58 replies to this topic

[Caesar]

Dear All, as all you are well aware of the recent economic and financial turmoil at Wall Street and its huge negative implications on not only US but the whole world.

The scary fact is that it all started with two or so institutes going bad!! In other worlds the fate of the whole world and humanity on this planet was depending upon failures of two or three institutes!!!

In plain and simple words THIS IS ABSOLUTE BULL-CRA-P OF THE HIGHEST LEVEL!!  How can this whole planet depend upon a few greedy, bastar-dly US financial institutes!!

Capitalism is system of slavery of human kind because this system has made MONEY the most important thing for humanity!! We as human have become slave to a few pieces of paper!!

The very sad fact is that all the religions, including Islam, support Capitalism in form or the other!!

Capitalism is nothing more than Materialism-- a system to keep us slave to paper. And the recent financial crisis is a very clear proof that we are being ruled by a few financial institutes!!!!

All members are invited to express their views!!!

[Bilal]

Its a proof of how flawed interest based economic system is. Islam does not support capitalism, it supports private ownership, but there are clearcut code of conduct on how to do business, don't spread lies.

[JANA]

The Financial Crisis: A View from the Left

by Dan La Botz
Faced with the failure of the financial sector and the possible collapse of the economic system, Republicans and Democrats are working together feverishly to come up with a plan and find the funds to save the American financial system.  The Congress that has been unable to provide adequate funding to health, education, housing, public transportation, social welfare, and environmental programs has suddenly found billions of dollars to save the banks and insurance companies.  When the crisis was ours, they had had no money and no answers.  When the crisis is theirs, they find both the funds and a plan.

The bankers and financiers, who fought for deregulation arguing that the free market would regulate itself, now call for government intervention to save the market from collapse.  The Republicans, who have argued against virtually any social control or social distribution of wealth, have suddenly become advocates of socialization: the socialization of the economic crisis.  The American people who have seen their standard of living stagnate and then decline while the banks and corporations enriched themselves are now expected to absorb the cost of the bankers' failures and losses.

Those who for years fought a national public health program for our citizens as socialism, now call for socialism for the financiers.  While factories and jobs could not be saved, while homes and health care insurance were lost, the banks must now be saved.  When the economy prospered the notion of sharing the abundance was unthinkable, but when the economy fails the idea of sharing the losses and the debt with the people becomes the solution.

Their Solution: State Capitalism

The financial crisis, the most serious since the Great Depression, has led the George W. Bush administration to propose measures that would suddenly transform the American economy -- and least temporarily -- into a kind of authoritarian state capitalism.  To prevent the collapse of the American financial system, and the paralysis of the entire economy, the Treasury Secretary Henry M. Paulson and Federal Reserve Chairman Ben S. Bernanke propose that Congress spend hundreds of billions of dollars, though the cost might go as high as three trillion dollars, to buy up mortgages, other securities, and virtually any financial instrument that's in trouble.  While the funds to carry out this operation immediately will come from lenders in China, Japan, Europe, and the Middle East, American taxpayers will ultimately have to pay for this rescue.

The result of the bailout would be that the government would virtually control many of the largest financial institutions in the country.  The U.S. government and the banks of the country would suddenly be fused -- or perhaps entangled would be a better word -- into one extremely powerful political-economic entity.  While the proposal does not envision state control of the economy as a long-term proposition, merely long enough to save the bankers, still the impact of the current proposals now being debated in Congress will be far-reaching.  The American government and the people have suddenly found themselves at a turning point which was not foreseen and for which no one was prepared.

The implications of all of this cannot be predicted, though the possibilities can be explored and evaluated.  We ask here: Why have the financial institutions such as Bear Stearns, Fannie Mae and Freddie Mac, Lehman Brothers, and American International Group (AIG) suddenly failed?  Why is the economy on the verge of collapse?  What options have been proposed?  What role can the radical, democratic, socialist left play in responding to this crisis?  What do we propose to put in the place of the existing system?  

Mortgage Madness

As we are now only too well aware, banks made many bad loans to home buyers, loans that were subsequently bundled together and sold off to Fannie Mae and Freddie Mac which in turn marketed them as mortgage-backed securities, guaranteeing both the principal and the interest.  The growing awareness that the mortgages and securities lacked the capital to back them up threatened a creditors' run for their money that sparked the current financial crisis.  It is those insecure instruments that the American government will now acquire.  Or as New York Times columnist Paul Krugman put it in his column, "Cash for Trash."

The mortgage paper, however, formed only one wing of a much larger house of cards that had arisen in the last couple of decades as financiers created new, almost entirely unregulated instruments called derivatives.  While derivatives such as such options and futures (gambling on the future value of a stock or a commodity) have been part of the capitalist financial system virtually since its inception, other derivatives, such as credit default swaps, were more recent creations.  Essentially a form of insurance against the failure of an investment arrived at by private contract and unregulated by the government, swaps were an attempt to hedge against the very nature of competitive capitalism.  These swaps now amount to more than $60 trillion.

The Derivative Disaster

The derivates -- futures and forwards, caps and collars, options and swaps -- were all derived from the performance of some ever more distant asset.  Financiers invested and speculated in these instruments both in order to skim off the value of the assets and to protect themselves from risk.  All of this trading was highly leveraged, which is to say that collateral in actual assets was far, far less than the supposed value of the derivatives.  A series of failures related to these derivative markets signaled a warning: the bankruptcy of Orange County in 1998 and of Long-Term Capital Management in 2000, the collapse of Amaranth Advisors in 2006, and the $7.2 billion dollar loss by Société Général in early 2008.  Now the entire complex and fragile system of derivatives threatens to disintegrate.

The U.S. government deregulated the banking industry leaving many of these transactions unregulated while in other areas it reduced the amount of collateral that financial firms were obligated to hold.  At the same time, an international derivative market developed, meaning that the increasingly insecure investments became part of the fabric of global financial transactions.  Consequently, the crisis in mortgages and mortgage-backed securities and the possible collapse of the American financial market threatens to become a world economic crisis.  With American capitalism teetering on the brink of the Second Great Depression, the theory of the self-regulating free market is dead for both conservatives and liberals.

The Failure of the Second American Century

The financial crisis rests upon a much deeper and broader crisis of American capitalism.  While the linkages between one aspect of this and another can only be sketched here, the financial crisis is inseparable from several developments which have undermined the overall strength of the U.S. economy.

First of all is the cost of the Iraq War, which has cost more than a $1 trillion while the Bush administration and the U.S. Congress refused to raise taxes to pay for it.  Bush is now asking Congress to raise the U.S. debt ceiling to $11.3 trillion dollars, or 79 percent of our $14.3 billion GDP, the highest since World War II.  Some 24 percent of that debt is owed to foreign banks.  China holds about $500 billion and Japan about $600 billion in U.S. treasuries.  Saudi Arabia, Russia, and Brazil are also large U.S. creditors.  The value of the dollar, however, is falling and threatens to cost U.S. creditors a lot of money, making it likely that they will invest their money elsewhere.  That would mean a rise in the cost of credit in the United States, making business and government more expensive.

Second, the U.S. wars in Afghanistan and Iraq, which were intended to solidify the dominance of the United States for a second American Century, have failed.  If the U.S. commanded the Middle East and Central Asia, it would have had its hand on the petroleum spigot giving it a tremendous advantage over Europe, Japan, and China.  But the wars have dragged on for years and the United States has failed to impose its will in Iraq, and is mired in a mess in Afghanistan, and has been impelled by its failure there to expand the conflict into Pakistan.  Consequently none of the geopolitical and petroleum benefits have materialized.  Thought it may not immediately be apparent, the failure of the U.S. in these wars means effectively the failure of a U.S.-dominated world empire.  It also means the opening of a new era of world imperialism as the great powers and near-great powers struggle to dominate the world market and global politics through economic might, political intervention, diplomacy, and war.

Petroleum Problems

Third, all of this has been taking place as world petroleum resources dwindled and refining capacity became a problematic bottleneck leading to a rise in fuel prices that dramatically impacts the real economy.  Not only the obvious sectors like airlines and truckers or plastics and chemical manufacturers, but every aspect of American and world business has been affected.  The fuel costs for ships that carry the containers in which world commerce moves have risen to levels that begin to inhibit trade.

Global Expansion -- National Decay

Finally, the globalization of the world economy, including world production, has meant a complete transformation of American society.  The system of industrial production, labor union contracts, social welfare, and consumerism as well as the corporations, communities, and broader society of the United States have been altered in ways that make the country today virtually unrecognizable to someone who grew up in the 1960s or 1970s.  Education, health, housing, and social welfare have all failed to keep pace with the demands of the contemporary global economy.  Or put differently, the U.S. has competed by degrading resources committed to education, health, housing and social welfare which made it immediately more competitive while simultaneously and grotesquely corroding the foundations of our society, and probably also its ultimate competitiveness, not to mention the degradation of our humanity.  The disjuncture between world economic expansion and the decay of the national physical and social infrastructure represents an obstacle to American economy supremacy.

