Proof that the NEW WORLD ORDER has been planned by the elite. Robert Welch, Founder of The John Birch Society, predicted today's problems with uncanny accuracy back in 1958 and prescribed solutions in 1974 that are very similar to Ron Paul's positions today. This is proof that there are plans in place by the elite to systemically disassemble US sovereignty. I wonder who those elite are.
Who of the famous people in Russia's modern history said the phrase: "I wanted the best, but it turned out as always"? There is quite a list of names that comes up in this connection, although it is associated with only one man - the Minister of Finance of the USSR, Valentin Pavlov, who once upon a time intended to stabilize currency in the country.
Many details of that story have been forgotten, although one should always keep such events in mind not to step on a rake again.
The formal reason for the currency reform was the fight against counterfeit rubles, which were allegedly brought to the USSR from abroad to undermine the Soviet economy. As a matter of fact, the cause for the collapse of the economy of the world's first-ever country of workers and peasants was much more prosaic: a low level of labor productivity in the USSR. When the Reagan administration managed to agree with Saudi Arabia to derail global oil prices, the situation became very bad. The production of money was growing, but it was not backed with the industrial production of essential commodities. In short, guns and tanks were produced in excess, but ordinary butter was hard to find.
Under these conditions, Mr. Pavlov decided to stabilize the currency circulation in the Soviet Union by removing a part of money from workers to thus solve (partially) the problem of shortage of goods on the commodity market of the USSR. Moreover, on 14 January 1991, shortly before the start of the reform, Pavlov was promoted and became the Prime Minister of the Soviet Union.
Thus, the desire of the administration of the country to reform the financial and political system was officially enshrined at the highest level.
On January 22, 1991, Soviet President Mikhail Gorbachev signed the decree about the withdrawal of 50- and 100-ruble notes issued in 1961." The exchange of those notes was to be accompanied by a number of strong restrictions.
The period of exchange was a very short one - only three days, from 23 to 25 January, that is, from Wednesday to Friday. Secondly, not more than 1,000 rubles per person could be exchanged, whereas the exchange of other bills was considered in special commissions before the end of March 1991.
All in all, 51.5 billion rubles from 133 billion cash paper money was subject to the exchange, or about 39 percent of cash assets. The amount of cash available for withdrawal at the Savings Bank of the USSR (Sberbank) was restricted as well - people could debit not more than 500 rubles from their accounts.
To conduct the reform, new 50 and 100 ruble notes were issued in 1991. The notes from 1991 in denominations of 1, 3, 5, 10, 200, 500 and 1000 rubles were issued soon afterwards. Old notes of 1, 3, 5, 10 and 25 rubles from 1961, and all Soviet coins continued to circulate along with the new ones, issued in 1991.
However, "it was smooth on paper, but they forgot about the ravines that they had to cross." As a result, the government's plans were realized only in part. The confiscatory procedure allowed to withdraw 14 billion rubles in cash from circulation (approximately 10.5 percent of the total mass, or slightly less than 17.1 percent of the planned withdrawal of 81.5 billion). The surprise effect of the reform was supposed to help in the struggle against speculation, unearned income, counterfeiting, smuggling and corruption. In practice, though, the main consequence of the reform was the loss of people's confidence in their government.
The international image of the USSR suffered too, a lot. For example, there were hundreds of thousands of shuttle traders, who were conducting trade with China at that time, and the Chinese were always happy to accept Soviet 50-100-ruble notes as payment. It is clear that the Chinese could not exchange their capitals in this way in three days just. They lost a lot of money because of the reform. The buses, on which shuttle traders would come, would be papered from top to bottom with paper money. Needless to say that all prices on Chinese goods immediately rose for Soviet buyers. The attitude to Soviet shuttle traders in Poland and other countries was similar.
Having realized the grand failure of his reform, Pavlov pronounced his famous phrase. However unpopular "shock" reforms in the Soviet Union continued under his leadership. On April 2 (just as unexpectedly), new prices were set in the country; they were about three times higher than the old prices. The inflation rate made up 12-35 percent a month.
Afterwards, there was a coup in August 1991. Pavlov took part in it - he was one of its organizers. Here is what General Valentin Varennikov wrote on this subject: "On August 18 overnight, the country's leadership, given Gorbachev's position, was forced to create the National Emergency Committee. This type of government agencies could be created by two figures: either the President of the USSR or the chairman of the Cabinet of Ministers of the USSR. The head of the Cabinet of Ministers, Pavlov, claimed responsibility, set up a committee and became one of its members."
He became a member of the committee, but he never became an active member of it.
According to the certificate from the Central Clinical Hospital of the Cabinet of Ministers of the USSR, No.200703/218 from August 19, 1991, Mr. Pavlov was diagnosed with alcohol poisoning in the morning of August 19. The next day, on August 20, he was hospitalized in the Central Clinical Hospital with "hypertensive crisis".
On August 29, the former prime minister was transferred to Sailor's Silence Prison (Matrosskaya Tishina), where all other members of the Emergency Committee were already staying. Pavlov was subsequently released from prison and pardoned in February 1994 by the State Duma of the first convocation. Afterwards, he served as the president of Chasprombanka for one year. He left the post on August 31, 1995. Interestingly, the bank's license was revoked on 13 February 1996.
In 1996 - 1997 years, he worked as an advisor at Promstroibank, then worked as a member of a number of economic institutions. Afterwards, he suffered a heart attack, then a stroke, and on March 30, 2003, Valentin Pavlov died. He was buried at the Pyatnitskoye cemetery in Moscow, next to his late relatives.
As for Pavlov's reforms, many politicians and historians agree that they completely undermined people's confidence in the Soviet government. Those notorious reforms showed a significant influence on the course of subsequent events in the country. Pavlov's reforms are considered to be one of the main reasons for the growth of political separatism in 1991 among the leaders of the Soviet republics. They led to the strengthening of centrifugal feelings between them, which ultimately led to the collapse of the Soviet Union.
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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WE ALWAYS BELIEVE THE IMF
Yet another 'leaked report' this time tells us something we have suspected for a long time – not only concerning the IMF's underhand “plausible denial” way of communicating bad news. The story starts with an internal IMF report called 'confidential' which was 'leaked to a Wall St Journal contributor'. This is now standard practice for the IMF, growing rapidly, and easy to trace back to its handling, or mishandling of European bailouts starting with Greece. One example is this report http://online.wsj.com...? where the IMF 'concedes it made mistakes'. Original leakage of this report generated a mini-crisis among EU27 finance ministers, including harsh words from Economics Commissioner Olli Rehn.
