JOHANNESBURG, SOUTH AFRICA- Two weeks ago, a list published on social media detailed 11 names of people accused of raping students at Rhodes University in the Eastern Cape region of South Africa.
The list was released, along with a set of demands by still unknown members of the Rhodes University student body.
Thousands of students protesting under the banner “Unashamed”, began their movement by placing posters on walls with quotes from Rhodes students, management and prosecutors.
The posters were intended to show the prevailing attitudes of those in and around Rhodes regarding rape and the rape culture that is being fostered in Rhodes and without a doubt, other South African universities.
The Unashamed movement, along with anti-rape organisation, Chapter 212 (which refers to Chapter 2(12) of the South African Constitution, which entails the freedom and security of the person,) began the anti-rape campaign in order to challenge the current systems in place for victims of rape and sexual assault in universities and the country.
Since the beginning of the campaign there have been protests on the Rhodes campus.
And while they intended to be peaceful, some students were injured after police fired stun grenades at them.
Five students were arrested for “protesting on a public road.”
WATCH: Video of three of the arrested students
Heavy police presence have been a feature of protests on South African campuses since the #FeesMustFall movement began last year.
It seems then that the #RUReferenceList was released in order to coincide with the larger student campaign for reform and in order to protect women on campus from suspected rapists.
However, the release of the list has been controversial with some people calling for justice to be served, before anyone is outed in a public way.
The implication among young people in this country is that a few members of the movement have had defamation charges brought against them; this has caused further outrage because it seems as though university management is more concerned about the identities of rapists than the safety of women on campus.
The movement prompted protests on campuses across the country, with Stellenbosch University and the University of Cape Town placing posters, such as the ones in Rhodes, on their campuses.
But the most dramatic protest was held by the women of the University of the Witwatersrand in Johannesburg. Scores of students here partook in a topless protest in solidarity with the women of Rhodes.
Images of the protests at University of the Witwatersrand:
It seems as though this is just the beginning of protests on campuses across South Africa, with the intention of bringing the serious issue of rape on university campuses to the forefront of discussion.
RISE NEWS will continue to cover this story as it develops in South Africa.
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RISE NEWS is a grassroots journalism news organization that is working to change the way young people become informed and engaged in public affairs. You can write for us.
Photo Credits: Lungani Gumede/ RISE NEWS.
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Hearing Begins Today For Six Officers Charged In Death Of Freddie Gray
Hearings began today in Baltimore for the six police officers charged for the arrest and death of Freddie Gray.
Gray, a 25-year-old black man, was arrested on April 12, and died one week later in police custody after suffering a fatal spinal injury.
The hearing will be the first verbal argument for a case that has spanned over five months in written motions.
Today’s arguments will focus on three motions: a call for the case to be dismissed, the state’s attorney to be recused, and whether the six officers charged will face trial together or separately.
Protesters arrive at #Baltimore courthouse for 1st hearing in case of six officers charged in death of #FreddieGray pic.twitter.com/F8XlrFvthh
— Sheryl Gay Stolberg (@SherylNYT) September 2, 2015
Officer Caesar R. Goodson Jr., who drove the police van that Gray suffered injuries in, is charged with second-degree murder. Three other officers are charged with manslaughter: Officer William G. Porter, Sgt. Alicia D. White and Lt. Brian W. Rice. Facing lesser charges are Officers Garrett E. Miller and Edward M. Nero. All officers involved pleaded not guilty and waived their right to attend the hearing.Attorneys representing the officers called for the dismissal of the case or the recusal of Moseby because they allege that Moseby’s office issued orders to crack down on law enforcement in the location Gray was arrested. “Mrs. Mosby herself is now an integral part of the story and as such is a central witness,” the motion reads. “In the charges relating to the initial arrest and/or detention of Mr. Gray, Mrs. Mosby herself has become essential exculpatory evidence.”
In the weeks following Gray’s death, nationwide protests occurred against police brutality and treatment of black people at the hands of the state. Protestors gathered at the steps of the courthouse in Baltimore at around 8 a.m., along with protests happening throughout cities across the country.
Twitter user @kwamerose was apparently arrested today at a Freddie Gray protest in Baltimore.
