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I have been following the twitter discussion of Jesse Colombo's Forbes article on why the New Zealand economy will crash. I realised I hadn't ever posted our submission made in November last year to the Finance and Expenditure Committee. The petition has never been heard. Must be gathering dust on some shelf somewhere. They have more important things to do no doubt than worry about the banks increasing exposure to derivatives and the increasing globalisation of the investment banks. Looks as though the big four Australian banks these days have directors from HSBC, JP Morgan, Citibank and so on. To say they are Australian banks is no longer accurate.
But back to our submission. Here it is. You will see the graphs of the rise of derivative exposures of Australian banks.
To The Chairperson and members of Finance and Expenditure Committee
Re Petition 2011/78 of Deirdre Kent and 877 others
Thank you for the opportunity to present my submission.
I wish to appear before your committee in a session open to the public.
Submission on the Petition of Deirdre Kent and 877 others, which asked:
We respectfully request that the House initiate a Parliamentary Enquiry into the best options for securing the ongoing stability of NZ registered banks to ensure they never need to be bailed out by their customers or NZ taxpayers. We also request this enquiry should include:-
1. An examination of The Chicago Plan Revisited by Jaromir Benes and Michael Kumhof on the IMF's website.
2. The ways New Zealand can initiate or support this important reform.
Who I am
My name is Deirdre Kent, from Otaki. I have a BSc in mathematics and have been a secondary school teacher and full time campaigner for tobacco control. I have been a Tauranga city councillor and for many years a community activist for a strong, resilient economy. I am the co-founder and co-leader of the New Economics Party of New Zealand. I am the author of the 2005 book Healthy Money Healthy Planet –Developing Sustainability through New Money Systems. I was a co-founder in an organisation called NZ Banking Reform which operated in Wellington around 2000 to 2002. I was a founding trustee of Living Economies Educational Trust.
I represent 190 people from the New Economics Party, together with a further 200 on our Facebook page and a further 107 on our Facebook petition page.
Structure and contents of this submission
I outline why some of the public is losing faith in economists. I explain how the way the global monetary system including New Zealand as now structured is inherently unstable, (that is not reaching the desired state of a dynamic equilibrium). I describe how our petition arose from Open Bank Resolution. I explain why we decided to ask for a Parliamentary Enquiry. I look at who the enquiry might attract. I discuss what the enquiry could include. Finally what an enquiry might turn up.There are links to graphs, articles and a slideshow. (For those with minimum time may I suggest you peruse the headlines plus the charts of Jesse Colombo in 2.9 and read the short transcript of IMF economist Michael Kumhof at the end of 7.5 and anything here on the Rentenmark.)
1.0 Summary of this submission
We are asking for a Parliamentary Enquiry on the best way to make banks stable because it appears we have to choose between a government bailout and depositor bailout and neither is acceptable. If banks are so unstable as to have the Reserve Bank set up a system where depositors bail out the banks, then it is high time for a concerted effort to make banks more stable in the first place.
A full enquiry is the way to draw out all the relevant information on banking stability in New Zealand.
New Zealand has watched a series of distressing economic crises in the Eurozone and USA and witnessed a range of fraudulent behaviour from banks. It appears that the central bankers of the world are themselves gravely concerned about the stability of the current financial system.
We know we live in a hyperconnected world but are collectively unable to do anything about the lack of effective regulation of the big four US investment banks. We know that there are three bank lobbyists for every elected member in the US Congress and the banks' campaign contributions are very high. Hence the plea to do what we can in New Zealand in the time available. It is time to take stock and better insulate our economy from the shocks in the global financial system.
Given the risk of another major financial crisis when the triple threat of worldwide housing bubbles, commodity bubbles and derivatives bubbles eventually burst, we believe it urgent to set aside Parliamentary time and resources and engage the public in an exploration of how we can make New Zealand banks safer.
In the Global Financial Crisis of 2008 our government had to act very quickly to guarantee our bank deposits, but the scheme has now finished. The last thing New Zealand needs is for chaos to break out when depositors discover they are having their money confiscated.
I also point out that housing bubbles are all occurring within the context of a tax system that taxes income but not land. So there is a connection to the tax system.
2.0 Many have lost a great deal of faith in the economics profession after the Global Financial Crisis.
2.1 As lay people, we have been told that our banks are safe yet we have observed a massive Global Financial Crisis which mainstream economists had not predicted. We saw the too-big-to-fail banks getting even bigger and nobody go to jail for fraud. With all these adverse financial events happening we have lost faith in economists. While we appreciate the work of the Reserve Bank of New Zealand to keep our banks safe, we believe they have underestimated the public outcry and the potential of the public to make a contribution. We have all witnessed the invention of a wide range of new financial products and a blow out of credit the world has never seen before. We can all see that the 'shadow economy' is $700 trillion while the global economy is $70 trillion and we are worried.
2.2 We don't want either the taxpayers or the individual depositors to bail out the banks. We know banking crises are very serious and something must be done very quickly to avert social unrest and keep the economy going. According to a book by his spin doctor Damian McBride, UK Prime MInister Gordon Brown said, "If the banks are shutting their doors, and the cash points aren't working, and people go to Tesco [a grocery chain] and their cards aren't being accepted, the whole thing will just explode. If you can't buy food or petrol or medicine for your kids, people will just start breaking the windows and helping themselves."
2.3 It is clear it is not financially viable for the taxpayers to bail out the banks ever again. Also according to President Obama in his remarks on the Dodd-Frank Act on July 15, 2010, "Because of this reform, . . . there will be no more taxpayer funded bailouts – period." But the arrival of a bail-in proposal, where depositors have their deposits confiscated to help the failing bank, brings with it serious consequences. Financial crises are socially and politically dangerous events and can happen within a very short timespan. We now know that martial law was being considered in UK during 2008. But perhaps bail-ins and martial law should really be seen as the last desperate thrashings of a dinosaur. It is time to get banks less vulnerable in the first place.
2.4. One cannot help come to the conclusion that the financial system, especially after the spawning of a range of exotic innovative financial "products", is inherently unstable. It was derivatives after all that were at the heart of the Global Financial Crisis of 2008 and, despite some regulation, yet the same financial asset bubbles are redeveloping as a symptom of growing private debt as before the crisis. As long as excess money is going into real estate or other bubbles, it will not be going into productive enterprises.
2.5 Most people are completely surprised by financial crises. People in Iceland, Cyprus or Thailand can wake up and find the banks closed, ATM machines not working and their relations stuck overseas unable to get home. Investors suddenly find they are worth less. Shortly after the Global Financial Crisis, the Queen of England asked bankers why nobody saw it coming.
2.6 Since only a handful of economists actually predicted the Global Financial Crisis it is not surprising that the public is losing faith in economists. Dutch economist Dr Dirk Bezemer researched those who did and found Dean Baker, Wynne Godley, Fred Harrison (UK), Michael Hudson, Eric Janszen, Steve Keen (Australia), Jakob Madsen & Jens Kjaer Sørensen (Denmark), Kurt Richebächer, Nouriel Roubini, Peter Schiff and Robert Shiller. Subsequently Bezemer had the list at three dozen, but out of a total profession of at least 20,000 it is a very poor record. If any other profession (e.g medicine) was so wrong in something that affected millions they would be sued. The universities who train economists should be ashamed of themselves to have such a poor record.