The basic cause of dispute is always traceable to two things: the IMF's bad habit of overestimating economic 'recovery', and who pays what for the next or present bailout?
The present leaked report is technical and concerns seemingly-complex fiscal matters, but soon gets to the meat. This time the IMF starts with it's own economists' recognition they made a terrible mistake with their forecasts of the Greek economy 'bouncing back' . They forecast that forced reduction in Greek deficits would lead to 'only' a 5.5% reduction in the size of the Greek economy. But rather soon they were horrified to discover this was a preposterous claim and had to admit that Greek GDP has already suffered – the right word – a contraction of close to 18%.
Ergo, Greece will need more money as its economy contracts further and faster, as its skilled persons and its young people flee the country – told by the government to do so.
MUCH MORE DRAMATIC IMPLICATIONS FOR THE US
Daniel Amerman writing in 'Financialsense' 11 July points out that the latest IMF leak is not only damagingly truthful, or truthfully damaging about Europe's economic meltdown, but is at least as damaging for the USA. In fact more so.
As the IMF report says, not exactly in these words, since late 2008 a substantial chunk of the US economy has become "artificial". Another term we could use is “virtualized”. In brief, as the leaked report says, the USA's private sector basically imploded and has not recovered to this day.
Both IMF and national government statistics have either lied about, or miscalculated the economic impact of “fiscal tightening” or the reduction of government spending – or projected reduction as in the case of the US and most other OECD countries. The merest glance at the absurdly manipulated financial markets of today will show their present all-time highs obviously do not relate to the shrunken, downsized and dysfunctional real economy on which these markets squat. Since 2008, the “damage containment” operated in the US, Europe, Japan and other countries, which propels financial markets to literally uncharted highs, is dependent on running unsustainable government deficits.
None of these governments have the ability to pay down their snowballing debt, under ordinary circumstances. The Catch 22 is they have to pay it back.
As this present 'leaked IMF report' rather clearly says, the constant growth of government control and siphoning of national economic wealth in the USA, exactly as elsewhere, a process that has grown for decades but has exploded since 2008, has created an unrecognizable economy. The IMF's economists used the poetic word “transformed”. More particularly for the US economy, long-gone are the days when the US could lecture to Europeans and Japanese about “bloated government”, pointing out that in 2007 the share of Federal and State government spending in the US was only about 35% of GDP.
Something happened at the height of the financial crisis of 2008. The USA's private economy imploded by $1.3 trillion-per-year according to IMF economists. The crash was so intense it was at least as large as the 1929-31 sequence relative to GDP. However, US government statistics disguise (or lie about) the event to this day. They claim a $300 billion contraction, ironed out by bailouts and QE and nice speeches by Obama, terminating at latest in June 2009.
The accounting trick, or fake statistics – take your pick – was the $1 trillion increase in government spending. Per year.
From the previous 35%/65% split of government/private enterprise activity and spending in GDP, in 2007, the US leapt to a 43%/57% split. According to the IMF that remains the situation since 2009. This makes it obligatory to “re-interpret” the US economy and the claimed post-2009 recovery. This has more than a few implications for what happens next – as the leaked IMF report suggest and hints in its own coded language.
FISCAL FEEDBACK LOOP OR RATCHET
What happened in Greece in fact happened everywhere, from 2008. The only difference was the scale and the speed with which “fiscal feedback” operated, negatively, on the real economy.
The situation is extreme in Greece as a bookshelf of IMF reports, leaked or not, will show. As a direct consequence the so-called “austerity trap” was sure and certain to trigger – although the IMF actually had the gall to pretend this was not sure and certain. Also, Greece already had an oversized and over-fattened government sector, meaning the economic damage associated with reducing government spending - while increasing income and VA taxes - was so great that it could only swallow the enhanced revenues that were expected. The economy could only implode.
The IMF for its own reasons, including ideological, blithely imagined that when all the beneficiaries of government spending, including large numbers of “grey zone” semi-governmental and part-state enterprises and activities lost their income, they would somehow not stop spending and to an extent would go on paying taxes. The economists believed the contraction would be on a roughly one-for-one basis, that a 1% cut in government spending, for a country where say 50% of GDP is government spending, will only cause an 0.5% reduction in total spending. They did not include “multipliers”, that is positive feedback – intensifying the cause of the slowdown.
Overall, as shown dramatically in Greece, reduced employment further shrinks the economy causing more unemployment, less tax payments and bigger government deficits -- a perfect “reverse multiplier” to the claimed Keynesian-type multiplier where increased government spending is manna from heaven. The Greek economy contracted three times faster than the IMF's economists thought it would. Unemployment spiraled. Future growth can only be weak in a long-term crippled economy.
Daniel Amerman is a professional accountant, therefore able to closely analyze, and contradict the basic excuse used by US political deciders since 2008. The excuse is also used by the IMF. It pretends or claims that “before and after” conditions and performance of the economy are symmetrical – or remediable – by reducing government deficits and “restoring the economy” to its previous status. This can be summarized as calling the fiscal multiplier 1, meaning that in the US case, if government spending was reduced as a percentage of GDP to the pre-2008 level, there would only be a proportionate reduction of the size of GDP and a proportionate increase in unemployment rates.
There would not be a “Greek type implosion” due to multipliers. Amerman contests this “benign” or delusionary belief.
He argues that if the United States government were in fact to abandon its "artificial" economy and return to spending only its revenues, mostly from taxes, the much-higher-than-1 real fiscal multiplier would trigger. By his calculations of what would happen, in an event which could be forced on the US, not politically decided because it is “politically impossible”, there could easily be an 8% to 10% contraction of US GDP. Unemployment would at minimum soar to 25%.
UNREAL ECONOMIC FUTURE
The fiscal multiplier under any hypothesis is far above 1. That is, economies of the developed world which have had a sometimes-insidious but always permanent real growth of the government sector as a part of GDP – for decades – will be exposed to “unexpectedly sharp” economic contraction anytime they try to backtrack on government spending. Calling the multiplier a “ratchet” is more accurate because a decrease in government spending will have an unsymmetrical and stronger depressive effect, than the growth effect a same-percentage increase in government spending will have. Putting this yet another way, the economy becomes addicted to government spending – based on borrowing – and cannot adapt to the withdrawal pain, if state spending is cut.