DEVELOPING: @kwamerose awaiting ambulance, still cuffed at #Baltimore #FreddieGray protest http://t.co/RueVUbWl2o pic.twitter.com/FS9AWh9U7S — RT America (@RT_America) September 2, 2015
Today’s hearing will also see a call to move the hearing to a different location.
Stay with Rise News as we continue to cover this developing story. Send tips to [email protected]
Cover Photo Credit: POLICEDIVER2/Flickr (CC BY 2.0).
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Clusterfuck: How Bush And Obama Both Created ISIS
Last week witnessed yet another guerilla attack on a European capital, as bombs went off in the Brussels airport and subway, murdering and injuring hundreds.
Events like these expose the silliness of most of our squabbles, as the true members of civil society shine through while a handful of mad(mostly)men demonstrate for all of us the true downside of mankind.
Anger is what nature provides us with in these situations because it forces us to assign blame, thus highlighting the failures of the present as a warning to future generations, and there is plenty of criticism to go around.
Taking a look back at the evolution of ISIS is instructive of the catastrophic failures of US foreign policy, as it took a series of cataclysmic blunders across two Presidencies that fostered the environment from which this murderous death cult would emerge.
The Bush Administration
George W. Bush’s 2003 invasion of Iraq served as the catalyst for the creation of ISIS, at least in the form that we know it as know.
Saddam Hussein was a brutal dictator, but one of the “advantages” of a dictator (from a wonkish macro perspective) is that the brutality of dictatorships tends to keep some semblance of order in these intentionally fractured societies.
ISIS did not have the means, nor the capability to become what it is today so long as Saddam was in power.
However, simply removing Saddam was not enough to facilitate the rise of ISIS.
It took a series of cataclysmic blunders across two Presidencies that fostered the environment from which this murderous death cult would emerge.
The first of many gigantic mistakes after the initial invasion came from Donald Rumsfeld and Dick Cheney’s commitment to a “light footprint” in Iraq following the initial invasion.
David Kilcullen, an Australian counter-terrorism strategist who arrived in Baghdad’s Green Zone in 2005 called it “Ground Zero for the greatest strategic screw up since Hitler’s invasion of Russia.”
By not providing American troops with enough support to maintain the peace, Rumsfeld ensured that a power vacuum would be created in one of the most violent areas on the planet, right on the border of our regional nemesis.
American pilots during the early days of the Iraq war in 2003. Photo Credit: US NAVY
The United States sent 127,000 troops to manage a divided population of 33 million in a country that is larger than California (California has about 126,000 police officers, fire fighters, and EMT’s to serve its 38 million citizens).
According to US Central Command’s OPLAN 1003-98, it was estimated that the army would need at least 385,000 soldiers to accomplish its goals in Iraq. The administration gave them a third of that.
Providing our troops with insufficient support in a war torn country was bad enough, but the Bush White House exponentially compounded that problem with its next two calamitous mistakes.
If you had to point to any singular event that is responsible for the rise of ISIS, disbanding the Iraqi army after the invasion would be it.
The US military had hoped to weed out Saddam loyalists and keep it mostly intact, but the administration eschewed that difficult task in favor of simply scrapping the army altogether.
As a result, from May 23, 2003 to September 6, 2006, the security of all of Iraq was the sole responsibility of the United States of America.
Major Robert S. Weiler from the United States Marine Corps summarized the contradiction at the heart of this clusterfuck:
“The decision was a product of colliding priorities. The Secretary of Defense wanted a small occupation force that commanders knew was imprudent, the military planners adapted by planning to use the Iraqi Army to make up for coalition short falls, and the Coalition Provisional Authority wanted to dissolve all things Baathist or resembling Saddam even if it was the only mechanism allowing the country to function.”
Seemingly overnight, 250,000 young men and their weapons and talents of war were thrown out on the street, and a huge chunk of them wound up joining the initial version of ISIS: al-Qaeda in Iraq.
This choice makes Rumsfeld and Cheney’s decision to use 127,000 US soldiers to keep the peace even more befuddling, and that is before you even get to the fact that around 80% of Iraqis reported a dislike for the American occupation. It was a plan that literally defied logic.
