April 20, 2010  Ecuador is bankrupt. Ecuador just signed a deal with North Korea and no one knows what that dirty deal is all about. What we do know is that Correa is looking for quick and dirty money and looking for love in all the wrong places. You can sing along to this woebegone cowboy tale of Ecuador today.   As long as Correa is playing with dirty operatives, there is no room for honest players: looking for money and love in all the wrong places. Correa- and Ecuador- will always lose as long as the main objective is to game and manipulate life’s credibility. The CATO fellow, O’Driscoll unwittingly describes what Rafael Correa has done to Ecuador’s economy: he has burglarized it as sure as a bank robber, operating right under your nose for all to see. And still yet… no one states the facts. Of course he is talking about the Obama-Soros team of self enriching operations from abusing the powers of the state to self enrich, contravening the U.S. constitution. Ecuador is not so lucky: Ecuadoreans approved Correa’s shut down of open media and free speech as well as gifting Correa full statist powers over every facet of human life in Ecuador through his 9-08 constitution, fully approved without anyone reading it and without so much as a by your leave. And still yet you have no clue what your constitution says and what Correa does. You have… AN ECONOMY OF LIARS.
 
The Wall Street Journal
OPINION

APRIL 20, 2010

An Economy of Liars
When government and business collude, it's called crony capitalism. Expect more of this from the financial reforms contemplated in Washington.
By GERALD P. O'DRISCOLL JR.
Free markets depend on truth telling. Prices must reflect the valuations of consumers; interest rates must be reliable guides to entrepreneurs allocating capital across time; and a firm's accounts must reflect the true value of the business. Rather than truth telling, we are becoming an economy of liars. The cause is straightforward: crony capitalism.

Thomas Carlyle, the 19th century Victorian essayist, unflatteringly described classical liberalism as "anarchy plus a constable." As a romanticist, Carlyle hated the system—but described it accurately.

Classical liberals, whose modern counterparts are libertarians and small-government conservatives, believed that the state's duties should be limited (1) to provide for the national defense; (2) to protect persons and property against force and fraud; and (3) to provide public goods that markets cannot. That conception of government and its duties was articulated by the Declaration of Independence and embodied in the U.S. Constitution.

Modern liberals have greatly expanded the list of government functions, but, aside from totalitarian regimes, I know of no modern political movement that has shortened it. While protecting citizens against force, both at home and abroad, is the government's most basic function, protecting them against fraud is closely allied. By the use of force, a thief takes by arms what is not rightfully his; he who commits fraud takes secretly what is not rightfully his. It is the difference between a robber stealing brazenly on the street and a burglar stealing by stealth at night. The result is the same: the loss of property by its owner and the disordering of civil society. And government has failed miserably to perform this basic function.

Why has this happened? Financial services regulators failed to enforce laws and regulations against fraud. Bernie Madoff is the paradigmatic case and the Securities and Exchange Commission the paradigmatic failed regulator. Fraud is famously difficult to uncover, but as we now know, not Madoff's. The SEC chose to ignore the evidence brought to its attention. Banking regulators allowed a kind of mortgage dubbed "liar loans" to flourish. And so on.

We have now learned of the creative way Lehman Brothers hid its leverage (how much money it was borrowing) by the use of a Repo 105. The Repo 105 meant Lehman temporarily swapped assets (such as bonds) for cash. A Repo, or repurchasing agreement, is a way to borrow money. But an accounting rule allowed Lehman to book the transaction as a sale and reduce its reported borrowings, according to a report by the court-appointed Lehman bankruptcy examiner, a former federal prosecutor, last month.

Are we to believe that regulators were unaware? Last week Goldman Sachs was accused in a civil fraud suit of deceiving many clients for the benefit of another, hedge-fund operator John Paulson.

The idea that multiplying rules and statutes can protect consumers and investors is surely one of the great intellectual failures of the 20th century. Any static rule will be circumvented or manipulated to evade its application. Better than multiplying rules, financial accounting should be governed by the traditional principle that one has an affirmative duty to present the true condition fairly and accurately—not withstanding what any rule might otherwise allow. And financial institutions should have a duty of care to their customers. Lawyers tell me that would get us closer to the common law approach to fraud and bad dealing.

Public choice theory has identified the root causes of regulatory failure as the capture of regulators by the industry being regulated. Regulatory agencies begin to identify with the interests of the regulated rather than the public they are charged to protect. In a paper for the Federal Reserve's Jackson Hole Conference in 2008, economist Willem Buiter described "cognitive capture," by which regulators become incapable of thinking in terms other than that of the industry. On April 5 of this year, The Wall Street Journal chronicled the revolving door between industry and regulator in "Staffer One Day, Opponent the Next."

Congressional committees overseeing industries succumb to the allure of campaign contributions, the solicitations of industry lobbyists, and the siren song of experts whose livelihood is beholden to the industry. The interests of industry and government become intertwined and it is regulation that binds those interests together. Business succeeds by getting along with politicians and regulators. And vice-versa through the revolving door.