Denying this “inconvenient truth” is the game of the IMF and the political and economic deciders of all the developed countries. This is another reason we are in uncharted waters.
At least as important, as Amerman also says, the coming forced reduction of government spending will truly be The Great Experiment. As we know, there is plenty of talk about reducing government spending – but when it actually happens as in Greece it produces dramatic and scary results. Greece is now truly in 1930s-style Great Depression territory, but uncharted because of the way it was thrown into economic meltdown. We literally do not know what will happen next, because so much of the economy is “virtualized”. We do not know if the “before situation” can be restored.
We can however use real world data from Greece, like the IMF's economists. This data underlines one important, possibly the most important point - that the Greek economy has been “transformed”, to use IMF jargon, but not for the better. For several months now, it is clear that its economy is in a type of void, where the role of government spending, at one and the same time, has to stop and cannot stop.
Amerman says exactly the same would happen to the US, or will happen to the US if it has to cut quickly. Basically, the only difference between Greece and the US is the second country is 30 times bigger. The probable fiscal multiplier-ratchet, in the US, is the same as the Greek one. Brave talk about QE Tapering is almost certainly talk – and not on the menu at all in Europe – because it firstly finances US government debt, long before any other claimed Keynesian miracles also produced by QE. Amerman concludes with a suggestion that the US might “limp through”, without collapse when (or if) government spending is reined in, but above all we are in uncharted waters, because a huge part of the economy is now “virtual”.
By Andrew McKillop
Contact: [email protected]
Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights
We live like gods, and we don't even know it.
We fly across oceans in airplanes, we eat tropical fruit in December, we have machines that sing us songs, clean our house, take pictures of Mars. Much the total accumulated knowledge of our species can fit on a hard drive that fits in our pocket. Even the poorest among us own electronic toys that millionaires and kings would have lusted for a decade ago. Our ancestors would be amazed. For most of our time on the planet, humans lived on the knife-edge of survival. A crop failure could mean starvation and even in good times, we worked from sun up to sundown to earn our daily bread. In 1600, a typical workman spent almost half his income on nourishment, and that food wasn't crème brûlée with passion fruit or organically raised filet mignon, it was gruel and the occasional turnip. Send us back to ancient Greece with an AK-47, a home brewing kit, or a battery-powered vibrator, and startled peasants would worship at our feet.
And yet we are not happy, we expected more, we were promised better. Our economy is a shambles, millions are out of work, and few of us think things are going to get better soon. When I graduated high school, in 1975, I assumed that whatever I did, I would end up somewhere in the great American middle class, and that I would live better than my father, who lived better than his. Today, my son doesn't have nearly the same confidence. Back in those days, you could go off to India for seven years, sit around in an ashram, smoke pot and seek spiritual fulfilment, and still come home and get a good job as a copywriter at Ogilvy and Mather. Today kids need a spectacular resume just to get an unpaid internship at IBM. Our children fear any moment not on a career path could ruin their prospects for a successful future. Back in the 1970s, pop stars sang songs about of the tedium and anomie of factory work. Today the sons of laid-off autoworkers would trade anything for that security and steady wage.
On the one hand, technology has made us all much more productive than we were 30 years ago. On the other, jobs have evaporated. Steel that used to require hundreds of men to manufacture now can be made with a dozen. A small businessman no longer needs to hire a secretary or a bookkeeper. Inexpensive software and a personal computer lets him do their jobs in a fraction of the time all by himself. The internet puts specialist knowledge that used to be almost impossible to find instantaneously on our laptops. The personal computer is doing to the office worker what the internal combustion engine did to the horse a century ago, making him obsolete.
Most of us are working harder, for less money and with no job security. My father and I both worked at the same large corporation but there was a difference, a difference determined by our respective eras: he was staff, I was freelance. When he got sick, the company found him doctors, paid his salary, put considerable effort into his recovery. Had I ever gotten sick, they would have simply forgotten my name. He yelled at the CEO habitually without any fear of losing his job. I mouthed off once to a middle manager and was never hired again. He had a defined benefit pension paid for by the corporation, the government gave me a tax break should I choose to save for my own retirement. The company had legal and moral responsibilities to him, which both he and they viewed as sacrosanct. All they owed me was a day's pay for a day's work. His generation gave their youth to a corporation, and the corporation took care of them in their old age. Today loyalty, if it exists at all, goes just one way. Many of my college buddies, are unemployed at 50, or earning less than they did ten years ago.
Most of us joke that we expect to fund our retirement by winning the lottery. Even investment bankers, who make more money than God, also work longer hours than galley slaves. Twenty-five-year-olds live with their parents; 50-year-olds borrow money from them. The conviction that each generation would live better than the last has evaporated. Emerging from the financial crisis won't be enough. For most of us, even the boom wasn't all that great. From 1950 to 1970, the typical American worker doubled his salary in real terms. Since then, even before the 2007 bust, inflation adjusted wages for the median male worker have actually gone down.
It is a paradox: our ever-growing productivity and our more insecure lives. Our understanding of economics is stuck in the past, in a world of scarcity, a world without advertising, where making things rather than selling them was the fundamental economic problem. Technology and the free enterprise system, to an extent that would amaze our ancestors, have solved much of the problem of supply. Our homes are more solid, our clothes more fashionable, our food tastier than our grandparents would have dreamed. In a world where even the residents of housing projects own more computing power than NASA did when they put a man on the moon, we cannot think that making stuff is the problem.
Supply side economics was invented by a journalist, a second rate academic, and two politicians (Jude Wallinski, Arthur Laffer, Dick Cheney, Donald Rumsfeld). Practical folk know better.
Ask any entrepreneur, and he will tell you making stuff, be it specialty steel, a low budget movie, saltimbocca a la romana, a collateralized loan obligation, a back massage, or an oil tanker is the fun part. It is selling it that keeps you up at night, breaks your heart, drives you into bankruptcy. That is why salesmen get paid more than engineers. Our problems today are purely problems of demand.
Picture an empty restaurant. The maître d' standing by the till, faking confidence, trying to will customers through the door. The waiters sweeping nonexistent breadcrumbs from immaculate tablecloths. The sauces are prepped, the fish purchased at dawn glisten, waiting to be pan-fried. A couple approaches, peruses the menu, looks through the window, and walks away. The chef runs numbers in his head, calculating how much money he owes, how he can manage to meet his next interest payment. All that preparation, all that investment, all that energy and potential, for nothing. Until a customer decides to spend his money, it is for naught. Marx knew it. Keynes knew it. More to the point, every businessman knows it. Lack of demand is the Achilles heel of modern capitalism.