Economists in the Real World Economics Review 2010, voted for Australian Professor Steve Keen first, ahead of Professor Nouriel Roubini by a 2 to 1 margin for their Revere Award. This is for the economist who best foresaw the crisis and warned and gave a full explanation. So it is not surprising that Steve Keen's analysis, based on the work of Hyman Minsky and including the use of dynamic modelling to prove how growth in debt drives instability in economic cycles, is gradually becoming more mainstream.
Minsky claimed that in prosperous times, when corporate cash flow rises beyond what is needed to pay off debt, a speculative euphoria develops, and soon thereafter debts exceed what borrowers can pay off from their incoming revenues, which in turn produces a financial crisis. He said we moved from a hedging stage where risk is low to a speculative stage and finally to a Ponzi stage. Minsky said a key indicator was the growth of private debt as a fraction of GDP, but when I ask I can't find this graph on the Reserve Bank site. The "Bezemer 11" quoted above had in common that they were concerned with the distinction between the financial economy (making money from money) and the real economy. Keen wrote in 2009 "Unfortunately after the crisis everything is being done by policy makers around the world is instead trying to restart private borrowing." Wikipedia notes that Minsky's theories have enjoyed some popularity, but have had little influence in mainstream economics or in central bank policy.
Regulators like Brooksley Born (head of US Commodity Futures Trading Commission) warned that derivatives trading needs stronger regulation and when her concerns were dismissed she resigned. In his book Bailout, Neil Barosky, regulator of TARP warned that the big banks must be broken up.
2.8. The failure to constrain the derivatives market has made the public mistrust big banks and those who regulate them. Derivatives can be useful tools for managing risk, but they've often had hugely negative, albeit unintended, consequences. All the big four American banks of the world are knee deep in derivatives, because like banks everywhere they found they could make huge profits from tiny margins. As a Forbes Magazine contributor wrote in March 2013, "The derivative bubble is a gigantic financial accident waiting to happen; it's the "mother of all bubbles"."
Although the official figure for notional derivatives contracts from the Bank of International Settlements was $633 trillion as at December 2012, it may be larger still. According to one of the world's leading derivatives experts, Paul Wilmott, who holds a doctorate in applied mathematics from Oxford University, $1.2 quadrillion is the so-called notional value of the worldwide derivatives market. In contrast the World's Gross Domestic Product was $71.8 trillion in 2012. Whatever the actual figure, it is clear it has got out of control and that the financial economy is overwhelming the real economy. Moreover the growth of OTC (Over the Counter) derivatives continues unabated.
So what about the Australian banks exposure to derivatives? The graph above shows the growth of derivatives since 1998. The graph below shows how large the notional value of derivatives is in relation to assets or deposits. The third graph shows how the Global Financial Crisis scarcely made any difference to the vertical trend.
2.9 In addition to a rapid rise in derivatives, the worldwide housing bubbles have continued, mostly in the big cities, even though there was a dip in some countries during the Global Financial Crisis. The housing bubble is no different. The series of charts by Jesse Colombo showing the housing bubbles continue unabated in a wide range of countries. We now have worldwide asset bubbles in derivatives, housing and commodities happening at the same time.
The French bank Societe Generale's Albert Edwards, seeing housing bubbles especially in London and China wrote to his clients (Oct 24, 2013, Business Insider Australia) "I keep reading that, despite central banks spewing money into our financial system, there isn't a bubble in asset prices. And in any case if one appeared central banks, having learnt the lessons of 2008, will head it off with macro-prudent policy measures. Are you kidding me? Exactly the same bozos who missed the last bubble deny there is one now."
1.10 We now have a growing segment of educated, informed and networked public.
Given the importance of economics and the devastating effect it can have on the lives of millions when it goes wrong, it is natural that many concerned individuals are becoming informed, largely through the internet. Economics is about "household management". Multiple tools are needed to ensure flows of resources and services within the household of the biosphere and within human communities, and money is a symbol of value. So economics is too important to be left to economists. When high status economists like Ben Bernanke did not forecast it, and after the event said that the basic theory was correct, it is clear they high priests of economists have a way to go. Bernanke even said "Do these failures of standard macroeconomic models mean that they are irrelevant or at least significantly flawed? I think the answer is a qualified no. Economic models are useful only in the context for which they are designed. Most of the time, including during recessions, serious financial instability is not an issue"
The public knows there is huge risk. The World Economic Forum now has regular conferences to address global risks, and produces a report each year. One risk was "systemic financial failure" and one of the graphs on their site showed that of all their listed risks, systemic financial failure has the biggest impact if it were to occur. It was connected on their charts with items like global governance failure and food shortage crises.
3.0 The way the money system as structured now is inherently unstable.
3.1 The very money system we all use insists that total debt increase. When money is created as interest bearing debt as it is, the total supply has to keep on increasing and that inevitably means more loans. The amount of money in the system is never at any time sufficient to pay off all the debt owing along with interest. Even though money circulates many times, at any one point there is only so much in the total system. There is always someone who can't pay their interest so they have to go back to the bank for another loan, so the money supply has to keep increasing. In this system, which we have come to accept as normal, the alternative to economic growth is unfortunately collapse, not stability.
If the banks stopped making loans tomorrow, there wouldn't be enough money in the system for all existing debts and the interest to be paid. Our money supply would virtually disappear if all debt were paid off. When the power to create credit is given to private banks, they control the amount of credit in the system and central banks have difficulty regulating their excesses. The current Greece debt crisis after two bailouts and austerity programmes illustrates you can never solve debt with more debt. As Professor Michael Hudson has noted, "it is simply a mathematical fact that the debt that can't be repaid, won't be."
3.2 While we appreciate the Reserve Bank has been bold in their experiment of limiting loans by imposing new Loan to Value Ratios in response to the Auckland housing boom, it doesn't address the fundamental problem that the government allows private banks to create 98% of the country's money supply as interest bearing debt, and this means that total money supply will have to go on increasing. It is a fundamentally unstable system made worse by derivatives. The unwanted side effects of restrictions on loan to value ratios (LVR) are minor in comparison with the bigger problem.
4.0 This petition originated when we heard about Open Bank Resolution
4.1 In early February this year I received a letter from the Hon Bill English, Minister of Finance in reply to my letter asking him if they would consider implementing the Chicago Plan Revisited, published by two IMF economists on their site in 2012. This plan would eliminate the risk of bank runs and monetary crisis.
Mr English's letter assured me it wouldn't be necessary as the Reserve Bank was putting in place a new scheme for dealing with banks in trouble. It was the Open Bank Resolution scheme. But when we examined this on the website of the Reserve Bank of New Zealand, we found it rather alarming.
4.2 We had never heard of Open Bank Resolution in the media and it seemed to us to be rather important. Nobody wants to wake up in the morning to find their bank had failed overnight and find their account had been reduced (or a certain unknown fraction of it frozen). Admittedly it is one step better than having banks close for 12 days but it shouldn't be necessary.