Paul Bremer, the head of the Coalition Provisional Authority overseeing all this, defended his momentous decision by stating that the Iraqi army could not be trusted by the populace, as the Baathists loyal to Saddam had too much power, and the Sunni’s were accepted as a sunk cost; there was no expectation that they would remain loyal to the state during the American occupation.
Lt. Gen. Ricardo Sanchez and Ambassador L. Paul Bremer (R), talk to reporters at the Baghdad Forum, Dec. 14, 2003, about the capture of Saddam Hussein. Bremer made the terrible decision to disband the Iraqi army. Photo Credit: U.S. Army Europe Images/ Flickr (CC BY 2.0)
But instead of trying to bridge the gap between the CPA and Sunni leaders, Bremer accelerated the process of alienation and installed Nouri al-Maliki as Iraqi Prime Minister; a devout Shiite who was raised with contempt for Sunni’s.
Maliki joined the Dawa party as a young man, which aimed to create a Shiite nation-state in Iraq by any means necessary.
Saddam arrested and executed many members of the Dawa party, including some of Maliki’s family members, which only further exacerbated the sectarian tensions boiling inside of Iraq’s future Prime Minister.
The idea that much of the Iraqi Army would remain steadfastly loyal to Saddam seemed like a specious argument anyway, because Michael R. Gordon and General Bernard E. Trainor wrote in “COBRA II: The Inside Story of the Invasion and Occupation of Iraq,” that Saddam refused to let his army enter Baghdad out of fears of a coup.
In 2007, the Combat Studies Institute published “Warfare in the Age of NonState Actors: Implications for the U.S. Army,” and it detailed the absurdity of Bremer and the CPA’s decision:
“Taking away the jobs and weapons in which so many men have depended for so long, and giving them an equivalent civilian occupation in a peacetime (something even highly educated US military personnel find challenging), is a delicate and absolutely vital challenge which has little room for error. To simply disband them is extremely dangerous”
Nouri al-Maliki provided the final push to facilitate the creation of ISIS, as he fired countless Sunni commanders during his 8 year tenure as Prime Minister.
These seasoned military men were out of a job with no prospects provided by the new regime, and al-Qaeda’s new branch in Iraq (AQI) was more than happy to welcome them into their ranks.
Nouri al-Maliki (R) fired countless Sunni commanders during his time as Prime Minister of Iraq. Photo Credit: Al Jazeera English/ Flickr (CC By 2.0)
There was no shortage of candidates available for any position in this new army, as some estimates put the unemployment rate as high as 60% in Iraq after the CPA disbanded the military.
The US government basically helped create an enemy from scratch for its army to fight during the Sunni uprising, which carried out scores of bombings across Iraq between 2003 and 2011, resulting in roughly half a million civilian casualties.
Sasnak Joshi, a Senior Fellow at the Royal United Services Institute highlights the central issue at hand:
“It’s less important in terms of the contribution to manpower, or sheer heft or size, and more important in terms of the specific skills, connections, linkages and technical expertise that the Baathists bring to the table.”
In 2014, Adnan al-Asani, Iraq’s deputy interior minister, told Al Arabiya that half of ISIS’s top military commanders: Haji Bakr, Abu Ayman al-Iraqi and Abu Ahmad al-Alwani, were all former high-ranking members of Sadaam’s party.
This map from Mother Jones of a divided Iraq from 2007 further depicts the folly of coalescing behind one faction, as any group that obtained absolute power would be seen as a threat to the rest of the populace:
Photo Credit: Mother Jones Magazine
Iraq is basically a fake country constructed by colonial powers; it’s really three countries cobbled into one, and a modern day colonial power came in, smashed everything, and sparked a civil war.
The History of ISIS
Abu Musab al-Zarqawi is effectively the father of ISIS.
Not only did his actions lead to the creation of ISIS, but the group embodies his spirit; a spirit that was deemed too extreme by Osama freaking bin-Laden. Zarqawi was a fighter who came up through organized crime, not “finding religion” until later in life, yet he thoroughly enjoyed rape, murder, and torture no matter what ideology he presently subscribed to.
Zarqawi became radicalized in prison during the 1980’s, and upon his release in 1988, he traveled to the Peshwar region of Afghanistan to fight against the Soviets.
By 1992, he had returned to Jordan to create Bayat al-Imam, which was the first iteration of ISIS.
