The Real Face of Socialism

The real 'socialists' here.

The George W. Bush administration handed 125 billion dollars to nine of Wall Street's richest banks, but this will do little to help the economy that is crumbling around ordinary U.S. citizens, independent experts and activists say.

"There is no way a modern economy can function without good roads, telecommunication, rail transport and an educated labour force," Allan Mendelowitz, a member and former chairman of the Federal Housing Finance Board, told IPS.

Bush's new Office of Financial Stability, led by Neel Kashkari, sealed a deal Tuesday to provide the billions, plus 125 billion dollars more for small banks, to encourage them to start lending to each other and the world's biggest businesses again.

A freeze in lending, related to the banks' risky trading ventures, has slowed the global economy, rocked stock markets around the world, and tightened lending throughout the U.S. economy.

"We're not proud of all the mistakes that were made by many different people, different parties, failures of our regulatory system, failures of market discipline that got us here," said Treasury Secretary Henry Paulson Thursday in an interview on Fox Business Network.

Global Economy in 'Major Downturn'

So says the IMF...

The International Monetary Fund said Wednesday that the global economy was sinking in a maelstrom of financial turmoil, and faces a painful crawl toward recovery in 2009.

"The world economy is now entering a major downturn in the face of the most dangerous shock in mature financial markets since the 1930s," the IMF said in its biannual World Economic Outlook (WEO) report.

The IMF revised downward its July forecasts for global economic growth to 3.9 percent in 2008 and 3.0 percent in 2009, the slowest pace since 2002. The markdowns shaved off 0.2 percentage point and a hefty 0.9 point, respectively.

"The major advanced economies are already in or close to recession, and, although a recovery is projected to take hold progressively in 2009, the pickup is likely to be unusually gradual, held back by continued financial market deleveraging," the 185-nation institution said.

National Debt Clock Ticks On

The results of 'fiscal conservatism'...

eBay to Cut Workforce By 10%

Going, Going...Gone!


EBay Inc. plans to eliminate 1,600 jobs, or 10 percent of its workforce, to reduce costs as the company tries to revive its slowing growth.

Separately today, eBay revealed its intent to spend $1.34 billion on three acquisitions, the biggest of which is Bill Me Later, an online credit service.

The staff cuts include 1,000 full-time, temporary and part-time workers, plus some open positions that will be left unfilled. They come on top of 125 dismissals earlier this year by the San Jose company, whose core online marketplace is slumping in the face of stiff competition from Amazon.com and users' growing preference for shopping for products at a fixed price rather than by auction.

Dow Finishes Below 10,000

This isn't good.

Wall Street joined in a worldwide cascade of despair Monday over the financial crisis, driving the Dow Jones industrials to their biggest loss ever during a trading day. Even a big afternoon rally failed to keep the Dow from its first close below 10,000 since 2004.

The sell-off came despite the $700 billion U.S. government bailout package, which was signed into law Friday after two weeks in which traders had appeared to count on the rescue as their only hope to avoid a market meltdown.

At its worst point, the Dow was down more than 800 points, an intraday record. The stock market rallied during the final 90 minutes of the trading day, and the Dow finished down about 370 points at 9,955.50.

Veto of Spending Bill Is Threatened

Here we go again.

The White House budget director warned on Saturday that President Bush was prepared to veto a $500 billion spending package being assembled in Congress if Democrats pushed for too much additional money for domestic programs.

Jim Nussle, the director of the Office of Management and Budget, accused Democrats of trying to tie money for combat operations in Iraq and Afghanistan to what the president considers excessive spending for federal agencies and home-state projects.

“Instead of trying to leverage troop-funding for more pork-barrel spending, Congress ought to pass responsible appropriations bills and the funding for the troops our commanders say they need to build on their battlefield success,” Mr. Nussle said.

Democratic leaders accused the White House of responding hastily to news accounts of the proposal, which is being developed behind closed doors. They said Democrats were determined to devote more resources to national needs like homeland security and law enforcement.

This is absolutely absurd. The Republicans are all over themselves screaming about fiscal responsibility and taking care of the 'people's money' while in the same breath screaming for more unaccountable funds to be sent to the money pit in Iraq and Afghanistan. It is truly amazing that more people haven't caught on to their con by now.

It wasn't that long ago that the Republicans in Congress were spending money like there was no tomorrow. The bloated Highway Bill, passed in 2005, is a perfect example. Let's take a look back.

Even by the standards of Alaska, the land where schemes and dreams come for new life, two bridges approved under the national highway bill passed by the House last week are monuments to the imagination.