China, India, and Brazil, the three largest developing economies, wrestle with the same issue of the disjuncture between national development and insertion in the international economy, but from the point of view of their ascending economies.  Europe and Japan -- after passing through serious problems in the 1980s -- have done better in maintaining equilibrium between world economic developments and their national economies, but all nations face the same problem of finding some position of social poise in a world of international competition.  No industrialized nation has done as poorly in dealing with these issues as the United States where official statistics put poverty at 12 percent and other estimates at double that.

The Plan for Salvation

President Bush and Treasury Secretary Paulson have proposed a plan that would simply have the U.S. government rescue the bankers by taking off their hands the devalued assets that they hold at a cost of $700 billion.  With the U.S. government taking out the trash, the bankers would have a clean house, prepared once again to make loans and finance business.  The Bush plan would give the Treasury Secretary the power to hire Wall Street firms or executives to manage the newly acquired assets; if done by private firms, they would make millions as government managers.  Virtually no other details of the plan have been developed and made public.

House Speaker Nancy Pelosi indicated that while the Democrats support the general thrust of the Republican plan, they will also call for Congressional oversight, for assistance to distressed homeowners, and for limits on compensation to corporate executives employed to manage the plan.  According to the New York Times, ". . .Democrats said they planned to consider the bailout proposal separately from an economic recovery program that would include new public works spending, aid to states and added unemployment and food-stamp benefits."  Virtually no one in business, government, or the media expresses any confidence that this broad plan will work.

Both presidential candidates, John McCain and Barack Obama, support the Paulson plan with reservations, calling for more oversight.  Everyone understands that with a new administration there will have to be a re-regulation of the economy, though on exactly what terms is unclear.  McCain would no doubt prefer minimal government oversight and Obama more regulatory action, yet neither candidate has developed a plan that derives from the needs of the American people.

Why the Plan Will Fail

The Paulson plan by itself will fail because it seeks only to restart the economy on the same basis, with all of the problems already touched on above.  Everyone recognizes that the plan itself is not enough, but McCain's proposal of mere oversight ignores the reality of the economic disaster that has befallen us and the capitalists' need for intervention, while Obama's economic program is too moderate and too modest to have much impact on a disaster of this scope.

Even if the Paulson plan passes, the next administration will face a continued unraveling of the financial system, the persistence of recession, and the broader issues which derive from both the decline of the United States as a world power and the coming end of the petroleum-based economy, and, we should also note, the environmental crisis.  What is needed is not a program aimed to save the bankers and the capitalist system, but one which begins with what we so often erroneously call the American middle class, but would be better called working people, and with the working poor, the casual laborers, and the just plain poor.

We need at once a moratorium on foreclosures, an end to adjustable rate mortgages, renegotiation of 30- and 40-year mortgages and creation of a financial program to aid struggling homeowners.  We must tax the banks, insurance companies, and corporations which have profited in the course of creating the financial crisis and make them pay the costs of reconstruction of the financial system, a new system.  We need to create affordable and attractive public housing to meet the needs of those who now struggle to pay market rents.  We must re-regulate the financial sector and create state and social credit agencies.  Still, all of this will only be a bridge over troubled waters, and we may cross the bridge only to find a rising tide on the other side.

A Socialist Alternative

The socialist alternative begins with the understanding that the economic crisis provides an opportunity to rethink and then to redo our economy and our society.  While we oppose the efforts to save the capitalist system, we need to demand programs to support its victims.  If we are going to spend billions and trillions of dollars to revamp the economy, then it should not be to save the bankers, financiers, and speculators who have brought us to ruin, but rather to keep people in their homes, to find them jobs, and to win them health insurance.  If the government is to own things, then it should own not only financial institutions, but also productive industries and construction companies so that we might build a national rail system.  If the government owns things, then we should have a national plan for the economy, elaborated through democratic institutions.

To create such a system of democratic socialism which represents the human alternative to an economic crisis suggests a political struggle, which means the building of a new political party to the left of the Democrats.  To build such a party that can fight to change the direction of society and build a democratic and socialist alternative will require new social movements larger and more powerful than the civil rights and anti-war movements of the 1960s or even the militant labor movement of the 1930s.  Acorn, national network of community organization that focuses on housing issues, called demonstrations around the country saying save homeowners, not bankers.  Such demonstrations represent an important beginning of building such a movement.

Everything, however, starts with rejecting the idea that we should save capitalism or reform capitalism.  It begins by putting human beings rather than banks at the center of our economic thinking to build a socialist society.


Dan La Botz, "The Financial Crisis: A View from the Left"
--------------------------------------------------------------------------------
Dan La Botz is a Cincinnati-based teacher, writer, and activist.  He is the author of Rank-and-File Rebellion: Teamsters for a Democratic Union (1990), Mask of Democracy: Labor Suppression in Mexico Today (1992), and Democracy in Mexico: Peasant Rebellion and Political Reform (1995), Made in Indonesia: Indonesian Workers Since Suharto (2001) and the editor of Mexican Labor News & Analysis, a monthly collaboration of the Mexico City-based Authentic Labor Front (FAT), the Pittsburgh-based United Electrical Workers (UE), and the Resource Center of the Americas.  His writing has also appeared in Against the Current, Labor Notes, and Monthly Review among other publications.

Dan La Botz, "The Financial Crisis: A View from the Left"

[JANA]

Dear Iraqi Friends

By THOMAS L. FRIEDMAN

Published: September 23, 2008
From: President George W. Bush

Skip to next paragraph

Fred R. Conrad/The New York Times
Thomas L. Friedman



Dear Sirs, I am writing you on a matter of grave importance. It’s hard for me to express to you how deep the economic crisis in America is today. We are discussing a $1 trillion bailout for our troubled banking system. This is a financial 9/11. As Americans lose their homes and sink into debt, they no longer understand why we are spending $1 billion a day to make Iraqis feel more secure in their homes.

For the past two years, there has been a debate in this country over whether to set a deadline for a U.S. withdrawal from Iraq. It seemed as if the resolution of that debate depended on who won the coming election. That is no longer the case. A deadline is coming. American taxpayers who would not let their money be used to subsidize their own companies — Lehman Brothers, Bear Stearns and Merrill Lynch — will not have their tax dollars used to subsidize your endless dithering over which Iraqi community dominates Kirkuk.

Don’t misunderstand me. Many Americans and me are relieved by the way you, the Iraqi people and Army have pulled back from your own brink of self-destruction. I originally launched this war in pursuit of weapons of mass destruction. I was wrong. But it quickly became apparent that Al Qaeda and its allies in Iraq were determined to make America fail in any attempt to build a decent Iraq and tilt the Middle East toward a more democratic track, no matter how many Iraqis had to be killed in the process. This was not the war we came for, but it was the one we found.

Al Qaeda understood that if it could defeat America in the heart of the Arab-Muslim world, that it would resonate throughout the region and put Al Qaeda and its allies in the ascendant. Conversely, we understood that if we could defeat Al Qaeda in Iraq, in collaboration with other Arabs and Muslims, that it would resonate throughout the region and pay dividends. Something very big was at stake here. We have gone a long way toward winning that war.

At the same time, I also came to realize that in helping Iraqis organize elections, we were facilitating the first ever attempt by the people of a modern Arab state to write their own social contract — rather than have one imposed on them by kings, dictators or colonial powers. If Iraqi Shiites, Sunnis and Kurds can forge your own social contract, then some form of a consensual government is possible in the Arab world. If you can’t, it is kings and dictators forever — with all the pathologies that come with that. Something very big is at stake there, too.

It’s not the stakes that have changed. It is the fact that you are now going to have to step up and finish this job. You have presumed an endless American safety net to permit you to endlessly bargain and dicker over who gets what. I’ve been way, way too patient with you. That is over. We bought you time with the surge to reach a formal political settlement and you better use it fast, because it is a rapidly diminishing asset.

You Shiites have got to bring the Sunni tribes and Awakening groups, who fought the war against Al Qaeda of Iraq, into the government and Army. You Kurds have got to find a solution for Kirkuk and accept greater integration into the Iraqi state system, while maintaining your autonomy. You Sunnis in government have got to agree to elections so the newly emergent Sunni tribal and Awakening groups are able to run for office and become “institutionalized” into the Iraqi system.

So pass your election and oil laws, spend some of your oil profits to get Iraqi refugees resettled and institutionalize the recent security gains while you still have a substantial U.S. presence. Read my lips: It will not be there indefinitely — even if McCain wins.

