Thursday, February 4, 2010
Through seven months of fiscal 2010, general revenue collections total $3.88 billion, down 12.5 percent compared to the same period in fiscal 2009.
Collections for January totaled $561.2 million, a 22.4 percent decrease from January 2009.
The revenue shortage is leading to additional spending cuts of $73.8 million, to ensure the budget stays balanced for the remainder of the fiscal year, according to a news release.
State salaries and operating expenses will be cut by $2.9 million. The cut should impact about 120 positions, some through attrition, according to the release.
The biggest chunk of the cuts comes from the state Office of Homeland Security's communications interoperability efforts. The state is cutting $29.2 million from its general revenue funding for that project, which assists in agencies' ability to communicate with each other; other state and federal funding sources picking up the difference.
The state also is cutting $24.2 million from matching funds for its rural broadband initiative, leaving $5.8 million in place for that effort.
General revenue collections in January were down in individual income taxes, sales and use taxes, and corporate income taxes, with refunds up for the month.
ALBANY — New York State’s revenue collections keep coming up short.
The state’s budget division said Wednesday that lower than expected tax revenue from Wall Street and rising Medicaid costs are driving up the state’s deficit. For the coming fiscal year, which begins on April 1, the deficit is now $8.2 billion, up from $7.4 billion when Gov. David A. Paterson laid out his proposed budget.
Robert L. Megna, the state budget director, said in comments to reporters Wednesday morning that revenue collections from Wall Street banks came in well below expectations and that personal income tax collections over all were about $1 billion below expectations.
“We know that big guys typically pay us at the end of January,” Mr. Megna said, referring to large banks like Goldman Sachs and JPMorgan Chase. “Last week, after the budget came out, they didn’t pay us.”
He offered a number of theories that might explain why the payments were delayed — more bonus payments made in stock, payments being spread out over a longer period — but added that the state was not expecting the lowered payments to be fully made up in the coming weeks.
Spending on Medicaid also continues to rise faster than expected as the economic crisis has driven more people to enroll. Costs are $400 million higher than expected in the coming year, the budget office said.
In other dismal budget news, the office of Comptroller Thomas P. DiNapoli says there is more budget balancing to be done in the last two months of the current fiscal year. Mr. DiNapoli’s office said the current deficit was roughly $1 billion, about twice what the governor had forecast.
“I called the budget passed last April a buy-time budget,” Mr. DiNapoli said in a statement, “but it didn’t buy all that much time.”
“Many of us were told in private conversations that if we voted against this bill on Monday, that the sky would fall, the market would drop two or three thousands points the first day, another couple thousand the second day, and a few members were even told that there would be martial law in America if we voted no.”
Consider this: If the system was about to meltdown in 2008 when Henry Paulson et. al. told then President Bush and Congressional leaders that we would have soldiers and tanks in the streets if they didn’t get the $700 Billion in bailout funds, then how serious of a problem was this to begin with?
Try to envision this scenario.
The only reason for declaring martial law and for why tanks and soldiers would need to be deployed on our streets is because the entire system as we know it today collapses and a state of emergency through martial law has to be implemented.
We’re talking economic, political and social meltdown on a massive, unprecedented scale. Basically, America as you know it to be today would no longer exist. This is how serious it would have to be if tanks and soldiers were dispatched throughout America.
Assuming the financial and economic systems were, in fact, on the brink of complete and total systemic meltdown, how confident can we really be that we have avoided disaster?
Did the TARP bailout and obscene stimulus spending programs really save us from going under?
What if – and we’re just hypothesizing here – what if they didn’t save the system and the worst is yet to come? What if the bailouts and stimulus don’t work?
Yes, our officials would have all of us believe there is nothing to worry about. But for the sake of argument, let’s say they overestimated their abilities to control the quadrillion dollar derivative bubble. Obviously, the bubble is still there, and as Dylan Ratigan pointed out on MSNBC recently, nothing has been done to fix it.
