Friday, July 15, 2011

Bearish message from the 500 index?

by Kimble Charting Solutions

Dollar ... good place to start ...

by Kimble Charting Solutions

Gold Breaks Out of 10 Week Trading Range

On Wednesday gold broke out from a 10-week long box or rectangular consolidation pattern to commence its next major upleg. Fundamentally this coincided with noises emanating from the US to the effect that it is recognized that there is no alternative but to continue with QE. Denials later in the day caused the broad stockmarket to lose much of its gains, but the fact is that there is no alternative to QE, except a global systemic economic implosion, and thus, there is no alternative to QE, although attempts may be made to disguise the extent of it.

On our 6-month chart we can see gold's breakout and how, after 7 days of gains, it is starting to become overbought. However, apart from brief pauses to partially unwind the overbought condition, it is expected to continue to advance strongly in coming weeks and months, overbought or not, and this positive outlook is reinforced by the strongly bullish picture for silver and Precious Metals stocks.

There has been talk in some quarters about gold "being in a bubble", but our long-term chart for gold going back to before the start of the bullmarket, shows that such an assertion is ridulous - gold has been in a steady uptrend as it has moved simply to compensate for the destruction of the purchasing power of fiat. What we are seeing here is real money, which gold is, standing out in an ocean if increasingly worthless fiat. Since gold has not been in a bubble and has not attracted the attention of speculators to any great degree it can be said to have an almost full tank of "bubble power", and if, in addition to its continued rise to compensate for the relentless attacks on fiat by central bankers and politicians, it does attract the attention of the investing public at large, its rate of rise could very easily accelerate rapidly and it could go into an ascending parabolic arc. This development is actually viewed as inevitable as we move ever closer to the fiat endgame of hyperinflation, but as we can see on the chart, it hasn't even started yet.

Speaking of gas in the tank, the last COT chart showed a setup similar to that which existed back at the start of February - before a $260 runup in the price of gold - so the impications of this chart are obvious.

We are going to end this Gold Market update by briefly summarizing the "global playbook" - once you grasp what is set out below you will understand why the continued advance in the prices of gold and silver are inevitable, and why their rate of advance is set to accelerate...

There is no way of resolving the Global Debt Crisis in a direct and honest manner - any attempt to tackle it head on would result in a global economic implosion and deep depression - and very possibly a state of total anarchy. The "de facto" decision has already been taken to inflate it away. While this will ultimately result in hyperinflation and possibly depression anyway, the transition to that state will be a lot smoother by taking the inflationary approach than it would be by taking the draconian root and branch approach. There will still be small to medium size defaults such as Greece, then Portugal, and after that probably Spain and Italy, but what will happen in each of these cases as they arise is that imminent default will be headed off at the last minute by them being bailed out and propped up, and whatever money is needed to patch things up and keep the system limping along will be forthcoming. In the United States, after much ritual wrangling, the debt ceiling will be raised - again and again and again, and the Fed will continue to backstop the Treasury market, and there will be QE3, QE4, QE5 and on and on, even if disguised under other names, and money will be manufactured in ever increasing quantities to keep eveything pumped up. For an investor it is crucially important to grasp what this means - it means that every default scare of this kind that spooks the markets will present another buying opportunity, as just happened with Greece, especially in commodities and in particular in gold and silver. A country such as Portugal will verge on default, bankers and politicians will run around like headless chickens for a few weeks, markets will drop, then suddenly - hey presto - the necessary funds to "kick the can down the road" yet again will be forthcoming and markets will breathe a sigh of relief and rally - and inflation will continue to build as the debt bill is pushed ever more onto the populace. The middle and lower classes of the world have been targeted to pay down the debts through ever increasing inflation that will reduce most to a state of penury. The good news is that if you understand the game THAT DOES NOT HAVE TO INCLUDE YOU.

The continuing debasement of fiat currencies around the world means that the bullmarkets in gold and silver are set to continue and to accelerate. Up until now both gold and silver having been moving higher in large part simply to compensate for the destruction of the purchasing power of fiat caused by inflation, but there is going to come a point when IN ADDITION to these important drivers, speculative interest in both metals is going to ramp up, as speculators are increasingly attracted to both metals simply because their prices continue to rise, with no prospect of them ceasing to do so. In addition there will be an ever increasing flow of funds into the Precious Metals by those desperate just to preserve their purchasing power in the face of the demise of fiat. This increasing influx of funds both from desperate investors and from speculators will eventually power the acclerating ramp in both gold and silver.

While it is true that China and Europe have been playing a dangerous game of chicken in recent weeks by raising interest rates, it is presumed that they will wake up soon and "come on side" and fully partake in the money pumping game, because if they don't the dollar will collapse relative to their currencies and their own economies will implode.

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Silver Breaks Out of Basing Pattern, Starts Next Major Uptrend

By: Clive_Maund

Yesterday's high volume breakout above its 50-day moving average marked completion of the intermediate basing pattern and the start of the next major uptrend in silver. Everything in now in place for a substantial uptrend to develop in coming months that should take silver comfortably to new highs. Fundamentally yesterday's breakout was due to the realization in the markets that QE is set to continue, whether called QE or not, and in fact it must continue, as any attempt to apply the brakes at this late stage would result in a global systemic economic collapse.

Hyperinflation will be the inevitable end result, as will prices for gold and silver at levels that many now would consider to belong solely in the realms of fantasy. We already had a foretaste of this coming ramp in Precious Metal prices earlier this year with the big runup in silver prices, before powerful interests decided the time was right to put the boot into the little guy by repeatedly hiking margin requirements over a short period. This served big money interests in 2 ways - first of all it crashed the silver price so that they can move in and scoop up more of it. Secondly big money is not all at concerned about margin requirements, since being wealthy in the first place they don't need to bother with margin at all, although it suits them to use it at times to maximise leverage. What the hiked margin requirements did do was to throw the little guy off the train, and like one of those old westerns big money is stood at the open end of the train carriage lighting up a cigar and grinning with satisfaction as the little guy rolls down the embankment and is left lying in the dust as the train chugs off into the distance without him.

Our 6-month chart for iShares, which is a good proxy for silver, shows the now extraordinarily bullish setup for silver. For some weeks it was not clear whether the C wave of the now completed A-B-C correction would take the silver price below the A wave low in May, which for iShares was exactly at $32, and had Greece not been bandaged up it would have, of course. The first sign of improvement was the breakout from the C wave downtrend channel about a week ago, after which the price was temporarily restrained by unfavorably aligned (falling) 50-day moving average, which forced a test of support at the top line of the channel, which we correctly anticipated. Then just yesterday the price blasted through the 50-day moving average on the highest volume for weeks, the importance of the resistance in the vicinity of this average being illustrated by the way the price gapped above it - a bullish "breakaway" gap. This is what we have been waiting for. This marks the end of the intermediate base building phase and the start of the next major uptrend.