4.3. In the light of their inadequacy at telling the public that their bank accounts were at risk and the money in the bank actually legally belongs to the bank, it does call into doubt the willingness and/or ability of the Reserve Bank of New Zealand to keep the public properly informed.
4.4. When we enquired of the Reserve Bank why we weren't told, we were informed there had been publicity – they had put it on their website. We consider this to be either a fundamental mistake made by their communications department or a deliberate error in order to keep people in the dark. It doesn't look good either way. Putting something on a website does not alert the ordinary people. We consider they need to 'up their game' if they were genuinely trying to inform the public.
4.5. Because the Open Bank Resolution didn't get passed in Parliament, there has been no opportunity for scrutiny of the details. Little is known by the ordinary depositor of what risks their banks take or whether or not their banks sell covered bonds. The level of public knowledge is too low, but is increasing.
4.6 Unfortunately, according to the Reserve Bank of New Zealand, Open Bank Resolution did not require a new law, so the public has never been given an opportunity to examine it. Here is one thing that could have been pointed out if a bill had gone to a Select Committee: Open Bank Resolution has a design flaw. Depositors in a failed bank, once it has been through its process in the crisis, will have their deposits guaranteed by the government. This will cause customers of other banks to move their accounts to that bank.
5.0 Why we decided to launch a petition asking for a Parliamentary Enquiry
5.1 Because of a fundamental fault in the design of money, financial crises have been happening for decades. According to IMF data, there were 145 banking crises, 208 monetary crashes and 72 sovereign-debt crises between 1970 and 2010. This represents a total of 425 systemic crises, an average of more than 10 countries getting into trouble each year. So financial crises are not new and they demonstrate that there is a fundamental structural error in the money system.
5.2 After consideration we decided to run a petition and decided that the matter of bank stability was so important that the public should know. A Parliamentary Enquiry would flush out all the facts, draw out all the experts and pool a great deal of knowledge held in many sectors of the community.
5.3. We believe that the public should be informed and a Parliamentary Enquiry would help. The publicity which resulted after the Cyprus events was actually largely due to us alerting journalists and organising a key letter to the Dominion Post at a critical time. The fact that this letter featured at exactly the time of the Cyprus bank closures stimulated thorough coverage in the print media and public radio at the time. Then the politicians publicised it still further with announcements about policy. However we believe only a tiny fraction of the public still knows that their bank account is at risk.
5.4. It has been argued that the big four Australian banks are safe. But business is now hyperconnected. An analysis of the relationships between 43,000 transnational corporations of the world has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy. When the team further untangled the web of ownership, it found much of it tracked back to a "super-entity" of 147 even more tightly knit companies - all of their ownership was held by other members of the super-entity - that controlled 40 per cent of the total wealth in the network. So is New Zealand not part of a global system or did a little country in the South Pacific somehow get left out of this network? We have been told that the big four banks are relatively safe, but taking just ANZ alone, we find that HSBC Custody Nominees owns 17%, JP Morgan Nominees owns 14.15% and Citicorp Nominees has 3.8%. The other three Australian banks have similar shareholder structures.
5.5 Even though we don't see it practicable or realistic to implement, and we see its limitations and risks, the Chicago Plan Revisited should be examined seriously. This proposal, based on the work of Irving Fisher, Henry Simons, Milton Friedman and others in 1936, was written by two IMF economists Michael Kumhof and Jaromir Benes. Kumhof was a Barclays Bank manager for five years. His most recent slideshow describing the plan is here. The scheme involves the government creating sufficient indestructible reserve money to provide 100% backing for all deposits. There are several further steps which are outlined in this summary, but the consequences are that money creation no longer requires debt creation and the quantity of money is controlled by the central bank, not by private banks. Private banks become true intermediaries. The scheme also reduces or eliminates public debt and dramatically reduces private debt. However here is why we believe it not to be practical. As it just replaces a privately created monopoly currency with a publicly created monopoly currency it is not as resilient as an ecosystem of currencies. Nor does it prevent monetary crashes. It also involves huge risk and is pragmatically impossible to implement, given the relative power of the big banks in the US.
One of the contributions that Michael Kumhof has made to the debate is that as a former bank manager he said he knows that he created the loan and then the deposit – in that order. He also says that the main function of banks is to create money. A transcript of a talk where he said that is here.
6.0 Who the enquiry might attract
This will widen your pool of advisors. Thanks to the benefits of the internet, there are a huge number of people now following the troubled hyperconnected global financial system and there is a great deal of knowledge that you as a Finance and Expenditure Committee probably don't yet know about. This enquiry would bring out a range of people including financial traders, home based researchers, people who administer public payrolls who are concerned about the implications of Open Bank Resolution. It would bring out brokers, investment advisors, farmers, bankers, fund managers, real estate analysts, academics in fields other than economics, accountants, investors, market analysts and public interest organisations.
7.0 What an enquiry could include
7.1 The whole field of Australian banks' exposure to derivatives needs to be investigated and understood.
7.2 Why are banks making record profits even though interest rates are so low?
7.3 How many mortgages of New Zealanders have been securitised, and packaged up and sold to pension funds and other investors and what effect this would have on the New Zealand mortgage holder in a banking crisis.
7.4 The upgrading and improving of communications coming out of the Reserve Bank.
7.5 Review the applicability of the observations made in the Chicago Plan Revisited. The scheme involves government creating sufficient indestructible reserve money to provide 100% backing for all deposits. There are several further steps which are outlined but the consequences are that money creation no longer requires debt creation and the quantity of money is controlled by the central bank, not by private banks. This is exactly the outcome required.
7.6 The main issues of course are "Should banks be in charge of how much credit is created? If banks stopped issuing loans tomorrow, would there be enough money in the system for everyone to pay back their debt with interest?"
7.7 Is there a lesson to be learnt from history that tells us we must connect fiscal policy with monetary policy? e.g. the successful Rentenmark currency in Germany in 1923 may have been successful because it was the nearest in history of the ideal of combining a full land rental with money spent into existence by a publicly owned agency.
7.8 Are there any other successful models in history other than creating one national currency by banks as interest bearing debt?
7.9 Has the financialisation of the economy since the delinking from the gold in 1971 had in it the seeds of its own destruction?
7.10 What should the role of banks be – creating the country's money supply or mediation between depositor and borrower?
7.11 Are there other models for protecting savings? e.g. the reinvention of mutual savings funds.
7.12 Should banks be involved in insurance and investment at all?
7.13 Should the national currency be issued by an arms-length agency of government and backed by land, now that it is no longer possible to back it with gold?
7.14 Are there cases in history like the German Rentenmark which in effect combined a land backed currency with a land tax, resulting in stability?
8.0 What the Enquiry might turn up
8.1. A range of suggestions from those who believe the Reserve Bank should create the country's money with no interest. This will include the suggestions of the Chicago Plan Revisited, Democrats for Social Credit, Positive Money and other monetary reformers who argue for replacing a bank created money by government created money.
8.2. A range of information about how governments in history dealt with financial crises or when banks tend to have too much power over politicians.
