US refuses to recognize UN court jurisdiction on Argentina’s debt
RT | August 9, 2014
Washington has refused to allow the UN International Court of Justice (IJC) to hear Argentina’s claims that US court decisions on the country’s debt have violated Argentina’s sovereignty.
“We do not view the ICJ as an appropriate venue for addressing Argentina’s debt issues, and we continue to urge Argentina to engage with its creditors to resolve remaining issues with bondholders,” the US State Department told Reuters in an email.
The State Department sent an email with the same content to one of Argentina’s leading newspapers, the Clarin.
Argentina complained against Washington’s decisions on its debt to the International Court of Justice in The Hague on Thursday.
But according to existing norms, Buenos Aires needs Washington to voluntarily accept the ICJ’s jurisdiction for the proceedings to begin.
The US withdrew from compulsory jurisdiction back in 1986 after the UN court ruled that America’s covert war against Nicaragua was in violation of international law.
Since then, Washington accepts International Court of Justice jurisdiction only on a case-by-case basis.
On Friday, US District Judge Thomas Griesa, who oversees Argentina’s legal battle with hedge funds, threatened that a contempt of court order may be implemented.
Griesa said it will be put forward if Argentina continues to “falsely” insist that it has made a required debt payment on restructured sovereign bonds.
The warning caused confusion, as the judge didn’t specify who will face the punishment – Argentina or its lawyers.
It will be quite difficult to sanction the Argentinean state, as US federal law largely protects the assets of foreign governments held in the US, said Michael Ramsey, a professor of international law at the University of San Diego.
“You can’t put Argentina in jail, so I’m not sure what he’d have in mind besides monetary sanctions,” Ramsey said.
Later on Friday, Argentina’s economy ministry issued another statement, accusing the US judge of “clear partiality in favor of the vulture funds.”
“Judge Griesa continues contradicting himself and the facts by saying that Argentina did not pay,” the statement said.
Previously, Argentina announced the restructuring of 93 percent of its 2001 debt, but creditors holding the other seven percent of the bonds demanded full payment and initiated a legal battle.
A New York court ruled that Argentina had to pay $1.33 billion to the hedge funds, blocking the transfer of $590 million that Buenos Aires forwarded in order to cover its restructured debt.
The judge said Argentina had to start talks with the lenders that didn’t approve the debt restructuring and negotiate to postpone the payment with those who did agree.
With lenders unable to receive payment, international regulators and rating agencies announced Argentina’s ‘selective’ default.
Argentina files lawsuit against US over debt dispute
Press TV – August 8, 2014
Argentina has attempted to sue the United States at the International Court of Justice (ICJ) in The Hague, the UN’s highest court, over a debt dispute.
The lawsuit was filed on Thursday after a US judge blocked Argentina from servicing its restructured debt, with Buenos Aires accusing Washington of violating Argentinean sovereignty.
New York District Judge Thomas Griesa has ruled to freeze Argentina’s June debt payment of $539 million in a US bank because two American hedge funds are demanding a full repayment of their money.
The two hedge funds, NML Capital and Aurelius Capital Management, have been described by Argentina as “vulture funds” that are seeking profit out of the country’s financial misery.
“Given that a state is responsible for the conduct of all the branches of its government, these violations have generated a controversy between the Republic of Argentina and the United States, which our country submits to the ICJ for resolution,” President Cristina Kirchner’s office said in a statement.
However, the ICJ declined to take any action, claiming that it is powerless to act “unless and until the United States of America consents to the court’s jurisdiction.”
Argentina’s 2001 economic collapse caused the country to default on more than $100 billion in debt. Argentina is still fighting to deal with the crisis.
Last week, Argentinean Economy Minister Axel Kicillof went to New York to try to resolve the impasse on the eve of his country’s default. There, he slammed the US judge for his ruling.
“A judge in one jurisdiction can’t be allowed to block the debt payments of an entire country,” he said. “There’s something called sovereignty.”
Who is hit hardest by Russia’s trade ban?
RT | August 8, 2014
Germany and Poland will lose the most trade with Russia, and neighboring Finland and Baltic states Lithuania and Latvia will lose a bigger proportion of their GDP. Norway will see fish sales to Russia disappear, and US damages would be very limited.
Russia has banned imports of fruit, vegetables, meat, fish and dairy products from the 28 countries of the EU, the US, Canada, Norway, and Australia for one year.
EU trade is heavily dependent on Russian food imports. Last year Russia bought $16 billion worth of food from the bloc, or about 10 percent of total exports, according to Eurostat.
In terms of losses, Germany, Poland and the Netherlands- the top three EU food suppliers to Russia in 2013 – will be hit hardest. Food for Russia makes up around 3.3 percent of total German exports.