The picture could not be more bullish. The price and its 50-day moving average have corrected back almost to the rising 200-day moving average which is now coming into play to support a major advance. The volume pattern during the base building process has been positive, with volume contracting, and the Accum-Distrib line shown at the top of the chart rising, indicating accumulation. Finally the COT charts are at their most bullish for ages with Commercial short and Large Spec long positions being at their lowest levels for a very long time.

The lower COT chart is courtesy of the renowned Scarborough Bullion Desk in England.

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A New Way for Income Investors to Get Ahead

By Larry D. Spears

The market isn't an easy place for income investors right now.

Stocks are too volatile, U.S. Treasury yields are anemic, and a strong reliable dividend is a rarity.

But income investors have a relatively new way they can use options to collect solid payouts on a routine basis. And they can do it without actually owning the underlying stock.

I'm talking about Weekly Options, or Weeklys.

Weeklys, which have a maximum lifespan of just seven trading days, are available on more than 40 widely traded stocks and a handful of indexes - including the Standard & Poor's 500 Index.

The great thing about Weeklys is that you can take advantage of short-term moves in the price of a stock or index. You can also generate income on a weekly basis by implementing a simple covered-call strategy.

Here's how.

Weekly Options Strategy #1: A Covered-Call Alternative

The first method is a slight variation on the standard covered-call strategy, where you own the underlying stock and write options against it for income.

Here's an example.

Assume you own 300 shares of Suncor Energy Inc. (NYSE: SU), recent price $40.10. Suncor is widely held, but unlike many oil-and-gas exploration and production companies, isn't overly volatile. Its 52-week range is $29.15 to $48.53. The dividend also isn't that spectacular at 45 cents, or 1.12%.

Let's say you believe Suncor's stock price will rise later in the year, especially if oil prices continue to rebound from their $23-plus slide between late April and late June. You don't want to sell your shares at current prices - but you would like a little extra income from the position while you're waiting for a price climb.

You would simply wait until the new "August Week 1" options were listed on Thursday, July 14. Then, sell a Suncor call option with a $41.00 strike price that expires on Friday, July 22, just eight days later.

Based on prices for the same time frame in June, that call would probably be priced around 55 to 60 cents, or $55 to $60 for each full contract. Since you own 300 shares of Suncor stock, let's assume you sell three of the calls at 58 cents a share, bringing in $174 - a play that has three distinct advantages over the standard covered-call scenario:

  • First, Suncor only has to stay below $41 a share for seven trading days - not five weeks - for you to keep 100% of the premium received. That's a 1.44% return on the $12,030 value of the stock in just over a week.
  • Second, you can repeat the play two, or possibly even three, times before the standard option would expire. If you get $174 on each weekly play, doing it three times would bring in $522 as compared to the $381 you'd get on the monthly covered-call play - increasing your five-week return to 4.33%. And, doing it four times would likely boost your monthly income to almost $700.
  • Third, you're not stuck with the same position for a full month. If Suncor's stock price rises or falls, you can adjust the strike price of the call you sell upward or downward, keeping it an appropriate distance above the actual stock price. This will tend to keep the premium you receive about the same, and maintain your cushion against an upward price spike that could force you to sell the stock.

All in all, it's a much more attractive play than the standard covered-call scenario. Indeed, the only real drawback is that, at present, Weeklys are offered on just 41 individual stocks.

But if you don't own any of the stocks on the weekly options list, and you don't have the money to buy 200 or 300 shares of some of the ones that are - say Inc. (Nasdaq: AMZN), recent price $210.38, or International Business Machines Corp. (NYSE: IBM), recent price $174.23 - don't fret. You can use still Weeklys to generate income without actually owning the underlying stocks.

Weekly Options Strategy #2: Low-Risk Call Selling

Sticking with Suncor, let's say you still expected the stock price to rise later in the year, but weren't quite ready to lay out $12,030 to buy 300 shares at the midday July 13 price of $40.10. You obviously can't collect the dividend without buying the stock - but you can still generate an income stream from it.

Start by going out to the September expiration month and buying three in-the-money (or at-the-money) Suncor call options. In this case, a good choice would be the September 39 strike price calls, $1.10 in the money (i.e., $1.10 below the current stock price of $40.10), priced on July 13 at $2.95 a share, or $295 per contract. That means three calls would cost $885 - a significant savings over the $12,030 value of the shares themselves.

With that as your base "long" position, you can then begin repeatedly selling out-of-the-money weekly Suncor calls, most likely bringing in a premium of $150 to $170 on each trade, depending on the position of the stock price relative to the strike price of the calls you sell. As long as the term is shorter and the strike price higher than $39.00, the weekly options you sell (for both August and the first two weeks of September) will always be "covered" by your long September monthly calls, meaning you won't have to put up any added money (or "margin").

After four or five weekly trades, you'll have offset the premium you paid for the September calls (which should still retain a good chunk of time value anyway). This leaves you another three or four weeks to sell additional Weeklys and collect income from the strategy before you either sell the September calls or exercise them to purchase the stock at $39.00 a share.

The only real potential for loss comes if Suncor's stock price falls sharply, which would carry the September 39 calls well out of the money. At that point, the shorter-term calls they'd cover wouldn't have enough premium to make them worth selling - though you could always "roll" the long position down to a lower strike price or a more distant expiration date and keep selling calls against it.

Plus, the loss on the options would most likely be less than the loss you'd have suffered had you held the stock itself - and the pullback would give you an opportunity to buy the shares at a much better price than was available when you first implemented the strategy.

The Weeklys have a number of other uses - ranging from speculating on news events such as earnings releases to hedging against possible short-term pullbacks by the broad market.

However, for income-oriented investors, the primary value of weekly options will unquestionably lie in generating a stream of steady cash flow from long stock positions.

Moody's Warning Edges U.S. Credit Rating Closer to Downgrade

By David Zeiler

With time running out on a deal to raise the U.S. debt ceiling, Moody's Investors Service turned up the heat by warning Washington's bickering politicians that any missed debt payments will result in a credit rating downgrade.

Such a downgrade would have economically catastrophic consequences, roiling stock markets worldwide, sharply increasing borrowing costs for the U.S. government as well as businesses, and derailing an already-anemic economic recovery.