Since it is obvious that what our leaders say and what is actually happening are two different things, we must seriously consider the possibility that we are in the eye of the storm and the worst is yet to come.
Some may argue that this perspective is alarmist, and this author would not deny that sirens are blaring. Considering that Congress was threatened with martial law fewer than 18 months ago, we should find it necessary to question whether or not the same possibility still exists today.
If martial law is a possibility foreseen by those in charge of our political and financial systems at the onset of this crisis, then we should be very concerned about our future if the underlying problems within our economy have not yet been resolved.
Can any American honestly say for certain that they believe the financial and economic systems have been saved from catastrophe?
In a recent CBS interview, former Secretary of the Treasury Henry Paulson, who was responsible for engineering the bailout of financial institutions, says he thinks we “came very, very close,” to meltdown in the fall of 2008.
Empirical evidence indicates that credit markets are essentially frozen, the jobless rate is rising, home delinquencies and foreclosures continue to mount, and consumer confidence is deteriorating. It seems that we are still, as the title of Mr. Paulson’s new book suggests, on the brink.
The implications of failure are truly terrifying.
The recent election in Massachusetts of Republican Scott Brown to the Senate was a seminal event. It ended the Democratic administration’s ability to ram through legislation. It changed the game. The locomotive hit the bunter.
China saw the error of its ways in overstimulating its economy and halted bank lending. The Senate majority refusing to seat the new Senator Brown passed a tremendous increase in short-term government debt. Goldman Sachs and others thumbed their noses at the rest of America and distributed giant bonuses as the country wallowed in depression and 22.5% unemployment. Finally we have Paul Volcker proclaiming the end of too big to fail and stopping banks from trading their own accounts. These announcements are just another diversion. If firms could not trade their own accounts they might as well close their doors. Then came the President’s “State of the Union” message, which was just more party line fantasy. If he’d been smart he would have waltzed down the middle and played populist. Imbued with their own power the Democrats have again destroyed themselves. Far more important than all this is something more salient and that is how is the US and other nations are going to service their debt and raise more funds in a depression?
The quest for money and solvency continues as Iceland, the Baltic States, assorted European states and now even Japan. Tagging along are the UK and US, both of which may have lower credit ratings by the end of the summer. There has to be credit creation to accommodate these sovereign needs. Any slowdown of credit for the system will strangle the system.
How can the US conceivably extricate itself from debt? That is $1 to $2 trillion deficits annually as far as the eye can see. It is already bogged down in an occupation in Iraq and a war in Afghanistan that stretches into Pakistan. That is all off budget, but it stretches already to more than $1 trillion. Then there is the phony, phantom war on terror the cost of which is unknown. That is the future. We are told we are in a recovery after two years of stimulus. We do see small signs of such in sectors, but unemployment stays high. If we could trust government statistics we’d have an idea of where we really are. Hoping that we’d believe 4th quarter GDP growth was 5.7% is ludicrous. The last figures for the 3rd quarter were adjusted downward twice from 3.6% to 2.2%. In Wall Street parlance that is called painting the tape. We have seen two of the largest stimulus packages in history and have really very little to show for it, in as much as the Treasury and the Fed have poured $12.7 trillion into the financial system, putting the public on the hook for $23.7 trillion. The Fed may have cut the creation of money and credit to the bone, but the US and world financial system runs on credit. Without that credit the system will collapse. This is why the addition of Paul Volcker to the immediate scene is not going to change things much, that is unless the elitists want to go into worldwide depression.
The current Democratic administration is now doomed to failure. The only way they were able to pass an increase of $1.9 trillion in the debt limit was to not seat the new Republican Senator from Massachusetts, Scott Brown.