French Agriculture Minister Stephane Le Foll said his government is already working together with Germany and Poland to reach a coordinated policy on the new Russian sanction regime.
Last year, Ireland exported €4.5 million worth of cheese to Russia, and not being able to do so this year is a big worry, Simon Coveney, the country’s agriculture minister, said.
Farmers across Europe could face big losses if they aren’t able to find alternative markets for their goods, especially fruit and vegetables.
Some are already demanding their governments provide compensation for lost revenue.
“If there isn’t a sufficient market, prices will go down, and we don’t know if we can cover the costs of production, because it is so expensive,” Jose Emilio Bofi, an orange farmer in Spain, told RT.
Are US Banks Still ‘Too Big to Fail’?
By Michael Winship | Consortium News | August 5, 2014
Analyzing a government report is like eating and digesting a meal — better to take it slowly than gobble quickly and suffer the possible consequences. Example: last Thursday’s report from the Government Accountability Office (GAO) on whether or not large financial institutions were still perceived as “too big to fail.”
The immediate takeaway by many in the media, government and investment community was that the need for a taxpayer subsidy like the bailouts of 2008 “may have declined or reversed in recent years” and, in the words of Mary J. Miller, the Treasury Department’s under secretary for domestic finance, “We believe these results reflect increased market recognition of what should now be evident – Dodd-Frank ended ‘too big to fail’ as a matter of law.”
But with just a little time to digest the GAO’s findings, much of the response has shifted to, “Not so fast.”
On the day of the report’s release, Sen. Sherrod Brown, D-Ohio, who, with Sen. David Vitter, R-Louisiana, requested the GAO analysis and co-sponsors the Terminating Bailouts for Taxpayer Fairness Act, held hearings.
Stanford University economist Anat Admati, a recent guest on Moyers & Company, testified that, “The main problem with the guarantees is they reinforce and create perverse incentives and intensify the conflicts of interest between the banks and the rest of society. … Requiring that banks fund themselves so that those who benefit from the upside of risk bear more of its downside brings about more safety and corrects distortions.”
In The New York Times, columnist Gretchen Morgenson writes, “Six years after the financial crisis, it’s clear that some institutions remain too complex and interconnected to be unwound quickly and efficiently if they get into trouble.
“It is also clear that this status confers financial benefits on those institutions. Stated simply, there is an enormous value in a bank’s ability to tap the taxpayer for a bailout rather than being forced to go through bankruptcy.”
Morgenson adds, “Were we to return to panic mode, the value of the implied taxpayer backing would rocket. The threat of high-taxpayer bailouts remains very much with us.”
Financial professionals echo her concern. Camden Fine, president and CEO of the Independent Community Bankers of America, notes in American Banker (not without self-interest) that while the size of big bank subsidies may have “diminished since the crisis … the larger point is that the biggest and riskiest financial firms still have a competitive advantage in the marketplace. They can still access subsidized funding more cheaply than smaller financial firms because creditors believe the government would bail them out in the event of a crisis. No matter how you cut it, a subsidy is a subsidy. And this subsidy is one that puts the American taxpayer on the hook. …
“Meanwhile, the largest financial institutions are only getting bigger. According to our analysis of call report data from the Federal Deposit Insurance Corp., since the end of 2009, the assets of the six largest financial institutions have grown each year. Their total assets rose from $6.41 trillion in 2009 to $7.22 trillion in 2014 — a total increase of $800 billion. The top six banks are also responsible for more than half of the $2 trillion increase in total U.S. banking assets in the years since 2009.”
In those same pages, Mayra Rodriguez Valladares, managing principal at a capital markets and financial regulatory consulting firm, is concerned that there are “signs that banks have failed to learn from the detrimental effects of the global credit crisis and pleas from bank regulators. This year, large banks are loosening their credit underwriting standards and are extending leveraged loans to companies. …
“Additionally, large banks continue to exhibit incredibly weak operational risk management. Operational risk is the threat of a breach in the day-to-day running of a business because of people, processes, systems, and external events. Since big banks have yet to make ethics a top priority, not a day goes by that one does not see examples of operational risk. Market rate manipulations and incorrect foreclosure procedures continue to plague banks and their reputation.”
She concludes, “As the U.S. economy continues to grow and the financial crisis is relegated to the dustbin of history, big banks are taking bigger chances. The challenge for regulators now is to remember that when the party gets going, it is difficult to stop the champagne flowing.”
