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We know that the Obama administration will not go after the banksters that created this global financial calamity. It has been thoroughly co-opted by Wall Street's fifth column, who hold most of the important posts in the administration. Europe has even more at stake and has shown somewhat more willingness to take action. Perhaps our only hope for retribution lies there.

Some might believe the term "banksters" is too mean. Surely Wall Street was just doing its job -- providing the financial services wanted by the world. Yes, it all turned out a tad unfortunate but no one could have foreseen that so many of the financial innovations would turn into black swans. And hasn't Wall Street learned its lesson and changed its practices? Fat chance. We know from internal emails that everyone on Wall Street saw this coming -- indeed, they sold trash assets and placed bets that they would crater. The crisis was not a mistake -- it was the foregone conclusion. The FBI warned of an epidemic of fraud back in 2004 -- with 80% of the fraud on the part of lenders. As Bill Black has been warning since the days of the Saving and Loan crisis, the most devastating kind of fraud is the "control fraud," perpetrated by the financial institution's management. Wall Street is, and was, run by control frauds. Not only were they busy defrauding the borrowers, like Greece, but they were simultaneously defrauding the owners of the firms they ran. Now add to that list the taxpayers that bailed out the firms. And Goldman is front and center when it comes to bad apples. Lest anyone believe that Goldman's executives were somehow unaware of bad deals done by rogue traders, William Cohan reports that top management unloaded their Goldman stocks in March 2008 when Bear crashed, and again when Lehman collapsed in September 2008. Why? Quite simple: they knew the firm was full of toxic waste that it would not be able to continue to unload on suckers -- and the only protection it had came from AIG, which it knew to be a bad counterparty. Hence on March 19, Jack Levy (co-chair of M&As) sold over $5 million of Goldman's stock and bet against 60,000 more shares; Gerald Corrigan (former head of the NY Fed who was rewarded for that tenure with a position as managing director of Goldman) sold 15,000 shares in March; Jon Winkelried (Goldman's co-president) sold 20,000 shares. After the Lehman fiasco, Levy sold over $6 million of Goldman shares and Masanori Mochida (head of Goldman in Japan) sold $56 million worth. The bloodletting by top management only stopped when Goldman got Geithner's NYFed to produce a bail-out for AIG, which of course turned around and funneled government money to Goldman. With the government rescue, the control frauds decided it was safe to stop betting against their firm. So much for the "savvy businessmen" that President Obama believes to be in charge of Wall Street firms like Goldman.

From 2001 through November 2009 (note the date -- a full year after Lehman) Goldman created financial instruments to hide European government debt, for example through currency trades or by pushing debt into the future. But not only did Goldman and other financial firms help and encourage Greece to take on more debt, they also brokered credit default swaps on Greece's debt-making income on bets that Greece would default. No doubt they also took positions as the financial conditions deteriorated-betting on default and driving up CDS spreads. But it gets even worse: An article by the German newspaper, Handelsblatt, ("Die Fieberkurve der griechischen Schuldenkrise", Feb. 20, 2010) strongly indicates that AIG, everybody's favorite poster boy for financial deviancy, may have been the party which sold the credit default swaps on Greece (English translation here). Generally, speaking, these CDSs lead to credit downgrades by ratings agencies, which drive spreads higher. In other words, Wall Street, led here by Goldman and AIG, helped to create the debt, then helped to create the hysteria about possible defaults. As CDS prices rise and Greece's credit rating collapses, the interest rate it must pay on bonds rises-fueling a death spiral because it cannot cut spending or raise taxes sufficiently to reduce its deficit. Having been bailed out by the Obama Administration, Wall Street firms are already eyeing other victims (and for allowing these kinds of activities to continue, the US Treasury remains indirectly complicit, another good reason why one shouldn't expect any action coming out of Washington). Since the economic collapse is causing all Euronations to run larger budget deficits and at the same time is raising CDS prices and interest rates, it is easy to pick off nation after nation. This will not stop with Greece, so it is in the interest of Euroland to stop the vampires now. With Washington unlikely to do anything to constrain Goldman, it looks like the European Union, which is launching a major audit, just might banish the bank from dealing in government debt. The problem is that CDS markets are essentially unregulated so such a ban will not prevent Wall Street from bringing down more countries-because they do not have to hold debt in order to bet against it using CDSs. These kinds of derivatives have already brought down an entire continent -- Asia -- in the late 1990s , and yet authorities are still standing by and basically doing nothing when CDSs are being used again to speculatively attack Euroland. The absence of sanctions last year, when we had a chance to deal with this problem once and for all, has simply induced even more outrageous and fundamentally anti-social behavior. It has pitted neighbor against neighbor -- with, for example, Germany and Greece lobbing insults at one another (Greece has requested reparations for WWII damages; Germany has complained about subsidizing what it perceives to be excessive social spending in Greece). Of course, as far as Greece goes, the claim now is that these types of off balance sheet transactions in which Goldman and others engaged were not strictly "illegal" under EU law. But these are precisely the kinds of "shadow banking transactions" that almost brought down the global financial system 18 months ago. Literally a year after the Lehman bankruptcy -- MONTHS after Goldman itself was saved from total ruin, it was again engaging in these kinds of deals. And it wasn't exactly a low-level functionary or "rogue trader" who was carrying out these transactions on behalf of Goldman. Gary Cohn is Lloyd "We're doing God's work" Blankfein's number 2 man. So it's hard to believe that St. Lloyd did not sanction the activities as well in advance of collecting his "modest" $9m bonus for last year's work.