Zarqawi was locked up for 15 years by King Hussein of Jordan, where he was subsequently mentored by Sheikh Abu Muhammad al Maqdisi, and the duo expanded the influence of their newfound Jihadist organization both inside the prison and within the outside world.
Upon Zarqawi’s release from jail in 1999, he visited Osama bin Laden, who was alarmed at his extremist views, but nonetheless was convinced to give him seed funding for his new organization, which was set up in Herat, 355 miles away from bin Laden’s base in Kandahar.
Abu Musab al-Zarqawi, the father of ISIS spent years in a Jordanian prison during the reign of King Hussein (L) where he became more radicalized. Current King of Jordan Abdullah II (R) is shown with his father in this public propaganda photo. Photo Credit: Maureen/ Flickr (CC By 2.0)
By the time the United States invaded Afghanistan in 2001, Zarqawi had assembled an army of between 2,000 and 3,000 men, the organization now being known as al-Tawhid wal-Jihad.
Zarqawi soon left Afghanistan to set up camp in Iran, and when some of his operatives were arrested in Europe in 2002, Zarqawi became a much more prominent figure in counterterrorism agencies across the globe.
He spent the next couple years hiding out in Syria, Lebanon, and Iraq all while expanding his army, culminating in an agreement with al-Qaeda’s security chief, Seif al-Adel, to move the group into Iraq.
Zarqawi spent most of his time in Iraq in the “Sunni triangle,” gaining new recruits and setting up bases.
By the time the US invaded in 2003, Zarqawi had effectively assembled a Sunni nation-state to combat the invasion.
His strategy was based on four central tactics that we still see ISIS use today:
- Isolate American forces by targeting international coalition partners (ie: the 2003 bombing of the UN headquarters in Baghdad).
- Attack civilians there to help (ie: the May 2004 beheading of Nicholas Berg, thought to be carried out by Zarqawi himself).
- Spark a sectarian war by attacking Shiite targets (ie: the December 2004 attack against Shiite leader Sayyid Muhammad al-Hakim at a funeral in the holy city of Najaf)
- Deter Iraqi cooperation by targeting politicians, recruiting centers, and police stations (too many examples to count).
The invasion of Iraq served as one of the greatest recruiting boons Jihad has ever seen (second only to the ongoing Israeli-Palestinian conflict), as an influx of foreign fighters from all over the globe entered Iraq to fight with Zarqawi and the rest of the Sunni insurgency against the US army.
After the bloody battle that took Fallujah in 2004, the insurgency began to pass out leaflets demanding full compliance with their version of Islamic Law, even going so far as to list the names of “offenders” who were marked for public execution. By October 2004, Zarqawi pledged his allegiance to Osama bin Laden and renamed the group al-Qaeda in Iraq (AQI).
The Sunni insurgency boycotted the 2005 Iraqi elections, which proved to be a disastrous decision, as they were left out of the redrafting of the new Constitution.
Zarqawi continued to attack Shiites, further dampening popular support for al-Qaeda in Iraq. The final straw came in November of 2005 as AQI bombed a wedding party, killing 60 people, most of them Muslims.
al-Qaeda began to distance themselves from AQI, as it along with other Sunni terrorist groups were absorbed into a larger Mujahedeen Shura Council from which Zarqawi was excluded.
His brutality and aggression had simply become too much for a terrorist organization that was obsessed with developing popular support from Muslims of all backgrounds. The United States killed Zarqawi in an airstrike on June 7th, 2006, but by then, his ideology had already poisoned an entire generation of fighters.
The 20,000 troop “surge” of 2007 is largely credited as the key event to break the stalemate in Iraq, but the surge would not have had the impact it did if it were not for Sahwa, more commonly known as the Sunni Awakening. Frustrated with the lack of progress by AQI, Sunni tribesmen began to use AQI’s tactics against them, killing many of their senior leaders and intimidating many more to leave the movement.
This was so successful, that by 2009, more than 100,000 Sunni tribesmen were working in cooperation with the United States army against AQI. Not only had they either killed or captured well over half of the organization, but the flow of foreign fighters entering Iraq went from around 120 per month to just a handful.