We call that system not the free-market, but crony capitalism. It owes more to Benito Mussolini than to Adam Smith.

Nobel laureate Friedrich Hayek described the price system as an information-transmission mechanism. The interplay of producers and consumers establishes prices that reflect relative valuations of goods and services. Subsidies distort prices and lead to misallocation of resources (judged by the preferences of consumers and the opportunity costs of producers). Prices no longer convey true values but distorted ones.

Hayek's mentor, Ludwig von Mises, predicted in the 1930s that communism would eventually fail because it did not rely on prices to allocate resources. He predicted that the wrong goods would be produced: too many of some, too few of others. He was proven correct.

In the U.S today, we are moving away from reliance on honest pricing. The federal government controls 90% of housing finance. Policies to encourage home ownership remain on the books, and more have been added. Fed policies of low interest rates result in capital being misallocated across time. Low interest rates particularly impact housing because a home is a pre-eminent long-lived asset whose value is enhanced by low interest rates.

Distorted prices and interest rates no longer serve as accurate indicators of the relative importance of goods. Crony capitalism ensures the special access of protected firms and industries to capital. Businesses that stumble in the process of doing what is politically favored are bailed out. That leads to moral hazard and more bailouts in the future. And those losing money may be enabled to hide it by accounting chicanery.

If we want to restore our economic freedom and recover the wonderfully productive free market, we must restore truth-telling on markets. That means the end to price-distorting subsidies, which include artificially low interest rates. No one admits to preferring crony capitalism, but an expansive regulatory state undergirds it in practice.

Piling on more rules and statutes will not produce something different than it has in the past. Reliance on affirmative principles of truth-telling in accounting statements and a duty of care would be preferable. Deregulation is not some kind of libertarian mantra but an absolute necessity if we are to exit crony capitalism.

Mr. O'Driscoll is a senior fellow at the Cato Institute. He has been a vice president at Citigroup and a vice president at the Federal Reserve Bank of Dallas.

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As anyone with a brain will state, Ecuador is in deep trouble, thanks to Correa and is going out of business- legitimate business that it.

Unless and until the “crony capitalists” – aka political actors who are actually local caudillos cease and desist taking and making bribes and start being HONEST about their business deals, all controlled now by Correa’s corrupt one man bandit arm like a Los Vegas casino game, you will have no freedom whatsoever. Stop the caudillo financiers and you will be free. It is a paradox but one worth noting. Just ask the Venezuelans if any gave back the man they hate- Chavez’s dirty money. No- none did not and for this, all Venezuelans are pocked in, by their own device, to the ownership of Chavez’s bribes. That sums up Ecuador too where no one has any way out because none chose to have or hold honor.

And your international helper club-the OAS? It is utterly a fraud- a teen agers’ gang for Latin communists on the move. Here from the wised-up Honduras.

Is the real leadership [although they forgot to put in Soros] of the unbearable OAS:

Meet Inchavastro, defender of democracy in the Americas .

Honduras, having rejected the Chavez efforts last year, is still being dragged criminally in to the orbit of the Russo-Iranian drug mafia, also called Chavez-Correa-Castro’s ALBA triad of evil. What we have never understood is why the USA’s Democrats think that Zelaya- aka Patricia Rolda- and Rafael Correa are such heroes. Heroes of disgrace is more factual:

The Wall Street Journal 
OPINION: THE AMERICAS
APRIL 19, 2010

Congress vs. Honduran Democrats
American liberals are still sore about the 'coup' that ousted Manuel Zelaya.
•                               By MARY ANASTASIA O'GRADY

The U.S. ambassador to Honduras, Hugo Llorens, continues to use his post in Tegucigalpa to advance the political strategy of some of Washington's most hard-left Democrats. His effort deserves attention because it is part of a broader ideological agenda for the region that runs counter to U.S. security interests.

Twelve days ago Mr. Llorens hosted a dinner party at his residence for more than a half-dozen members of President Porfirio Lobo's cabinet. The guests of honor were two visiting Capitol Hill staffers. Fulton Armstrong works for Massachusetts Sen. John Kerry, who heads the Senate Foreign Relations Committee; Peter Quilter works for California Congressman Howard Berman, who chairs the House Committee on Foreign Affairs.

Both elected politicians are known for left-wing sympathies. So too are their staffers. Mr. Armstrong is more famous than his House counterpart because of his working relationship—when he was on the National Intelligence Council—with Ana Belen Montes, the highest ranking Cuban spy ever to penetrate the Pentagon.

It is strange enough that the ambassador thought it appropriate to subject cabinet ministers to an evening with Hill staffers. It is even more bizarre that the staffers would think it appropriate to use the occasion to pressure the ministers on matters of domestic politics.

Yet multiple reports from the event all told the same story: The foreigners said that they are still sore with Honduran supporters of what the Obama administration had branded "a coup d'etat" last year. Those supporters, who argued that Honduras had the constitutional right to remove President Manuel Zelaya from power, had hired lobbyists to present their arguments in Washington. They caused great trouble for the Democrats, the Kerry-Berman emissaries complained.