These might include:-
a. When Lloyd George suddenly found he had to go to war in 1914 and within a matter of days the Treasury had created Bradbury Pounds, which were good for payment of tax and could fund the war.
b. When Abraham Lincoln, faced in 1861 with the option of borrowing from banks at usurious interest rates, decided to create Greenbacks without interest to fight the civil war.
c. When President John F Kennedy, five months before he was shot, issued $4,292,893,825 of cash money; free of debt and free of interest. It was a sufficient amount to allow the nation to operate without the private Federal Reserve. On June 4, 1963, Kennedy signed Executive Order 11110, which authorized the US Treasury to issue a new form of silver certificate.
8.3. A range of information about how governments dealt with financial crises eg. From 1999 there was a surge of complementary currencies in Argentina becauses the country was deep in recession and had high inflation. Wikipedia says "While the provinces had always issued complementary currency in the form of bonds and drafts to manage shortages of cash, the scale of such borrowing reached unprecedented levels during this period. This led to their being called "quasi-currencies". The strongest of them was Buenos Aires's Patacón. The national government issued its own quasi-currency—the LECOP." They brought back their own peso.
What happened in 1923 in Germany at the peak of their hyperinflation crisis and how the Rentenmark solved the problem within days. When Germany had no gold to back the currency after the first world war, and inflation had grown till there was massive hyperinflation, poverty and social chaos, they issued a new land backed currency and imposed a twice yearly payment for the use of that land. The nation quickly went from a state of chaos and misery to stability. Descriptions of what happened included the term "the miracle of the Rentenmark". So this successful system effectively combined a land backed currency with what amounted to a regular land fee. One author said "The Rentenmark experiment marks one of the most extraordinary monetary experiments of all time, yet most historians of the episode seem to have misunderstood the mechanism and its role to the stabilization." My own account of what happened and how its success could be explained is here. Although they issued the money as mortgages, for the first year of its existence it seemed as though the mortgage payment was a full land rental.
I am of the opinion that it is important to look at bank stability in conjunction with fiscal policy. It is unrealistic, for instance to expect monetary policy to deal to the escalation of Auckland house prices while the tax system favours land owners and there is no charge on the holding of land. Restrictions on LVR can never therefore work by itself, nor can more house building.
8.4. A range of information about how countries in depression or financial crises allow the issuing of local currencies e.g. Greece's TEM. The Austrian town called Wørgl in 1932 issued work certificates, good for paying local taxes and designed with a circulation incentive. They paid their workers in it. When unemployment dropped dramatically it became known as the miracle of Wørgl and people came from all over Europe to see it.
8.5. The need for Parliament to legislate to support and not stand in the way of new well designed currencies at any level. Complementary currencies have been springing up all over the world. New Zealand's timebanks now number 27 for instance. Numerous books have been written on the topic, including authors like Bernard Lietaer, Stephen Belgin, Thomas Greco, Margrit Kennedy, and myself. The list of 180 books and DVDs sold by the LIving Economies Educational Trust is comprehensive. An international skype chat group on the topic has been going for seven years and has reached 200 participants and a google search on complementary currencies turns up over 1 million results nowadays. They can be local or national, private or public and have a variety of designs and purposes. An education currency can make the budget go further, a health currency can make the health budget go further. A currency for small businesses can stimulate job growth. A currency can also solve problems as when rubbish piled in narrow streets in Curitiba, Brazil. Tokens were given to those who produced sorted rubbish and were accepted on buses. In Lyttelton during the earthquakes the timebank was there to help before the Civil Defence, Red Cross and other agencies got organised. Other purposes for complementary currencies are helping deal with aged care, encourage customer loyalty e.g. airmiles and flybuys, buiding community, mitigating unemployment and other social problems and encouraging volunteering. On November 3rd 2012 in Christchurch the Volunteer Army Foundation, led by Sam Johnson, Jason Pemberton and Raf Manji , organised a one day Concert, featuring 24 bands, for volunteers only. The only way to get a ticket was to do at least 4 hours of volunteering. Nearly 50,000 hours of time was donated with hundreds of community projects completed. Volunteer hours are now becoming an important part of a student's transcript, alongside traditional academic information.
As long as complementary currencies are not producing inflation, they should be welcomed by the Reserve Bank of New Zealand. During a period of high unemployment the Internal Affairs Department encouraged green dollar exchanges which flourished in the early 90s.
8.6. The need for universities to reintroduce courses on economic history.
Tag Archives: derivatives
Why we need a parliamentary enquiry into the best methods of making banks stable
Submission of Deirdre Kent in support of petition 2011_78 to Parliament This submission is substantial. It outlines why banks are unstable, includes charts on banks assets compared with their exposure to derivatives and on housing bubbles. In a hyperconnected world New Zealand's four Australian owned banks are not going to be immune to shocks. Now instead of taxpayer bailouts, it seems depositors will bailout the banks. The Reserve Bank has in place a system called Open Bank Resolution. We would rather the banks were stable in the first place.
Derivatives for Dummies
This I found on the web. Sorry I can't acknowedge the writer. Others seem to have put it on their websites too. I asked a meeting of 35 people in New Plymouth the other day how many people know what a derivative is and only one person put up her hand. It is worrying that the shadow economy of at least $700 trillion is at least ten times as big as the real economy yet so few understand the shadow economy. A financial reporter in Australia said in 2009 all banks are exposed to toxic derivatives. If 1% of these contracts default because third parties get into trouble, the whole shareholder wealth would be wiped out and the banks could be broke. So here is the derivatives for dummies piece. Nice and easy. Derivatives for Dummies An Easily Understandable Explanation of Derivative Markets Heidi is the proprietor of a bar in Detroit . She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar. To solve this problem, she comes up with new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans). Word gets around about Heidi's "drink now pay later" marketing strategy and, as a result, increasing numbers of customers flood into Heidi's bar. Soon she has the largest sales volume for any bar in Detroit . By providing her customers' freedom from immediate payment demands, Heidi gets no resistance when, at regular intervals, she substantially increases her prices for whiskey and beer, the most consumed beverages. Consequently, Heidi's gross sales volume increases massively. A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Heidi's borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral. At the bank's corporate headquarters, expert traders transform these customer loans into DRINKBONDS, ALCOBONDS and PUKEBONDS. These securities are then bundled and traded on international security markets. Naive investors don't really understand that the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation's leading brokerage houses. One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Heidi's bar. He so informs Heidi. Heidi then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts. Since, Heidi cannot fulfill her loan obligations she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs. Overnight, DRINKBONDS, ALCOBONDS and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the banks' liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community. The suppliers of Heidi's bar had granted her generous payment extensions and had invested their firms' pension funds in the various BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds. Her whiskey supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations. Her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers. Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion dollar no-strings attached cash infusion from the Government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-alcoholics.
How safe is your bank?