Indeed, Moody's announcement triggered a 1.1% drop in the dollar on Wednesday - its biggest one-day drop in six months.

Most observers have assumed that Congress and U.S. President Barack Obama would eventually reach a deal on raising the $14.3 trillion debt ceiling and the growing federal deficits before the Aug. 2 deadline - necessary to avoid losing the ability to borrow and a possible default on the federal debt.

But with little progress having been made on a deal and the deadline less than three weeks away, concern is growing that ideological stubbornness and posturing for the 2012 elections had led to an impasse.

"They are worried they are having these ideological arguments while Rome burns," Carl Kaufman, portfolio manager at Osterweis Capital Management, told Reuters.

The warning from Moody's follows a move by Standard & Poor's in April to downgrade its outlook for U.S. debt from "stable" to "negative."

S&P not only reiterated its concerns at a private meeting to several key U.S. lawmakers and business groups, it went a step further, according to The Wall Street Journal.

S&P Managing Director John Chambers said that even if the United States makes all its debt payments, it could be downgraded for missing payments to any creditors whatsoever, including veterans or vendors.

All this U.S. credit rating downgrade talk - even if nothing comes of it - only serves to rattle already unsettled markets.

"It does create additional nervousness on top of all the other issues like the uncertainty about U.S. growth in the second half of 2011, inflation problems in emerging countries and the European debt problem," Koen De Leus, an economist at KBC Securities, told Reuters.

Moody's statement also pointed out the necessity of dealing with the systemic budget deficits that have created the debt problem - even if Congress acts by the Aug. 2 deadline.

"The outlook assigned at that time to the government bond rating would very likely be changed to negative at the conclusion of the review unless substantial and credible agreement is achieved on a budget that includes long-term deficit reduction," Moody's said.

Moody's added that other institutions would be affected by a U.S. credit rating downgrade, including Fannie Mae, Freddie Mac, the Federal Home Loan Banks and the Federal Farm Credit Banks. As many as 7,000 states and municipalities could feel the impact, as well as foreign bonds that are guaranteed by the U.S. government, such as those of Israel and Egypt.

Those who think the ratings agencies are bluffing just to scare the politicians into action should note that Moody's and S&P already have downgraded the debt of both Greece and Portugal - and neither of those nations has yet missed a payment.

"They don't care anything about Democrats or Republicans or the president," former U.S. Sen. Alan Simpson, R-WY, co-chair of the White House's deficit-reduction panel, told The Journal. "They care about money, the bonds, and the securities. They don't give a rat's fanny about who is to blame."

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The Debt Ceiling Debate: Will the Democrats' Gambit Lead to a Victory in the 2012 Election?

By Martin Hutchinson

We talked yesterday (Thursday) about the debt ceiling debate, and how the GOP is making the most of its opportunity to affect the economy in the run up to the 2012 election.

Well, the Democrats are doing the same thing - except whereas the Republicans are looking to make long-term fixes at the expense of short-term growth, Democrats are doing the opposite.

I'll show you what I mean.

As I said in my previous piece on GOP economic strategy, I'm a firm believer in Public Choice Theory.

And in this battle the Democrats would like to see rapid growth between now and November 2012. More than anything, they want to see unemployment come down sharply.

They don't care so much about whether inflation is ticking up a bit, or whether an over-large budget deficit may cause trouble in the future. If they get elected in November 2012, they can try to sort out problems then - particularly if they can recapture the House of Representatives.

Furthermore, the wish to get U.S. President Barack Obama re-elected is not confined to the president and his entourage. If Obama were to lose in 2012, after presiding for four years over a lackluster economy with high unemployment, this would seriously damage the Democrat brand.

The Republicans would very likely preside over a recovering economy and be re-elected in 2016 on the strength of it. That would give them eight years to write the history of the preceding period and cast President Obama's Democratic policies as a failure. After all, President Carter would be remembered much more fondly if he had been re-elected in 1980 and had presided over the 1982-84 economic upturn; conversely FDR would be remembered as a one-term president who failed to cure a deep depression if he had lost in 1936.

Regardless of their ideological preferences, Democrats are thus very keen to see policies enacted now that will produce a more vigorous recovery in 2012 and lower unemployment.

They don't much care if those policies cause inflation to surge, or leave the incoming president in 2013 with a dangerous budget position. If President Obama is re-elected, Democrats will have the first two years of his second term to take painful actions to control inflation and rein in the budget deficit. Even if those policies don't work exceptionally well, the Democrats would still have a chance in 2016 to blame any failures on the outgoing President Obama and campaign independently of his administration.

So for Democrats - for public choice theory reasons - short-term benefits from policies implemented now are the only benefits that matter.

In the current negotiations, the Democrats have more power. While their majority in the Senate is now too small to pass major legislation (which requires 60 Senators to the Democrats' current effective total of 53), the Democrats still set the agenda and can both block Republican proposals and advance their own. Add to that the enormous advantage of the Presidency's "bully pulpit" and control of the executive branch, and you'd expect them to end up with most of the marbles at the end of this round of the game.

The Democrats don't want spending cuts for two reasons.

First, their ideological preference is for larger government. The government workforce has declined by over 1 million since April 2009, offsetting by more than one-third of the rise in private sector employment.

Secondly, Democrats - being mostly Keynesians - believe that spending cuts have had a depressing effect on the economy as a whole, keeping the unemployment rate unexpectedly high. (Republican supply-siders would suggest that the government employees have to be paid for somehow, and that reducing government redundancies frees up money that often ends up in the hands of small businesses, boosting private hiring.)

To the extent that tax increases would dampen economic growth, the Democrats don't want those, either. For example, temporary cuts in payroll taxes are attractive because they could stimulate economic activity among the modestly paid and would almost certainly stimulate middle-class spending.

On the other hand, tax increases in the longer term - those that would take effect in 2013 or later - are favored, as they would push any pain (and much of the unpopularity) into the next administration while still encouraging the bond markets to believe that the deficit is being cut.

Higher tax increases on the wealthy and on oil companies also are welcome. Democrats think the income of the wealthy tends not to be spent, resting useless in a bank. They don't believe tax rates have a supply-side effect.

On monetary policy, the Democrats want more stimulus. They believe low interest rates stimulate economic activity and they want to make sure that Federal Reserve Chairman Ben S. Bernanke buys enough Treasury bonds to prevent the budget deficit from becoming a problem before November 2012.

Democrats don't worry much about inflation. They believe it will arrive fairly gradually, and can be prevented from becoming a big worry before November 2012 with creative accounting at the U.S. Bureau of Labor Statistics.

