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Do you want a recovery? Let the foreign banks fail

By LUIS MIRANDA | THE REAL AGENDA | OCTOBER 24, 2012

Although the financial crisis is said to have begun in 2008, its actual inception started many years before. As explained yesterday, the so-called recovery that almost every politician says governments are seeking is a sham. There are no plans drawn to have a recovery of the kind spoken of on the main stream media. In fact, it is totally the opposite.

It is true; the crisis that we are experiencing is the worst since the Great Depression of the 1930’s, but the conditions that created the crisis are the same that have existed for the past century. The system of creating money out of thin air enables the money makers to inject fake capital into economies, in what is called investments. After the economies get addicted to ‘free’ quick money to build their businesses, the issuers of the fake money take it away quickly or demand immediate return on those ‘investments’, which causes the decapitalization of those economies and consequently their collapse.

The causes of what seemed to have unraveled in 2008 began at the start of the 20th century with the adoption of the debt-based economic model. According to its precepts, governments yield the power to issue money to a group of international bankers who issue the it on behalf of governments around the world at a profit of as much as 30 percent or so. The interests accrued due to the issuance of the money — which is given to governments as a credit — is charged on those governments’ credit card and are immediately added to the tabs of the people who work to sustain government spending.

In a sense, the debt-based economic model originated on the irresponsibility from the part of the bureaucrats who manage the  government. Instead of spending the people’s money responsibly, the bureaucrats thought it was a better idea to borrow cash at immense interest rates, rather than decrease spending. Then, they decided to accept bribes and advice from international bankers to finance their out of control expenditures while charging the interests of the debt on the working classes.

The same system initiated in 1913, is still used today everywhere there is a central bank. Whether the bank is a private entity or an agency of the government is irrelevant. The bureaucrats elected to represent the people borrow money from the IMF and the World Bank, for example, in exchange for adopting specific policies that will guarantee the international bankers their ownership of the labor force for many generations into the future.

The money paid by working people to the central governments is not used to improve the communities where they live. They go to pay the interests on the debt acquired by the same central government in the name of the people. The type of improvements promised by politicians during their political campaigns are not paid with taxpayer money, but with the cash borrowed from the international bankers. The bankers arrive to nation-states and offer loans to governments that do not have enough liquidity to carry out the promises made during the political campaign. The government accepts all the conditions on the loan contract and effectively sign away sovereignty to the money makers.

The collapse of the kind the world is experiencing now is the last step of the plan that bankers have put together and implemented to become the sole owners of everything out there. The important difference between previous crises and the current one is that this may just be the last time bankers need to use their plan. That is because this time the bankers may simply walk away with everything, so no more manufactured crises will be needed.

The question is then, how do we stop the bankers from doing the same they’ve done in Greece, where they’ve looted it all? It is very easy, actually. All of Europe and the rest of the world needs to do the same that Iceland did. Instead of saying that international financial institutions were too big to fail, Iceland decided to kick them out. As it turns out, around 90 percent of the debt held by the Icelandic government was debt created by the banks and only 10 percent was actual debt incurred into by the people. After that fact was carefully determined, Iceland decided to take the other path towards a real recovery.

Believe it or not, Iceland decided to let the banks fail, which is exactly the opposite of what was done in Italy, France, Greece, Spain, England and the United States, to cite a few countries. Everywhere else where the crisis touched international banks, governments decided that it was a bad idea to tell the banks to get out of their countries and to take their debt with them. Instead, they printed more fake money to ‘rescue’ those banks and passed the debt to the people, who will have to pay interests on that debt for generations to come. This move not only did not solve the problem because the only thing it accomplished was to increase the debt, but also worsened economic conditions as no real solutions to the crisis were enacted.

At the beginning of 2008, the banks operating in Iceland owed the equivalent of 6 times the country’s GDP. The government there decided to nationalize the 3 most important debtor banks, which caused the devaluation of the local currency — the króna — by 85 percent. This seemed to spell trouble for Iceland, but contrary to common wisdom it actually help the nation have a real recovery while it maintained much of its independence and sovereignty. The government went bankrupt by the end of the year, but the country avoided having to make the citizens responsible for the debt generated by the international banks.