The staffers had other meetings with government and private-sector VIPS where this issue came up. According to some of those present, the visitors implied that if Honduras wants to get right with the U.S., it should find a way to officially accept the Obama administration's coup d'etat narrative.

Mr. Armstrong's office says that the staffers' visit was "part of their normal staff responsibilities" and that they "discussed a whole host of issues with their interlocutors."

If that included pushing to make their version of the "coup" official, it's nothing new. Last year, after the Law Library of Congress opined that Honduras had acted constitutionally when it removed Mr. Zelaya, Messrs. Kerry and Berman penned a letter to the head of the Law Library to demand that the opinion be retracted and "corrected." The head librarian stood by the Library's analysis. But as the Armstrong-Quilter visit suggests, the lawmakers have not given up their quest to rewrite history.

Equally troubling are questions about Mr. Armstrong, who last year tried to block Republican Sen. Jim DeMint's fact-finding trip to Honduras. For much of his career as a Central Intelligence Agency analyst on Latin America, Mr. Armstrong's work was shrouded in secrecy. That changed when Mr. Kerry blurted out his name during 2005 hearings on George W. Bush's nomination of John Bolton as U.S. ambassador to the United Nations. Mr. Bolton's adversaries claimed that he was unqualified for the job because he had tried to have Mr. Armstrong fired for political reasons.

Otto Reich, a former assistant secretary of state for Western hemisphere affairs, went before staffers of the Senate Foreign Relations Committee to testify on Mr. Bolton's behalf. Mr. Reich says he told the staffers that he had found Mr. Armstrong's work consistently unreliable and that much of the national security bureaucracy saw it the same way. The late columnist Robert Novak wrote for Townhall.com at the time that Mr. Reich's views fit "complaints I have heard from Reagan administration officials about Armstrong's left-wing bias on Western Hemisphere questions in general, but particularly on Cuba."

Mr. Armstrong's name also comes up in the 2007 book "True Believer," by Defense Intelligence Agency "mole hunter" Scott Carmichael. It tells the story of how the U.S. busted Cuban spy Montes in 2001.

As the National Intelligence Officer for Latin America in 2000, Mr. Armstrong was "in frequent telephone and e-mail contact with Ana," Mr. Carmichael writes. "As NIO he was the senior subject-matter expert on Latin American affairs for the [director of central intelligence], and he welcomed Ana's participation in the fellowship program under his personal tutelage. They had discussed the nature of her research project in some detail, and preparations were already underway to launch Ana further and deeper into the U.S. intelligence community." The book does not say that he knew she was a spy. Mr. Armstrong's office did not respond to my request for comments.

All of this raises questions about Mr. Armstrong's judgment on Latin America and his qualifications to be the point person for the Senate in shaping U.S. policy in Honduras in 2010.
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We at ECrisis ask you: have you ever heard of the alternative to Obama’s Kerry and Dodd, Senator DeMint? Has he ever toured Ecuador? Why is it, do you suppose, that amb. Hodges and Correa despise these elected officials from the USA and spend lots of US tax dollars on liars like Noam Chomsky, Joe Stiglitz and debauched Congressman Jim McGovern to lie a lot and support extortion rackets?   You do not need Ms. Hodges to invite Jim DeMint to visit Ecuador: you can invite him yourself and there is nothing to stop you except your own….laziness and addiction to enjoying manipulations. Ecuadoreans have silenced truth tellers because they are screamed at/yelled at and hounded by Correa, their employers and worse- their own wives and mothers for standing for something- anything better than the failed state that Ecuador is today. It does not have to be this way. At some point however, no one will believe anything from Ecuador except the awareness that no one- no one at all- stands for anything decent because….no one stood up for anything decent. They all….went shopping or on vacation in the sanctified canyons of Brickell Avenue’s ghetto of forgettable but unforgivable escape artists (busy escaping from adult responsibility), losers, manipulators and unmanned men in Miami who pretend to be Americans but care nothing about America except what they can game from America’s gifts, which they do not deserve, selfishly holding no interest in anything but themselves. Do not think for one single moment that these bastions of Latin American greatness suffer one second to volunteer at hospitals, serve to help the Boy Scouts, assist literacy projects or even condescend to support America’s military which has defended the very freedoms that Ecuadoreans in droves do now game and scam inside the USA. No indeed- these Pay Go escapees from moral integrity manipulatively consider that they are so special that they are exempt from what made America great. They never really lifted one finger in Latin America and they do now suck off others’ work in America. It is not an export any desire nor should Ecuadoreans be proud of their own exports of lazy childish boobs to the USA. Real change begins with real morals and definable acts instead of mocking those who actually work to build strong communities while avoiding any honesty.

Some say that Ecuador gets the government it wants. We say: Ecuador got the economy it wants….selfish caudillo criminals of the central state. An economy of criminals and liars. Too difficult you say to stop lying and manipulating? Too easy to sell your soul to the state machine of corruption? Hugo Chavez has a job for you. So too does Raul Castro… and that will be your lot: $80 a year and some rice, if you are lucky.

-Pedro Camargo for ECrisis