The Obama Administration
However, an opportunity to reassert themselves emerged when Barack Obama continued the Bush Administration’s misguided “small footprint” strategy by ratifying the US-Iraq Status of Force’s Agreement that Bush had negotiated, which promised a full withdrawal of all US troops by December 31, 2011.
On December 18th of that year, the last US boot left the ground in Iraq, leaving a fractured and vulnerable country with no national force capable of holding all of its disparate parts together.
With AQI seemingly confined to an existence as a regional pest, the Iraqi election of 2010 served as a major event which breathed life back into the movement.
After the populace had elected a more moderate, even pro-American Prime Minister Ayad Allawi in 2010, the United States still continued to back the increasingly unpopular Nouri al-Maliki and his allies in parliament while pursuing conflicting goals, as Joe Biden told top US officials
“I’ll bet you my vice presidency Maliki will extend the SOFA [Status of Forces Agreement]”
As yet another power vacuum was being created by American intransigence in Iraq, next door in Syria, an even larger problem was emerging. The Iranian backed dictator, Bashar al-Assad, was facing a serious challenge to his rule, as the Arab Spring spilled into Syria’s streets.
American Vice President Joe Biden in Iraq in 2011. Photo Credit: U.S. Forces Iraq/ Flickr (CC By 2.0)
Assad and his Alawite support (who are minorities in Syria) were being challenged on all sides, and his strategy to stay in power is to build up the more extremist segments of the revolution while brutally massacring the moderates, thus presenting the West with a stark choice for the future of Syria: him or ISIS.
Obama massively compounded the problem when he stated that Assad using chemical weapons would be a “red line,” for the United States.
Once it was discovered that Assad did gas his own people, the President did nothing militarily, effectively letting the rest of the world know that he did not have the will to commit to a war with a relatively small regime like Assad’s even if he implied it, making his future proclamations on this conflict ring completely hollow.
Additionally, it let Assad (and by extension, Iran) know that they had full control over this situation.
While the United States debated what to do, the former Iraqi officers and Sunni Jihadists who had comprised AQI began to unite with Syrian factions, and captured Raqqa in 2013, declaring it the capital of the Caliphate the following year.
Still paralyzed by indecision, the United States watched as this new iteration of AQI claimed town after town, reaching a breaking point in 2014 as ISIS took over Mosul, Iraq’s 2nd largest city.
Five months prior to this event, Obama dismissed ISIS as a “JV team,” further demonstrating the administration’s miscalculation of this virus rapidly spreading across the globe. By the time a serious military campaign was launched, ISIS had already established a nation state.
Conclusion
Long story short: a decade-plus of foreign policy adventurism and fecklessness from two Presidents combined with the psychotic brutality of a charismatic Jihadist culminated in the establishment of a functional Caliphate in 2014.
Since its establishment, the US State Department estimates that upwards of 25,000 foreign fighters have flocked to these hinterlands formerly known as Syria and Iraq.
Even though they have demonstrated the capability to export their ideology and tactical skillset across the globe, there are still many signs that ISIS is on the decline.
In January, the US military estimated that ISIS has lost 40% of its territory in Iraq and 20% in Syria. In that same month, ISIS announced a 50% pay cut for everyone on the payroll.
Additionally, there have been many reports of protests in ISIS controlled territory, as we are seeing the same dissatisfaction that many Iraqi Sunni’s felt after the initial opposition to the US occupation.
If we have learned anything from this quagmire, it is contained in this sobering quote from Syrian Businessman Raja Sidawi:
“I am sorry for America. You are stuck. You have become a country of the Middle East. America will never change Iraq, but Iraq will change America.”
RISE NEWS is a grassroots journalism news organization that is working to change the way young people become informed and engaged in public affairs. You can write for us!
Cover Photo Credit: Barney Moss/ Flickr (CC By 2.0)
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Here’s The Biggest Threat To America’s Economy
Nearly a decade of economic stagnation has fostered an environment of distrust and anger around some of our most important institutions, and this has lead us to Bernie Sanders and Donald Trump.
Both candidates pose as warriors for the underclass, promising that their policies and/or personality will break the vice grip of the “establishment” or the “1%” or the “upper class” or any other number of buzzwords thrown around at campaign rallies to generalize America’s wealthiest and most powerful citizens.