When you have your money in a bank, the money is legally no longer yours. It belongs to the bank and you become an "unsecured creditor". This is the legal situation and it has been confirmed by the Reserve Bank in an email (27 March from Sonia Speedy) to Sue Hamill of Positive Money. When the bank has your money it can do what it likes with it, including take risks you don't know about. So putting your money in a bank is a "customer beware" activity it seems. If you have your money in Bank of New Zealand, Westpac, ASB or ANZ, then you run the risk that you don't know too much about what your bank is up to. The latest thing is covered bonds, which is just one of these risks. They are packaging their 'high quality residential mortgages' up and selling them off as 'Covered Bonds' to investment funds. Then if the bank gets into trouble, the investment funds are 'secured creditors' and are ahead of you in line when the liquidator takes over. This means that Kiwi households will be forced to help bail out banks while overseas lenders have their money protected. If you think Kiwibank is an exception, then think again. They started selling off their mortgages as covered bonds in April 2013. But authorisation from Government doesn't seem to matter to banks. When I rang Parliament on 9 May 2013, I found the Bill on covered bonds was still at committee stage, having passed its Second Reading on 22 February. Then there is the small matter of Interest Rate Swaps (IRS) which all these banks (and the Co-operative Bank too, not sure about TSB) engage in. If you can imagine taking out a variable-rate mortgage and then paying a bank to make your loan payments fixed, you've got the basic idea of an interest-rate swap. They comprise 80% of our derivatives market and are widely used by local authorities to hedge against the risk of interest rate changes. In April 2013 the US futures regulator was reported to be investigating allegations of manipulation of this popular derivatives benchmark and had issued subpoenas to market participants including the interdealer brokerage ICAP and several global banks. It seems the rates are set by 20 exhorbitantly paid brokers at a desk in Jersey City, New Jersey. A year earlier they had discovered that the LIBOR rates were being manipulated and this investigation has now been widened. LIBOR sets the actual interest rate that banks charge each other. Since mortgages, student loans, financial derivatives, and other financial products often rely on Libor as a reference rate, the manipulation of submissions used to calculate those rates can have significant negative effects on consumers and financial markets worldwide. At the time LIBOR was though to be the biggest financial scam ever. Two big banks have been fined for this including the Swiss bank UBS which was fined a record $1.5billion in Dec, 2012. Interest rates swaps are a gigantic market. Would you believe this figure, or even be able to imagine how big it is? It is $379 trillion in June 2012 (Bank of International Settlements website accessed May 1, 2103). The size of the global economy is $70 trillion, so it is more than five times this. The risk manager of the Co-operative Bank told me when I visited him in early 2012 that they were involved in interest rate swaps because it was safe and it saved them money. The Financial Manager of Kapiti Coast District Council told me they had made money from interest rate swaps and had no plans to drop the practice. So this leaves us with the possibility of putting your money with a credit union. Unfortunately all credit unions must use a bank for their overnight transfers, so that one is a dud too. There is one other possibility. When I rang the Reserve Bank some time ago about which banks were involved with Open Bank Resolution (where the customers bail out a distressed bank and which will be in place by July 1 this year) I was told there are two small Indian banks which were too small to be involved in the scheme. So there are the facts. The choice is now yours. I am sticking with the Co-operative Bank and TSB.
For fraud and dishonesty of banks – read Janet Tavakoli
I have some new heroines and yes, they are mostly women. Janet Tavakoli, Brooksley Born, Ann Pettifor are among them. Janet Tavakoli I have recently discovered. She was interviewed by Chris Martenson and quite late in the interview she said "Sorry, you are not getting it Chris. I am opposed to the fraud and lies. I am not opposed to all derivatives". So I downloaded an e-bookof hers called The Robber Barons, and read more. It is the fact that banks and rating agencies misled investors by rating an investment as AAA when they knew it was junk that is the problem. And the banks knew it was junk yet they sold it and demanded they be bailed out. Innocent investors and home owners lost billions. Yet nobody is in jail. Not a single one. Nobody has been brought to trial. This is unlike the earlier but smaller Saving and Loans crisis where 1000 or so were indicted. Quotes from Tavakoli's book: "Fraud thrives and spreads in a regulatory free, highly paid, criminogenic environment. Cheaters prosper driving honest out of the market" "While there were instances of fraud by borrowers, the key drivers of our housing crisis were fraud perpetuated by mortgage lenders and securities fraud – by some of our most revered financial institutions – that provided money to fuel fraudulent mortgage lending." And I have finally found this one: "If a high-on-crack driver crashed his speeding rental car into your house and killed your spouse, you would be outraged if law enforcers took bribes and gave the driver a pass on a blood test. If the judge then merely fined the killer and order you to pay it, you would appeal, wondering what happened to justice. If the government then handed the crack-driver keys to a bigger rental car and presented you with the rental bill, you would certainly protest. How is it, then that you have remained largely silent in the face of the same sort of behavior by Wall Street and Washington? Bonus-seeking bankers careened off the right path and ran Ponzi schemes that nearly ruined our economy. Bureaucrats and elected officials bailed them out without demanding consequences. Bankers are revving their engines again." Yes that is Janet Tavakoli.
Government's huge derivatives exposure needs public scrutiny
Media statement June 3rd 2012 Government's huge derivatives exposure needs public scrutiny The government should come clean on taxpayer's exposure to credit and market risk from their derivatives positions, according to a New Economics Party spokesperson, Deirdre Kent. The government is putting New Zealanders at risk by increasing its investment in derivatives and not encouraging public scrutiny. She said that buried in the government accounts is information that $115 billion is at risk through derivatives if the other party to the contract defaults. "On P156 of a 193 page document of government accounts of June 2011 is the statement on derivatives. If there were another global financial crisis our government's growing exposure to derivatives would put all New Zealanders at risk. If the unthinkable happens and the other party to the derivative contract fails to pay, our government pays $115 billion and receives nothing. This is over half our GDP and ten times our education budget." "The problem is that the accounts are written in a way that is difficult for an ordinary person to fathom. Although they are legal, there is no transparency. For me it has taken five emails with a professor of accounting and a lot of research to come near to understanding this problem. The official accounts don't explain that we have to add two columns together to get the total exposure of $120 billion or that you have to then subtract a certain figure", she said. "It seems only a professor of public accounting can work it out." "In the financial statement of government there are no fewer than 66 mentions of derivatives, which can become, as once described by investor Warren Buffet, 'financial weapons of mass destruction,'" she said. "Derivatives are not just bets. They are sometimes bets on bets, she said. Orange County went bankrupt in 1994 after losing $1.8 billion in interest rate derivatives, JP Morgan has recently lost at least $2 billion and Lehman Bros went under very quickly. Despite reassurance from Treasury it can only end in tears if our derivative exposure keeps rising. If you want to make a killing you have got to be prepared to be killed." The government is starting to look like a casino government. We need limits, and the accounts need proper scrutiny and regulation. The deregulators have had their way and made a complete mess of things. It is time for the public to examine what is happening."


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If you know only a little bit about Charles Darwin, you know that he figured out Evolution via his study of the finches (and other birds) of the Galapagos. If you know a bit more than that about Darwin, you know that he totally messed up his collection of birds from the Galapagos Islands, and didn't really think up Evolution until much later in time. If you know more than that about Darwin, then you know that neither of these characterizations of the great man's work is accurate.