One, here in Ketchikan, would be among the biggest in the United States: a mile long, with a top clearance of 200 feet from the water -- 80 feet higher than the Brooklyn Bridge and just 20 feet short of the Golden Gate Bridge. It would connect this economically depressed, rain-soaked town of 7,845 people to an island that has about 50 residents and the area's airport, which offers six flights a day (a few more in summer). It could cost about $200 million.

The other bridge would span an inlet for nearly two miles to tie Anchorage to a port that has a single regular tenant and almost no homes or businesses. It would cost up to $2 billion.

Republicans screaming about the 'people's money'? Hardly! As Rep. Don Young (R) Alaska said at the time,

''I'd like to be a little oinker, myself,'' Mr. Young told a Republican lunch crowd here, taking mock offense at the suggestion that Ted Stevens, the Alaska Republican who is chairman of the Senate Appropriations Committee, directs more pork to their state than he does. ''If he's the chief porker, I'm upset.''

And did Bush go to the fainting couch protesting about the pork laden bill? Hardly! As he said at the time of the signing at a Caterpillar plant

"If we want people working in America, we got to make sure our highways and roads are modern," Mr. Bush said. "We've got to bring up this transportation system into the 21st century."

"I mean, you can't expect your farmers to be able to get goods to market if we don't have a good road system," he said. "You can't expect to get these Caterpillar products all around the United States if we don't have a good road system."

And the con job continues...

Impending Destruction of the US Economy

An eye-opening look at the state of our financial health today.

Impending Destruction of the US Economy

by Dr. Paul Craig Roberts


Hubris and arrogance are too ensconced in Washington for policymakers to be aware of the economic policy trap in which they have placed the US economy. If the subprime mortgage meltdown is half as bad as predicted, low US interest rates will be required in order to contain the crisis. But if the dollar’s plight is half as bad as predicted, high US interest rates will be required if foreigners are to continue to hold dollars and to finance US budget and trade deficits.

Which will Washington sacrifice, the domestic financial system and over-extended homeowners or its ability to finance deficits?

The answer seems obvious. Everything will be sacrificed in order to protect Washington’s ability to borrow abroad. Without the ability to borrow abroad, Washington cannot conduct its wars of aggression, and Americans cannot continue to consume $800 billion dollars more each year than the economy produces.

A few years ago the euro was worth 85 cents. Today it is worth $1.48. This is an enormous decline in the exchange value of the US dollar. Foreigners who finance the US budget and trade deficits have experienced a huge drop in the value of their dollar holdings. The interest rate on US Treasury bonds does not come close to compensating foreigners for the decline in the value of the dollar against other traded currencies. Investment returns from real estate and equities do not offset the losses from the decline in the dollar’s value.

China holds over one trillion dollars, and Japan almost one trillion, in dollar-denominated assets. Other countries have lesser but still substantial amounts. As the US dollar is the reserve currency, the entire world’s investment portfolio is over-weighted in dollars.

No country wants to hold a depreciating asset, and no country wants to acquire more depreciating assets. In order to reassure itself, Wall Street claims that foreign countries are locked into accumulating dollars in order to protect the value of their existing dollar holdings. But this is utter nonsense. The US dollar has lost 60% of its value during the current administration. Obviously, countries are not locked into accumulating dollars.

The reason the dollar has not completely collapsed is that there is no clear alternative as reserve currency. The euro is a currency without a country. It is the monetary unit of the European Union, but the countries of Europe have not surrendered their sovereignty to the EU. Moreover, the UK, a member of the EU, retains the British pound. The fact that a currency as politically exposed as the euro can rise in value so rapidly against the US dollar is powerful evidence of the weakness of the US dollar.

Japan and China have willingly accumulated dollars as the counterpart of their penetration and capture of US domestic markets. Japan and China have viewed the productive capacity and wealth created in their domestic economies by the success of their exports as compensation for the decline in the value of their dollar holdings. However, both countries have seen the writing on the wall, ignored by Washington and American economists: By offshoring production for US markets, the US has no prospect of closing its trade deficit. The offshored production of US firms counts as imports when it returns to the US to be marketed. The more US production moves abroad, the less there is to export and the higher imports rise.

Japan and China, indeed, the entire world, realize that they cannot continue forever to give Americans real goods and services in exchange for depreciating paper dollars. China is endeavoring to turn its development inward and to rely on its potentially huge domestic market. Japan is pinning hopes on participating in Asia’s economic development.