Our ambassador, Ryan Crocker, has told me your problem: Iraqi Shiites are still afraid of the past, Iraqi Sunnis are still afraid of the future and Iraqi Kurds are still afraid of both.

Well, you want to see fear. Look in the eyes of Americans who are seeing their savings wiped out, their companies disappear, their homes foreclosed. We are a different country today. After a decade of the world being afraid of too much American power, it is now going to be treated to a world of too little American power, as we turn inward to get our house back in order.

I still believe a decent outcome in Iraq, if you achieve it, will have long-lasting, positive implications for you and the entire Arab world, although the price has been way too high. I will wait for history for my redemption, but the American people will not. They want nation-building in America now. They will not walk away from Iraq overnight, but they will not stay there in numbers over time. I repeat: Do not misread this moment. God be with you.

George W. Bush.


http://www.nytimes.com/2008/09/24/opinion/24friedman.html

[_killuminati_]

The US is headed in the same recession caused by usury that destroyed the Roman empire.

[Yahya]

the truth of the fact is simple,

capitalism, doesnt exist...


its called free market...and in my opinion it RULES, as this is what islam teaches us, on  the other end of the scale to free market is centraly planned, where EVERYTHING is controled by the government, in such economies most of the time the government is run by ONE party which is OWNED by ONE MAN.

why is the amerian free market system failing?

US economic statistics:

Current account balance: -$738.6 billion

exports: $1.149 trillion

imports: $1.965 trillion

these are figures for 2007


source: CIA fact book

[Caesar]

Its a proof of how flawed interest based economic system is. Islam does not support capitalism, it supports private ownership, but there are clearcut code of conduct on how to do business, don't spread lies.

Take it easy dude--lets have a decent discussion.

To answer your objection--Stock Market is an ESSENTAIL COMPONENT of Capitalism. In Islam "Stock Market" business is considered Halal!!

In other words all religions including Islam PARTIALLY or fully endorse Capitalism.

[Caesar]

Capitalism is a system that gives God Like powers to a few Jewish institutes who in turn control the fate of whole humanity!! The failure of all major religions to free humans from such a hideous system is an ample proof of their ineffectiveness and raises a million questions about the true reality of these religions.

Just in the past couple weeks or so many huge financial institutes and banks have become bankrupt, people have lost billions or perhaps trillions of money--pieces of paper that were always a fruad from day one!!! Now billions close to a TRILLION Dollars of the ordinary tax payers money is being poured into to  save this system of slavery!!! An example, US bank AIG, 93 billion pounds was given to the bank to try and save.

So we had Lehman Brothers, one of the giants of American investment banks, the so called "too big to fail" -- failed miserably and begging for money!! So called Demi-Gods Goldman Sachs, Merrill Lynch, Bear Sterns, Fannie Mae and Freddie Mac all going down the toilets with trillions of dollars of liabilities!!! Wow!!!!

Now these failed institutes and many more failed institutes are begging the GRANPAPA of all Banks--The US Federal Reserve-- to save them!! For those of you who do not know--US FEDERAL RESERVE IS PRIVATELY OWNED and CONTROLLED BY A FEW FAMILIES!!!!!

This crisis is having global impact--thousands and thousands of ordinary people are being kicked out of jobs!! US stooges like Britain and the rest of Europe is waiting their fate!! But if this crisis continues then we will soon see institutes in Britain and others being flushed down the gutters!!!

For those of you who think that this crisis in any ways will help China or Russia or whatever should stop dreaming and get a life!! China with more than $1 trillion in foreign, mostly greenback, currency reserves will be massively F*d!!! Beijing will face catastrophic failure!!!!

Which planet in this Galaxy would allow such a blood sucking system to control fate of 6 Billion people!!! Only here on Planet Earth!!! And I am sorry to say that religions have partially or wholly promoted this HIDEOUS System!!!

[Saqr]

Take it easy dude--lets have a decent discussion.

To answer your objection--Stock Market is an ESSENTAIL COMPONENT of Capitalism. In Islam "Stock Market" business is considered Halal!!

In other words all religions including Islam PARTIALLY or fully endorse Capitalism.

Actually you will have to provide some proper religious references to your stock market claim...and how Islam endorses post-17th century capitalism.

[Bilal]

Take it easy dude--lets have a decent discussion.

To answer your objection--Stock Market is an ESSENTAIL COMPONENT of Capitalism. In Islam "Stock Market" business is considered Halal!!

In other words all religions including Islam PARTIALLY or fully endorse Capitalism.

The essential philosophy of capitalism is to make profits by any and all means, without socio-political and moral consideration, while Islamic economic system has strict guidelines for making investment socially and morally responsible way. While many of the stock trading practices are allowed in Islam, BUT, the main evils that cause these bubble/burst cycle are not allowed, i.e., speculation, selling securities before you receive full possession, using interest based credits. by these measures you can only buy securities that you can afford and not over commit in a wild speculation, leading to defaults, which when done on a large scale causes large scale bubble/burst cycles.

I am glad that you took your words back, saying Islam fully endorses Capitalism. But let me point out, that some capitalist practices are allowed in Islam, but Islamic economic model is distinct and independent system, its more of a controlled economy system.

One more thing that I would like to emphasize here is that he recent economic crash is a prime example of how interest based economic system is bound to fail, since it has no solid base, that is why Islam totally forbids any kind of economic practice involving interest/usury, I believe you should appreciate this fact more.

[_killuminati_]

Which planet in this Galaxy would allow such a blood sucking system to control fate of 6 Billion people!!! Only here on Planet Earth!!! And I am sorry to say that religions have partially or wholly promoted this HIDEOUS System!!!

How does Judaism promote this system? Explain.

[Caesar]

The essential philosophy of capitalism is to make profits by any and all means, without socio-political and moral consideration, while Islamic economic system has strict guidelines for making investment socially and morally responsible way. While many of the stock trading practices are allowed in Islam, BUT, the main evils that cause these bubble/burst cycle are not allowed, i.e., speculation, selling securities before you receive full possession, using interest based credits. by these measures you can only buy securities that you can afford and not over commit in a wild speculation, leading to defaults, which when done on a large scale causes large scale bubble/burst cycles.

I am glad that you took your words back, saying Islam fully endorses Capitalism. But let me point out, that some capitalist practices are allowed in Islam, but Islamic economic model is distinct and independent system, its more of a controlled economy system.

One more thing that I would like to emphasize here is that he recent economic crash is a prime example of how interest based economic system is bound to fail, since it has no solid base, that is why Islam totally forbids any kind of economic practice involving interest/usury, I believe you should appreciate this fact more.

In the para above highlighted in red you said that I took my words back--just to clarify I never said Islam fuly endorses such a system. The words I used in my very first post were:

The very sad fact is that all the religions, including Islam, support Capitalism in form or the other!!

"in one form or the other" meant partially or fully.

Anyways moving forward, you have raised good points. The thing that makes Islam different from all other religions is that Islam strongly prohibits "INTEREST BASED SYSTEM" . However, unfortunately, a few Islamic leaders of the past by endorsing Stock Market as halal have done a huge disservice to Islam and humanity. We cannot support a blood sucking partially and still maintain that we are different. We have to totally distance ourselves from such a system--it is totally against Islam to support a system that promotes materlism, greed, lust and gives powers to a few individuals to control the lives of whole humanity!!!.

[Caesar]

How does Judaism promote this system? Explain.

By not opposing it!!! And its believers being the front runners of this system. US Federal Reserve, for example, is owned by Jews.

[Bilal]

Caeser, there is nothing wrong with stock markets, since its just a way to trade stakes in a business, the evil comes in one greedy people invent ways by means of which they can cause large scale speculations and/or allow individuals to buy more than they can afford, for example, there are ways in which I can commit to buy x number of stocks of a company without actually paying for it and if the prices rise sell it "at profit", all this before I get full possession of my securities and having paid nothing! this allows people to blindly follow their greed and in case of losses not only cause themselves great harm but also when done on large scale cause harm to many other people(by causing large scale meltdowns). Islam allows trade of stakes in companies, but, introduces measures by which one can only expose himself to the risks he/she can afford by prohibiting practices I mentioned above.

[_killuminati_]

There is nothing wrong with stock-trading. I fail to understand how this is equivalent to usury.

By not opposing it!!! And its believers being the front runners of this system. US Federal Reserve, for example, is owned by Jews.

What makes you think that Judaism does not oppose it?

Do not criticize the religion based on the actions of its believers. There are many Muslims who think that killing civilians is okay - that does not mean that Islam advocates it.

[Caesar]

There is nothing wrong with stock-trading. I fail to understand how this is equivalent to usury.
What makes you think that Judaism does not oppose it?