Along with the devaluation of the króna, Iceland experienced soaring inflation immediately after the declaration of bankruptcy. Meanwhile, the government decided to take all monies and deposit them in the recently nationalized banks in order to start all over again. The move by the Icelandic government meant a short period of real pain, but also gave the opportunity to the people there to start fresh, with no debt and with spending under control.

By 2010, just two years after the declaration of bankruptcy and the nationalization of the banks, Iceland experienced its first signs of economic growth, which marked the beginning of the recovery. By letting the international banks fail, Iceland not only punished irresponsible bankers for their overreach, but also prevented their people from becoming slaves to the banks. The country also admitted to having some real debt — a tiny portion of the total — and is now working on a successful path to a full recovery.

The lesson we get from all this is the following: We cannot fight fire by dumping gasoline on it. If the origin of the current crisis is the debt-based economic system, no solution will emerge when all we do is create more debt to pay the existing one. The reason why most countries decided to choose the issuance of more debt — as nations in Europe are doing now — is because their politicians are bought and paid for by the bankers to make that decision. If the opposite is done, that is, if the debt generated by the banks is rejected and they are left to fail, we will have many other successful recoveries. It is so simple that even Paul Krugman understands it.

So if you want your country to be free from fake money and fake debt, ask your government to renounce the debt-based development model, which is not even a development model. If all you want is a real recovery, let the banks fail.

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Jose Dirceu Convicted in Mensalão Corruption case

But the Brazilian Court abstained itself from even hearing evidence that may have incriminated former Brazilian president Luis Inacio da Silva.

By LUIS MIRANDA | THE REAL AGENDA | OCTOBER 10, 2012

The Brazilian Supreme Court convicted Jose Dirceu, a minister of former President Lula da Silva, for bribery in the process called Mensalão.

Along with Dirceu were also sentenced the then president of the Workers Party (PT), Jose Genuino, and treasurer, Delubio Soares. The three men who were the strong core of PT back in 2003, have been convicted of using taxpaer money to bribe four other political parties. The same political parties are now allies of the government, and several of their congressmen were — according to the discoveries made in the trial — bought off to support the first Lula government. The three convicted men will also be tried later for a crime known in Brazil as  “crew training”, the equivalent to forming and operating a criminal organization.

The Supreme Court had already convicted politicians from four different parties for passive corruption. On Tuesday, the Court dealt with the now proven corrupters.

The most difficult sentence to agree on, according to the press was that of Jose Dirceu, as the evidence against him was not as obvious as those of the others involved. One of the judges who acquitted Dirceu, Ricardo Lewandowski, warned that the acquittal did not mean that Dirceu was not the head of the plot, but he had not found in acts concrete evidence of his guilt.

Most judges, however, based their decision to convict Dirceu based on the theory of evidence along with the evidence presented by witnesses. They also turned to what happens in criminal organizations and the mafia. In these cases, they say, the bosses “leave no trace” and you have to get to the guilty verdict based on what they called “the crime as a whole.”

The conviction of the political nucleus that participated in the plot, whose responsibility, according to the indictment, fell over Jose Dirceu himself, the judges threw out the claim made by his legal defense that no such plot existed or that it was organized by the Workers Party in order to perpetuate its power in government. In fact, Dirceu’s defense team alleged that the Mensalão case was just isolated criminal behavior.

The local press in Brazil cites as a surprising fact that Jose Dirceu and his accomplices in the Mensalão plot were convicted by a Supreme Court in which 8 of the 11 judges, were appointed by Lula and President Dilma Rousseff. This fact debunks the argument that the trial against Dirceu and his cabal of criminals was just an attempt to ‘hurt’ the image of former president Lula da Silva. The result of the trial is not a move carried out by people from the opposite side of the aisle, but by PT loyalists who have identified themselves as Lula’s magistrate friends.

President Dilma had ordered on Tuesday morning his ministers not to manifest before the expected and Dirceu sentence.

The main stream press in Brazil anxiously expected an official statement from Lula, who in the past said that the Mensalão trial was a move stain his presidency. Lula has now said that the conviction of Dirceu is a sign of ‘hypocrisy’. The former president called Dirceu, José Genoino and Delubio Soares on Tuesday. As it is reported in Brazil, the calls were a gesture of solidarity to comfort the trio convicted by the Supreme, who always had Lula’s back during his 8 years as president of Brazil.