Gretchen Morgenson’s colleague at the Times, Paul Krugman, has a more positive point of view, while asking the crucial question, “How do you rescue a banking system without rewarding bad behavior? …
“The answer is that the government should seize troubled institutions when it bails them out, so that they can be kept running without rewarding stockholders or bondholders who don’t need rescue. In 2008 and 2009, however, it wasn’t clear that the Treasury Department had the necessary legal authority to do that. So Dodd-Frank filled that gap, giving regulators Ordinary Liquidation Authority, also known as resolution authority, so that in the next crisis we can save ‘systemically important’ banks and other institutions without bailing out the bankers.”
The GAO report, he writes, “suggests that reform has done at least part of what it was supposed to do… Wall Street and its allies wouldn’t be screaming so loudly, and spending so much money in an effort to gut [Dodd-Frank], if it weren’t an important step in the right direction.”
Nonetheless, as Senators Brown and Vitter stated, “Today’s report confirms that in times of crisis, the largest megabanks receive an advantage over Main Street financial institutions. Wall Street lobbyists may try to spin that the advantage has lessened. But if the Army Corps of Engineers came out with a study that said a levee system works pretty well when it’s sunny — but couldn’t be trusted in a hurricane — we would take that as evidence we need to act.”
Michael Winship is the Emmy Award-winning senior writer of Moyers & Company and BillMoyers.com, and a senior writing fellow at the policy and advocacy group Demos.
What the NML vs Argentina case means for the world
By Oscar Ugarteche | ALAI | July 29, 2014
At the end of June, 2014, a New York Second District Judge ruled in favour of a hedge fund, NML Capital, and against the Republic of Argentina. The issue at stake was if a hedge fund that bought debt paper three years after a debt restructuring, had or not the right to collect on the same terms as the rest of creditors. The ruling was, yes it has. The problem is that in the original debt restructuring creditors received new instruments with a strong haircut that made the payback possible for Argentina, while the old instruments do not have any debt reduction. In this way, the profitability of the hedge funds in buying, in 2008, those old unwanted instruments of a debt rescheduled in 2005, and unpaid since 2001, will be of 1,600%. The way the hedge fund works is through buying, at a very heavy discount, the debt paper that was not included in the rescheduling, and then suing the Argentine Government for full payment of capital plus all the interest due. Interest comes free when debt paper is under impaired value credit category. Elliott Associates, major shareholder of NML Ltd., has made a reputation for cornering Governments in times of need and getting away with it. Panama was the first one, Congo, Peru, Argentina amongst others. Their argument is that these lawsuits discipline the debtors.
The international relevance of this sort of activity is that it brings to the fore the nature and presence of US law and rulings in international finance. Most US dollar-denominated debt is issued under US law and subject to the Southern district courts of New York City, those near Wall Street. This means that if Botswana borrows from Uganda in US dollars, it is almost certain those contracts will be written under NY law. The ramifications of this are that any legal action between those two countries will be subject to New York law, with the implication that New York law becomes world law and is applied worldwide, becoming a mechanism of coercion. The enforcement of payment in the ruling is executed through bank account or asset embargoes. For example, in 2012 the Argentine frigate Libertad was seized in a port in Ghana under orders from the New York judge. She was released after some months under a ruling from the UN International Tribunal for the Law of the Sea because she holds diplomatic immunity.
The last ruling includes non-dollar denominated instruments signed under British and other laws, with the argument that the payment due to one creditor is equally due to all. Ecuador, a debtor that defaulted and bought its debt at a 70% discount in 2008 decided in May 2014 to buy back 80% of the held out debt plus interest and got it over with.[1] The huge return on investment for unpaid bondholders was less of a problem for Ecuador than the likelihood of having its accounts frozen after the new loans were disbursed, given it is a dollar denominated economy.[2]
Vulture Funds
Vulture funds are hedge funds specialised in buying debt paper from problem debtors who have solved or are in the process of solving a default problem. They jump over their prey, the struggling country, purchase his debt instruments not included in the final debt restructuring arrangement at a small percentage of face value and sue the country for full payment including interest. If the country is undergoing duress, the fund is perfectly happy to subject her citizen’s to more hardship in exchange for a huge profit. This is possible because debt papers before 2001 did not have collective action clauses (CAC) yet, which means that if most creditors agreed to a debt workout solution, this included only those who joined voluntarily. With a CAC, if a large portion of the creditors are in favour of a workout, all instruments are included.