Do not criticize the religion based on the actions of its believers. There are many Muslims who think that killing civilians is okay - that does not mean that Islam advocates it.

Dude you really need to stop behaving as if you are out of this world cause if you were really living on this planet than even a kid knows what is happening. Anyways I don't want to argue with you as you will keep on going around in circles.

However what I will do is to provide you a link to an excellent book called "Jews and Modern Capitalism" by Werner Sowbart published in 1911!!! And specially go to the chapter titled "The Significance of Jewish Religion in Economic Life". I am sure you will get your answers!!!!

http://socserv.mcmaster.ca/econ/ugcm/3ll3/sombart/jews.pdf

[_killuminati_]

Dude you really need to stop behaving as if you are out of this world cause if you were really living on this planet than even a kid knows what is happening. Anyways I don't want to argue with you as you will keep on going around in circles.

However what I will do is to provide you a link to an excellent book called "Jews and Modern Capitalism" by Werner Sowbart published in 1911!!! And specially go to the chapter titled "The Significance of Jewish Religion in Economic Life". I am sure you will get your answers!!!!

http://socserv.mcmaster.ca/econ/ugcm/3ll3/sombart/jews.pdf

I am not going to read an entire chapter of a book just to see if you were right. When you make claims, have your exact referrences handy.

Now provide me with authentic Holy Judaism scriptures which support your theory. Because I have never come across any when reading the Torah. But I have come across many verses that prohibit interest.

[KIB]

A very good discussion, Dear Ceasar.

We have to discuss it in length. Does Islam provide any economic system? Does it supports Capitalism or Socialism or Islam has its own economic system?

Sure Ceasar, we should discuss it. But here are some conditions for stock trading.

KIB


Q.) Is it permissible to buy and sell stocks? --------------------------------------------------------------------------------

A.) A Muslim can acquire the shares of a joint stock company with the following conditions:

1. The main business of the company must be Halaal (permissible) according to Shariah. So, a Muslim cannot invest in a company whose main business is Haraam, like the traditional banks, insurance companies, companies dealing in wines, etc.

2. If the main business is Halaal, but it is involved in borrowing money on Interest or placing its funds in an Interest bearing account a Muslim share-holder should raise his voice against this practice in the annual general meeting of the company.

3. When a Muslim share-holder receives a dividend he must ascertain that proportion of the profit of the company which has accrued on its interest-bearing accounts. Then a similar proportion from his own dividend must be given by him to a person or persons entitled to receive Zakaat.

4. If all the assets of a company are in a liquid form and the company has not yet acquired any fixed assets or any stock for trade, then the sale and purchase of shares must be on their par value only.

If anyone of these conditions is contravened, the investment in a company is not permissible in the Shari'ah.

NB. The above ruling has been issued by Justice Mufti Muhammad Taqi Usmani.

[Caesar]

A very good discussion, Dear Ceasar.

We have to discuss it in length. Does Islam provide any economic system? Does it supports Capitalism or Socialism or Islam has its own economic system?

Sure Ceasar, we should discuss it. But here are some conditions for stock trading.

KIB
Q.) Is it permissible to buy and sell stocks? --------------------------------------------------------------------------------

A.) A Muslim can acquire the shares of a joint stock company with the following conditions:

1. The main business of the company must be Halaal (permissible) according to Shariah. So, a Muslim cannot invest in a company whose main business is Haraam, like the traditional banks, insurance companies, companies dealing in wines, etc.

2. If the main business is Halaal, but it is involved in borrowing money on Interest or placing its funds in an Interest bearing account a Muslim share-holder should raise his voice against this practice in the annual general meeting of the company.

3. When a Muslim share-holder receives a dividend he must ascertain that proportion of the profit of the company which has accrued on its interest-bearing accounts. Then a similar proportion from his own dividend must be given by him to a person or persons entitled to receive Zakaat.

4. If all the assets of a company are in a liquid form and the company has not yet acquired any fixed assets or any stock for trade, then the sale and purchase of shares must be on their par value only.

If anyone of these conditions is contravened, the investment in a company is not permissible in the Shari'ah.

NB. The above ruling has been issued by Justice Mufti Muhammad Taqi Usmani.

Humm....very good indeed KIB!! Here is some more:

Investing in stock market: the Shariah way

By The Milli Gazette Online

http://www.milligazette.com/Archives/2005/...1507200530b.htm

Islamic economists and financial experts agree that if certain conditions are met, it is lawful to invest in the stock market. Any earnings that result from such investments will be halal. The logic behind this argument is that when one purchases shares in a company he actually becomes a shareholder and thus becomes a partner in the business. Thus, this arrangement is akin to the Islamic concept of musharakah. However, there are a host of conditions that must be satisfied before one is allowed to invest in stocks. To start with, one must be sure that the business of the corporation/company offering the stock must be halal. Over and above this, shariah scholars have developed certain financial parameters for stocks selection. These are mainly related to the capital structure of the company. The purpose of these criteria is to determine the level of involvement of riba (interest) and gharar (uncertainty) in the overall business of the company.

One should keep in mind that these criteria are the results of modern fiqh scholarship (ijtihad) and therefore, should be seen to represent the current state of thinking on the issue. In that way, they represent the maximum tolerance levels and not the last word on the subject. In short, if a Muslim investor is contemplating investment in the stock market, he must not only be careful about the profitability but also about the compliance of shariah. These can be done by looking at the nature of business, percentage of income from interest and the financial soundness of the company. While there are a number of tools available to help understand the financial soundness of a company there are not many that can guide an investor in determining the shariah compliance of a stock. Following screening patterns may be helpful in determining the shariah compliance of stocks.

Islamic Investment Criteria

A. Qualitative Screens
There are two types of qualitative screens:
i. Industry screening: Is the company in a business that is prohibited or abhorred in Islam? Apart from investment in banking and finance there are a number of business activities that are considered to be prohibited in Islam, and thus investing in these kinds of businesses is not something a Muslim would like to undertake such as alcoholic beverages, pork and pork products, tobacco products, gambling, lottery, pornography and adult oriented material, prostitution and drugs etc.
ii. Business practices: Following shariah principles are applicable to investing and trading practices applicable to individual investors as well as Islamic financial institutions:

a. Investible funds must be free of interest based debt:
The investor cannot borrow on interest to finance his investments, and therefore cannot trade on margin i.e., borrow to purchase shares. Conventional hedge funds, arbitrage funds, and leveraged buy-out (LBO) funds are prohibited for Islamic investors as they all borrow heavily in order to finance their investment practices.

b. Prohibition of speculation
Unlike conventional investors Muslims cannot base their investment decisions on short-term speculation. They cannot enter the market as speculators but only as investors.

B. Quantitative Screens

There are three types of quantitative screens:
i. Debt/Asset Ratio:
Has the company borrowed funds on interest? Ideally there should be no interest-based debt, but based on the Islamic legal principle "li al-akthar hukm al-kul" (to the majority goes the verdict of the whole) and subsequent scholarly opinions, a company is not a permissible investment if debt financing is more than 33% of its capital. This could be calculated as Total Debt divided by Trailing 12-Month Average Market Capitalization (where Total Debt = Short-Term Debt + Current Portion of Long-Term Debt + Long-Term Debt).

ii.Interest-related Income
Does the company generate any interest or interest-related income? This only includes those companies which do not make earning interest their business, but place their surplus funds in investments that yield interest income. As in the previous case, ideally no income should come from interest-related sources. However, looking at the current situation shariah scholars have permitted to invest in stocks of companies whose income from interest forms less than 5% of a company's total income. Some scholars have fixed that ceiling at 10% of a company’s total income.

iii. Monetary Assets
To invest in shariah compliant companies, one has to be very careful about company's monetary assets. Accounts receivables and liquid assets such as bank accounts and marketable securities have to be below the limits fixed by shariah scholars for the investment to be permissible. Some scholars have set this minimum at 51% whereas the majority of shariah scholars agree that "Accounts Receivables" should not be over 45% of company's total assets (where Accounts Receivables = Current Receivables + Long-Term Receivables).

C. Trading Practices

i. Day Trading
Day trading has little to do with actual investing. Usually day traders watch the market and buy and sell on short-term price fluctuation (normally within one day). For this reason, a number of Islamic scholars have termed this as closer to gambling and thus it is prohibited.

ii. Margin Trading:
Margin trading is buying stocks using money loaned from the broker. Interest is paid for this loan, and therefore it is prohibited. Moreover this is a very risky (and complicated) practice, as one can lose more than what he has borrowed.

iii. Derivatives - Options and Futures
Option is purchasing the right to buy or sell a stock or a commodity at a future date for a fixed price (regardless of the then prevailing price in the market). Exercising this option means buying at the price set in the past. Not exercising the option results in the investor paying the option fee. A great majority of scholars are of the opinion that Futures trading is not permitted in Islam.

iv. Short Selling:
Short selling is borrowing a stock from the brokerage firm and selling it in anticipation that the stock price will further go down. Once the prices are a bit stabilised the stock is purchased back to square up the sale transaction. Thus, the investor as a “shorter” keeps the difference. This transaction involves huge risk that almost has no upper limits. Moreover, from shariah point of view you cannot sell what you do not posses.