There were no recessions in Stalinist Russia or in Carolinian Europe, instead, just generalized poverty. Command and feudal economies were not nearly productive enough for supply to ever dream of outstripping demand. Every grain of wheat was consumed, every iron pot in use. The classic image of Brezhnev's Russia is a line of shoppers, outside a store, making a cue while not knowing what is for sale. Advertising is redundant in a world of scarcity, where consumers will buy everything that is up for sale. Supply, not demand, was the problem back then. A recession, by definition, is a lack of aggregate demand, an unwillingness of firms and households to consume as much as the society can produce. It is a sign of the incredible capacity of capitalism that our fundamental problem is we make more stuff than we want to buy.
The empty restaurant, writ large, is the predicament of the world economy today. No war, no hurricane has destroyed the productive capacity we had during the halcyon days of the boom. But consumers are not spending, firms are not hiring, households are paying off debt, corporations are sitting on piles of cash, banks are cautious about lending, and governments are hoping to reduce their deficits. Seven years after the real estate bust, five years after the collapse of Lehman brothers, four years after the recession first officially ended, we still find ourselves stuck with high unemployment, slow growth, a stagnant economy.
Progressive economists, led by Paul Krugman, have argued persuasively that what the world economy needs now is government deficit spending to put money in workers' wallets, to stimulate consumption, to give the private sector a reason to invest and expand. This is the classic Keynesian solution, one proved by years of experience. Krugman tells us that the problem with the world economy now is lack of demand. Indeed, solving the problem of demand has been the essential capitalist dilemma of the past 80 years. As productivity rises, we can make more with the same level of inputs. Demand has to rise just as fast or the economy shrinks. For an economy to be at full employment, demand needs to equal the society's productive capacity. If it does not, then supply will shrink to meet demand and millions of workers will become redundant. To achieve full employment, we must find a way to instead push demand up to meet the economy's productive capacity. Since the Great Depression, we have solved this problem of demand three different ways: war, rising wages, and debt.
The Great Depression shocked the capitalist world. The first real recession occurred in 1820, in the aftermath of the Napoleonic Wars, but until the 1930s, no downturn had never been so deep nor so long. Radicals hoped it might be the end of capitalism. John Maynard Keynes, for all the distaste he evokes amongst free marketeers, saw his task as saving capitalism from itself. According to conventional models, long-term unemployment was inconceivable. Most economists at the time believed that markets, if left alone would inevitably self-equilibrate. Unemployment would drive wages down until, at some certain level, workers would be so cheap to hire that once again, men would be put to work and growth could return.
Keynes saw the fallacy in this reasoning. He recognized that workers, after all, are also consumers. Drive down their wages, you also drive down their ability to purchase goods and services. Lowering wages was no panacea; it would just knock demand even further down. And since entrepreneurs base their decisions to invest and hire on whether sales are increasing, lower wages would lower sales, which would lower investment and so just increase misery without raising employment. It is a fallacy of composition. If I reduce my workers' wages, I increase my own profits, but if everybody else also lowers the wages of their workers, sales will fall for all. From this misery some sort of equilibrium would emerge, but Keynes insisted it would not be a full employment equilibrium.
When Roosevelt was inaugurated in 1933, "one third of the nation was ill-clothed, ill-housed, ill-fed" because close to one third of the nation was also unemployed. Were they all working, they could also be clothed, housed, fed. Conventional economics, what Keynes called the "Treasury View," believed that supply should be driven down to the level of demand. Keynes and Roosevelt figured why not drive demand up to the level of supply instead? Combining idleness with scarcity was criminal. Instead, demand should be stimulated to meet the economy's productive capacity.
World War II finally ended the Depression and proved Keynes right. New Deal deficit spending was too small, too timid to restore the animal spirits of entrepreneurs battered by years of debt deflation. War is the least productive, most destructive of human activities with negative economic benefit, but the US government, by printing money and using it to hire workers knocked unemployment, which had been close to 20 percent in 1938 down to barely over 1 percent six years later.
It is important to understand that making bombs and blowing up cities is not what shrunk unemployment. It was the printing of money, the hiring of workers, the creation of demand by deficit spending. Had the US government spent as much as it had on fighting Hitler on promoting the arts, or building schools or even digging ditches and then filling them, it would have had just as beneficial an economic effect as did the war. Blowing stuff up is the opposite of investment. From an economic point of view, bombs and bullets are purely consumption goods, not nearly as beneficial as education or infrastructure. The reason defense spending has become the common means of stimulating demand is largely political. Conservatives who cannot stomach deficit spending for any other reason are willing to forgo their hard money prejudices in time of national emergency.
When the war ended, policy makers feared that without the stimulus of defense spending, the United States and the world would sink back into recession. The end of wars had been the cause of economic slowdowns in 1818, after the Napoleonic Wars, and in 1919, after World War I, and indeed, 1946 saw the US GDP shrink slightly. But the economy soon recovered and for the next 25 years, the world experienced the greatest growth in its history. The fundamental source of Golden Age growth was rising incomes that brought millions out of poverty and into the middle class. Their demand for luxuries that were fast becoming necessities created a mass consumer market, and corporations grew rapidly by satisfying it. In 1939, 25 percent of Americans didn't have running water, only 65 percent had indoor toilets, and none had television.
The rich grew richer during the Golden Age, but so did everyone else. Golden Age policies of progressive taxation, unionization, regulation are the opposite of what conservatives advocate today, but they were much more successful than the supply side policies that have dominated our more inequitable era. Inflation adjusted GDP growth was greater in the 1950s, 1960s, and even 1970s, than it ever has been since.
In the 1970s, for a variety of reasons, corporate profitability went south. The positive feedback loop that raised the income of workers and businessmen alike fell apart. The Golden Age depended on capital and labor cooperating, and both profiting. In the 1970s, their social pact fell apart. The inflation of that era can be seen as capital and labor each trying to shift the cost of oil price hikes to the other. At first, organized labor won that battle and grabbed a larger share of the pie. Workers, especially organized workers did well in the 1970s. Wage growth, even taking inflation into account, was greater than it ever has been since. Capital, on the other hand, had a terrible decade. From 1966 to 1982, the stock market fell more than three quarters in real terms. Bonds did even worse. With inflation greater than nominal interest rates, putting money into the bank meant that after a year you had less money than you put in. The 1970s were a bad decade to be rich. No wonder John Lennon sang about working class heroes. No wonder the children of millionaires dressed like farmers or factory workers. In the 1970s, a union cameraman made more money than most stockbrokers. But the glory days of labor were about to evaporate.