Previous to the conviction of Dirceu and the other PT members, Lula said he considered the live broadcast of the trial as a “political hit” by people who could not stand that a man like himself, reached the presidency of the country.

The loss endured by the Workers Party (PT) is not limited to the conviction of some of its most influential leaders. The significant defeat that the PT suffered last Sunday during the national election for Mayor and Councilmen all over the country is a clear sign of how the party has lost the favor of millions of Brazilians who were Lula’s unconditional supporters for 8 years and who also supported Dilma Rousseff, a woman that came to power mainly due to Lula’s sponsorship.

Leaving out the fact that the judges were not brave enough to at least hear accusations against former president Lula himself, it seems that the conviction of Dirceu is counted as a goal for accountability in Brazil and as a rare victory for The People in the match between them and the Mafia that governs over this country.

In a country like Brazil, it is not outrageous to ask whether the judges who convicted Jose Dirceu now have a target drawn on their backs.

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Brazilian Court convicts 12 politicians in Mensalão Scandal

By LUIS MIRANDA | THE REAL AGENDA | OCTOBER 2, 2012

The time has come for Jose Dirceu to face justice in the Mensalão corruption scandal.

The Brazilian Supreme Court convicted Monday afternoon 12 individuals from four different political parties which were government allies during the Lula administration. These convictions are part of the process known as Mensalão, a corruption case where 38 people were brought to trial charged with seven crimes including active and passive corruption, money laundering and gang formation.

So far the Supreme Court issued 22 convictions and four acquittals. The acquittals were issued due to what the court said was lack of evidence. Monday’s convictions relate to 12 politicians from the political parties known as PP, PR, PTB and PMDB, which up until today are close to the Brazilian government and members of the Executive power.

According to the judges from the Supreme Court these politicians, which include MPs and party chairmen, such as Roberto Jefferson, president of the PTB and informer in the corruption case since 2005, had created a corruption scheme that brought former President Lula da Silva to the brink of losing his mandate. Despite multiple accusations against Lula himself, the Court has refused to hear testimony from those who accuse him of knowing about the corruption scheme that paid political groups in exchange for political support.

These 12 politicians have been convicted of having bribed with money taken from public coffers, to amass support for the Lula government and sell their votes in favor of the bills introduced by the Government, including the reform of the Social Security System.

The dean of the Supreme, Celso de Mello, who sentenced the 12 politicians for the three crimes charged by the Attorney General, made a harsh reflection on the serious consequences of corruption by politicians who should be the guarantors of democratic ethics. Mello defined them as “empowered criminals.” He said that “no one lives with dignity in a state taken by corruption”.

Mello had question the very same projects approved by people being accused of bribery today. He remembered that, for example, the judgments issued by a corrupt judge is invalid. The Chief Justice Ayres Britto, quoted Ulysses Guimarães, while explaining that “political corruption is the cancer of democracy.”

In the next few days, the focus will be on the block of inmates that belong to the Workers Party (PT), who, when the scandal broke out, were the ones responsible for the corruption scheme. They include José Dirceu, Lula’s right hand man and two-time presidents of PT, the former party member José Genuino and the treasurer Delubio Suares.

The three are accused of bribery, and of being the corrupters of political allies and of forming an organized gang as they sought to perpetuate their grasp of power in Brazilian politics and the government.

The possible sentence for Dirceu is the trickiest because, according to political scientists such sentence would also taint former president Lula, who maintains that he did not know anything about the corruption scheme known as the Mensalão.

An acquittal of Dirceu, who still claims he is innocent of the charges, would indirectly absolve Lula who insists that the ongoing process in the Supreme is a way to put in doubt the projects that his government conducted during the eight years he was in power, which he says, helped 30 million Brazilians to get out of poverty.

The PT, one of the most corrupt organizations in the country, has called on its militants and social formations to take to the streets to “defend the attempted coup against Lula”.

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Was Brazilian ‘Lula’ Behind the ‘Mensalão’ Corruption Scheme?

By LUIS MIRANDA | THE REAL AGENDA | SEPTEMBER 18, 2012

Brazilian businessman Marcos Valerio de Souza, one of the people being accused of corruption during the trial for the ‘Mensalão’ scheme, has accused the former president of Brazil Luiz Inacio Lula da Silva of orchestrating a vote-buying plot as part of the scandal that has rocked Brazilian politics in 2011 and 2012. During the depositions and hearings, several members of Lula’s cabinet were cited as involved in the Mensalão scheme together with bankers and businessmen.