The lack of CAC was made evident when Elliott sued Peru[3] in the 1990s and won the case in 2000. Peru had undergone the longest sovereign default in history, from 1984 to 1994, and came out with a debt restructuring that included a sharp haircut and new Brady bonds. Only four instruments were left at Swiss Bank Corp., the Peruvian manager of the Brady deal, belonging to Banco Popular, a bankrupt bank closed in 1992. These four instruments were sold by Swiss Bank, the agent for Peru’s debt, to Elliott not to Peru, after the Brady deal had been signed in what appeared to be a breach of contract on Swiss bank’s side. Elliott then sued Peru and apparently got a helping hand from a Peruvian lawyer who happened to be an official at the Ministry of Finance in 1994. There was much information passed in 1994 from the Ministry of Finance to the creditors leading to the trial of Finance Minister Camet, responsible for this operation. He died in 2013 serving prison term at home for this and other cases.
Elliott sued Peru for 100% of capital. It had paid 5% of the face price of the papers. On top it sued it for unpaid interest since 1984. The profitability on the Peruvian operation was 1,600%. Peru’s case was made using the Champerty Doctrine that says that no debt purchased with the sole purpose of harming a debtor should be taken into account by the US judiciary. Investors who become creditors through the purchase of debt instruments at a time when the debtor is undergoing hardship should not be taken into legal consideration. Nevertheless, the New York judge ruled against Peru. Amongst the group of investors was a former US ambassador to Peru. It remains unclear if the former ambassador was there on his own right or as a representative of the US State Department. The Peruvian Government lost the case and the appeal and as a result all Society for Worldwide Interbank Financial Telecommunication (SWIFT) dollar transactions were blocked. After that, Elliott sued Peru in the Belgian courts that ruled in favour of Elliott and prevented the use of Brussels based Euroclear.[4] It then proceeded to use Clearstream in Luxembourg, but knowing this would also be blocked. The argument of the Belgian Court was pari passu, all creditors should be treated equally.
The Argentine operation[5]
NML associates, a subsidiary used by Elliott to do the Argentine operation, purchased 50 million dollars of debt paper that had not entered the restructuring scheme in 2005 and has sued for 1,500 million USD. The holders of those unrestructured papers sold them to NML in 2008 after the 2005 swap was arranged and before the 2010 swap was finalised. They then started the legal proceedings that have lasted six years until finally the judiciary ruled in favour of NML. The Argentine debt is held with creditors in many jurisdictions and not all are subject to US law, theoretically. Equally there are dollar and non-dollar denominated instruments and agent banks operating outside the US. The ruling however starts from a peculiar reading of the principle of pari passu, equal payments must be made to all creditors either if they restructured or if they did not, regardless of the law applied in their contract. The Trustee in charge of making the payments is Bank of New York who must abide by this ruling and comply with the law.
This ruling essentially takes away the incentive to restructure sovereign debts normally done on the basis of debt reductions. Worse, it places legal creditors who underwent the restructuring procedure on the same basis as highly speculative investors who operate on bad faith buying the debt after the swaps are finalised, in the spirit of Champerty. The gravest consequence is that a New York ruling is converted into a global ruling for any Argentine assets held by anyone anywhere. An explanation was given that the ruling is not meant to be a precedent[6] which means the ruling was done as a specific punishment reminding the ruling of the Court of the Hague against Austria in 1931 when it decided it wanted to form a customs union with Germany. Then as now, if it is not a precedent, it is a punishment. The question is why.
Ways forward
Argentina’s position is that it is the right of a sovereign debtor to restructure its debt. It believes in the principle of non-intervention in foreign states and does not admit legal actions executed outside the natural range of the justice of the United States. In so doing it believes it is defending the property rights of the holders of Argentine bonds, especially those whose right is not governed by justice of the United States. But also of those who entered willingly and in good faith in the swap agreements of 2005 and 2010 and who this ruling has declared, for all purposes, invalid. Argentina is opening the fight by depositing the money at the Bank of New York so bondholders will collect. As the money belongs to the bondholders, they should be able to do so. This is the sense of a communique published in the international press in July, 2014, a week after the ruling was made public.
The vultures, being what they are, have a press campaign stating that Argentina does not want to pay any of its debt nor comply with US law. Argentina, on its side, has informed the clients it will pay through Euroclear which should protect them from the US international payment embargo, as book entry accounts in Euroclear enjoy unconditional immunity from attachment.
Finally
The international support given to Argentina is an expression of what is globally perceived as being an unjust ruling from a court that should not have extraterritorial functions over currencies and assets that are not US assets. The capture of a payment for Cuban cigars traded between Germany and Denmark under US law is an expression of the extraterritorial use of US law, which is unacceptable.[7] If the international system is going to evolve it must go in the direction of international law and international courts and not in the direction of local law with a local court with global ramifications. This implies a new financial architecture which, following the lines of the BRICS in terms of financial reforms, could mean the creation of a clearing house and greater use of non-dollar means of payments in international transactions. The creation of an international financial law process in the United Nations sphere, similar to that being developed for international trade law (UNCITRAL), is vital. This should come together with the development of the concept of international tribunals for debt arbitration in order to obtain reasonable debt workouts of sovereign defaults following the principles of fair and transparent arbitration that should begin with a debt audit, keeping the Champerty principle in mind.