In 1980, capital struck back.
In response to a seemingly inexorable inflationary spiral in which rising goods prices sparked cost of living wage hikes, which naturally increased the prices of goods and services, Federal Reserve Chairman Paul Volcker raised interest rates provoking the most brutal recession in 50 years. Unemployment soared, and so the Volcker and Thatcher recessions broke the back of inflation. When workers fear for their jobs, they no longer demand higher wages. In June 1980, when Volcker started raising interest rates, US inflation was over 14 percent. Since then, it has averaged around 2 to 3 percent. Simultaneously, both in the United States and the United Kingdom, the government attacked the basis of union power. When Reagan fired the obstreperous air traffic controllers and planes did not fall out of the sky, he shattered the confidence of organized labor. If we could do without trained air traffic controllers, then what is the bargaining power of unionized truck drivers, construction workers, steel workers, cameramen?
And so, starting during the recession of the early 1980s, corporations were able to reduce real wages, fire workers, get rid of staff and replace them with freelancers. Power on the shop floor shifted from the unions to management. Risks that had been absorbed by the corporation (you get sick you still get paid) now became the worker's responsibility (if you are freelance, you get no vacation, you have no job security, and if you get sick and you don't work, your employer has no responsibility to you). On a company by company level, this policy was remarkably successful. Cutting labor costs, if it does not affect output, goes straight to the bottom line. Lower wages for the worker mean higher profit for the entrepreneur. The decline in corporate profitability that signalled the end of the Golden Age was reversed and even today, in the midst of economic stagnation, corporate profits remain strong.
But on a society wide level, cutting wages creates as many problems as it solves. Your workers, after all, are my customers, and vice versa. Lower their wages, they will spend less in my store. For an economy to grow, demand needs to grow as well. For the past 30 years, we have solved the problem of creating demand in a world of stagnant wages by going ever deeper into debt. In 1965, private sector interest payments as a percentage of GDP were around 5 percent. At the top of the bubble, they were close to 25 percent.
Going into debt allowed families to keep consuming more even as their wages did not grow. This willingness to absorb higher levels of debt meant that lower wages did not mean lower demand. This required a profound change in attitudes toward borrowing. Golden Age workers, children of the Great Depression, had a horror towards spending more than they earned. They would rather do without than place themselves in a situation in which they might have difficulty repaying their debts. By the 1980s, this attitude evaporated. Saving became passé, having huge amounts of credit card debt nothing to be ashamed off. If the origin of capitalism, according to Max Weber, was in the willingness of Protestant entrepreneurs to forgo immediate gratification in order to save and invest in productivity enhancing machinery, today capitalism requires us to spend more than we make. Forgoing immediate gratification can be disastrous to the economy, thus George W. Bush's suggestion to the American people after 9/11 to "go out and shop".
That today's youngsters want to spend more than they earn is not that surprising. What does require an explanation is the reason banks were eager to lend. The answer, and the key to the growth paradigm of the period 1982-2007, is asset price inflation. Since 1971, when Richard Nixon severed the final link between money supply and gold, the quantity of money in the world has skyrocketed. According to the standard textbooks, this should have caused an explosion of inflation. It hasn't because of globalization. Globalization is essentially a deflationary phenomenon. It destroys pricing power. Corporations can't charge more for their goods because a factory in China can make it cheaper. Meanwhile increasing job insecurity means that workers cannot demand higher wages.
But all that money coursing through the world financial system has to go somewhere and despite the lack of goods and wages inflation, it sparked inflation in real assets. Houses on my block in the United Kingdom that cost £3000 in 1970 are now going for over £1.5 million. Companies, which traditionally had a price to earnings ratio of 8, soared to over 45. The rising value of real assets did have a wealth effect (if your house doubles in value, you feel richer and are more likely to splash out), but more important, it means the value of collateral goes up.
When you borrow money, you have to give the bank collateral, the right to take something you own should you miss your interest payments. As collateral goes up, banks are more willing to lend. Yes, bankers would like to believe you will earn sufficient income to repay your loan, but what gives them confidence to lend you money is the certainty that if you default on your payments, they have something of equal or greater value that they can take from you and sell.
So the chain of causality goes like this: globalization - low inflation - central banks set low interest rates - easy money - asset price inflation - strong collateral - more loans - easy money - asset price inflation. And it all adds up to debt-fuelled consumption.
From 1982 to 2007 when the last bubble finally popped, it was debt-fuelled consumption that allowed the global economy to grow. If an American did not max out his credit card, a factory in China closed. With wages stagnating, wage growth could not keep demand growing at the pace of supply.
One common, and naïve, notion blames Alan Greenspan for the financial crisis. This argument states that had he not cut interest rates in the wake of the dot-com bust, he wouldn't have sparked the real estate bubble and so the subsequent bust could have been avoided. But had Greenspan kept rates high after 2000, then the Great Recession would have just occurred seven years earlier. It was the central bankers complicity in creating bubble after bubble that allowed the perpetual motion debt machine to keep rolling on for as long as it did.
August 9, 2007 was the moment greed turned to fear, the appetite for debt disappeared, and the asset price inflation/debt fuelled consumption paradigm finally fell apart. Two years of falling house prices infected bank balance sheets. As foreclosures rose and a handful of hedge funds specializing in mortgage backed securities went under, wholesale lenders became frightened that these securities weren't actually worth as much as the banks claimed. Fearing that their counterparty banks were undercapitalized, wholesale lenders stopped rolling over their short term deposits as they came due. This "run on the bank" by wholesale lenders rippled through the system. Bank balance sheets had to shrink. Instead of lending more, banks instead had to call in existing loans. Households accustomed to spending more than they earned finally had to cut expenses in order to repay debts incurred in happier days.
When you are strapped for cash and owe more than you can afford, reducing your expenditures is a sensible response. Unfortunately, when everyone is cutting back, the economy slows. When consumers stop spending, firms have no reason to invest in increased capacity, no reason to hire more workers. And when workers fear for their jobs, they cut consumption even more. In 2007, the debt-based feedback loop that had kept the economy ticking went into reverse.