The author is PhD in Islamic Economics. At present he is Investment Consultant and Joint Editor Islamic Economics Bulletin. He can be contacted at: shariqnisar@yahoo.com

[Caesar]

Now all of this is good on paper--what are the ground realities??? The realities are that:

-Most of the Muslims do not understand and follow these rules as they are very difficult and Impractical!!!

-If Islamic criteria is applied on any modern stock markets then thse stock markets would cease to function!!

So we have a problem here: Why impose such a criteria which is on a collision course with stock market fundamentals?? Why not oppose such a system altogether???

This example clearly demonstrates that the Islamic leaders got it wrong!!! Islam does not support such a system!!!

[KIB]

How can I attach file wihch is in pdf subject is Economic System of Islam.

[Bilal]

Now all of this is good on paper--what are the ground realities??? The realities are that:

-Most of the Muslims do not understand and follow these rules as they are very difficult and Impractical!!!

-If Islamic criteria is applied on any modern stock markets then thse stock markets would cease to function!!

So we have a problem here: Why impose such a criteria which is on a collision course with stock market fundamentals?? Why not oppose such a system altogether???

This example clearly demonstrates that the Islamic leaders got it wrong!!! Islam does not support such a system!!!

The principles are not impractical, they are just not practiced, indeed, with these checks in place markets would not perform the way they do(since the system does not allow unrealistic bloating), but in the hind sight its all the better since bloated markets only give short term gains and to a select few manipulators, if right from the beginning you are arguing that such practices which allows a few to hold many under hostage condition is wrong, then you must agree to the regulations put forward by Islam.


and now I would like to re-quote a thing from your post:

If Islamic criteria is applied on any modern stock markets then thse stock markets would cease to function

You see now you are realizing that Islamic economic system is fundamentally different from the capitalist system, contrary to what you said in your earlier posts, hence, trying to graft some Islamic regulations into an overall capitalist system seems unfeasible. The key lies in an economic system which adhears to the Islamic system wholly.

How can I attach file wihch is in pdf subject is Economic System of Islam.

I think there is an attachment feature, but I am unable to find it.


P.S.: I think Islamic scholars should be more active for making a case in favour of Islamic Economic System, specially in the wake of the current crisis.

[theonethatis]

"Just in the past couple weeks or so many huge financial institutes and banks have become bankrupt, people have lost billions or perhaps trillions of money--pieces of paper that were always a fruad from day one!!! Now billions close to a TRILLION Dollars of the ordinary tax payers money is being poured into to  save this system of slavery!!! [b]An example, US bank AIG, 93 billion pounds was given to the bank to try and save"

AIG is an insurance company NOT a bank.  Please get the facts before making strange unfounded accusations.  Pray tell how is this system a system of slavery?  Do you know the definition of slavery?

"However what I will do is to provide you a link to an excellent book called "Jews and Modern Capitalism" by Werner Sowbart published in 1911!!! And specially go to the chapter titled "The Significance of Jewish Religion in Economic Life". I am sure you will get your answers!!!!"

WOW! What an amazing book.  I think we should all start reading books from 1911!  That will show those western bastards.  After all everyone knows science books from 1911 were pure ethical books based on fact. (just in case u didnt pick up on it that was sarcasm.)

Caesar I find your remarks particularly distasteful.  You have failed to provide any evidence and you have many of your facts mixed up.  All your posts are filled with Bull****.

[Caesar]

You see now you are realizing that Islamic economic system is fundamentally different from the capitalist system, contrary to what you said in your earlier posts, hence, trying to graft some Islamic regulations into an overall capitalist system seems unfeasible. The key lies in an economic system which adhears to the Islamic system wholly.
I think there is an attachment feature, but I am unable to find it.

I was presently my view point from a different angle!! You see your first line which says: "You see now you are realizing that Islamic economic system is fundamentally different from the capitalist system" contradictary!!

You have used the word “Different” which means “Dissimilar”. Then why is this dissimilar system supporting stock markets of a Capitalistic system even under certain restrictions?

So people should make up their minds—either Islam supports this capitalistic system, even if partially, or it does not support this system totally!! There is no middle ground.

[Caesar]

[color="#FF0000"]"Just in the past couple weeks or so many huge financial institutes and banks have become bankrupt, people have lost billions or perhaps trillions of money--pieces of paper that were always a fruad from day one!!! Now billions close to a TRILLION Dollars of the ordinary tax payers money is being poured into to  save this system of slavery!!! [b]An example, US bank AIG, 93 billion pounds was given to the bank to try and save".........................................................Caesar I find your remarks particularly distasteful.  You have failed to provide any evidence and you have many of your facts mixed up.  All your posts are filled with Bull****.

Is that 700 billion to 1 trillion dollar going into your Grand Mama's pockets rather than supporting a blood sucking capitalistic system????

Please you can now come out of that pre-historic den you were living in and give me a break!!

[Bilal]

Don't get me wrong I am not trying to make you look bad and I truly respect the way in which you have been open to accept he good points of Islamic economic system, I just want to clear for all he readers that Islamic system is fundamentally different from capitalism but it would be childish in thinking that two systems that are different in their basic philosophy can have nothing in common. As I told you Islam presents a controlled economic system (controlled not by lazy or corrupt beaurucrats but by the guidelines of Islamic law). As already discussed, trade of stakes in a company is allowed but under clearcut rules which differ from the current system so much that you yourself said "-If Islamic criteria is applied on any modern stock markets then thse stock markets would cease to function!!", but, I would differ slightly on this statement, markets won't seize to exist but they will be changed drastically in the way they do business. This takes us to the first question, i.e., do we want to continue with the current system of economic exploitation, if the answer is no, then in my honest opinion, Islam presents a very viable alternative for this world.

[theonethatis]

Is that 700 billion to 1 trillion dollar going into your Grand Mama's pockets rather than supporting a blood sucking capitalistic system????

Please you can now come out of that pre-historic den you were living in and give me a break!!

Right...you believe in books from 1911 and i'm living in a prehistoric cave?  You don't even know what capitalism is.  Do you even know where the money is going? It is going to ensure that the banks dont fail and to make sure that the banks are not forced to take peoples homes from them. So yea the money is going to help people.  Perhaps if you knew more about the bailout that you are whining about you would have understood that.  Why do you even care? It is not your money? Let them do what they will with their own money.  You just mind your own business.  Once we set Pakistan's economy on the right track then we can lecture others.

[Caesar]

Right...you believe in books from 1911 and i'm living in a prehistoric cave?  You don't even know what capitalism is.  Do you even know where the money is going? It is going to ensure that the banks dont fail and to make sure that the banks are not forced to take peoples homes from them. So yea the money is going to help people.  Perhaps if you knew more about the bailout that you are whining about you would have understood that.  Why do you even care? It is not your money? Let them do what they will with their own money.  You just mind your own business.  Once we set Pakistan's economy on the right track then we can lecture others.

You got to be kidding me!!! Money going to ordinary people???? How freaking naive!!!! I mean sorry but how dump can one be??? And that is why you really need to get out of that pre-historic den!!!

This money is going into the pockets of the pillars of Capitalistic system--The Banks and Investment Banks!!

The thing that amazes me to death is the foolishness and Idiocrasy of the American people in particular and Europeans in general. Here is a system which on one hand sucks the living day lights of ordinary people who work their arses off and on the other hand not only pays millions to retarded CEOs and MDs of these financial institutes but when these institutions F* Up astronomically due to the inhuman actions of these CEOs and MDs the ordinary people have to spend trillion dollar to bail them out!!!!!!!!!!   And to top that off--the WHOLE SYSTEM IS PRIVATELY OWNED--EVEN THE US FEDERAL RESERVE!!!! Boy oh Boy!!!!!

[penguin]

The Federal Reserve System is the central banking system of the United States. Created in 1913 by the enactment of the Federal Reserve Act, it is a quasi-public (government entity with private components) banking system[1] composed of (1) the presidentially appointed Board of Governors of the Federal Reserve System in Washington, D.C.; (2) the Federal Open Market Committee; (3) twelve regional Federal Reserve Banks located in major cities throughout the nation acting as fiscal agents for the U.S. Treasury, each with its own nine-member board of directors; (4) numerous private U.S. member banks, which subscribe to required amounts of non-transferable stock in their regional Federal Reserve Banks; and (5) various advisory councils.