In spite of its new whizz-bang CEO, Prudential is a slow-moving but very reliable organization with a level of integrity that is trusted by policyholders. Frankly, that's what you want in an insurance company. I have had a modest U.K. pension with one of its competitors since 1980, and I am constantly worried that some leveraged buyout (LBO) artist will step in, take it over, change the computer system so that information gets lost, outsource customer service, and drive the company into bankruptcy. If you're buying life insurance or pension services, you want a company that's not going to disappear in the next 30 years, and doesn't change its address or computer system too often. Avoid a company like the plague if it is run by whiz kids. However, that's what AIG was like. We know how AIG operated; a guy who thought betting the ranch on the credit default swap market was a good idea ran it. Its Asian operation is no doubt full of similarly clever ideas. Even in the unlikely event that everything there is on the level, the cultural clash with an old-fashioned British insurance company is huge. And why would you pay a PREMIUM for an AIG operation? Like the Kraft/Cadbury deal, Prudential's takeover of AIA is value-destroying. Also like Kraft/Cadbury, it looks likely to destroy a valuable part of the British economy that millions of people have relied upon for generations - only this time the destruction will be caused by the buyer rather than the target. As shareholders we need a new form of corporate governance. Those in management are hired hands. In the old days, large shareholders used to treat management as they would have treated their butler - and management was equally deferential to the owners of substantial percentages of the company's capital. That's how capitalism is supposed to work - with resources deployed in the interests of the owners of capital. We know that system works; economics shows us why it works. The alternative, with resources deployed to satisfy the egos and fill the pockets of the hired hands, has no theoretical justification and little practicality - just as a big country house run in the interests of the butler would be a mess. As capitalists, we must work together to restore capitalism!

