can it be that clean, plentiful nuclear energy will eventually pollute the whole planet with long-lived radionuclides, resulting sky-high cancer rates? How can it be that wonderful genetically modified seeds will render us sickly and infertile in just a few generations?

And how can it be that ingenious mobile computing technology has turned our children into zombies who are constantly twiddling their smartphones as they sleepwalk through life? It’s hard to think about any of this without taking some happy pills; and how can it be that taking those happy pills has… you get the idea.

The unintended consequence of negative interest rates is that they destroy money. This is true in an entirely trivial sense: if you deposit x dollars at -ρ% annual, then a year later you will only have x(1-ρ) dollars because xρ dollars has been destroyed.

(In case you prefer to count on your fingers and toes, if you deposit $10 at -10% annual, then a year later you will only have $9 because $1 has been destroyed.) But what I mean is something slightly more profound: negative interest rates erode the very concept of money.

To get at the reason for this, we have to ask a slightly more profound question: What is money? I think that money is the cult of the god Mammon. Look at the following symbols:

€ $ ¥ £

Don’t they resemble religious symbols? In fact, that’s what they are: they are symbols of faith in money. They are also units—dimensionless units, of a peculiar kind. There are quite a few dimensionless units in math and science, such as π, e, %, ppm, but they are all ratios that relate physical quantities to other, identical, physical quantities. They are dimensionless because the units cancel out.

For instance, π is the ratio between a circle’s circumference and diameter; length over length gives nothing.

But monetary quantities do not directly relate to any physical quantity at all. It can be said that some number of monetary units (let's call them "yarbles") is equivalent to some number of turnips, but that, you see, is a matter of faith.

Should the turnip farmer turn out to be an unbeliever, he would be within his rights to say, “I am not taking any of your damn yarbles!” or, if he were a polite turnip farmer, “Your money is no good here, Sir!”

Of course, if our turnip farmer were to do that, he’d land in quite a bit of trouble because, you see, the cult of Mammon is a state cult. You have no choice but to be a believer, because only by worshiping Mammon can you earn the money to pay your taxes, and if you don’t pay your taxes you get jailed.

Nor can you produce money on your own, because that right is reserved for Mammon’s high priests, the bankers.

Making your own money makes you a heretic, and gets you the modern equivalent of being burned at the stake, which is a $250,000 fine and a 20-year prison sentence.

But it goes beyond that, because the state insists that just about everything there is must be valued in units of its money. And the way everything must be valued is through a mystical legitimizing process that is central to the cult of money: Mammon’s “invisible hand” makes itself apparent within the “free market,” which is Mammon's virtual temple.

The “invisible hand” sets the price of everything as a mystical revelation and, as with any revelation, it is beyond criticism. It is a redemptive ritual, in which people acting out of their basest, most antisocial instincts—greed and fear—manage, through Mammon's divine intervention, to serve the common good.

The “free market” is also believed to have all sorts of miraculous properties, and as with all miracles it is all a matter of smoke and mirrors and suspension of disbelief.

For example, the “free market” is said to be “efficient.” But it sets the price of turnips, and the result is that fully 40% of the food in the US ends up being wasted. That’s definitely not efficient.

This sort of inefficiency can be tolerated while resources are plentiful. Should throwing away 40% of the turnips cause a shortage of turnips develop, turnip producers can grow more turnips and sell them at prices that turnip consumers can still afford. But when resources are no longer plentiful, this trick stops working, and what you end up with is something called market failure.

The current state of the global oil industry is a good example: either the price is so high that marginal consumers cannot afford it (as was the case until quite recently), or the price is so low that the marginal producers can’t break even (as is the case now).

And so a bout of supply destruction follows a bout of demand destruction, and then the pattern repeats. Everybody loses, plus this is terribly inefficient. It would be far more efficient to appoint some central planner to calculate the optimum price of oil once a month.

Then all the marginal producers would jump out the window, all the marginal consumers would slit their wrists, and equilibrium conditions would prevail.

As the oil supply dwindled (it is depleting at around 5% per year), some additional number of producers and consumers would need to sacrifice themselves for the greater good, and so on until the last barrel is produced and burned, leaving whatever producers and consumers still remained lying in pools of their own blood.

As natural resources dwindle, our faith in the cult of Mammon is being sorely tested. But what alternatives are there? Well, there is an even older, ancient cult that’s based on idolatry: the worship of precious metals. Gold has some industrial and aesthetic uses, but it is primarily useful for making a golden calf for you to worship (or, if you are former Ukrainian president Viktor Yanukovich, a golden toilet).