Today we view the Galapagos birds, including some finches and some mocking birds, as a great example of evolution. The idea is that some finches from what is now Ecuador ended up on the Galapagos Islands, and subsequently diversified into a number of different forms … they speciated … filling various niches that on the mainland would have been filled by a number of different species. The most commonly cited example is "Darwin's Finch," which filled the woodpecker niche by adopting the practice of acquiring a cactus thorn, and using this to access grubs hidden beneath the bark of trees. The other finches differentiated in other ways, having to do with the kinds of food they eat and the part of the landscape they tended to forage on (i.e., ground vs. in bushes, etc.) More recently, the finches of the Galapagos, in particular of one of the Galapagos Islands, have been under intense study by a team lead by the famous Grants (The Beak of the Finch: A Story of Evolution in Our Time). All of the finches of the two species found on this island have been identified as individuals, labeled, and tracked through several generations as local climate has shifted between very very dry and even drier conditions. Food availability has shifted over time, and the two versions of finch do better under different conditions, and their relative abundance reflects this shift. Also, within each species of finch, there have been shifts back and forth in the shape of their beaks, reflecting the differences in the kinds of food available. Variation in finch beak shape is constantly arising due to the usual sources of genetic variation, and that variation is then culled across generational time, but which direction the culling happens in depends on the climate of that particular year or season. Thus, to the Grants, a dead finch is a very important piece of data.
There are things about the Galapagos Islands that many people are not aware of, and there are things about Darwin's thinking about evolution that are not part of the usual description of Darwin's life. I'd like to outline what a couple of these things are.
First, about the Galapagos. We think that the original stock from which the Galapagos Finches evolved came from nearby South America. Generally speaking, air and wind currents make it difficult for birds to accidentally end up on the Galapagos, but that may have been different in the past. Regardless, it makes sense that the source of the islands' birds is the nearest major landmass, though in truth, those finches could have come from anywhere that your basic root stock finch was living. However, this is not the case with the Galapagos Tortoises. They also have an interesting evolutionary story, varying across the different Galapagos Islands, as well as within some of the islands. Some of the tortoises have shells and necks and heads configured for picking leaves off of bushes (involving a lot of reaching upwards) while others have shells, necks and heads that go more with grazing off the surface. The famous Galapagos Iguanas are of two types: The kind that live on land are distinct form the kind that hang out on land but feed off of sea weed underwater. This second adaptation is especially interesting because iguanas generally don't graze on underwater marine plants; this is a remarkable instance of the rise of a totally new adaptation.
But the Tortoises and Iguanas (and some other animals, probably) did not come from the nearby South American landmass via what is now Ecuador. Rather, they came from the Caribbean region, and prior to that, probably from the eastern or northeastern part of the South American land mass. How did they get from the Caribbean across the Isthmus of Panama, which is mountainous and very much in the way? They did it before the Panama Land Bridge formed. The Panama Land Bridge probably started to form, as a series of islands, about 15 million years ago, and by 3 million years ago it was fully in place. Some estimates put the closure of the passage between the Pacific and Atlantic at about 5 million years ago, which coincides with some major changes in the Earth's climate systems. Genetic studies seem to show that the Iguanas and Tortoises passed through this region, presumably on rafts of floating vegetation and stuff, via currents running east to west along the northern rim of what was then an "isolated" South America.
Another thing that people often don't realize about the Galapagos, and this is not something that to my knowledge is totally worked out yet, is that the islands you see there now are not the islands that were first occupied by the various species of plant and animal that gave rise to the species we see today. Among the Galapagos Islands are numerous sea mounts, some of which were above-water islands in the past. Over time, islands in this area have formed from sub oceanic volcanoes, grown in size, stopped growing, and then eroded back into the sea. It is not the case that the islands we see today were populated by various continental forms of animals and plants which then differentiated. Rather, there is a complex history of mainland life forms ending up on various islands, and then colonizing other islands over time as the islands themselves formed, grew, shrank, and went away. Presumably this complex opera of biogeography is still underway today.
Regarding Darwin's conceptualization of evolution vis-a-vis the Galapagos Islands, the first thing you need to realize is that Darwin's voyage on the Beagle lasted a very long time. The Beagle left England in December of 1831 and returned in October 1836. The Galapagos was first sighted in September 1835, after four years of voyaging, much of which was spent in other areas of South America where Darwin was focused on the geology of the region as much as he was on the biological wonders he encountered.
Much earlier, the Beagle sailed to the Falkland Islands, arriving there in March of 1833. It is here that Darwin records some observations and thoughts that make me think that thoughts of biogeography and speciation were starting to form in his head. He noted the similarity and differences among animals found on the islands and mainland versions of the same. This included some birds as well as a fox. Today, scholars do not think that Darwin "thought up" evolution at that time because even when he encountered the Galapagos much later, he was still speaking in terms of a creationist (and not a Darwinist!). Nonetheless, he was already beginning to get his mind around the idea that species do not remain the same across vast areas of time and space.
The link between Darwin's earlier observations on the Falklands and his later observations on the Galapagos is seen in this passage regarding mockingbirds:
These birds are closely allied in appearance to the Thenca of Chile or Callandra of La Plata. In their habits I cannot point out a single difference. They are lively, inquisitive, active, run fast, frequent houses to pick the meat of the Tortoise which is hung up, sing tolerably well; are said to build a simple open nest; are very tame, a character in common with the other birds. I imagined however its note or cry was rather different from the Thenca of Chile? Are very abundant over the whole Island; are chiefly tempted up into the high & damp parts by the houses & cleared land. I have specimens from four of the larger Islands: the two above enumerated [males from Charles and Chatham Islands]; a female from Albemarle Isd. and a male from James Island. The specimens from Chatham & Albemarle Isd appear to be the same; but the other two are different. In each Isld each kind is exclusively found: habits of all are indistinguishable. When I recollect the fact that [from] the form of the body, shape of scales & general size, the Spaniards can at once pronounce from which Island any Tortoise may have been brought. When I see these Islands in sight of each other, & possessed of but a scanty stock of animals, tenanted by these birds but slightly differing in structure & filling the same place in Nature, I must suspect they are only varieties. The only fact of a similar kind of which I am aware is the constant asserted difference between the wolf-like Fox of East & West Falkland Islds. If there is the slightest foundation for these remarks the zoology of Archipelagoes will be well worth examining; for such facts would undermine the stability of Species.
That is from Darwin's ornithological notes. Bulletin of the British Museum (Natural History). Historical Series Vol. 2, No. 7, probably penned in 1836, after leaving the Galapagos and on the way back to England.
So the evidence needed to sway Darwin's thinking about what species are and how they arise congealed in the Galapagos, but he was exposed to it before, and not just in the Falklands. The fact that his evolutionary models that we now know to have been very insightful really came together after the trip was over does not mean that his mind was not turning over these ideas from much earlier on. Darwin needed to go through a transformation in thinking that, once he developed and espoused, took the rest of the scientific world decades to experience. I think that ultimately, if you went back in time to the 1840s and asked Charles Darwin where he came up with the ideas of diversification of species and Natural Selection, he would probably say: "Oh, that … a little bird told me. Or, really, a bunch of little birds."