Trade's effect on military conflict is one of the most important issues in international relations. The last decade has seen research and debate into the role of trade intensify; Liberals argue that trade brings peace, neo-realists and neo-Marxists reason that trade brings conflict, and classical realists contend that trade has no impact. This debate is not just academic: some key U.S. policymakers (Senator McCain and former President Clinton for instance) believe that trade brings peace, a view that contributes to their support for free trade. Economists developed bilateral trade models in isolation from models of interstate conflict, which were the work of political scientists. These two types of models handle distance between nations differently. Bilateral trade takes its cue from Isaac Newton's formula for the gravitational attraction between two objects: the larger the objects' masses and the shorter the distance between them, the larger the attraction. So the larger the trade partners' economies and the closer they are to one another, the greater their trade. However, conflict models instead incorporate shared borders by land or close distance over water (contiguity) - stressing the role of border disputes in sparking interstate conflict. Distance is included in conflict equations based on the idea that an army gets weaker the farther it strays from its base, but what point in a nation to pick for the trade and conflict equation is unclear. Often theorists use the distance between capital cities, which is problematic: wars generally happen around borders where armies are often based, and capitals have historically changed without this altering the likelihood of war between the nation and its neighbours. The authors suggest that the trade data set plugged into trade and conflict equations is critical. This type of data often contains gaps - there are a number of reasons why data from a particular nation might be unavailable, inevitably leaving researchers to make assumptions. The majority of trade and conflict studies define conflict to include all types of militarised interstate disputes (MIDs). But Keshk, Reuveny, and Pollins question the results generated when different conflict definitions are chosen. For instance, a conflict such as a threat to use nuclear weapons would not cause fatalities, but may still have some impact on trade and vice versa. In fact, by altering the data treatment and assumptions in the equation, the authors generated a variety of results, which supported several different theoretical viewpoints. The authors suggest that future research should investigate questions of missing bilateral trade data, and attempt a more subtle use of the meaning of "military conflict". Researchers might also develop distance and contiguity measures at a more sophisticated level. "Any signal that trade brings peace remains weak and inconsistent, regardless of the way proximity is modelled in the conflict equation. The signal that conflict reduces trade, in contrast, is strong and consistent," say the authors. "Any study of the effect of trade on conflict that ignores the reverse fact is practically guaranteed to produce estimates that contain simultaneity bias." Studies of the relationship between international trade and military conflict can be traced back many centuries, particularly in the works of luminaries such as de Montesquieu, Immanuel Kant, John Hobson, Vladimir Lenin, Henry Morgenthau, Kenneth Waltz, Frederic List, and Albert Hirschman. This latest study emphasises that international politics are affecting trade between nation pairs, while it is far less obvious whether trade systematically affects politics. "To our colleagues from the liberal camp we would like to say that we still believe there are limited circumstances in which more trade may help lead countries to more peaceful resolutions of their differences, particularly if they are already at peace," the authors state. "However, it is past time for academics and policymakers to look beyond the naive claim that the cultivation of trade ties will always and everywhere produce a more peaceful world."

University of Edinburgh law lecturer Andres Guadamuz wrote a blog entry this week highlighting some particularly troubling aspects of the IIPA's 301 recommendations. The organization has condemned Indonesia and several other countries for encouraging government adoption of open source software. According to the IIPA, official government endorsements of open source software create "trade barriers" and restrict "equitable market access" for software companies. The profound absurdity of this accusation is exacerbated by the fact that Indonesia's move towards open source software was almost entirely motivated by a desire to eliminate the use of pirated software within the government IT infrastructure. It's important to understand that Indonesia has not mandated the adoption of open source software or barred government agencies from purchasing proprietary commercial software. The Indonesian government issued a statement in 2009 informing municipal governments that they had to stop using pirated software. The statement said that government agencies must either purchase legally licensed commercial software or switch to free and open source alternatives in order to comply with copyright law. This attempt by Indonesia to promote legal software procurement processes by endorsing the viability of open source software has apparently angered the IIPA. In its 301 recommendations for Indonesia, the IIPA demands that the government rescind its 2009 statement. According to the IIPA, Indonesia's policy "weakens the software industry and undermines its long-term competitiveness" because open source software "encourages a mindset that does not give due consideration to the value to intellectual creations [and] fails to build respect for intellectual property rights." The number of ways in which the IIPA's statements regarding open source software are egregiously misleading and dishonest are too numerous to count. The IIPA seems to have completely missed the fact that there is a very robust ecosystem of commercial software vendors in the open source software market and that open source software is at the heart of some of the most popular consumer electronics products that are sold in the United States. It has clearly become an important part of the US software economy and increasingly serves as an enabler of innovation and technological progress. In light of the profitability of Red Hat and other open source leaders, it seems absurd to contend that open source software adoption will weaken the software industry or reduce its competitiveness. In fact, the emergence of open source software has contributed to creating a more competitive landscape in the software industry by offering alternative business models that enable smaller companies to gain traction against the dominant incumbent players. The IIPA's position is profoundly hypocritical, because many parts of the US government, including the Department of Defense, have issued their own memos endorsing open source software adoption. The IIPA's disingenuous move to equate open source software with piracy reeks of desperation. The BSA and other IIPA members are likely losing sleep over open source software because that development model and approach to licensing will empower developing countries to build their own domestic IT industries, eliminating the need for them to tithe to American software giants. It's another failing of the 301 review, which Big Content wants used to coerce other countries into adopting ever-more-stringent copyright laws.