The way our politicians talk about the rich, it’s as if they’re a monolithic class of people.
The top one percent are not a homogenous group of monetary zealots hell bent on destroying civilization one Machiavellian step at a time; they’re a somewhat diverse group of white people (roughly 96%) whose jobs range from pediatricians, to athletes, to “managers” of everything you could possibly imagine.
The Chief Economic Adviser to global insurance giant Allianz, Mohamed El-Erian essentially wrote the thesis for this piece in his interview with Business Insider:
“Don’t underestimate the power of a simple framework to put into context a lot of the unusual and improbable things we see.”
Looking at the composition of Fortune 500 directors, we see a distorted example of the same issues surrounding race and gender that we have struggled with since the dawn of humanity.
Credit: Dr. William Domhoff/ University of California, Santa Cruz.
When Bernie Sanders derides “the one percent,” he’s doing the truth in his message a disservice.
“The one percent” stretch across nearly every industry in America. Surely Senator Sanders does not believe that LeBron James is engaged in a cynical attempt to drive middle class workers’ wages down, but the generality of his rhetoric implies just that.
When trying to determine the central issues surrounding our economic malaise, simply saying “the rich are winning and we’re all losing” does not do the importance of the topic justice. In short, no shit.
We need to dive deep into the causes of our problems, instead of blanketing people and industries with cheap generalizations that barely scratch the surface, and then retreating to our corners.
All that said, there is one industry that stands out when searching for the genesis of our modern economic dysfunction: finance.
Ever since the crash of 2008, the world of investment’s public perception has taken a major blow, and it was not exactly in the best shape to begin with.
Matt Taibbi has popularized the term “Vampire Squid” as a nickname for Goldman Sachs in his reporting on financial malfeasance. Goldman Sachs has certainly done plenty to earn this derisive moniker, with one example being their complex plan to drive up the price of aluminum in order to further pad their wallets.
However, just because executives at some of our largest financial institutions have proven to be corrupt and inhumanly greedy, even at the expense of the people supposedly working for them, it does not mean that the entire industry is rotten.
My father worked as a stockbroker for 35 years, and I can promise you that a lot of the complexity coming out of the executive offices of Wall Street is nothing like what your average broker does while trying to create wealth for their clients.
Nearly one million people work in financial services in America, and the majority of them are trying to do right by their customers and play by the rules.
Many of the problems with finance don’t stem from some nefarious, evil plot to enslave mankind in some sort of New World Order (like Alex Jones’ four million monthly unique subscribers to Infowars might assert), but from what precipitates the fall of all great empires: a toxic combination of secrecy and ego.
The world of “shadow banking” has been blamed for much of our economic corruption, as it is an easy target due to its complex nature.
An eagle outside of the Federal Reserve building in Washington, D.C. Photo Credit: Tim Evanson/ Flickr (CC By 2.0)
Tucker Hart Adams is one of the few people who foresaw the economic crash of 2008.
Her travels have taken her everywhere from leading classrooms in Russia to the heads of boards in both the private and public sector.
“We’ve just outsmarted ourselves,” Adams said in an interview with RISE NEWS. “Shadow banking isn’t some sinister thing, it’s simply something that we don’t know that much about.”
It’s similar to how scientists call dark matter “dark” because we know it’s there, and we can measure its impact on us, but we can’t even begin to rationally explain its inner mechanisms; the same can be said of shadow banking.
In fact, “shadow banking” has been around for ages.
Izabella Kaminska asserted in the Financial Times that Pompey’s offensive against the Cilician pirates in 67 BC is similar to today’s battle against offshore banking and off-balance sheet accounting.
The problem with determining if she is correct is that no matter how far and wide you search, there is no universally agreed upon definition of “shadow banking.” Kaminska goes on to write in the FT:
“The nearest thing to a formal definition comes from Perry Mehrling, professor of economics at Barnard College in New York City, who suggests that anything involving money market funding of capital market lending qualifies as shadow banking. For others, it’s simply lending done by any unlicensed institution, or non-bank, which doesn’t have access to ‘lender of last resort’ liquidity in a crisis.”
Even though the term conjures up images of the executive suites of Manhattan’s skyscrapers, there are many financial entities that would qualify as “shadow banking,” like Bitcoin.