The Federal Reserve System is an independent government institution that has private aspects. The System is not a private organization and does not operate for the purpose of making a profit. The stocks of the regional federal reserve banks are owned by the banks operating within that region and which are part of the system. The System derives its authority and public purpose from the Federal Reserve Act passed by Congress in 1913.

http://en.wikipedia.org/wiki/Federal_Reserve_System

[Caesar]

Nice Try Penguin but you are not fooling anyone!! Chao!!!

Court Rules Federal Reserve is Privately Owned
Case Reveals Fed's Status as a Private Institution

--------------------------------------------------------------------------------
Below are excerpts from a court case proving the Federal Reserve system's status. As you will see, the court ruled that the Federal Reserve Banks are "independent, privately owned and locally controlled corporations", and there is not sufficient "federal government control over 'detailed physical performance' and 'day to day operation'" of the Federal Reserve Bank for it to be considered a federal agency:

Lewis v. United States, 680 F.2d 1239 (1982)
John L. Lewis, Plaintiff/Appellant,
v.
United States of America, Defendant/Appellee.
No. 80-5905
United States Court of Appeals, Ninth Circuit.
Submitted March 2, 1982.
Decided April 19, 1982.
As Amended June 24, 1982.

Plaintiff, who was injured by vehicle owned and operated by a federal reserve bank, brought action alleging jurisdiction under the Federal Tort Claims Act. The United States District Court for the Central District of California, David W. Williams, J., dismissed holding that federal reserve bank was not a federal agency within meaning of Act and that the court therefore lacked subject-matter jurisdiction. Appeal was taken. The Court of Appeals, Poole, Circuit Judge, held that federal reserve banks are not federal instrumentalities for purposes of the Act, but are independent, privately owned and locally controlled corporations.

Affirmed.

1. United States

There are no sharp criteria for determining whether an entity is a federal agency within meaning of the Federal Tort Claims Act, but critical factor is existence of federal government control over "detailed physical performance" and "day to day operation" of an entity. . . .

2. United States

Federal reserve banks are not federal instrumentalities for purposes of a Federal Tort Claims Act, but are independent, privately owned and locally controlled corporations in light of fact that direct supervision and control of each bank is exercised by board of directors, federal reserve banks, though heavily regulated, are locally controlled by their member banks, banks are listed neither as "wholly owned" government corporations nor as "mixed ownership" corporations; federal reserve banks receive no appropriated funds from Congress and the banks are empowered to sue and be sued in their own names. . . .

3. United States

Under the Federal Tort Claims Act, federal liability is narrowly based on traditional agency principles and does not necessarily lie when a tortfeasor simply works for an entity, like the Reserve Bank, which performs important activities for the government. . . .

4. Taxation

The Reserve Banks are deemed to be federal instrumentalities for purposes of immunity from state taxation.

5. States Taxation

Tests for determining whether an entity is federal instrumentality for purposes of protection from state or local action or taxation, is very broad: whether entity performs important governmental function.


--------------
Lafayette L. Blair, Compton, Cal., for plaintiff/appellant.

James R. Sullivan, Asst. U.S. Atty., Los Angeles, Cal., argued, for defendant/appellee; Andrea Sheridan Ordin, U.S. Atty., Los Angeles, Cal., on brief.

Appeal from the United States District Court for the Central District of California.

Before Poole and Boochever, Circuit Judges, and Soloman, District Judge. (The Honorable Gus J. Solomon, Senior District Judge for the District of Oregon, sitting by designation)

Poole, Circuit Judge:

On July 27, 1979, appellant John Lewis was injured by a vehicle owned and operated by the Los Angeles branch of the Federal Reserve Bank of San Francisco. Lewis brought this action in district court alleging jurisdiction under the Federal Tort Clains Act (the Act), 28 U.S.C. Sect. 1346(b). The United States moved to dismiss for lack of subject matter jurisdiction. The district court dismissed, holding that the Federal Reserve Bank is not a federal agency within the meaning of the Act and that the court therefore lacked subject matter jurisdiction. We affirm.

In enacting the Federal Tort Claims Act, Congress provided a limited waiver of the sovereign immunity of the United States for certain torts of federal employees. . . . Specifically, the Act creates liability for injuries "caused by the negligent or wrongful act or omission" of an employee of any federal agency acting within the scope of his office or employment. . . . "Federal agency" is defined as:


     the executive departments, the military departments, independent
     establishments of the United States, and corporations acting
     primarily as instrumentalities of the United States, but does not
     include any contractors with the United States.

28 U.S.C. Sect. 2671. The liability of the United States for the negligence of a Federal Reserve Bank employee depends, therefore, on whether the Bank is a federal agency under Sect. 2671.

[1,2] There are no sharp criteria for determining whether an entity is a federal agency within the meaning of the Act, but the critical factor is the existence of federal government control over the "detailed physical performance" and "day to day operation" of that entity. . . . Other factors courts have considered include whether the entity is an independent corporation . . ., whether the government is involved in the entity's finances. . . ., and whether the mission of the entity furthers the policy of the United States, . . . Examining the organization and function of the Federal Reserve Banks, and applying the relevant factors, we conclude that the Reserve Banks are not federal instrumentalities for purpose of the FTCA, but are independent, privately owned and locally controlled corporations.

Each Federal Reserve Bank is a separate corporation owned by commercial banks in its region. The stockholding commercial banks elect two thirds of each Bank's nine member board of directors. The remaining three directors are appointed by the Federal Reserve Board. The Federal Reserve Board regulates the Reserve Banks, but direct supervision and control of each Bank is exercised by its board of directors. 12 U.S.C. Sect. 301. The directors enact by-laws regulating the manner of conducting general Bank business, 12 U.S.C. Sect. 341, and appoint officers to implement and supervise daily Bank activities. These activites include collecting and clearing checks, making advances to private and commercial entities, holding reserves for member banks, discounting the notes of member banks, and buying and selling securities on the open market. See 12 U.S.C. Sub-Sect. 341-361.

Each Bank is statutorily empowered to conduct these activites without day to day direction from the federal government. Thus, for example, the interest rates on advances to member banks, individuals, partnerships, and corporations are set by each Reserve Bank and their decisions regarding the purchase and sale of securities are likewise independently made.

It is evident from the legislative history of the Federal Reserve Act that Congress did not intend to give the federal government direction over the daily operation of the Reserve Banks:


     It is proposed that the Government shall retain sufficient power over
     the reserve banks to enable it to exercise a direct authority when
     necessary to do so, but that it shall in no way attempt to carry on
     through its own mechanism the routine operations and banking which
     require detailed knowledge of local and individual credit and which
     determine the funds of the community in any given instance.  In other
     words, the reserve-bank plan retains to the Government power over the
     exercise of the broader banking functions, while it leaves to
     individuals and privately owned institutions the actual direction of
     routine.

H.R. Report No. 69 Cong. 1st Sess. 18-19 (1913).

The fact that the Federal Reserve Board regulates the Reserve Banks does not make them federal agencies under the Act. In United States v. Orleans, 425 U.S. 807, 96 S.Ct. 1971, 48 L.Ed.2d 390 (1976), the Supreme Court held that a community action agency was not a federal agency or instrumentality for purposes of the Act, even though the agency was organized under federal regulations and heavily funded by the federal government. Because the agency's day to day operation was not supervised by the federal government, but by local officials, the Court refused to extend federal tort liability for the negligence of the agency's employees. Similarly, the Federal Reserve Banks, though heavily regulated, are locally controlled by their member banks. Unlike typical federal agencies, each bank is empowered to hire and fire employees at will. Bank employees do not participate in the Civil Service Retirement System. They are covered by worker's compensation insurance, purchased by the Bank, rather than the Federal Employees Compensation Act. Employees travelling on Bank business are not subject to federal travel regulations and do not receive government employee discounts on lodging and services.

The Banks are listed neither as "wholly owned" government corporations under 31 U.S.C. Sect. 846 nor as "mixed ownership" corporations under 31 U.S.C. Sect. 856, a factor considered is Pearl v. United States, 230 F.2d 243 (10th Cir. 1956), which held that the Civil Air Patrol is not a federal agency under the Act. Closely resembling the status of the Federal Reserve Bank, the Civil Air Patrol is a non-profit, federally chartered corporation organized to serve the public welfare. But because Congress' control over the Civil Air Patrol is limited and the corporation is not designated as a wholly owned or mixed ownership government corporation under 31 U.S.C. Sub-Sect. 846 and 856, the court concluded that the corporation is a non-governmental, independent entity, not covered under the Act.

Additionally, Reserve Banks, as privately owned entities, receive no appropriated funds from Congress. . . .