“Lula was the head. He ran it all”, said Souza, who has been identified as a “luxury messenger” of the plot laid out by the president, as reported by the Brazilian magazine ‘Veja’. “Everything I did was well known by Lula,” noted the owner of two major advertising companies in Brazil. Souza has argued, according to ‘Veja’, that the Workers Party headed government assured him his sentence would be soft if he kept quite about the Mensalão scandal, in which the defendants received monthly payments in exchange for votes.

Meanwhile, Souza’s lawyer has denied such statements saying that his client has not spoken to the press since 2005. The Brazilian Supreme Court is accusing eight people, including Souza, of money laundering and embezzlement with monies that belonged to the Brazilian Workers Party (PT), which is the political party that launched Lula to the presidency. The Mensalão scandal involving members of the PT was originally made public back in 2005.

Despite the accusations directed at the former president, the Supreme Court refused to investigate Lula’s involvement, much less to charge  him with any wrong doing. Luiz Inacio da Silva ruled over Brazil between 2003 and 2010. The Court did accuse Lula’s right hand man and  chief of staff, Jose Dirceu, who is now one of the eight people accused in the case.

The process has been dubbed as the “trial of the century” in Brazil, a country plagued with corruption from top to bottom and left to right, where politicians and military often get away with their crimes. The Mensalão scandal spreads its tentacles through the politics and business worlds. There are 38 former Lula ministers, legislators, bankers and businessmen involved in one of the biggest corruption scandals in the South American nation.

Thus far, from the 38 defendants — all free — face charges of money laundering, tax evasion, corruption, embezzlement and formation of a criminal organization, among others. The sentences could be of over 30 years in prison. According to ‘Veja’ magazine, the PT had bought political favors to gain support in Congress. The scandal diverted some 101 million reais (40.5 million euros).

The PT had allegedly pledged to pay a large sum of money to legislators of the Brazilian Labor Party (PTB) to give their unconditional support to the government. This illegal agreement was announced following the breakdown of the alliance in 2005. Lula, who is not among the accused, has always denied having knowledge that members of his party and people close to the government had been paid to commit such offenses. In spite of the scandal, the leftist leader was reelected in 2006. Its popularity was always at high levels despite the conflict.

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Apple’s Phantom Taxes Hide Billions in Profits

By PETER SVENSSON | AP | JULY 23, 2012

On Tuesday, Apple is set to report financial results for the second quarter. Analysts are expecting net income of $9.8 billion. But whatever figure Apple reports won’t reflect its true profit, because the company hides some of it with an unusual tax maneuver.

Apple Inc., already the world’s most valuable company, understates its profits compared with other multinationals. It’s building up an overlooked asset in the form of billions of dollars, tucked away for tax bills it may never pay.

Tax experts say the company could easily eliminate these phantom tax obligations. That would boost Apple’s profits for the past three years by as much $10.5 billion, according to calculations by The Associated Press.

While investors might rejoice if Apple suddenly added $10.5 billion to its profits, unilaterally erasing a massive U.S. tax obligation could tarnish its reputation as a relatively responsible payer of U.S. taxes. Instead, the company is lobbying to change U.S. law so that it can erase its liabilities in a less conspicuous fashion. The issue has become part of the presidential campaign.

Like other companies, Apple typically keeps profits on overseas sales in overseas accounts. When someone buys an iPad in Paris or Sydney, for instance, the profit stays outside the United States.

Apple may pay some corporate income taxes on that profit to the country where it sells the iPad, but it minimizes these by using various accounting moves to shift profits to countries with low tax rates. For example the strategy known as “Double Irish With a Dutch Sandwich,” routes profits through Irish and Dutch subsidiaries and then to the Caribbean.

When it comes to using creative tax techniques, Apple is no different from other multinational corporations, says Robert Willens, an independent accounting expert.

And just like other corporations, Apple leaves cash overseas. If it brought it home to the U.S., it would have to pay federal income taxes on the money (though it would get a credit for foreign taxes already paid). In Apple’s case, those overseas accounts have grown to a staggering $74 billion — equal to the market value of Citigroup Inc.