There are major flaws in the international financial architecture that allow the supreme court of the leading debtor country in the world to rule over the lives of millions of people in another land in an unjust, unfair and non-transparent manner. The ruling affects the position of other bondholders in non-dollar denominated instruments issued under other legal domains and opens the possibility of embargoes worldwide. It also opens up the possibility of disavowing the debt to international bondholders, following the same logic in reverse.
The practice of extorting money from troubled nations in favour of a minuscule group of investors who purchase debt paper after debt negotiations with the rightful creditors are finished, with the sole purpose of extorting an unfair profit from it, is sanctioned by US law. This is called the Champerty Doctrine. This sort of practice was outlawed in New York by Judiciary Law §489 http://codes.lp.findlaw.com/nycode/JUD/15/489#sthash.TroVCUs0.dpuf. The rulings from the New York courts, however, seem to favour the vultures and the application of the rulings worldwide has dire consequences on the debtor.
The lesson from the NML-Argentina case is that non-OECD countries in the future should not issue debt instruments in US dollars nor be subject to New York law and courts, given the risk expressed above. Given the world power structure change, BRICS should continue to develop a new international financial architecture. International trade should equally not be settled in US dollars and a new non-OECD international clearing house should be started to prevent harassments from dubious US rulings. International capital is not going to give up its power to extort wealth from distressed countries.
Newcastle and Fortaleza, 15 July, 2014.
– Oscar Ugarteche, Peruvian economist, is the Coordinador del Observatorio Económico de América Latina (OBELA), Instituto de Investigaciones Económicas de la UNAM, México – http://www.obela.org. Member of SNI/Conacyt and president of ALAI http://www.alainet.org
[1] “Ecuador Sells $2 Billion in to Bond Market,” Bloomberg, 17 June, 2014, at http://www.bloomberg.com/news/2014-06-17/ecuador-plans-bond-market-return-today-five-years-after-default.html
[2] “Argentina’s Woes don’t Chill Ecuador’s New York Bond Sales”, Bloomberg, June 24, 2014 at http://www.bloomberg.com/news/2014-06-24/argentina-s-chilling-effect-on-new-york-debunked-by-ecuador-sale.html
[3] Congreso del Perú. Comisión Investigadora de la Corrupción. Caso Elliott. Junio, 2003. Fallo judicial. http://www.congreso.gob.pe/historico/ciccor/anexos/CASO%20ELLIOT%20ASSOCIATES%20LLP%20TOMO%20II.pdf
[4] Rodrigo Olivares-Caminal, “The Pari Passu Interpretation in the Elliott Case. A Brilliant Strategy but an awful (mid long term) outcome”, Hoftsra Law Review, 2011, Vol. 40, pp. 39-63.
http://www.hofstralawreview.org/wp-content/uploads/2013/09/BB.4.Olivares-Caminal.final_.pdf
[5]Conversations with various Argentine officials over the February to June 2014 period.
[6] “Don’t worry about an Elliott vs Argentina precedent”, January 11, 2013, http://blogs.reuters.com/felix-salmon/2013/01/11/dont-worry-about-an-elliott-vs-argentina-precedent/
[7] “US snubs out legal cigar transaction.” Copenhagen Post, February 27, 2012. http://cphpost.dk/news/us-snubs-out-legal-cigar-transaction.898.html
Brazil to increase Russia meat exports after US sanctions
The BRICS Post | August 7, 2014
Russia’s BRICS partner, Brazil has said it would step up to fill in the void of chicken imports to Russia after Russian President Vladimir Putin signed a decree banning certain food imports from countries that have sanctioned Russia over the Ukraine crisis.
Russian news agency Ria Novosti quoted a Brazilian official as saying the Latin American economy could increase chicken exports to Russia by 150,000 tons. Brazil, the world’s largest chicken exporter currently exports 60,000 tons of chicken to Russia. US exports of poultry to Russia are expected to be affected after Russia hit back at the US in a tit-for-tat move.
Head of the Brazilian Poultry Association Francisco Turra said the numbers of poultry plants licensed to send chicken to Russia will grow from the current figure of 20 as US and Canadian chicken and pork industries brace for a heavy blow to business after Putin’s announcement of the anti-sanction decree on Wednesday.
Brazilian firms like chicken exporter BRF SA and meatpacker JBS SA stand to majorly benefit from the move.