Finally, the Banks are empowered to sue and be sued in their own name. 12 U.S.C. Sect. 341. They carry their own liability insurance and typically process and handle their own claims. In the past, the Banks have defended against tort claims directly, through private counsel, not government attorneys . . ., and they have never been required to settle tort claims under the administrative procedure of 28 U.S.C. Sect. 2672. The waiver of sovereign immunity contained in the Act would therefore appear to be inapposite to the Banks who have not historically claimed or received general immunity from judicial process.

[3] The Reserve Banks have properly been held to be federal instrumentalities for some purposes. In United States v. Hollingshead, 672 F.2d 751 (9th Cir. 1982), this court held that a Federal Reserve Bank employee who was responsible for recommending expenditure of federal funds was a "public official" under the Federal Bribery Statute. That statute broadly defines public official to include any person acting "for or on behalf of the Government." . . . The test for determining status as a public official turns on whether there is "substantial federal involvement" in the defendant's activities. United States v. Hollingshead, 672 F.2d at 754. In contrast, under the FTCA, federal liability is narrowly based on traditional agency principles and does not necessarily lie when the tortfeasor simply works for an entity, like the Reserve Banks, which perform important activities for the government.

[4, 5] The Reserve Banks are deemed to be federal instrumentalities for purposes of immunity from state taxation. . . . The test for determining whether an entity is a federal instrumentality for purposes of protection from state or local action or taxation, however, is very broad: whether the entity performs an important governmental function. . . . The Reserve Banks, which further the nation's fiscal policy, clearly perform an important governmental function.

Performance of an important governmental function, however, is but a single factor and not determinative in tort claims actions. . . . State taxation has traditionally been viewed as a greater obstacle to an entity's ability to perform federal functions than exposure to judicial process; therefore tax immunity is liberally applied. . . . Federal tort liability, however, is based on traditional agency principles and thus depends upon the principal's ability to control the actions of his agent, and not simply upon whether the entity performs an important governmental function. . . .

Brinks Inc. v. Board of Governors of the Federal Reserve System, 466 F.Supp. 116 (D.D.C.1979), held that a Federal Reserve Bank is a federal instrumentality for purposes of the Service Contract Act, 41 U.S.C. Sect. 351. Citing Federal Reserve Bank of Boston and Federal Reserve Bank of Minneapolis, the court applied the "important governmental function" test and concluded that the term "Federal Government" in the Service Contract Act must be "liberally construed to effectuate the Act's humanitarian purpose of providing minimum wage and fringe benefit protection to individuals performing contracts with the federal government." Id. 288 Mich. at 120, 284 N.W.2d 667.

Such a liberal construction of the term "federal agency" for purposes of the Act is unwarranted. Unlike in Brinks, plaintiffs are not without a forum in which to seek a remedy, for they may bring an appropriate state tort claim directly against the Bank; and if successful, their prospects of recovery are bright since the institutions are both highly solvent and amply insured.

For these reasons we hold that the Reserve Banks are not federal agencies for purposes of the Federal Tort Claims Act and we affirm the judgement of the district court.

AFFIRMED.



--------------------------------------------------------------------------------

It is clear from this that in some circumstances, the Federal Reserve Bank can be considered a government "instrumentality", but cannot be considered a "federal agency", because the term carries with it the assumption that the federal government has direct oversight over what the Fed does. Of course it does not, because most people who know about this subject know that the Fed is "politically independent."

The only area where one might disagree with the judge's decision is where he states that the Fed furthers the federal government's fiscal policy, and therefore performs an important governmental function. While we would like to think that the federal government and the Fed work cooperatively with each other, and they may on occasion, the Fed is by no means required to do so. One example is where Rep. Wright Patman, Chairman of the House Banking Committee, said in the Congressional Record back in the '60s, that depending on the temperament of the Fed's Chairman, sometimes the Fed worked with the government's fiscal policy, and other times either went in the complete opposite direction, or threatens to do so in order to influence policy.

The common claim that the Fed is accountable to the government, because it is required to report to Congress on its activities annually, is incorrect. The reports to Congress mean little unless what the Chairman reports can be verified by complete records. From its founding to this day, the Fed has never undergone a complete independent audit. Congress time after time has requested that the Fed voluntarily submit to a complete audit, and every time, it refuses.

Those in the know about the Fed, realize that it does keep certain records secret. The soon-to-be-former Chairman of the House Banking Committee, Henry Gonzales, has spoken on record repeatedly about how the Fed at one point says it does not have certain requested records, and then it is found through investigation that it in fact does have those records, or at least used to. It would appear that the Fed Chairman can say anything he wants to to Congress, and they'll have to accept what he says, because verification of what he says is not always possible.

[END]



--------------------------------------------------------------------------------
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[Archangelesk99]

http://biz.yahoo.com/ap/081006/wall_street.html

DOW fell 800 points at some time today, was at 9,600.  Still too high    Maximal real value of DOW is 8,100 and actually 6,000 according to economist Joachim Henkle.

[harrypotter]

Chinese lenders escape crisis

http://edition.cnn.com/video/?/video/busin...china.banks.cnn

[_killuminati_]

Chinese lenders escape crisis

http://edition.cnn.com/video/?/video/busin...china.banks.cnn

"Chinese economy will lead us out"

[clutch]

"Chinese economy will lead us out"

It cant really... Chinese economy is:
1. not mature enough yet.
2. is too dependent on the US economy (exports to US)  
3. Chinese banks also have high stakes in the US banking system


in my opinion, there is gonna be a global depression...

[_killuminati_]

It cant really... Chinese economy is:
1. not mature enough yet.
2. is too dependent on the US economy (exports to US)  
3. Chinese banks also have high stakes in the US banking system
in my opinion, there is gonna be a global depression...

The video posted by 'harry potter' shows how Chinese lenders escaped the crisis, and how their economy will react.
I think it is very interesting.

[penguin]

Nice Try Penguin but you are not fooling anyone!! Chao!!!

"The Federal Reserve System is an independent government institution that has private aspects. The System is not a private organization and does not operate for the purpose of making a profit. The stocks of the regional federal reserve banks are owned by the banks operating within that region and which are part of the system. The System derives its authority and public purpose from the Federal Reserve Act passed by Congress in 1913."

Interesting find. However, your post only conforms the italicised line. That in and of itself does not make the Federal Reserve System (which constitutes more than the regional federal reserve banks) a private organisation.

Indeed, you own quote includes this:

It is clear from this that in some circumstances, the Federal Reserve Bank can be considered a government "instrumentality", but cannot be considered a "federal agency", because the term carries with it the assumption that the federal government has direct oversight over what the Fed does. Of course it does not, because most people who know about this subject know that the Fed is "politically independent."

[Caesar]

So here is the story so far:

1- US Congress has approved 700 billion dollars for its bankrupt capitalistic institutes.
2- Experts say it actually requires around 2 TRILLION DOLLARS to save these institutes
3- Britain has announced its own 1.2 TRILLION DOLLAR rescue pack
4- Iceland is on the brink of bankrupcy
5- Europes main bank including German bank are on the verge of bankrupcy
6- Stock markets all over the world has taken a battering!!!

So this shows something--this corrupt, greedy system is about to fall but countries like US and UK and Europe are trying the hardest to avoid such a collapse. I say: LET THIS MORONIC SYSTEM COLLAPSE AND LET START ALL OVER AGAIN!!!

[Archangelesk99]

So here is the story so far:

1- US Congress has approved 700 billion dollars for its bankrupt capitalistic institutes.
2- Experts say it actually requires around 2 TRILLION DOLLARS to save these institutes
3- Britain has announced its own 1.2 TRILLION DOLLAR rescue pack
4- Iceland is on the brink of bankrupcy
5- Europes main bank including German bank are on the verge of bankrupcy
6- Stock markets all over the world has taken a battering!!!

So this shows something--this corrupt, greedy system is about to fall but countries like US and UK and Europe are trying the hardest to avoid such a collapse. I say: LET THIS MORONIC SYSTEM COLLAPSE AND LET START ALL OVER AGAIN!!!

No system is failproof.  Capitalism, socialism, communism all have strengths and weaknesses.  However one thing is very clear in this shindig.  The more integrated a country is with the United States the more chance it has of falling apart, as the "Asian Tigers" did a decade ago due to the manipulation of their currencies by the US.  This is why EU, Japan and UK are having a real problem now while China, Venezuela and Russia will fare okay as long as they keep turning their attentions to making domestic demand grow.

Globalisation as practised by the United States only harms other countries its associated with because American companies are always selling to those other nations in return for hard assets like gold, coal, etc. while buying from them on credit (dollars) - the whole thing is nothing but a farce.