The bottom line is that the Democrats are likely to get more of what they want in the current negotiations, but they are taking a big gamble.

If Bernanke's monetary stimulus fails to create new jobs (and both theory and evidence suggest very low interest rates encourage companies to substitute capital for labor, thereby destroying jobs), then unemployment may still be high in November 2012, with inflation increasingly a problem.

That would make it very difficult for President Obama to be re-elected - in which case the Democrats' only hope (but it's a substantial one) would be that the eccentric Republican primary system produces a flawed opponent.

Tech Bubble or Boom?

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Islanda, quando il popolo sconfigge l'economia globale

di Andrea Degl'Innocenti

L'hanno definita una 'rivoluzione silenziosa' quella che ha portato l'Islanda alla riappropriazione dei propri diritti. Sconfitti gli interessi economici di Inghilterra ed Olanda e le pressioni dell'intero sistema finanziario internazionale, gli islandesi hanno nazionalizzato le banche e avviato un processo di democrazia diretta e partecipata che ha portato a stilare una nuova Costituzione.

Oggi vogliamo raccontarvi una storia, il perché lo si capirà dopo. Di quelle storie che nessuno racconta a gran voce, che vengono piuttosto sussurrate di bocca in orecchio, al massimo narrate davanti ad una tavola imbandita o inviate per e-mail ai propri amici. È la storia di una delle nazioni più ricche al mondo, che ha affrontato la crisi peggiore mai piombata addosso ad un paese industrializzato e ne è uscita nel migliore dei modi.

L'Islanda. Già, proprio quel paese che in pochi sanno dove stia esattamente, noto alla cronaca per vulcani dai nomi impronunciabili che con i loro sbuffi bianchi sono in grado di congelare il traffico aereo di un intero emisfero, ha dato il via ad un'eruzione ben più significativa, seppur molto meno conosciuta. Un'esplosione democratica che terrorizza i poteri economici e le banche di tutto il mondo, che porta con se messaggi rivoluzionari: di democrazia diretta, autodeterminazione finanziaria, annullamento del sistema del debito.

Ma procediamo con ordine. L'Islanda è un'isola di sole di 320mila anime – il paese europeo meno popolato se si escludono i micro-stati – privo di esercito. Una città come Bari spalmata su un territorio vasto 100mila chilometri quadrati, un terzo dell'intera Italia, situato un poco a sud dell'immensa Groenlandia.
15 anni di crescita economica avevano fatto dell'Islanda uno dei paesi più ricchi del mondo. Ma su quali basi poggiava questa ricchezza? Il modello di 'neoliberismo puro' applicato nel paese che ne aveva consentito il rapido sviluppo avrebbe ben presto presentato il conto. Nel 2003 tutte le banche del paese erano state privatizzate completamente. Da allora esse avevano fatto di tutto per attirare gli investimenti stranieri, adottando la tecnica dei conti online, che riducevano al minimo i costi di gestione e permettevano di applicare tassi di interesse piuttosto alti. IceSave, si chiamava il conto, una sorta del nostrano Conto Arancio. Moltissimi stranieri, soprattutto inglesi e olandesi vi avevano depositato i propri risparmi.


La Landsbanki fu la prima banca a crollare e ad essere nazionalizzata in seguito al tracollo del conto IceSave
Così, se da un lato crescevano gli investimenti, dall'altro aumentava il debito estero delle stesse banche. Nel 2003 era pari al 200 per cento del prodotto interno lordo islandese, quattro anni dopo, nel 2007, era arrivato al 900 per cento. A dare il colpo definitivo ci pensò la crisi dei mercati finanziari del 2008. Le tre principali banche del paese, la Landsbanki, la Kaupthing e la Glitnir, caddero in fallimento e vennero nazionalizzate; il crollo della corona sull'euro – che perse in breve l'85 per cento – non fece altro che decuplicare l'entità del loro debito insoluto. Alla fine dell'anno il paese venne dichiarato in bancarotta.
Il Primo Ministro conservatore Geir Haarde, alla guida della coalizione Social-Democratica che governava il paese, chiese l’aiuto del Fondo Monetario Internazionale, che accordò all'Islanda un prestito di 2 miliardi e 100 milioni di dollari, cui si aggiunsero altri 2 miliardi e mezzo da parte di alcuni Paesi nordici. Intanto, le proteste ed il malcontento della popolazione aumentavano.
A gennaio, un presidio prolungato davanti al parlamento portò alle dimissioni del governo. Nel frattempo i potentati finanziari internazionali spingevano perché fossero adottate misure drastiche. Il Fondo Monetario Internazionale e l'Unione Europea proponevano allo stato islandese di di farsi carico del debito insoluto delle banche, socializzandolo. Vale a dire spalmandolo sulla popolazione. Era l'unico modo, a detta loro, per riuscire a rimborsare il debito ai creditori, in particolar modo a Olanda ed Inghilterra, che già si erano fatti carico di rimborsare i propri cittadini.
Il nuovo governo, eletto con elezioni anticipate ad aprile 2009, era una coalizione di sinistra che, pur condannando il modello neoliberista fin lì prevalente, cedette da subito alle richieste della comunità economica internazionale: con una apposita manovra di salvataggio venne proposta la restituzione dei debiti attraverso il pagamento di 3 miliardi e mezzo di euro complessivi, suddivisi fra tutte le famiglie islandesi lungo un periodo di 15 anni e con un interesse del 5,5 per cento.
I cittadini islandesi non erano disposti ad accettare le misure imposte per il pagamento del debito.
Si trattava di circa 100 euro al mese a persona, che ogni cittadino della nazione avrebbe dovuto pagare per 15 anni; un totale di 18mila euro a testa per risarcire un debito contratto da un privato nei confronti di altri privati. Einars Már Gudmundsson, un romanziere islandese, ha recentemente affermato che quando avvenne il crack, “gli utili [delle banche, ndr] sono stati privatizzati ma le perdite sono state nazionalizzate”. Per i cittadini d'Islanda era decisamente troppo.
Fu qui che qualcosa si ruppe. E qualcos'altro invece si riaggiustò. Si ruppe l'idea che il debito fosse un'entità sovrana, in nome della quale era sacrificabile un'intera nazione. Che i cittadini dovessero pagare per gli errori commessi da un manipoli di banchieri e finanzieri. Si riaggiustò d'un tratto il rapporto con le istituzioni, che di fronte alla protesta generalizzata decisero finalmente di stare dalla parte di coloro che erano tenuti a rappresentare.
Accadde che il capo dello Stato, Ólafur Ragnar Grímsson, si rifiutò di ratificare la legge che faceva ricadere tutto il peso della crisi sulle spalle dei cittadini e indisse, su richiesta di questi ultimi, un referendum, di modo che questi si potessero esprimere.
La comunità internazionale aumentò allora la propria pressione sullo stato islandese. Olanda ed Inghilterra minacciarono pesanti ritorsioni, arrivando a paventare l'isolamento dell'Islanda. I grandi banchieri di queste due nazioni usarono il loro potere ricattare il popolo che si apprestava a votare. Nel caso in cui il referendum fosse passato, si diceva, verrà impedito ogni aiuto da parte del Fmi, bloccato il prestito precedentemente concesso. Il governo inglese arrivò a dichiarare che avrebbe adottato contro l'Islanda le classiche misure antiterrorismo: il congelamento dei risparmi e dei conti in banca degli islandesi. “Ci è stato detto che se rifiutiamo le condizioni, saremo la Cuba del nord – ha continuato Grímsson nell'intervista - ma se accettiamo, saremo l’Haiti del nord”.