The Dilma Rousseff government in Brazil was quick to respond to Putin’s strong criticism of the EU’s latest round of sanctions against Russian businesses by offering to step up dairy and meat exports to Russia.
Russia’s agricultural watchdog, Rosselkhoznadzor, is expected to hold discussions on increasing exports from Latin American countries on Thursday.
Earlier on Wednesday, Putin signed a decree prohibiting “import into the territory of the Russian Federation of certain agricultural products, raw materials and foodstuffs originating in the state, has decided to impose economic sanctions against Russian legal entities and (or) physical individual or party to this decision”, said a Kremlin statement.
Russian Prime Minister Dmitry Medvedev said on Thursday fruit, vegetables, meat, fish, milk and dairy imports from the US, EU, Australia and Norway would be banned for the stipulated one-year period according to the decree signed by President Putin yesterday.
Brazil and other BRICS countries had last month rallied against the economic sanctions imposed by the West on Moscow.
“We condemn unilateral military interventions and economic sanctions in violation of international law and universally recognized norms of international relations. Bearing this in mind, we emphasize the unique importance of the indivisible nature of security, and that no State should strengthen its security at the expense of the security of others,” said the joint declaration at the end of the BRICS leaders plenary meet in Fortaleza in July.
Russia to ban all US agricultural products, EU fruit & vegetable imports – watchdog
RT | August 6, 2014
Moscow plans to ban all US agricultural products, including poultry, as well as EU fruit and vegetable imports in response to Western sanctions imposed on Russia over the Ukrainian crisis, according to the country’s agricultural watchdog.
All agricultural goods produced in the US and imported into Russia will be halted for one year, the assistant to the head of Rosselkhoznadzor, Aleksey Alekseenko, told RIA Novosti.
The list of banned products will be published on Thursday, he added.
Gaza industrial sector hit hard as 134 factories destroyed
Ma’an – 06/08/2014
GAZA CITY – At least 134 factories were destroyed during Israel’s four-week military offensive in the Gaza Strip, a Palestinian industrial union said Wednesday, causing severe damage to an already fragile industrial sector.
The union of Palestinian industries said that most factories stopped operations for over 30 days, with reported losses of at least $70 million.
Over 30,000 workers were made redundant due to the closures.
“The Israeli war machine deliberately destroyed the infrastructure of the Palestinian national economy by targeting factories which posed no security threat to the occupation,” the union said.
The industrial sector had already suffered major damage during previous Israeli military offenses in Gaza in 2012 and 2008.
The ongoing Israeli blockade has also severely limited the productivity of the industrial sector since it was imposed eight years ago, forcing factories to close or fire workers to remain in operation.
“Israel shouldn’t be rewarded for this aggression, and so Israeli products should be boycotted both locally and internationally,” the union added.
Deputy PA economy minister Taysir Amro said the 29-day war had caused total damage of up to $6 billion dollars.
The Subprime Economy is Back—But It Never Really Left
By JP Sottile | WhoWhatWhy | August 3, 2014
Remember the sub-prime economy?
It’s back, but it’s different this time. Well, sorta different. And you may be affected by it in all kinds of ways.
The new sub-prime economy is a direct result of the catastrophic financial ruin caused by the old sub-prime mortgage crisis. Wall Street’s biggest money has figured out how to profit off of people deep in debt and unable to climb out because of the still-limping economy.
So, after pushing people to the margins with exotic financial instruments, Wall Street is now profiting off the increasingly marginal existence of many Americans. With more and more people renting their homes, the median household now 20% poorer today than it was in 1984, and almost half of all Americans now living paycheck to paycheck, the sub-prime economy has shifted away from big-ticket mortgages to profiting off the banalities of everyday life.
The numbers don’t lie: 35% of Americans—roughly 77 million people—have an outstanding debt currently being pursued by a collection agency, according to a new study by the Urban Institute. Although the individual amounts of delinquent debt range from as little as $25 to over $125,000, the national average is a staggering $5,178.
That’s a lot of bad debt in the system, and there are rich pickings in all of it.
Maybe that’s why the study was funded by Encore Capital Group—the country’s largest publicly-traded buyer of defaulted debt—and co-authored by its very own think-tank, the Consumer Credit Research Institute. The latter, founded in 2011, describes its work as a “ground-breaking effort to develop new knowledge about low- and moderate-income consumers” using techniques borrowed from economics, statistics and psychology.
The first go-round on the subprime roulette wheel was fueled primarily by the post-9/11 “go-go” housing boom. The middlemen of Manhattan systematically used predatory lending to ensnare hundreds of thousands of hopeful American Dreamers into an adjustable-rate, no-money-down, balloon-payment nightmare. So they made money handing out subprime mortgages like Halloween candy, bundled that risky, unsustainable debt into exotic financial instruments, and profited again by betting they’d fail.