 Economists tell us that gold is a “pet rock” or a “barbarous relic,” and they are right, but what is one to do when there is a Götterdämmerung (twilight of the gods) going on? Nature abhors a vacuum, and in a Götterdämmerung older pagan deities sometimes emerge and demand virgin sacrifices—such as poisoning entire river ecosystems by mining gold using mercury, or squandering prodigious amounts of fossil fuels in mining, crushing and sifting through millions of tons of hard rock to get at just 3 parts per million of gold.

Negative interest rates are Mammon’s Götterdämmerung. The money cult is bolstered by the idea that its huge and all-powerful deity will be even more huge and all-powerful tomorrow; if the opposite is demonstrably the case, then people’s faith in it begins to falter and fade.

Negative interest rates are like an icy-cold bath for Mammon, causing its godhead to shrink a little more with every dip.

People see that, and think, “I don’t want to worship his shrinking yarbles.” Then they go and spend their own yarbles on anything they can find—fallow land, vacant houses, golden calves, boxes of brass knobs... They don’t bother investing their yarbles in growing turnips, because what’s the use of turnips if all you can do with them is sell them for even more shrinking yarbles?

Negative interest rates are an excellent idea—and perhaps the only way to keep the financial game going a bit longer—but, given these unintended consequences, they are also a terrible idea. The bankers know that. They want to preserve their cult’s status, and constantly talk about raising interest rates.

But they haven’t yet, because they also know that just a small increase will result in trillions of dollars of losses, triggering widespread business failures and ushering in the Greatest Great Depression Ever. This is not a problem for them to solve; this is a predicament.

They will delay and pray, and make pronouncements loaded with keywords designed to please the high-frequency trading algorithms that are in charge of artificially levitating the “free market” with judiciously timed injections of “free money.” But in the end all they can do is act brave, wait for a distraction and then… run for the exits!

And your job is to make it to the exits before they do.
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Pension fund cuts coming?

SUBHEAD: Woe betide. A major union pension fund is threatened by low interest rate yields on investments.

By Tyler Durden on 20 April 2016 for Zero Hedge -
(http://www.zerohedge.com/news/2016-04-20/going-be-national-crisis-one-largest-us-pension-funds-set-cut-retiree-benefits)


Image above: Regardless of a sense of injustice and unfairness - if and when the pension stop coming, we will go through something like what the former Soviet Union went through in the late 1980's. A cataclysmic social convulsion and contraction that leads to a rebirth - of sorts. From original article.

A dark storm is brewing in the world of private pensions, and all hell could break loose when it finally hits.

As the Washington Post reports, the Central States Pension Fund, which handles retirement benefits for current and former Teamster union truck drivers across various states including Texas, Michigan, Wisconsin, Missouri, New York, and Minnesota, and is one of the largest pension funds in the nation, has filed an application to cut participant benefits, which would be effective July 1 2016, as it "projects" it will become officially insolvent by 2025.

In 2015, the fund returned -0.81%, underperforming the 0.37% return of its benchmark.

Over a quarter of a million people depend on their pension being handled by the CSPF; for most it is their only source of fixed income.

Pension funds applying to lower promised benefits is a new development, albeit not unexpected (we warned of this mounting issue numerous times in the past).

For many years there existed federal protections which shielded pensions from being cut, but that all changed in December 2014, when folded neatly into a $1.1 trillion government spending bill, was a proposal to allow multi employer pension plans to cut pension benefits so long as they are projected to run out of money in the next 10 to 20 years.

Between rising benefit payouts as participants become eligible, the global financial crisis, and the current interest rate environment, it was certainly just a matter of time before these steps were taken to allow pension plans to cut benefits to stave off insolvency.

The Central States Pension Fund is currently paying out $3.46 in pension benefits for every $1 it receives from employers, which has resulted in the fund paying out $2 billion more in benefits than it receives in employer contributions each year.

As a result, Thomas Nyhan, executive director of the Central States Pension Fund said that the fund could become insolvent by 2025 if nothing is done.

The fund currently pays out $2.8 billion a year in benefits according to Nyhan, and if the plan becomes insolvent it would overwhelm the Pension Benefit Guaranty Corporation (designed by the government to absorb insolvent plans and continue paying benefits), who at the end of fiscal 2015 only had $1.9 billion in total assets itself. Incidentally as we also pointed out last month, the PBGC projects that they will also be insolvent by 2025 - it appears there is something very foreboding about that particular year.

As the Washington Post writes:

Ava Miller, 64, and her husband, Ed Northrup, 68, could see their combined monthly pension income cut to about $3,000 from the nearly $7,000 they receive now, according to a letter they received from Central States in October.
If the cuts go through, Miller, who worked as a dispatcher in Flint, Mich., said they will need to dip into their savings to help cover their $1,300 mortgage payment, heating bills and trips to visit her 84-year old mother. Northrup, a retired car hauler, has started applying for truck driving jobs that could supplement their potentially smaller pension payments.