The specific details of the housing bust and its effect on bank balance sheets are important and illuminating, but the bigger truth is that we had dodged a similar bullet several times before. We might have dodged it again in 2007, as central banks used the same tricks that calmed financial markets before, but this time, the wholesale money markets that lent money to the banks were not reassured, and when the banks had less money to lend, they had to stop extending more credit.
"Bang" - the party was over.
The interaction between falling house prices, mortgage-backed securities, and third party repo agreements was the trigger of this disaster, but the larger lesson is that we are in this mess today because our post-scarcity world economy cannot produce sufficient effective demand required to keep everybody employed. From 1938 to 1945, war created that demand. From 1945 to 1973, prosperity, rising wages, and advertising created that demand. From 1982 to 2007, debt fuelled consumption financed by ever rising asset prices created that demand. In 2007, as fear roiled the markets, banks stopped lending, and when we could no longer spend beyond our means, the economy collapsed.
The most important thing to remember about the faux-prosperity of the last 30 years is that it was manufactured on the basis of paper profits. If my house was worth £3000 in 1973 and £1.5 million in 2012, it is still essentially the same house and gives me the same pleasure to live in. If we could manufacture demand by making bombs and if we could manufacture demand by making houses quadruple in price, then we can manufacture demand in other ways, perhaps more satisfying ways as well.
What is to be done?
Our policy makers are desperately hoping that ultra-low interest will spark a new asset price bubble and we can return to the fool's paradise of 2005, right before house prices started falling in Nevada and mortgage-backed securities started stinking up bank balance sheets. Not only is this looking unlikely, it also ignores that debt fuelled consumption didn't give us strong or equitable growth. Remember, real GDP growth during the bubble years was lower than it was even the unlamented 1970s.
In the short run, the first thing we should do to emerge from this debacle is to increase government deficits and focus this spending on infrastructure and education. These investments in our future create jobs today, and by putting money in workers wallets, give the private sector reason to hire and invest in increasing capacity.
This is a no brainer.
Pundits and economists enamored with austerity argue against this policy and insist that firms require lower government deficits before they have confidence to invest. This shows a breathtaking lack of understanding of the business world. Only one thing makes entrepreneurs expand capacity and that has nothing to do with government tax policy. A businessman will hire more workers and invest when his inventory is shrinking, specifically, when he is able to sell more than he is able to produce. If stock is sitting on his shelf, he instead fires workers, no matter what his tax rate. Only someone living in Washington who has never run a business could assume that entrepreneurs are fixated on the possibility of future tax hikes. Of course, like all of us, businessmen would rather pay less tax, but what makes employers hire is the realization that they cannot meet the demand for their goods and services with existing staff. If they do not expand production, customers willing to buy their goods will have to leave the store empty handed and spend their money instead at a competitor's shop.
The need for increased government spending is basic Economics 101. Gross national product equals consumption plus investment plus government spending. If households are consuming less and firms are investing less, government has to increase spending is the economy is not to shrink.
Austerity has been a dreadful failure. A return to sensible Keynesian policies is the first step to restoring prosperity.
But in the longer run we need to figure out a better way to stimulate demand than either war or going into debt to buy more stuff. Personally, I favor government spending targeted on making the lives of citizens richer and more cultured. Some may say, this is elitist of me, to which I reply, what is wrong with elitism? Call me bourgeois, but Tolstoy is better than Adam Sandler and playing the piano more uplifting than playing Call of Duty 2. Consumer capitalism in its current form nurtures our basest urges, from unseemly spending to internet porn. From that commercial perspective, all spending is equal, all spending is good, and YouPorn is as valid as Shakespeare.
I would want government to counteract this "bread and circuses" perspective with a Reithian attitude. Let us spend on education and on high-speed rail, but let us also spend on culture. The Works Progress Administration created beautiful murals in post offices all over America. This is a model we should expand on. If dance classes for housewives seem silly, then what is wrong with skate parks and concerts and playgrounds and parties and parades? The actual form of spending, though, is merely up to our taste. The key is to create demand to match the productive capacity of the economy. How we decide to do it should be democratically determined. That we should do it is just sound economics.
"You never want a serious crisis to go to waste," said Rahm Emanuel, President Obama's chief of staff, right before he let the financial crisis go to waste. The past 30 years, even before the popping of the latest bubble, were a period of mediocre growth, stagnant wages, and rampant inequality. We can do better. The first step is to open our minds to the implications of post scarcity economics.
Tom Streihorst is a filmmaker and writer who publishes articles on finance and economics on both sides of the pond.
The OECD has stated in a report commissioned by the G20 that there will be “global tax chaos” in the next few years due to falling tax revenues from multinational companies around the world. Perhaps we could have saved a few thousand dollars by not commissioning the OECD report, since we could have all told them that was going to happen. It really does come to something when we waste the money that we don’t have on reports that we don’t need. Sometimes people get money for old rope it seems. But one other adage is also true: you can’t teach old dog new tricks; the old dog being the multinationals. They are hardly likely to suddenly start paying more tax, are they? Although, maybe someone somewhere will commission a report to see if they will and then discover that they won’t after all. Oh well!
G20 Meeting: Tax!
It’s not just that the report has been commissioned when it was probably needless to say more than common knowledge around the world, but also that it has been hailed as a ‘long-awaited’ report that will be used this weekend as the G20 Finance Ministers continue to meet in Moscow along with Central Bank Deputies. They met yesterday and the meetings will continue throughout the day, ending in a Finance-Ministers’ and Central-Bank Governor s’ Meeting onSaturday July 20th.
The report by the OECD states that there needs to be increased clamping down in corporate tax practices and says that this will be “a turning –point in the history of international co-operation on tax”. In the G8 summit in June 2013, Prime Minister of the UK David Cameron had said that he wanted to crack down on tax havens and bring them into line with other countries, eradicating tax avoidance.
Although the report by the OECD is rather more an analysis of the situation than a solution-finding aid (there are very few actual, concrete proposals that are made), it does state the following:
- Companies should be made to publish tax-avoidance plans so that they can be looked into by authorities who should determine whether they are acceptable or not. Although, that seems rather strange since companies such as Amazon and Google that are writing off their tax are doing so through the exploiting of loopholes that we have allowed to exist still today in an antiquated system.
- Tax havens need to be reformed as they provide for unfair situations for some multinationals (with no suggestion as to how to reform the situation. Any ideas?).