But that was then, and things are supposed to be different now, right?
Now the financial system is supposed to be chastened. It is, according to its staunchest critics, wholly and restrictively regulated by Dodd-Frank. In fact, Dodd-Frank is so restrictive, they say, that it has impeded the “recovery” and needs to be loosened. That’s despite the fact that many key rules still haven’t been written and despite the omnipresence of corporate banking interests at every step of the rule-making process.
Things are different now. This new sub-prime bubble is not being inflated by predatory lenders targeting would-be homeowners. Even though the real estate market is improving in places like San Francisco, New York and Washington, D.C., homeownership is at a 19-year low, with more people opting to rent because of tighter finances.
Hedge Funds, Hedge Hogs
Well-positioned hedge funds gobbled up tens of thousands of homes left vacant by the bursting mortgage bubble. Sometimes entire neighborhoods were purchased by those firms, who—unlike Lehman Brothers—were not broken by the crash. Like JP Morgan hoarding the devalued financial assets of its failed competitors, hedge funds saw the sudden surge in low-cost real estate as a buying opportunity.
The Blackstone Group—one of the world’s largest hedge funds—went on a two-year buying spree that transformed it into “America’s largest landlord” with over 40,000 houses in its profitable inventory.
And that’s where bad debt is accumulating—in the day-to-day struggle to make ends meet.
To wit, the Urban Institute’s study focused on collections of non-mortgage bills. These include credit card bills, medical bills, and utility bills that are “more than 180 days past due and have been placed in collections.”
A good example of the financial jeopardy many face is in Detroit. That’s where the median household income is less than half the national average—and where tens of thousands couldn’t afford to pay their water bills.
The bankrupted city decided to do something about chronic delinquencies—they began shutting off people’s water. As the pace of the shut-offs sped up, the city paid $6 million to a private contractor to make sure the taps ran dry. So far, some 100,000 have been without water at times.
This is exactly the sort of compromised position many find themselves in with this new economy. And it’s where predatory lending is taking its toll, targeting the desperate with high-risk, high-interest and, therefore, high-reward loans that epitomize Wall Street’s unending “search for yield.”
Bad Credit? We Can Help You Make It Worse
And what a yield lending to subprime customers earns. The “Payday Loan” industry still gets away with interest rates as high as 700 percent, a story WhoWhatWhy reported in March. That kind of loan puts many people into a modern form of sharecropping, accruing debt faster than they can pay it off.
The $3 billion-a-year industry is finally being scrutinized by federal regulators at the Consumer Financial Protection Bureau. Even so, the underlying business model is being profitably recycled.
Take, for example, the entry of banks and private equity firms into the used car business.
They identify distressed and marginal candidates for risky, high-interest loans on cars that all too often end up being lemons, according to the New York Times. After searching for potential customers with low credit scores, banks like Capital One and Wells Fargo work with dealers who send them “certificates” redeemable for a “no credit, no problem” loan. That traps the less financially savvy customers into long-term loans that eventually triple or quadruple the cost of the car—or worse.
A little-known company called USA Discounters has opened another front of the high-interest assault, targeting the rank and file of the U.S. military.
USA Discounters leverages the low-wage position of active-duty military families into high-yield loans for mundane household items like TVs and washers and dryers. Despite their name, the company sometimes charges double the normal retail price for items, and gives customers credit on terms that can quickly turn unfavorable.
And that’s really what the subprime economy is now—easy money at the lowerend of America’s wealth gap. And the lower end is growing.
Photo Credit: BUDGET PICTURE
35% of Americans are in Debt to Collection Agencies
By Noel Brinkerhoff | AllGov | August 5, 2014
More than a third of all adults in the United States find themselves dealing with collections agencies as a result of falling seriously behind on their debts.
It is estimated that 35% of Americans nationwide are in collections, according to Delinquent Debt in America, a new report from the Urban Institute. Debts in collection can include medical bills and traffic fines, as well as consumer credit accounts.
In some states, nearly half of those with credit files are being hounded by debt collectors. Nevada, “which was hard hit by the housing crisis,” the report says, has a 47% rate, the highest in the country.
A dozen states, including 11 in the South, as well as the District of Columbia, are above 40%: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, New Mexico, North Carolina, South Carolina, Texas, and West Virginia. At the other end are Minnesota, North Dakota, and South Dakota, which have the lowest rate of people in collections, about 20%.
Looking at the numbers of what people owe, it isn’t a shock to learn that so many Americans are so far behind on paying their credit cards, mortgages and other debts.