Costituzione Islanda
I Cittadini islandesi hanno votato per eleggere i membri del Consiglio costituente
A marzo 2010, il referendum venne stravinto, con il 93 per cento delle preferenze, da chi sosteneva che il debito non dovesse essere pagato dai cittadini. Le ritorsioni non si fecero attendere: il Fmi congelò immediatamente il prestito concesso. Ma la rivoluzione non si fermò. Nel frattempo, infatti, il governo – incalzato dalla folla inferocita – si era mosso per indagare le responsabilità civili e penali del crollo finanziario. L'Interpool emise un ordine internazionale di arresto contro l’ex-Presidente della Kaupthing, Sigurdur Einarsson. Gli altri banchieri implicati nella vicenda abbandonarono in fretta l'Islanda.
In questo clima concitato si decise di creare ex novo una costituzione islandese, che sottraesse il paese allo strapotere dei banchieri internazionali e del denaro virtuale. Quella vecchia risaliva a quando il paese aveva ottenuto l'indipendenza dalla Danimarca, ed era praticamente identica a quella danese eccezion fatta per degli aggiustamenti marginali (come inserire la parola 'presidente' al posto di 're').
Per la nuova carta si scelse un metodo innovativo. Venne eletta un'assemblea costituente composta da 25 cittadini. Questi furono scelti, tramite regolari elezioni, da una base di 522 che avevano presentato la candidatura. Per candidarsi era necessario essere maggiorenni, avere l'appoggio di almeno 30 persone ed essere liberi dalla tessera di un qualsiasi partito.
Ma la vera novità è stato il modo in cui è stata redatta la magna charta. "Io credo - ha detto Thorvaldur Gylfason, un membro del Consiglio costituente - che questa sia la prima volta in cui una costituzione viene abbozzata principalmente in Internet".
Quarto Stato
L'Islanda ha riaffermato il principio per cui la volontà del popolo sovrano deve prevalere su qualsiasi accordo o pretesa internazionale
Chiunque poteva seguire i progressi della costituzione davanti ai propri occhi. Le riunioni del Consiglio erano trasmesse in streaming online e chiunque poteva commentare le bozze e lanciare da casa le proprie proposte. Veniva così ribaltato il concetto per cui le basi di una nazione vanno poste in stanze buie e segrete, per mano di pochi saggi. La costituzione scaturita da questo processo partecipato di democrazia diretta verrà sottoposta al vaglio del parlamento immediatamente dopo le prossime elezioni.
Ed eccoci così arrivati ad oggi. Con l'Islanda che si sta riprendendo dalla terribile crisi economica e lo sta facendo in modo del tutto opposto a quello che viene generalmente propagandato come inevitabile. Niente salvataggi da parte di Bce o Fmi, niente cessione della propria sovranità a nazioni straniere, ma piuttosto un percorso di riappropriazione dei diritti e della partecipazione.
Lo sappiano i cittadini greci, cui è stato detto che la svendita del settore pubblico era l'unica soluzione. E lo tengano a mente anche quelli portoghesi, spagnoli ed italiani. In Islanda è stato riaffermato un principio fondamentale: è la volontà del popolo sovrano a determinare le sorti di una nazione, e questa deve prevalere su qualsiasi accordo o pretesa internazionale. Per questo nessuno racconta a gran voce la storia islandese. Cosa accadrebbe se lo scoprissero tutti?

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Morning markets: crops cower, as rash of key events looms


Sentiment on farm commodity markets, having turned mixed in the last session, was most definitely wary on Friday, in line with the more general market mood.
The macroeconomic view is clouded both by the results of stress rests on European banks, due to be released at 16:00 GMT, and the US budget negotiations.
Standard & Poor's warned that it, too, may too cut America's credit rating if no deal is reached on raising the government's debt ceiling.
Layered on top of this are the ongoing uncertainties surrounding eurozone sovereign debt, and US economic policy, with Ben Bernanke, the head of the US Federal Reserve, on Thursday downplaying the chances of a further round of quantitative easing after the day before appearing to raise the likelihood of further ultra-loose credit.
That was one reason for a bit of profit-taking in, for example, wheat, which is up 20% in Chicago this month, on a nearest contract basis.
'Critical stage'
But there were crop-specific reasons too, with a dearth of news overnight which might be deemed supportive to prices.
Sure, the weather forecast for the US still calls for unhelpful heat and dryness.
"The high temperatures that are expected to linger through the night are set to arrive just as the bulk of the corn crop hits pollination, the critical stage of development for determining final yields," Lynette Tan at Phillip Futures said.
"High temperatures keep corn plants working throughout the night. This way, development is speeded up, bringing the corn closer to maturity and shortening the life cycle of the plant which consequently affects corn yields."
The key night-time temperature is, according to some experts, 64 degrees Fahrenheit, above which damage occurs, and which has already been exceeded in, for example, Des Moines, Iowa and Springfield, Illinois.
In iowa, Mike Mawdsley at Market 1 said: "The weather threat is for real at the moment. Many US areas are witnessing extreme heat and lack of moisture."
He added that this "should be reflected in Monday's condition report" - the weekly US Department of Agriculture briefing on crop health.
Key period
But there is still some debate of a further week of poor conditions, heading into August, which is seen as doing real damage.
"The 11-to-15 day outlook is now key and will keep market volatile as meteorologists note little confidence in extended models," Kim Rugel at Benson Quinn Commodities said.
Corn for September, now the spot contract, fell 0.3% to $6.88 ¾ a bushel as of 07:50 GMT (08:50 UK time).
Egypt, and Russia
And that was a depressant to wheat too, which is back a premium to corn on a spot contract basis – the normal state of affairs – following the expiry of the July contracts on Thursday.
Chicago's September contract was 0.5% lower at $7.03 ¾ a bushel, getting a further kicker from an Egyptian grain tender announced overnight, and likely to remind the trade of the competitiveness of Russian wheat.
"Expect the Russians to sell this tender once again, but they may offer it at $240-$245 a tonne [including freight]," Brian Henry at Benson Quinn said.
"If the Russians stay don't raise their offer, the EU offers will be nearly $40 higher and US offers will likely be $50 plus higher."
Still, he added that "ultimately, I expect the Egyptians to reject these shipments due to quality", and there is some doubt that Russia will win again.
Agritel, the Paris-based consultancy, said: "From a price point of view, Russian wheat is much more competitive than other origins. The question is whether the Egypt will add a risk criterion to its choice,"
Tumbling bales
Soybeans wilted in line with corn, and the uncertainty over really poor weather conditions setting in.
The spot August lot eased 0.5 cents to $13.81 ½ a bushel.
Bears were more successful in sinking cotton, which looks increasingly at risk (although not today, thanks to exchange limits on movement) of falling below 100 cents a pound for the first time since October, on a spot contract basis following another week of poor US export sales data.
Sales were in negative, in fact, by 48,000 bales, meaning cancellations.
"Current prices have not proven sufficient to induce export demand. In our view, demand must re-enter the market before prices are able to rise," Luke Mathews at Commonwealth Bank of Australia said.
Cotton for October fell 3.6% to 102.50 cents a pound, with the December lot easing 3.9% to 100.41 cents a pound.