- Economic activity must be in line with generation of income. At the moment, through subsidiaries, multinationalsare able to disassociate income from economic activity by using low-tax countries. On-line companies would be forced to pay tax in countries where the sales are generated and not where they are headquartered.
- Multinationals must be requested to publish all costs (including license expenses, interest, administrative costs and salaries).
- International rules allow companies today to have a digital presence in a country but not pay tax there due to a lack of both a legal framework encompassing that and also lack of legal binding to that country’s economy. This must be changed.
The OECD report has stated that there is a need for “urgent reform”, but also that bilateral agreements between countries must be made into multilateral frameworks that will solve the tax avoidance problem in the world. It also states that "the way in which multinationals have greatly minimised their tax burden has led to a tense situation in which citizens have become more sensitive to tax fairness issues."
Reports from the meeting in Moscow have said that the Finance Ministers of the G20 and the Governors of the Central Banks believe that there will be some breakthroughs in dealing with tax evasion in the years to come, although without actually stating how, when or where. But, it also states that eradicating tax evasion will take a long time. But, thereby hangs the whole crux of the matter. The downfall of administration is that it is exceedingly long and procrastinated. It doesn’t live in the real world in which people communicate and take decisions at a million miles a second across the planet. The administration we are engulfed in is drawn-out and exceedingly slow. The hare and the snail. But, admittedly, the snail won the race in the end. We shall see if that happens this time. There are many that believe that by the time the Finance Ministers of the G20 and the Governors of the Central Banks have come to any sort of agreement it will be a few years down the road. Then we shall have to wait for those plans to be implemented and show results. That will be another couple of years. By that time, the companies that are doing the diddling and the tax dodgers will have dodged their way into another cushy number that will be a loophole that the admin guys failed to see. But, one saving grace is that the admin guys that are in Moscow today will not be the admin guys of times to come, so the new guys will be able to point the figure and say “I told you so”.
The US administration stated that it would not allow for anything to stand in the way of development of fast-growing US multinationals such as Google and Amazon, for instance. The US agreed that there was a need to bring tax regulations into the 21st century and update antiquated 1920s international tax agreements. But, moderate change was requested in the days before the G20 summit opened.
We shall see after Saturday’s meeting in Moscow if the Finance Ministers of the G20 and the Governors of the Central Banks are able or even willing to come to some sort of agreement and find common ground that will be beneficial to the average people in their countries, or if, on the other hand, they are going to be guided by competitive self-interest in maintaining the system as it is.
Originally posted: Global Tax Chaos Coming
By George Friedman
In June 1942, the bulk of the Japanese fleet sailed to seize the Island of Midway. Had Midway fallen, Pearl Harbor would have been at risk and U.S. submarines, unable to refuel at Midway, would have been much less effective. Most of all, the Japanese wanted to surprise the Americans and draw them into a naval battle they couldn't win.
The Japanese fleet was vast. The Americans had two carriers intact in addition to one that was badly damaged. The United States had only one advantage: It had broken Japan's naval code and thus knew a great deal of the country's battle plan. In large part because of this cryptologic advantage, a handful of American ships devastated the Japanese fleet and changed the balance of power in the Pacific permanently.
This -- and the advantage given to the allies by penetrating German codes -- taught the Americans about the centrality of communications code breaking. It is reasonable to argue that World War II would have ended much less satisfactorily for the United States had its military not broken German and Japanese codes. Where the Americans had previously been guided to a great extent by Henry Stimson's famous principle that "gentlemen do not read each other's mail," by the end of World War II they were obsessed with stealing and reading all relevant communications.
The National Security Agency evolved out of various post-war organizations charged with this task. In 1951, all of these disparate efforts were organized under the NSA to capture and decrypt communications of other governments around the world -- particularly those of the Soviet Union, which was ruled by Josef Stalin, and of China, which the United States was fighting in 1951. How far the NSA could go in pursuing this was governed only by the extent to which such communications were electronic and the extent to which the NSA could intercept and decrypt them.
The amount of communications other countries sent electronically surged after World War II yet represented only a fraction of their communications. Resources were limited, and given that the primary threat to the United States was posed by nation-states, the NSA focused on state communications. But the principle on which the NSA was founded has remained, and as the world has come to rely more heavily on electronic and digital communication, the scope of the NSA's commission has expanded.
What drove all of this was Pearl Harbor. The United States knew that the Japanese were going to attack. They did not know where or when. The result was disaster. All American strategic thinking during the Cold War was built around Pearl Harbor -- the deep fear that the Soviets would launch a first strike that the United States did not know about. The fear of an unforeseen nuclear attack gave the NSA leave to be as aggressive as possible in penetrating not only Soviet codes but also the codes of other nations. You don't know what you don't know, and given the stakes, the United States became obsessed with knowing everything it possibly could.
In order to collect data about nuclear attacks, you must also collect vast amounts of data that have nothing to do with nuclear attacks. The Cold War with the Soviet Union had to do with more than just nuclear exchanges, and the information on what the Soviets were doing -- what governments they had penetrated, who was working for them -- was a global issue. But you couldn't judge what was important and what was unimportant until after you read it. Thus the mechanics of assuaging fears about a "nuclear Pearl Harbor" rapidly devolved into a global collection system, whereby vast amounts of information were collected regardless of their pertinence to the Cold War.
There was nothing that was not potentially important, and a highly focused collection strategy could miss vital things. So the focus grew, the technology advanced and the penetration of private communications logically followed. This was not confined to the United States. The Soviet Union, China, the United Kingdom, France, Israel, India and any country with foreign policy interests spent a great deal on collecting electronic information. Much of what was collected on all sides was not read because far more was collected than could possibly be absorbed by the staff. Still, it was collected. It became a vast intrusion mitigated only by inherent inefficiency or the strength of the target's encryption.
The Pearl Harbor dread declined with the end of the Cold War -- until Sept. 11, 2001. In order to understand 9/11's impact, a clear memory of our own fears must be recalled. As individuals, Americans were stunned by 9/11 not only because of its size and daring but also because it was unexpected. Terrorist attacks were not uncommon, but this one raised another question: What comes next? Unlike Timothy McVeigh, it appeared that al Qaeda was capable of other, perhaps greater acts of terrorism. Fear gripped the land. It was a justified fear, and while it resonated across the world, it struck the United States particularly hard.