Very nice post – thanks! What always intrigues me when thinking about island colonization by birds (or any animal for that matter) is the idea that it requires not just one lucky survivor of a long over-ocean voyage, but 2 (and probably more actually), obviously at approximately the same time if not exactly. For example, I get to thinking about birds like the Short-eared Owl which inhabit not only Genovesa on the Galapagos, but a couple of the Hawaiian Islands. I'm stunned by the thought of an owl making that trip, not to mention multiple owls at once, but clearly that's what must have happened.
Why do you think these particular ornithological notes were penned in September of October of 1835, while on the Galapagos?
Keynes is among authors who consider these to be the more developed notes he expanded from his brief original comments made on the islands, written up while the ship was approaching Britain during June and July 1836. From what Keynes says, Darwin couldn't have written about the relationship between the birds from various islands while he was still on the Galapagos, as it was only after they left the islands and were sailing towards Tahiti that he was astonished to find the relationship between mockingbirds and islands, noting "This is a parallel fact to the one mentioned about the tortoises". That's an indication that Darwin was, as Keynes says, already looking at 'deep patterns in the distribution of species'.
Darwin had learnt earlier from Henslow about ideas of distribution of species, and from Lyell the concept of species spreading from centres of creation. He'd also seen the relationship of fossil giant armadillos with living species, and of the two species of Rheas.
On the point about "such facts would undermine the stability of Species", Eldredge discusses how the term "would" before "undermine" had been a cautious addition after first writing the bolder statement.
Thanks, that's an interesting point about keeping options open. It's easy to jump to the conclusion that Darwin was trying to hide his dangerous thoughts, when it makes more sense that he was theorising and brainstrorming. He'd already been very inventive in concepts of geology, and was reading various opposed ideas of biogeography.
Thanks for the article, the points about the development of the Galapagos and source of the reptiles are very interesting. Seem to recall Darwin finding a reference suggesting the iguanas came from around Panama, but hadn't thought of them coming from the Caribbean.
Ah, here's the source: on p. 293 of his zoology notes Darwin cited "the Blonde's Voyage" on the Galapagos Iguanas "described from a specimen brought from the shores of the Pacifick", a footnote in the book states "Amblyrhyncus Cristatus — described by Bell from a specimen brought to Europe by Mr Bullock among his Mexican curiosities. Mr. B. does not state the spot where it was found: probably on the Pacific shore.'"
In his Narrative, Darwin is sure that the specimen "originally came through some whaling ship" from the Galapagos.
Jonathan Hodge gives more info on Darwin's thinking about bird species, and suggests the Pteroptochos genus as another possible inspiration..
© 2013 10,000 Birds. All words, images, and opinions are the property of their respective authors unless stated otherwise.

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Project Background
The County State Aid Highway (CSAH) 37 Improvement Project is scheduled for construction in the summer of 2019 to address safety and operational concerns. Wright County has allocated Local Option Sales Tax (LOST) funding to partially fund the project. The project extends from CSAH 18, on the west end, to CSAH 19, on the east end. The Cities of Albertville and Otsego are also partners in the project as the corridor extends through both Cities and Monticello Township. The project will involve the following components:
• 2-lane section with widened 6-ft paved shoulders from east of CSAH 18 to Jansen Avenue
• 3-lane section, with two-way left turn lanes from Jansen Avenue to Kalland Drive
• Addition of right turn lanes at side streets
• Flatter side slopes in rural sections
• Roundabout at intersection of CSAH 37 and CSAH 18, to enhance safety and operations
• Signal Enhancements at intersection of CSAH 37 and CSAH 19
• Drainage enhancements
It is anticipated the project will begin Spring, 2019 and be completed Fall, 2019 (subject to change).
Project Layout


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Here at insolvency.co.uk we are owned and run by F A Simms & Partners Insolvency Practitioners & business rescue firm. We strongly believe that our aim as a business is to help sole traders, individuals and limited companies overcome the struggle of insolvency. With either a rescue process or formal liquidation, we are here to help not hinder a situation.
We offer free initial consultations where we discuss all the options available and then we allow you to make an informed decision going forward that is best for you.


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Trade Schools in Mississippi
Enjoy a state with southern charm and a beautiful landscape in Mississippi. Over half of the state is covered by forests, and nature lovers can spot over 100 tree species. Magnolias are treasured blooms in Mississippi and are known as the state flower. Top industries in Mississippi include agriculture, fisheries and manufacturing, and supporting these technical and agrarian industries often requires professionals with targeted vocational training. At trade schools in Mississippi, you can gain the skills you need to work confidently within the field of your choice.
The Bureau of Labor Statistics (BLS) reports mean annual wages for top vocations in Mississippi in 2009 include: Electrical and electronic engineering technicians, $55,300; automotive service technicians and mechanics, $30,470; Bus and truck mechanics and diesel engine specialists, $33,750; and industrial machinery mechanics, $44,510. While no degree program can guarantee a particular career or salary, the training found at trade schools in Mississippi can help boost your skills, upgrade your knowledge, and expand your resume to meet the standards of many hiring managers in the state.
Career Outlook After Graduating from Trade Schools in Mississippi
Mississippi had a population of over 2.9 million in 2010, according to the U.S. Census Bureau. Like most southern states, Mississippi boasts a low cost of living--ACCRA reports that the state had the 10th lowest cost of living index in 2010. The BLS notes that the state's 1.09 million workers earned mean annual wages of $33,570 in 2009. Boost your potential with training from trade schools in Mississippi.


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When I shop for my clients I shop anywhere from Hickory Chair to Target. And sometimes, hoping to score a light fixture, I shop at Overstock. I was cruising through the website today and came upon this great chandelier for a whopping $189 !!!
Love the simplicity of this fixture.
Love the price even more...
Found HERE.


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I invite you to join our Power Partner family, today!
New Episodes Every Friday @ 10PM EST/9PM CST on Dish Network #269 Faith U.S.A
For over 5 decades, Power Partners have been used mightily by God to carry the life-transforming power of the Gospel to men, women, and young people on every continent of the globe!
There are several ways to give.
First, decide a monthly amount that you feel confident you can give as an offering every month. As you pray, God will impress that amount on your heart.
Many people begin at $25/month, while most average $40 or more.
For your commitment to sow a minimum of $25/month faithfully, we want to thank you by sending you an audio book of 3 CD's, THE POWER BOOK. On these recordings, R.W. Schambach, in his powerfully anointed voice, reads faith-building Scriptures for every aspect of your life and circumstance. We will also send you a membership card, a beautiful Power Partner commemorative pin, and prayer handkerchief and an oil bottle over which we have prayed.
If you sow an all-at-once gift of $300 or more, we will send you a beautiful SPIRIT-FILLED LIFE BIBLE, GIANT PRINT, leather bound, inscribed with your name, along with the membership card, pin, prayer cloth and oil bottle.
I know you will listen to the voice of the Spirit and I believe your life will be abundantly blessed for your partnership with the work of evangelism around the world.
Thank you so much and know I am praying for you and your family!
Donna J. Schambach


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About the Intaglio Prints
Intaglio Printmaking
Intaglio printmaking has been around in one form or another for almost 700 years. All forms of intaglio printmaking rely on making an image based on ink being drawn from the etched or "sunken" areas of a plate or other media rather than from the surface. Intaglio is the opposite of relief printing such as woodcuts which rely on the surface ink. The term "intaglio" is an Italian word meaning "carved" or "recesses." The intaglio process provides the opportunity for gradations in tone in the final print.