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Evening markets: crops struggle as doubts over prices set in


OK, grains have had some price-supportive news recently, with the Chinese corn orders, Midwest hot weather threat and the US inventory data on Tuesday which fell short of expectations.
In soft commodities, sugar has been helped by waning expectations for output from top-ranked producer Brazil, with cane industry group Unica on Wednesday cutting its estimate for the cane crush to 534m tonnes, 6% lower than their first estimate, besides being 4% lower than last year's figure.
But is that now all factored in?
That's the question that farm commodity investors were asking on Thursday and, against a background of some caution, following Moody's warning of a potential downgrade to America's AAA sovereign debt rating, coming up with some less upbeat answers than of late.
'High and overbought'
In sugar, for instance, Nick Penney at Sucden Financial said: "Now that the Unica report is out and its contents known, we may enter a period where the markets will either consolidate or drop on liquidation as upside momentum is reduced.
"It is still very high and overbought.
"One wonders if the attention has been too firmly fixed on one producer," as in Brazil.
Certainly, raw sugar closed weakly in New York, down 4.0% at 29.02 cents a pound for October delivery.
China imports to slow?
And, in Chicago, corn found it hard going too, even despite some positive export data, with the US weekly export sales of the grain coming in at 1.6m tonnes.
"Export sales were very solid for corn. But that was generally expected," Darrell Holaday at Country Futures said.
And is it to lose a big prop, in terms of Chinese buying?
"It is now likely that corn has been pushed beyond Chinese buy levels and continued support will have to come from decrease yield," US Commodities said.
Benson Quinn Commodities said that while the "international consensus is China will import 5m- 10m tonnes of corn over the course of the marketing year, a large percentage of the buying may have been done already".
The weather question
And then there was the squabble over the weather.
"The debate is that the GFS model indicates it will stay in place through July 24-25, but the European and Canadian models indicate it will break down by July 21-22 period," Darrell Holaday at Country Futures said.
"The Midwest has plenty of moisture to withstand the heat over the next week, but if it stretches into the next week, it would begin to trim corn yields."
EU wheat
In the end, Chicago's September contract closed up 0.6% at$ 6.90 ¾ a bushel having spent much of the day in negative territory. And, certainly, the December lot put in a less convincing performance, closing down 0.2% at $56.78 ½ a bushel
And with corn looking a little more vulnerable, wheat lost a major support, closing down 1.0% at $7.07 a bushel for September.
Wheat faced setbacks on fundamentals from an upgrade to the European Union crop by Strategie Grains, pegging it way above a forecast from the US Department of Agriculture earlier this week.
"Wheat prospects in the EU have improved over the past weeks with production forecasts for the major producers now showing signs of increasing," David Sheppard, managing director of UK grain merchant Gleadell, said.
"With the apparent cheap offers of Russian wheat, this extra EU tonnage should keep markets in check during the short-term as harvest progresses in the northern hemisphere regions."
'Not as bearish'
He added that "long-term the sentiment regarding Australian and Argentine production is not as bearish as first thought".
Dry weather is trimming expectations for Australia's east coast crop, while Argentine sowings estimates are being curbed too, and now look set only to match last year's, grain exchange estimates on Thursday said.
Still, Paris wheat for November closed down 1.6% at E197.75 a tonne, with London wheat for the same month shedding 0.6% to £166.15 a tonne.

S&P 500 Closes Down 1% From Its Intraday High...Again

by Bespoke Investment Group

As shown in the chart below, for the fourth time in as many days, the S&P 500 closed today down more than 1% from its intraday high. Just a week after one of the broadest equity market rallies in decades, sentiment has shifted on a dime, and investors are taking the term 'sell into rallies' to a new level.

Earlier this evening, we sent out a report to clients where we looked at prior periods where the S&P 500 saw similar intraday sell-offs, and then we analyzed the index's performance in the days and weeks following such occurrences.

He is Big, Mean and Powerful-Meet BIG Bernanke

Welcome to the World’s Greatest Hedge Fund. An insight into what they trade, how they trade and who runs the show. Fortune reports,

The bailout of the financial system is roughly as popular as Wall Street bonuses, the federal budget deficit, or LeBron James in a Cleveland sports bar. You hear over and over that the bailout was a disaster, it cost taxpayers a fortune, we didn’t really need it, it didn’t work, it was a failure. It has become politically toxic, which inhibits reasoned public discussion about it.

But you know what? The bailout, by the numbers, clearly did work. Not only did it forestall a worldwide financial meltdown, but a Fortune analysis shows that U.S. taxpayers are coming out ahead on it — by at least $40 billion, and possibly by as much as $100 billion eventually. This is our count for the entire bailout, not just the 3% represented by the massively unpopular Troubled Asset Relief Program. Yes, that’s right — TARP is only about 3% of the bailout, even though it gets about 97% of the attention.