So when we’re talking about “shadow banking” in the sense that most TV news discusses it, we’re really talking about the derivatives market, which is a real problem.
It was one of the prime causes of the 2008 crash, which stemmed from an effort to try to get ahead of the market, and the market nearly swallowed itself whole using financial instruments that Wall Street didn’t quite understand.
These complex swaps that basically amount to various forms of financial insurance have led to a situation where only the biggest banks have the capital and the expertise to play in this space. However, just because a bunch of wonks are on the case with a nuclear silo full of cash doesn’t mean that they will succeed in this post-2008 world, as it was revealed that five Wall St banks just failed living will tests.
Now, this doesn’t mean that derivatives were solely responsible for that result, but given the explosion of their popularity in the first part of the 21st century and its resulting impact on the economic crash, one would have to imagine that they played a role in these failures.
Four large commercial banks were responsible for 91% of the total banking industry notional amounts in the derivatives market in Q4 2015, which is a fairly tenuous situation.
Given the amount of this space that is controlled by so few entities, one misstep might cause a hiccup that could have drastic consequences for the rest of the economy.
Our government has a hand in all of this mess, as it creates the conditions for everyone to operate within. The derivatives market is in the shadows because the federal government has not found a suitable method to regulate these securities, yet will not ban them outright either. This ambivalent position sows the seeds of confusion for later crises.
The chart below further demonstrates the dramatic effect that certain government policies can have on the economy. Accounting for capital gains, which the government taxes at less than half of the tax rate for labor, the top 10% are taking a greater share of the income than they did during the Gilded Age.
Photo Credit: Emmanuel Saez/UC Berkeley
The Panama Papers, which will dominate much of the news cycle over the coming months, will produce a veritable truckload of stories about companies dodging taxes (amongst many other potentially scandalous revelations once the 11 million documents get sorted through and litigated).
A report just stated that the 50 biggest US companies stash an estimated $1.3 trillion overseas. Ironically enough, the Financial Secrecy Index ranks the United States as the 3rd best place in the world to hide money.
Somehow, we manage to chase our own cash out of the country with one of the highest corporate tax rates in the world, yet we let much of it and others back in through faceless shell companies exempting millions (billions? trillions?) of dollars from taxation.
The statistic that most embodies the absurdity of US tax havens is that 64% of Fortune 500 companies are based in Delaware (I’m sure that it has nothing to do with their state tax code and everything to do with Joe Biden’s charm).
Andy Fastow, the former felon/CFO of Enron, is lending his expertise to help firms spot fraud, sometimes even pro bono. He gives lectures on how companies engage in tactics today similar to what he performed at Enron.
Because of the shitshow that is the US tax code, it’s more beneficial for Apple to station their global HQ in Ireland than in Cupertino.
“If Apple did not do this, your iPhone would cost $2,000,” Fastow told the Irish Times. “They run over $50 billion of earnings through this building [in Ireland].”
Once accounting for state taxes, the average corporate tax rate in the United States is 39.2% (unless you have an army of lawyers, accountants, and Congress on your payroll, then you pay much less). To compare, the global average is around 25%.
Tucker Adams provided RISE NEWS with a simple solution to keep tax money within our borders:
“You have all these companies going through all this to avoid taxes at 39%, you’ll collect more revenue if you bring the rate down to match everyone else.”
According to the Atlantic, only three OECD countries (Mexico, Turkey and Japan) bring in less tax revenue as a percentage of GDP than the United States.
Andy Fastow, the former CEO of Enron has warned that big companies are doing similar things that he did. Photo Credit: Lindsay Eyink/ Flickr (CC By 2.0)
Now, that’s not a list that you necessarily want to find yourself at the top of; tax policy should be focused on funneling as much money into the hands of consumers, because my spending is your income etcetera, etcetera, etcetera…but if your tax rate is high and the relative income you gain from it is low, something is fundamentally wrong.