[ZhengHe]

It is amusing that 24 months ago, Western "experts" were pontificating about the weakness of China's banks. About the overhang from all the bad loans made to Chinese companies owned by the government. And now? Non-performing loans (those not making their interest payments) at Chinese banks are lower than they have been in two decades. Non-performing loans at US banks? Not so good.

China hopefully will learn some lessons from this episode. Hopefully this whole world will learn some lessons from this episode. Hopefully one of those lessons will NOT be that capitalism is a failure. I do not think that is the lesson that China will take away from this, even if that is the lesson some socialists in Europe are spouting.

China has a lot of experience with not using the open market as a pricing mechanism. Let's be honest. It didn't work. Yet undeniably there is something wrong with the current Western market economies. But it is not the open market pricing mechanism. In fact I'd argue that if allowed to operate, the open market pricing mechanism would be better than the mismash of government intervention we are currently seeing. The open market pricing mechanism wouldn't FIX everything, but it would be better.

So what is the problem?

It's simple. Entities in the West, and in the US in particular, spend too much. It is habitual in the US that individuals, local governments, state governments and the federal government spend 105% of their annual income each year. They do so by borrowing money. They get those loans backed not by wealth but on the strength of their future (expected) income. They do this every year.  They pay off those ever growing loans by getting bigger loans. There's a phrase in the English language that describes the behavior of expecting to pay off growing debts with growing loans. It's called, PONZI SCHEME. Such endeavors invariably end when the ability to fund new loans ends. Just as is happening right now. Nor are business entities innocent in this era. If you look at their capital expenditures, they are way out of line (high) relative to their wealth (for a company this is Shareholder's Equity). Instead their cap ex is funded by loans that are backed by their EBITDA (earnings before interest, tax, depreciation and amortization), in other words future (expected) income. And again guess what happens when that future income vanishes?

This is why all the government intervention seen so far is ultimately flawed. Over an over again you see politicians and policymakers saying that they are trying to get credit, i.e. loans, flowing again. This is the same thing an addict says ("I just need one more!"). The problem isn't that there are too few loans. The problem is that there were too many! The adjustment that MUST occur is a shift towards spending less and saving more. Now everyone knows what will happen if everyone spends less. A recession will occur. A depression may occur. But this is unavoidable. Best to get it over with and get on with rebuilding. Because a sound stable economy can NOT be built on a pyramid scheme of everyone spending 105% of their income/revenue.

Hardcore Islamists should be crowing right now about how too much debt caused the implosion of Western economies. But I have a feeling they are too busy celebrating to really understand what is happening right now. But to be fair, Hank Paulson doesn't even understand what's happening right now. If he did, he would be trying to get banks to make even MORE loans. For China, it's much more simple - this entire episode is a warning. A warning about what happens when unrealistically optimistic expectations leads to rampant borrowing to finance current expenditures. Don't do it.

[Caesar]

http://www.dawn.com/2008/10/11/top10.htm

Financial meltdown dissected

By Yousuf Nazar

THE worst global financial crisis since the 1930s is more than just an economic phenomenon. It may turn out to be the most important event since the collapse of the Soviet Union and the fall of the Berlin Wall in 1989.

A unipolar world emerged following the disintegration of the Soviet Union. The year 2008 may go down in history as the year in which the Anglo-Saxon financial model collapsed and global economic power shifted from the West to the East.

Since January 2008, the US stock market capitalisation has fallen by about 40 per cent, its worst performance since 1937, wiping out almost $7.3tr in wealth, or equivalent to about 53 per cent of the US’s GDP.  Some of its biggest and most powerful banks have collapsed. About 3.6m Americans have their lost homes since the sub-prime mortgage crisis began and more continue to lose their homes.

The US is now in a recession, and the unemployment rate is rising rapidly and forecast to reach 7.1 per cent early next year according to Goldman Sachs. The US budget deficit for

2009 could be close to $2tr, or 12.5 per cent of its GDP.

The financial crisis has its roots in the mysterious world of sub-prime mortgages, derivatives and credit default swaps. What began as a borrowing binge by US consumers eager to own homes on easy — as it turns out, unsustainable — terms offered by a financial industry flush with liquidity has rocked the very edifice of the western model of finance. Joseph Stiglitz, a Nobel Prize–winning economist from the US, recently wrote, “A unique combination of ideology, special-interest pressure, populist politics, bad economics, and sheer incompetence has brought us to our present condition.”

When mortgage payments by home owners with low incomes and poor credit histories became due, many of those customers began to default or seek to defer their payments. These so-called sub-prime mortgages total $2.3tr, sending shockwaves through the housing industry as they began to turn sour. But sub-prime lending is just one of the reasons of the crisis. The collapse of America’s financial giants was brought about by excessive greed of banks, mindless deregulation, lax supervision, and a false belief represented by the bipartisan Washington Consensus that financial markets know best. Handed a gun and set minimal rules, the financial ultimately market shot itself in the foot.

One of the weapons the market used was derivatives, which are complex financial instruments whose values change in response to the changes in underlying variables such as bonds, stocks, commodities, interest rates, credit risk, etc.  They are not traded on any exchange and are hard to value or trade during market turmoil. By the end of 2007, the total notional amount of all the derivatives had risen to $596tr from $220tr in June 2004. While the banks have announced losses from the mortgage loans to the tune of nearly $700bn, losses from derivatives pose a much bigger and unknown risk. The risk that the bank next door could be sitting on large losses has led banks to stop trading with each other and sparked fears of banks falling like dominoes, shattering the confidence in the whole system.

The worldwide cost so far

In just the last few weeks, the governments of the US, UK, Germany, France, Belgium, Iceland and Sweden have announced bailouts totalling $1.8tr to rescue the troubled banks. In September, the US nationalised its two biggest mortgage banks, or virtually half of its mortgage lending market, to save them from bankruptcy.

On Oct 7, Britain announced that its largest banks are to be partly nationalised to avert a banking collapse. Under the UK bank rescue, the government is to put up to £250bn into the banking system in an effort to keep banks lending. It will also offer a guarantee to banks issuing medium-term debt, which could mean backing a further £250bn of bank borrowings. But the UK government is likely to demand dividend cuts and the end of big bonuses at the banks in return.

In addition, the central banks of the US, Europe and Japan have pumped nearly $1tr into the money market to restore confidence and to avert more bank failures.

The UK move came as central banks around the world announced an unprecedented coordinated cut in interest rates in response to mounting fears about the impact of the financial crisis on the world economy. The US Federal Reserve, the European Central Bank, the Bank of England, and the central banks of Canada, Switzerland, Sweden and the United Arab Emirates have all cut their main lending rates by 0.5 percentage points.

In Latin America, central banks are being forced to draw on record foreign reserves built up during the six-year commodities rally to stop their currencies from sinking. In the last couple of days, Brazil sold dollars for the first time in five years and Mexico offered $2.5bn in the spot market after their currencies fell to decade-old lows. Chile may follow suit after its peso fell to the lowest in almost four years. A new world order?

The IMF has warned that the world economy is now entering a major downturn in the face of the most dangerous shock to mature financial markets since the 1930s. “The situation is exceptionally uncertain and subject to considerable downside risks,” according to the IMF.

The US may face its longest recession in a quarter century despite it $700bn plan to rescue the battered banking industry. The stock markets continue to fall, the money markets in the US and Europe are practically shut, and credit has dried up. Economists say it now appears the economy shrank in the third quarter of this year as credit-crimped consumers cut spending for the first time since 1991. Stock markets continue to fall, money markets in the US and Europe are practically shut, and credit has dried up, which is bound to hurt all those who borrow from international markets.

Asian stock markets have not been immune to the crisis and have fallen sharply reflecting slower growth forecasts. However, according to the IMF, the Chinese economy is still likely to grow by 9.3 per cent, Russia’s by 5.5 per cent and India’s by 6.9 per cent. Their foreign exchanges reserves are reportedly around $1.8tr, $582bn and $283bn respectively. The total reserves of these three countries represent 38 per cent of the world’s total and 12 times the reserves of the European Community (EU).

With the US and Europe in turmoil, their governments piling up huge deficits to rescue banks, and their capacity to provide aid to the developing countries’ seriously impaired, a dozen sovereign wealth funds, none of them from the US or western Europe, are now the world’s largest and most powerful investors.  These funds, controlled by Asian and Arab governments, are sitting on an estimated $7-8tr. A few have selectively helped some western banks.

Japan and China are the two largest foreign creditors of the US: Japan holds $593bn of US treasury bills, followed by China with $519bn. The US is now completely dependent on Asia for financing its losses and deficits and hugely dependent on the Middle East and Venezuela for meeting its oil needs.

The shift in the global economic power balance, once a matter of long-term projections, has been dramatically accelerated by what has been described as the fall of Anglo-Saxon financial capitalism as we knew it for a long time.