The money is accumulating overseas because corporations are counting on lower U.S. tax rates in the future. At 35 percent, the U.S. corporate tax rate is among the highest for developed countries. In 2004, Congress enacted a one-year “tax holiday” for overseas earnings, and multinationals are hoping for a repeat of that. Presidential candidate Mitt Romney wants to permanently eliminate federal taxes on overseas profits. President Barack Obama attacked that idea last week, saying it won’t create U.S. jobs, like the Romney campaign contends.

Where Apple does differ from other companies is that it sets aside a portion of these overseas profits, marking them as subject to U.S. taxes sometime in the future. Essentially, it’s saying “this is money that we’ll likely have to pay U.S. federal income taxes on” because we intend to repatriate it, says Willens.

But because Apple doesn’t actually bring the profits into U.S. accounts, it doesn’t pay the taxes. Instead, it records a tax liability. When Apple reports quarterly results, it subtracts these liabilities from its profits, even though it hasn’t actually paid the taxes.

The liabilities accumulate, and as Apple’s profits grow, they’re piling up faster and faster.

“When you capitalize that into the future, it might be tens of billions of dollars,” said Martin Sullivan, an economist with Tax Analysts, a nonprofit publisher.

The company had a net $6 billion of tax liabilities at the end of September, the last reported figure. It’s had two blow-out quarters since then and is expected to report another one Tuesday. Based on reported and expected profits for the last three quarters, the liabilities can be estimated at around $10.5 billion.

Apple declined to comment on the specifics of its tax strategies or why it records tax liabilities that other multinationals avoid.

“Apple has conducted all of its business with the highest of ethical standards, complying with applicable laws and accounting rules,” the Cupertino, Calif., company said in a statement.

Yet Apple has made clear that it has no intention of repatriating its profits from overseas at the current U.S. tax rate. When CEO Tim Cook announced that the company would start paying a dividend this summer, he said the board determined the size of the dividend solely by looking at the amount of cash the company has in U.S. accounts.

“We do not want to incur the tax cost to repatriate the foreign cash at this time,” Chief Financial Officer Peter Oppenheimer told investors in March.

Apple’s net tax liabilities started building three years ago, when its sales started rocketing because of the iPhone. In that time, the company has reported a total of $69 billion in net income. If it had applied the same accounting practices as other multinational technology companies, and not marked some overseas profits as subject to U.S. taxes, its profits would have been about $78 billion, or 13 percent higher.

The boost to net income could mean a boost to the stock, since companies are usually valued on their earnings. If investors were to value Apple based on the last 12 months of earnings, with the tax liabilities added to earnings, the stock might be 13 percent higher.

Willens and Sullivan say that Apple could erase its liabilities by considering the profits “permanently reinvested” overseas, acknowledging that they will never be brought home. That would erase the tax liability, but it could make Apple look like a less responsible corporate citizen.

“I doubt they’re going to do that on their own, because they don’t want to be set up for criticism,” said Willens.

Groups such as Citizens for Tax Justice compile lists of the tax rates corporations report. Apple looks like a relatively good taxpayer on such lists, with a 24 percent rate. But Apple doesn’t actually pay the 24 percent, since it isn’t repatriating its overseas profits. The actual taxes Apple pays are 13 percent of profits, as computed by Sullivan. That’s a relatively low rate compared with other multinationals.

But keeping the money overseas limits what Apple can do with it. It means, for instance, that Apple can’t use it to buy another U.S. company, or give it to shareholders.

To get the money home without paying full U.S. taxes on it, the company advocates a change in U.S. tax law. It’s a member of Working to Invest Now in America, or WinAmerica. The coalition is lobbying for two congressional bills that would temporarily reduce the tax rate on such earnings to 5.25 percent. That would encourage the repatriation of some of the $1.4 trillion in cash that U.S. companies have sitting in overseas accounts, the group says.

The temporary tax amnesty enacted in 2004, resulted in hundreds of billions being brought home to the U.S. But according to the Congressional Research Service, it didn’t create jobs or stimulate the economy, as had been hoped.

Google Inc., Oracle Corp., Microsoft Corp. and Cisco Systems Inc. are also members of WinAmerica, but none of them stand to gain as much as Apple from a tax amnesty, because they have less cash overseas.