A key reason for the rescue’s profitability is that the Federal Reserve System has already turned over more than $100 billion of bailout-related income to the Treasury, and is on track to turn over $85 billion more this year and next. That’s not something most people include in their math. On the negative side, we’re including what may be the first overall cost calculation of a special tax break that’s worth tens of billions of dollars to four big bailout recipients. And, of course, we’ve analyzed reports from the Congressional Budget Office, the Treasury, the Federal Deposit Insurance Corp., and other sources.

We’ll get to the detailed numbers in a bit. But for now, we’d like to remind you why the bailout exists. The revisionist idea that the bailout is the problem — rather than excesses in the financial system — is simply stunning to those of us who watched the financial crisis surface in 2007, when two Bear Stearns hedge funds speculating in mortgage securities collapsed, and reach a crescendo in September 2008, when Lehman Brothers went bankrupt. Many in the financial world applauded Washington’s decision to let Lehman go under — but that applause was quickly replaced by fear as unanticipated consequences of the bankruptcy surfaced.
Lehman’s collapse touched off a terrifying run on money market mutual funds when the Reserve Primary Fund announced it could pay holders only 97¢ on the dollar because of Lehman-related losses. Savers who’d considered money funds as safe as federally insured bank deposits stampeded for the exits, pulling out hundreds of billions of dollars. It took federal guarantees of more than $3 trillion of money market fund balances — bailout! — to stop this modern-day bank run.

Some hedge funds that used Lehman’s London office as their “prime broker” had their assets frozen, setting off a run on prime brokers Goldman Sachs (GS) and Morgan Stanley (MS) as U.S. hedge funds pulled out their assets to avoid getting frozen if either firm failed. Goldman and Morgan were close to running out of cash when the government saved them by making them bank companies with access to the Fed’s lending facilities. Bailout! Bailout! GE Capital (GE) was having trouble rolling over its borrowings, and was rescued by a government guarantee program. Bailout! Then there was American International Group, the now infamous AIG (AIG), which required a 12-figure rescue.

Had Goldman, Morgan Stanley, GE Capital, AIG, and several giant European banks not gotten bailouts and instead failed, even capital-rich J.P. Morgan Chase (JPM) would have gone under, because it wouldn’t have been able to collect what these and other players owed it. There would have been trillions in losses, worldwide panic, missed payrolls, and quite likely the onset of Great Depression II. That’s why we needed a bailout. And why we got it.

Now that we’ve relived the history, let’s take a stroll through the numbers. Things have turned out far better than expected because the massive government intervention calmed the markets, and Uncle Sam had to make good on only a tiny fraction of the obligations that taxpayers guaranteed. Uncle Sam bought assets at what turned out to be near-bottom prices amid the market panic; the value of Sam’s holdings has since soared. The more than $14 trillion of government investments, securities purchases, and loan guarantees — of which TARP never amounted to more than $411 billion (although it was authorized to spend up to $700 billion) — stabilized the whole financial system.

So how has this worked out for U.S. taxpayers?

Let’s take the costs first.

· The biggest expense by far comes from the rescue of mortgage finance giants Fannie Mae and Freddie Mac. Or, actually, the rescue of their debtholders — stockholders have been essentially wiped out.
 The $130 billion cost is the money the government has put into Fannie and Freddie ($154 billion) to cover their losses, less the dividends ($24 billion) Fannie and Freddie have paid on the government’s preferred stock. The Treasury and the nonpartisan Congressional Budget Office both expect that $130 billion figure to shrink; Fannie and Freddie have been adding profitable business since 2008, and it should begin to outweigh their losses from the housing bubble. But we’re being conservative and counting the full $130 billion.

· Then there’s a $35 billion tax expense, which no one else has included in bailout calculations. It’s our analysis (with assistance from tax guru Bob Willens) of the taxpayer cost of special IRS rulings that allowed TARP recipients AIG, Citigroup, (C) General Motors, (GM) and Ally Financial (formerly GMAC) to use their tax losses in full, rather than being subject to “change in control” rules designed to stop companies from being taken over for their tax losses. GM got both an IRS ruling and a provision in the 2008 economic stimulus legislation to preserve its losses despite having gone bankrupt.

We estimate that without special treatment, the companies could have used only about $4 billion of their $43 billion of “deferred tax assets” to offset federal income taxes. Now they can use them all. We’re estimating the taxpayer cost at $35 billion rather than the full $39 billion because it’s not clear when — or whether — the companies will earn enough to use all the losses. (The tax breaks have presumably increased the prices of the shares in those companies that the government owns or has sold, because they have made the companies more valuable to investors. That means the higher share prices have decreased the cost of the bailout, though it’s impossible to quantify by how much.)

· We’re counting the cost of TARP as $19 billion, based on the most recent update by the Congressional Budget Office. That includes $13 billion spent to help homeowners restructure their mortgages, plus projected losses on AIG, GM, and Chrysler, offset by gains in some of TARP’s other holdings, primarily in banks. The $19 billion estimate is a big improvement from the CBO’s first estimate, $189 billion, in January 2009. That’s because TARP’s investments have fared better than expected, and its total outlays have been shrinking rapidly. They’re down to $104 billion, according to the Treasury, from their aforementioned high of $411 billion.

The plus side

· The biggest and most surprising numbers are the bailout-related profits that the Federal Reserve has turned over to the Treasury, and that we expect it to turn over this year and next.

We’re counting these payments as an offset to the bailout’s cost because they stem from the Fed’s bailout activities. The Fed’s increased profits come primarily from income on the $1.25 trillion of mortgage-backed securities it bought in 2008–09 to stabilize credit markets (Quantitative Easing 1), and the $600 billion of Treasury securities it bought in 2010–11 (QE2) to hold down interest rates and raise asset values. Even though QE2 is usually considered “economic stimulus,” we’re treating it as part of the bailout because rising asset values have helped stabilize the financial system.

The Fed now owns almost $2 trillion more of securities than it did before financial problems surfaced in 2007. A normal financial institution would have had to borrow heavily to add $2 trillion of assets, and interest on that borrowed money would have offset most or all of the income from the added assets. The Fed, though, doesn’t have to borrow: It effectively creates money (which has its own problems) to buy the securities. So the Fed’s income on its added securities is pure profit.