The dollar’s decline has resulted from foreigners accumulating new dollars at a lower rate. They still accumulate dollars, but fewer. As new dollars are still being produced at high rates, their value has dropped.

If foreigners were to stop accumulating new dollars, the dollar’s value would plummet. If foreigners were to reduce their existing holdings of dollars, superpower America would instantly disappear.

Foreigners have continued to accumulate dollars in the expectation that sooner or later Washington would address its trade and budget deficits. However, now these deficits seem to have passed the point of no return.

The sharp decline in the dollar has not closed the trade deficit by increasing exports and decreasing imports. Offshoring prevents the possibility of exports reducing the trade deficit, and Americans are now dependent on imports (including offshored production) for which there are no longer any domestically produced alternatives. The US trade deficit will close when foreigners cease to finance it.

The budget deficit cannot be closed by taxation without driving up unemployment and poverty. American median family incomes have experienced no real increase during the 21st century. Moreover, if the huge bonuses paid to CEOs for offshoring their corporations’ production and to Wall Street for marketing subprime derivatives are removed from the income figures, Americans have experienced a decline in real income. Some studies, such as the Economic Mobility Project, find long-term declines in the real median incomes of some US population groups and a decline in upward mobility.

The situation may be even more dire. Recent work by Susan Houseman concludes that US statistical data systems, which were set in place prior to the development of offshoring, are counting some foreign production as part of US productivity and GDP growth, thus overstating the actual performance of the US economy.

The falling dollar has pushed oil to $100 a barrel, which in turn will drive up other prices. The falling dollar means that the imports and offshored production on which Americans are dependent will rise in price. This is not a formula to produce a rise in US real incomes.

In the 21st century, the US economy has been driven by consumers going deeper in debt. Consumption fueled by increases in indebtedness received its greatest boost from Fed chairman Alan Greenspan’s low interest rate policy. Greenspan covered up the adverse effects of offshoring on the US economy by engineering a housing boom. The boom created employment in construction and financial firms and pushed up home prices, thus creating equity for consumers to spend to keep consumer demand growing.

This source of US economic growth is exhausted and imploding. The full consequences of the housing bust remain to be realized. American consumers lack discretionary income and can pay higher taxes only by reducing their consumption. The service industries, which have provided the only source of new jobs in the 21st century, are already experiencing falling demand. A tax increase would cause widespread distress.

As John Maynard Keynes and his followers made clear, a tax increase on a recessionary economy is a recipe for falling tax revenues as well as economic hardship.

Superpower America is a ship of fools in denial of their plight. While offshoring kills American economic prospects, “free market economists” sing its praises. While war imposes enormous costs on a bankrupt country, neoconservatives call for more war, and Republicans and Democrats appropriate war funds which can only be obtained by borrowing abroad.

By focusing America on war in the Middle East, the purpose of which is to guarantee Israel’s territorial expansion, the executive and legislative branches, along with the media, have let slip the last opportunities the US had to put its financial house in order. We have arrived at the point where it is no longer bold to say that nothing now can be done. Unless the rest of the world decides to underwrite our economic rescue, the chips will fall where they may.

Dr. Roberts was Assistant Secretary of the US Treasury for Economic Policy in the Reagan administration. He is credited with curing stagflation and eliminating “Phillips curve” trade-offs between employment and inflation, an achievement now on the verge of being lost by the worst economic mismanagement in US history.

National Debt Grows $1 Million a Minute

The AP has an excellent article out today highlighting our ever growing national debt.

Like a ticking time bomb, the national debt is an explosion waiting to happen. It's expanding by about $1.4 billion a day — or nearly $1 million a minute.

What's that mean to you?

It means almost $30,000 in debt for each man, woman, child and infant in the United States.

Even if you've escaped the recent housing and credit crunches and are coping with rising fuel prices, you may still be headed for economic misery, along with the rest of the country. That's because the government is fast straining resources needed to meet interest payments on the national debt, which stands at a mind-numbing $9.13 trillion.

And like homeowners who took out adjustable-rate mortgages, the government faces the prospect of seeing this debt — now at relatively low interest rates — rolling over to higher rates, multiplying the financial pain.

Surprisingly, our national debt has not been a major campaign issue in the presidential primaries so far. In my opinion, candidates would be wise to speak up about this ticking time bomb or else be blamed when the house of cards comes tumbling down...

Matinee- No Logo Brands- Globalization

Excellent film that takes a good look at globalization and corporate branding. Hosted by Naomi Klein. Subtitulo en Español.