Tax rates are not the only area where the government is fomenting big problems, central bank policies have contributed as well. Keeping interest rates near 0% for nearly a decade has been punishing savers, as Larry Fink, the CEO of Blackrock, one of the largest hedge funds in the world said in an annual letter to his shareholders:
“Not nearly enough attention has been paid to the toll these low rates — and now negative rates — are taking on the ability of investors to save and plan for the future. People need to invest more today to achieve their desired annual retirement income in the future. For example, a 35-year-old looking to generate $48,000 per year in retirement income beginning at age 65 would need to invest $178,000 today in a 5% interest rate environment. In a 2% interest rate environment, however, that individual would need to invest $563,000 (or 3.2 times as much) to achieve the same outcome in retirement.”
Interest rates are a double edged sword.
When they’re low, it encourages borrowing but discourages saving. If I take on $1,000 in debt at 1% interest, I’ll only owe $10 on my interest payment. I don’t know about you, but a $10 interest payment that I have to make sounds a lot more appealing than a $10 interest payment that I will receive.
The main reason for this dependence on the Fed to play the role of economic Batman comes from the fact that our political system is completely paralyzed, which lets markets know that any major tax reform is completely off the table.
People should be angry. The deck is stacked, the game is rigged, and the bad guys have already won before you even finished reading this sentence, yet no one seems to be doing anything about it.
However, just because all you hear on TV is gloom and doom does not mean that is all that’s occurring. Our most pressing issues are largely concentrated in rectifiable areas; there’s simply a lack of will to undertake the effort to correct them. Perhaps it’s an issue of culture, as we assume that the “smart guys” will eventually fix it.
Warren Buffett’s right hand man, Charlie Munger certainly thinks so, as he stated during Whitney Tilson’s annual meeting:
“Too much of the new wealth has gone to people who either own a casino or are playing in a casino. And I don’t think the exaltation of that group has been good for life generally, and I am to some extent a member of that group. Both Elizabeth Warren and Bernie Sanders are not two of my favorite people on earth, but they are absolutely right.”
Some investors like Bill Ackman are speculating that the next economic calamity will come from student debt, as they say it could resemble the housing crisis.
But Tucker Adams disagrees with this assessment, telling RISE NEWS:
“No I do not believe this is like 2005, 06, 07. The average student debt is about $28,000, and there isn’t the speculation around it like there was with housing, so it’s much more manageable.”
If there is a bubble that could be created by this student debt, it might be in apartments, as millennials have been reluctant up to this point to seriously invest in housing, but we would be the first American generation in history to buck this trend.
“These new apartments they’re building just outside the city and not near much public transportation, those are the ones I would worry about, but I think it would be very very sad if millennials decided not to buy houses,” Adams said. “They’re a solid investment.”
Whatever economic future we are entering, the general sentiment amongst experts seems to be that it is manageable, so long as we have the political will to do what is needed.
Given that Donald Trump is the overwhelming favorite to win the Republican nomination, political will to do real, challenging things seems to be off the table right now.
Things are bad, but they’re fixable.
There are simple steps we can take to tilt the scales back in favor of the many. One example is to find a better way to compensate federal regulators in the financial sector.
America is fighting off a recession with one arm, and we need the government to function properly and join the Fed in this fight. The fact of the matter is that our political and economic futures are intertwined. Without government creating the right conditions, economic growth stalls, and the levers of power are leveraged by the powerful to grab a larger slice for themselves while the rest of us struggle to grow the pie.
Our economic dysfunction is largely in response to a tax code devised to help a select few and waste resources for everyone else. Nearly everyone agrees that the current tax code is less valuable than a Nickelback cassette, but nothing is being done about it.
Why? It makes no sense. Americans have abandoned our responsibility to govern ourselves effectively, or even show up for an election every two years.
Congress’ approval rating hovers near 10%, yet we reelect our Congressmen at a 90% clip, effectively proving that Americans are political hypocrites. We despise our Congress, but don’t care enough to change it, thus creating the conditions for corruption to flourish.
Hopefully we will use this election as a moment to understand how our apathy has helped to create all of this misfortune. We demand that government be for the people, of the people, and by the people, but we don’t hold any of the people accountable.
Like every single one in recent memory, the main issue in this election is the economy. We want government to fix it for us, but in order for that to happen, Americans need to step up and fix our government first.
RISE NEWS is a grassroots journalism news organization that is working to change the way young people become informed and engaged in public affairs. You can write for us.
Cover Photo Credit: Kurtis Garbutt/ Flickr (CC By 2.0)
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