Each year the Fed turns over most of its annual profit to the Treasury. It’s money that the Treasury can spend, and it reduces the federal budget deficit. From 2007 (when the Fed began expanding its balance sheet to combat financial instability) through 2010, the Fed sent a total of $193 billion to the Treasury. In the previous four years it sent the Treasury only $91 billion. We’re counting that $102 billion difference as bailout-related profit.

· Most Fed analysts expect the size of the Fed’s securities portfolio (and hence its profits) to fall slowly, if at all, this year and next. So we’re estimating that the Fed will send $55 billion of bailout-related profits to the Treasury this year, about what it sent in 2010. To be conservative, we’re estimating the 2012 bailout profit at only $30 billion.

· The Treasury owns 563 million shares of AIG that it got from the Fed, which extracted them from the insurance giant in 2008 in return for making $85 billion of credit available. Even though AIG was a big TARP recipient, this holding, currently worth about $16 billion, isn’t included in TARP’s profit-and-loss statement. That’s why we’re including it here.

· The Treasury says it has made a total of $15 billion from fees for insuring money fund balances, and from the $150 billion of mortgage-backed securities that it owns.

· We estimate that the FDIC has made $8 billion from the difference between the fees it has charged to guarantee borrowings and the losses it has incurred on those guarantees. The FDIC declined to give us a number because some of the guarantees are still outstanding.

Bottom line

Our accounting is unconventional because in some places we count what has happened, in some places we project what’s likely to happen, and in some places we’ve done our own numbers because no others exist. If things break right, taxpayers could come out $100 billion ahead: our $42 billion profit estimate, plus a $25 billion reduction in the Fannie/Freddie cost, $25 billion more in Fed profits, and a reduction in the $19 billion expense we’re showing for TARP.

We don’t expect any of what we’ve told you to make the bailout popular — we’re not wild about it ourselves for the same reasons many people dislike it. The government was picking winners and losers. Big Government bailed out Big Finance while letting average taxpayers lose their homes. Creditors of bank companies and AIG got far too good a deal at taxpayer expense. Wall Street is back to paying enormous bonuses (and whining about being demonized), while average Americans, whose tax dollars saved the Street, are still suffering. And, of course, the economy is down 7 million jobs from its peak in 2007.

But something needed to be done when the financial world was on the brink of the abyss, and the government did something. No matter what your views are, you should be happy that taxpayers, almost miraculously, are coming out ahead rather than hundreds of billions of dollars behind.

When our boss assigned us to find out how much the financial rescue cost, we expected to find a monumental loss, because Fannie Mae and Freddie Mac seemed like a bottomless pit. Instead, we discovered that bailout profit payments from the Fed — which we hadn’t previously thought of as a profit center — are virtually certain to exceed taxpayer losses on Fannie and Freddie. We were surprised — and pleased — to discover taxpayers showing a profit on the bailout. We hope that you are too.

Orwell is back-some are more equal than others

By Susan Feinberg

In the midst of heated debates between the president and Congress over slashing government spending, three men sat down to a nice dinner with a couple of great bottles of wine in an upscale Washington, D.C., restaurant. Normally, such an event would not raise eyebrows in D.C., where restaurants are pricey and members of the Washington politocracy dine out regularly. But on the night of July 6, with the prospects of reaching a budget agreement hanging by a thread, there was nothing ordinary about this dinner.

One of the three men at the table, Rep. Paul Ryan of Wisconsin is the author of the Republican budget plan adopted by the House of Representatives in April. His plan proposes to gut Medicare by providing seniors with vouchers to buy private insurance, rather than paying for their health care directly, and to take health care away from tens of millions of middle-class and moderate-income Americans.

At the same time, the Ryan budget reduces corporate tax rates on the highest-income Americans from 35 percent to 25 percent. Thus, under Ryan’s plan, the wealthiest 5 percent of individuals and households are not only spared the need to sacrifice, they benefit from the sacrifices of America’s seniors and middle-income working families.

Ryan’s dinner raised my eyebrows that night at the restaurant, where I was enjoying a special birthday dinner with my husband. Ryan and his companions occupied the table directly across from us, and soon after arriving, they ordered two bottles of the most expensive wine on the menu, a $350 French grand cru Burgundy. At first we joked about it: What could you buy with $700? But thinking a little more about it raised uncomfortable questions about how many hours a person would have to work at different salary levels to earn $700 in a week.

To clear $700 in a week, a person would have to earn close to $50,000 a year, an amount greater than the income of nearly half of American households. Households earning below $50,000 per year are being asked to shoulder most of the sacrifices in the Ryan budget. Millions of seniors and middle-income Americans will see their standard of living decline significantly if the parameters of the Ryan budget become part of the negotiated spending cuts in the debt ceiling debate.

Ryan and his companions had every right to drink $700 worth of wine. However, to blithely enjoy such extravagance while preparing to inflict so much pain on so many Americans seemed terribly wrong, particularly when one considers that those who can easily afford an evening out with a $700 bar tab will benefit from the sacrifices Ryan’s budget heaps upon average Americans.

This is where I came into the picture.

After finishing our dinner and paying our bill, I approached Ryan’s table and asked the congressman how he could live with himself: drinking $700 worth of wine, the equivalent of a week’s wages for many Americans, while actively working to take away their health care benefits. Ryan’s only response was that he had no idea how much the wine cost. This struck me as ironic, coming from the GOP’s lead budget architect.

One of Ryan’s dinner companions, economist and hedge fund manager Clifford Asness (whom I did not recognize at the time), shouted that he had ordered the wine (which was true) and that he intended to pay for it. I asked Asness if he was a lobbyist, since members of Congress are not permitted to accept expensive meals and gifts from lobbyists. As it turned out, Asness was not a lobbyist, but as a hedge fund manager, he had access to high-ranking political decision-makers such as Ryan. Being confronted about the wine purchase enraged Asness, who subsequently shouted obscenities at me.

I left the restaurant wondering why the reaction was so vehement. And further reaction has continued in the days since, in the form of hateful and threatening e-mails — anonymous and signed.

Clearly, I had upset the natural D.C. order of things by confronting a politician — a public servant — who was in the midst of enjoying a good dinner out at a fancy restaurant. However, I think the strong reaction came from a different place.

For decades, our tax policies have favored the interests of the wealthy over the interests of the poor and middle class. Some would argue that such policies are job-creating, but in the harsh light of our current economic situation, the flaws in these arguments become apparent. Now we are confronted with the need to sacrifice, and those who have benefited the most from the status quo become resentful when asked to give up anything they have gained.

Calling these folks out for drinking $700 worth of wine while negotiating spending cuts that saddle others with all the burdens of “austerity” is what really upsets the natural order of things.

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