Part of the fear was that U.S. intelligence had failed again to predict the attack. The public did not know what would come next, nor did it believe that U.S. intelligence had any idea. A federal commission on 9/11 was created to study the defense failure. It charged that the president had ignored warnings. The focus in those days was on intelligence failure. The CIA admitted it lacked the human sources inside al Qaeda. By default the only way to track al Qaeda was via their communications. It was to be the NSA's job.
As we have written, al Qaeda was a global, sparse and dispersed network. It appeared to be tied together by burying itself in a vast new communications network: the Internet. At one point, al Qaeda had communicated by embedding messages in pictures transmitted via the Internet. They appeared to be using free and anonymous Hotmail accounts. To find Japanese communications, you looked in the electronic ether. To find al Qaeda's message, you looked on the Internet.
But with a global, sparse and dispersed network you are looking for at most a few hundred men in the midst of billions of people, and a few dozen messages among hundreds of billions. And given the architecture of the Internet, the messages did not have to originate where the sender was located or be read where the reader was located. It was like looking for a needle in a haystack. The needle can be found only if you are willing to sift the entire haystack. That led to PRISM and other NSA programs.
The mission was to stop any further al Qaeda attacks. The means was to break into their communications and read their plans and orders. To find their plans and orders, it was necessary to examine all communications. The anonymity of the Internet and the uncertainties built into its system meant that any message could be one of a tiny handful of messages. Nothing could be ruled out. Everything was suspect. This was reality, not paranoia.
It also meant that the NSA could not exclude the communications of American citizens because some al Qaeda members were citizens. This was an attack on the civil rights of Americans, but it was not an unprecedented attack. During World War II, the United States imposed postal censorship on military personnel, and the FBI intercepted selected letters sent in the United States and from overseas. The government created a system of voluntary media censorship that was less than voluntary in many ways. Most famously, the United States abrogated the civil rights of citizens of Japanese origin by seizing property and transporting them to other locations. Members of pro-German organizations were harassed and arrested even prior to Pearl Harbor. Decades earlier, Abraham Lincoln suspended the writ of habeas corpus during the Civil War, effectively allowing the arrest and isolation of citizens without due process.
There are two major differences between the war on terror and the aforementioned wars. First, there was a declaration of war in World War II. Second, there is a provision in the Constitution that allows the president to suspend habeas corpus in the event of a rebellion. The declaration of war imbues the president with certain powers as commander in chief -- as does rebellion. Neither of these conditions was put in place to justify NSA programs such as PRISM.
Moreover, partly because of the constitutional basis of the actions and partly because of the nature of the conflicts, World War II and the Civil War had a clear end, a point at which civil rights had to be restored or a process had to be created for their restoration. No such terminal point exists for the war on terror. As was witnessed at the Boston Marathon -- and in many instances over the past several centuries -- the ease with which improvised explosive devices can be assembled makes it possible for simple terrorist acts to be carried out cheaply and effectively. Some plots might be detectable by intercepting all communications, but obviously the Boston Marathon attack could not be predicted.
The problem with the war on terror is that it has no criteria of success that is potentially obtainable. It defines no level of terrorism that is tolerable but has as its goal the elimination of all terrorism, not just from Islamic sources but from all sources. That is simply never going to happen and therefore, PRISM and its attendant programs will never end. These intrusions, unlike all prior ones, have set a condition for success that is unattainable, and therefore the suspension of civil rights is permanent. Without a constitutional amendment, formal declaration of war or declaration of a state of emergency, the executive branch has overridden fundamental limits on its powers and protections for citizens.
Since World War II, the constitutional requirements for waging war have fallen by the wayside. President Harry S. Truman used a U.N resolution to justify the Korean War. President Lyndon Johnson justified an extended large-scale war with the Gulf of Tonkin Resolution, equating it to a declaration of war. The conceptual chaos of the war on terror left out any declaration, and it also included North Korea in the axis of evil the United States was fighting against. Former NSA contractor Edward Snowden is charged with aiding an enemy that has never been legally designated. Anyone who might contemplate terrorism is therefore an enemy. The enemy in this case was clear. It was the organization of al Qaeda but since that was not a rigid nation but an evolving group, the definition spread well beyond them to include any person contemplating an infinite number of actions. After all, how do you define terrorism, and how do you distinguish it from crime?
Three thousand people died in the 9/11 attacks, and we know that al Qaeda wished to kill more because it has said that it intended to do so. Al Qaeda and other jihadist movements -- and indeed those unaffiliated with Islamic movements -- pose threats. Some of their members are American citizens, others are citizens of foreign nations. Preventing these attacks, rather than prosecuting in the aftermath, is important. I do not know enough about PRISM to even try to guess how useful it is.
At the same time, the threat that PRISM is fighting must be kept in perspective. Some terrorist threats are dangerous, but you simply cannot stop every nut who wants to pop off a pipe bomb for a political cause. So the critical question is whether the danger posed by terrorism is sufficient to justify indifference to the spirit of the Constitution, despite the current state of the law. If it is, then formally declare war or declare a state of emergency. The danger of PRISM and other programs is that the decision to build it was not made after the Congress and the president were required to make a clear finding on war and peace. That was the point where they undermined the Constitution, and the American public is responsible for allowing them to do so.
Defensible Origins, Dangerous Futures
The emergence of programs such as PRISM was not the result of despots seeking to control the world. It had a much more clear, logical and defensible origin in our experiences of war and in legitimate fears of real dangers. The NSA was charged with stopping terrorism, and it devised a plan that was not nearly as secret as some claim. Obviously it was not as effective as hoped, or the Boston Marathon attack wouldn't have happened. If the program was meant to suppress dissent it has certainly failed, as the polls and the media of the past weeks show.
The revelations about PRISM are far from new or interesting in themselves. The NSA was created with a charter to do these things, and given the state of technology it was inevitable that the NSA would be capturing communications around the world. Many leaks prior to Snowden's showed that the NSA was doing this. It would have been more newsworthy if the leak revealed the NSA had not been capturing all communications. But this does give us an opportunity to consider what has happened and to consider whether it is tolerable.
The threat posed by PRISM and other programs is not what has been done with them but rather what could happen if they are permitted to survive. But this is not simply about the United States ending this program. The United States certainly is not the only country with such a program. But a reasonable start is for the country that claims to be most dedicated to its Constitution to adhere to it meticulously above and beyond the narrowest interpretation. This is not a path without danger. As Benjamin Franklin said, "They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety."
"Keeping the NSA in Perspective is republished with permission of Stratfor."
Further Reading: http://en.wikipedia.org/wiki/The_Century_of_the_Self