Making the Plate
A modern method of creating an etched plate from which to print intaglios is used. It first involves making a transparency from a photograph. The transparency is sandwiched with a steel plate that has a UV light-sensitive emulsion, known as a photopolymer plate. The image is transferred to the plate by exposure to UV light. The plate is then etched simply by washing the plate with water, revealing the original image on the plate.
Making the Print
The etched plate is hand-inked and palm wiped to remove excess ink on the surface of the plate. This process of inking is done for each printing of the image. The inked plate is placed on a hand-cranked printing press with a moist sheet of rag printmaking paper and subjected to heavy pressure during the "pull" of the plate and paper. Archival Charbonnel inks are used in combination with BFK Rives for the final images.
A variation of the intaglio involves sandwiching tissue paper between the inked plate and the paper during the pressing process. This process, known as "chine-collé" provides the opportunity to add textures and color to the final print. Translucent unryu mulberry-fiber papers are primarily used.


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What is Juvenile Dependency Law?
The primary purpose of "juvenile dependency law" is to provide for the protection and wellbeing of children who have been, or are at risk of being, abused or neglected. In California, each county has an agency (e.g., Health and Human Services Agency (San Diego), Department of Public Social Services (Los Angeles)) responsible for the welfare of the children residing there. Because agency names vary from county-to-county, the term "Agency" is used generically here.
The Agency is responsible for investigating allegations of child abuse and/or neglect. If an investigation reveals there are legitimate concerns for the wellbeing of children in a household, the Agency will likely get involved with the family; typically, this means the Agency either offers the parents "voluntary services" (e.g., drug treatment) to remedy the concerns or files a "petition" (under Welf. & Inst. Code, § 300). Filing a petition is essentially asking the juvenile court to get involved.
Much of juvenile dependency law is concerned with the juvenile court proceedings that occur after the Agency files a petition.
How Do Juvenile Dependency Cases Start?
The way the Agency becomes involved with a family is by receiving a "referral" from a concerned person. Oftentimes, referrals come from calls made to "child abuse hotlines" which anyone can call to report neglect or abuse. It's also common for referrals to originate from police. Once the Agency receives a referral, it will investigate and determine the appropriate action to take.
If the referral can't be "substantiated" for abuse or neglect (i.e., there is no evidence to support the allegations), the Agency typically won't take any further action. If, on the other hand, the referral is substantiated, the Agency will need to take measures to ensure the safety and wellbeing of the children involved.
In less serious cases, the Agency may opt to offer the parents "voluntary services." In this way, the Agency may be able to address the family's issues without the juvenile court being involved. Voluntary services may include things like substance abuse treatment or parenting classes.
However, in more serious cases, and in cases where the parents fail to adequately address their issues with voluntary services, the Agency will likely seek more formal intervention by filing a "petition"(under Welf. & Inst. Code, § 300) in the juvenile court. The filing of the petition marks the beginning of a juvenile dependency court case.
Rights of Parents in Juvenile Dependency Cases
In juvenile dependency proceedings, parents have legal rights that typically come from the California and U.S. Constitutions, as well as statutes. Statutes are written laws that are created by the legislature; the statutes that are most important for dependency cases are found in the Welfare and Institutions Code. The California Supreme Court has said: "A parent's interest in the companionship, care, custody and management of his children is a compelling one, ranked among the most basic of civil rights." (In re Marilyn H., 5 Cal.4th 295, 306 (1993).)
Dependency cases are complex and the rules that apply to them are intricate and numerous. However, among the most basic rights parents have in these cases are the rights to the assistance of an attorney, and notice of the dependency proceedings and all court hearings. When a parent wishes to contest an allegation (e.g., whether the parent was driving under the influence with the child in the car) or issue (e.g., whether child will be removed from the parent's home), the parent has the right "to be heard" at a court hearing. This means that the parent has the right to come to court, argue their position, present evidence, have witnesses testify, and cross-examine witnesses that are called to testify by other parties. Of course, it is typically the parent's attorney, rather than the parent themselves, that does most of these things at the hearing.
Rights of Minors in Juvenile Dependency Cases
In dependency proceedings, minors have rights similar to those of parents. Minors have the right to the assistance of an attorney, to be to present at all court hearings, present evidence, call witnesses to testify, and cross-examine witnesses called by other parties.
Although minors do have constitutional rights in dependency cases, they have less (or at least less defined) constitutional rights than parents do. As such, most of their rights are considered "statutory" (i.e., they come from the Welfare and Institutions Code) rather than constitutional.
Stages of Juvenile Dependency Cases
While the overarching goal of dependency law is to protect children from neglect and abuse, children should only be removed from their parents' custody when protection is necessary. (Welf. & Inst. Code, § 16000.) And once a dependency case begins, "family preservation" becomes the first priority. (In re Elizabeth R., 35 Cal.App.4th 1774.) In other words, once a child is removed from their parents, the goal thereafter is to help the family remedy the issues that put the child at risk of neglect or abuse.
Dependency cases do not always take the same path. Ideally, children can be returned to their parents' custody without extensive and prolonged involvement of the Agency and the juvenile court. However, where safe return to parental custody cannot be achieved, it is possible for a dependency case to go through all of the following stages:
Petition and removal,
Jurisdiction and disposition,
Review hearings,
Selection and implementation hearing, and
Post permanency review hearings.
Juvenile Dependency Appeals
An appeal is where a party (a parent, the child, or the Agency) challenges a decision of the juvenile court in a higher court—the Court of Appeal. Whereas in most criminal cases, there is only one opportunity to appeal—after the verdict and sentencing—it's common for there to be multiple appeals arising from a single juvenile dependency case. It's because parties in dependency cases can appeal at numerous stages of the case.
The first opportunity to appeal in a dependency case is after the disposition hearing. Although there are typically several hearings that occurs before the disposition hearing (the detention and jurisdiction hearings), those hearings can't be directly appealed. The prior hearings can, however, be appealed as part of the appeal from disposition. (See Welf. & Inst. Code, § 395, subd. (a); In re Joann E., 104 Cal.App.4th 347, 353-54.)
After the disposition hearing, "any subsequent order" of the juvenile court can be appealed. (Welf. & Inst. Code, § 395, subd. (a).) The only exception to this right to appeal is when the juvenile court orders a hearing under Welfare and Institutions Code section 366.26 (often called a "26 hearing") to be set. When that happens, the order (and any other orders made at that hearing) must be brought to the Court of Appeal using an "extraordinary writ petition." (Welf. & Inst. Code, §366.26, subd. (l); Cal. Rules of Court, rule 8.452.) The extraordinary writ petition serves the same purpose as any other appeal, but process is much quicker.
Because juvenile dependency cases often involve lots of hearings after disposition, the result is lots of opportunities to appeal. Like criminal appeals, in juvenile dependency cases, the appeals typically aren't handled by the trial attorneys—a different attorney will be appointed represent the client in the Court of Appeal.