Nerd Wallet reported these sobering figures for the U.S. in April:
Average per household credit card debt: $15,191
Average per household mortgage debt: $154,365
Average per household student loan debt: $33,607
At any one time, about 5% of the population has a non-mortgage bill such as a credit card account, car loan or student loan that’s more than 30 days past due.
To Learn More:
Delinquent Debt in America (Urban Institute) (pdf)
American Household Credit Card Debt Statistics: 2014 (by Tim Chen, Nerd Wallet)
Debt Collection Complaints by Military Members and Veterans Skyrocket (by Noel Brinkerhoff, AllGov)
Largest Debt Collector Gets away with Minor Fine for Harassing Citizens (by Matt Bewig, AllGov)
Switzerland will not blindly follow EU sanctions against Russia – Swiss economy minister
RT | August 4, 2014
For Switzerland to copy and paste EU sanctions against Moscow is unwise, and would jeopardize the country’s role as a mediator, said Swiss Economy Minister Johann Schneider-Ammann.
The Swiss government has no plans to follow in the EU’s footsteps and impose sanctions against Russia, Schneider-Ammann said in an interview with the Swiss newspaper Schweiz am Sonntag.
Schneider-Ammann said that choosing a side would undermine the country’s neutrality in the matter.
“This role [as mediator] will be weakened, if we duplicate EU sanctions,” Schneider-Ammann said, adding that Switzerland holds the chairmanship of the Organization for Security and Co-operation in Europe (OSCE), which is vitally important for peace talks between Russia and Ukraine.
Another main concern for Switzerland, home to many Russian nationals, is any economic blowback from sanctions.
The economy minister warned that shutting out Russia could “result in a domino effect” which will “have a negative impact on our economy.”
Unlike its European neighbors who are dependent on Russia for natural gas, Switzerland is financially tied to Russia. Switzerland is home to an estimated $15.2 billion in Russian assets as of 2012, and oil exchanges in Geneva account for 75 percent of Russian crude exports, Reuters reports. Many Russians live in the country.
In March, after Crimea reunited with Russia and the US unveiled its first round of sanctions, Switzerland said it would take measures if needed.
Switzerland has however frozen assets of ousted Ukrainian President Viktor Yanukovich and other former Kiev government officials.
The minister plans to visit Moscow in October to discuss Swiss-Russian bilateral economic cooperation. Schneider-Ammann is a member of Switzerland’s Free Democratic Party, and was first elected to the Swiss National Council in 1999.
Iron Dome blocked just 8 out of 120 rockets: Israeli military
Press TV – August 4, 2014
The Israeli army has admitted that Israel’s Iron Dome missile system intercepted only eight out of nearly 120 rockets that were fired from the Gaza Strip into the occupied Palestinian territories on Sunday.
The military confirmed that around 110 rockets struck the occupied territories.
The development comes as the US Senate on Friday approved an additional USD 225 million in funding for the missile system despite Israel’s deadly war on the Gaza Strip.
Last month, US Defense Secretary Chuck Hagel sent a letter to congressional leadership requesting USD 225 million in additional US funding for the Iron Dome.
The money would be in addition to the USD 351 million that is already under discussion for Israel’s Iron Dome in fiscal 2015. It would bring total funding to USD 576 million, compared with the USD 176 million requested by the Pentagon for the fiscal year that begins on October 1.
On July 28, US Senate Majority Leader Harry Reid said Tel Aviv urgently needs more financial aid from Washington for its offensive against Palestinians in the Gaza Strip.
Israeli warplanes have been pounding numerous sites in the Gaza Strip since July 8, demolishing houses and burying families under the rubble. Israeli forces also began a ground offensive against the besieged Palestinian territory on July 17.
According to Palestinian sources in the Gaza Strip, Israel’s airstrikes and ground invasion have left at least 1,822 people dead and some 9,400 others injured.
The Israeli military says 64 soldiers have been killed in the conflict, but Palestinian resistance movement Hamas puts the fatalities at more than 150.
Iron Dome is a short-range missile system designed to intercept rockets and artillery shells fired from a range of four to 70 kilometers.
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Secret document reveals plans for civil war in Lebanon, Israeli false flags, and invasion
By Randi Nord | Geopolitics Alert | April 5, 2019
Beirut – During his visit with US Secretary of State, Mike Pompeo, Lebanese President Michael Aoun reportedly received a US-Israeli document detailing plans for creating a civil war in Lebanon with covert false flag operations and possible Israeli invasion.
Although the source of the document is Israeli and created in partnership with Washington, no one knows who presented it to Aoun. The Lebanese TV station, Al-Jadeed, initially reported the document on Lebanese TV and a video on its website. Geopolitics Alert translated the report for this article. … continue
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