What makes the cuts more painful, Miller said, is that she took pay cuts so that the company could continue making contributions to the pension.

"I did everything I was supposed to," Miller said, adding that she and her husband made extra payments on their car loan to cut down on their monthly bills after they received letters in October informing them of the potential cuts.
All hope is not lost, however.

Democratic candidate Bernie Sanders has proposed a bill that would repeal the measure allowing cuts, and instead calls for the government to provide assistance to troubled pension funds.
In other words, another bailout.

Which brings us to the current juncture, where we remind everyone that the governments own safety net, the PBGC has itself become insolvent, and according to CNN, projects that more than 10% of the roughly 1,400 multiemployer plans, covering more than 1 million workers fits the current criteria to be able to apply for benefit cuts for participants.

"This is going to be a national crisis for hundreds of thousands, and eventually millions, of retirees and their families. It's going to open the floodgates for other cuts." said Karen Friedman, executive president of the Pension Rights Center.

We can't help but wonder that as more pension funds become insolvent, and more and more participants are forced to take reductions in benefits, whether helicopter money won't soon become a reality for the United States, even before it becomes one in Japan.

Especially if it is spun by some opportunistic politicians as the "only hope" for America's workers to preserve some of their retirement savings.

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Cashless NIRP economy signal

SUBHEAD: Cashless economy would let banks set negative interest rates well below -1%.

By Tyler Durden on 10 February 2016 for Zero Hedge -
(http://www.zerohedge.com/news/2016-02-10/something-very-disturbing-spotted-morgan-stanley-presentation-slide)


Image above: Morgan Stanley bank sign on headquarters building.  The company is paying a fine of $3.2 billion to end lending rpobe. See article below. From (http://www.dailynewsx.com/news/business-news/morgan-stanley-to-pay-3-2b-to-end-mortgage-probe-22761.html).

With central bankers losing credibility left and right, and failing outright to boost the "wealth effect" no matter what they throw at it, the next big question is when will central planners around the world unveil the cashless society which is a necessary and sufficient condition to a regime of global NIRP.

http://www.islandbreath.org/2016Year/02/160220chartbig.jpg
Image above: Chart of recent interest rates and monetary base. Click to embiggen. From original article.

And while in recent days we have seen op-eds by both Bloomberg and FT urging the banning of cash, the most disturbing development we have seen yet in the push for a cashless society has come from the following slide in a Morgan Stanley presentation, one in which the bank's head of EMEA equity research Huw van Steenis, pointed out the following...

... and added this:
One of the most surprising comments this year came from a closed session on fintech where I sat next to someone in policy circles who argued that we should move quickly to a cashless economy so that we could introduce negative rates well below 1% – as they were concerned that Larry Summers' secular stagnation was indeed playing out and we would be stuck with negative rates for a decade in Europe. They felt below (1.5)% depositors would start to hoard notes, leading to yet further complexities for monetary policy.
Consider this the latest, and loudest, warning on the road to digital fiat serfdom.



Morgan Stanley settles for $3.2 billion

By Daniel McDonald on 11 February 2016 for Daily Newsx
(http://www.dailynewsx.com/news/business-news/morgan-stanley-to-pay-3-2b-to-end-mortgage-probe-22761.html)

Morgan Stanley is paying $3.2 billion — the largest fine in its history — to settle claims that it sold soured mortgage-backed bonds in the run up to the financial crisis.

The Wall Street bank peddled the securities to investors even though traders knew many of the underlying home loans were underwater, according to the settlement with New York Attorney General Eric Schneiderman.

Traders openly bragged about using “magic” to make the bonds look better than they actually were, according to the settlement released on Thursday morning.

Under the terms of the deal, the state will get $550 million to help community rebuilding efforts, the AG’s office said.

“Today’s agreement is another victory in our efforts to help New Yorkers rebuild in the wake of the financial devastation caused by major banks,” Schneiderman said in a statement.

Morgan Stanley, led by CEO James Gorman, is the latest bank to get fined over the sale of busted mortgage-backed securities. Last month, Goldman Sachs paid $5 billion to settle similar charges.

Shares of Morgan Stanley were down 3.3 percent, at $21.96, on Tuesday morning amid a broader market sell-off.

The Post broke the news of the settlement ahead of the announcement.

EXCLUSIVE: NY AG Schneiderman to announce $3.2BB settlement with Morgan Stanley over RMBS. $550 going million to New York. via @KevinTDugan

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