We call that politics at its lowest level. Now we are saddled with a new limit of $14.294 trillion, or $25,000 of debt for every American. Like the Republicans, the Democrats just won’t stop spending. Of course if they do stop the system will come to a halt. All we are left with is a deficit task force, which will work in secret, that has to be voted on by all members of both houses, and the reports findings won’t be available until after the November election. This is another phony distraction to keep the public looking in the wrong direction. There will be no vote on the issue in 2011; it is a ruse.
The administration says it will cut non-defense discretionary spending by about 13%, but they just increased such spending by 17%. We might ask why didn’t they just rescind the increase? The reason is there can be no deficit reductions. In fact, if there is not more stimuli added then the economy will dip back into depression. This is the same mistake FDR made in 1937, and as a result America had to create another war to save itself from collapse. FDR’s methods are what are being used today and as in the 1930s, they won’t work today. Both are Keynesian nightmares created to put ultimate power into the hands of the elitists so they can force the world to accept world government. The tactics being used now are the same as in the 1930s, a 2-stage depression to be followed by a WWIII. We are now seeing the 1934 type rebound, that could last a few years, if enough stimuli are supplied. Deficits do not produce a solid recovery; they create a transitory recovery. Business knows this and as a result they won’t commit to expansion. They have no confidence in such plans, because they know once stimulus stops the economy will fall back again. They are also aware that stimulus is inflationary, just as monetization is. As far as the stock market is concerned we could be seeing a replay of 1936. Taxes had already risen by 5%, the deficit fell by more than 50% and the Fed cut back on M3 and raised reserve requirements, all of which was simply too much for the economy to handle. It receded and unemployment rose again. The Fed and the administration are well aware of this and that is why deficit cuts will not come and why more stimuli will be added. The economy is not back to any kind of “normality,” if in fact such a thing exists. We keep on hearing employment is a lagging indicator, when that is untrue. The only thing true about the unemployment numbers is that they are bogus.
Just as they did 73 years ago the Fed is contemplating removing reserves from the system. They already know what that will result in, so why would they do such a thing? Could it be that they want a repeat of 1937?
The administration is cutting very little and has no easy way to raise taxes to increase revenues. In addition after losing three straight special elections they’ll be in no mood to raise taxes with November nine months away. As we said earlier the whole Democratic Party is in serious trouble making them lame ducks. Any sort of tax increases will be cloaked in subterfuge. There is no hope of any budget changes for the better. The Democrats and many republicans are doomed and that is good.
What we have experienced over the past several years has been an orgy of securitization and leverage not previously experienced in modern times. That was accommodated by ridiculously low Fed interest rates. These conditions along with unregulated derivative creation led us to our present state of affairs along with mammoth consumption of mortgages by Fannie Mae, Freddie Mac, Ginnie Mae and the FHA. We were subjected to unbridled monetary and fiscal abandon.
Such unbridled greed came close to bringing down the entire financial system, which American taxpayers have been allowed to pick up the bill for. After all this we see absolutely no regulation in sight and the SEC and the CFTC continue to protect the titans of Wall Street as government looks on in total disinterest. This, of course, omits the Executive Order borne criminality, which has turned our free markets into controlled and manipulated fascist markets. People say what can I do? You can start by throwing almost every incumbent out of office and buy pressing the Senate relentlessly to pass the bill that includes an audit and investigation of the Fed. If you do not do these things you will end up living on your knees enslaved, as will generations to follow. Too big to fail has to be stopped along with moral hazard. Limits have to be put on leverage. The world of derivatives has to be unraveled. If we do not have serious financial reform the markets will continue to self-destruct. How can we conceivably allow hedge funds to remain offshore and unregulated? The FDIC is a joke and perpetually under-funded. Today they have $93 billion in assets with more than 2,000 banks in serious trouble that would cost $1 trillion to bail out. Those funds include $45 billion paid in by banks for their next three year’s dues. Even with taxpayer assistance the private sector cannot recover. It has been just 2-1/2 years since these problems began and Wall Street and banking are right back doing what they did before, wildly speculating. How can the taxpayer continue to fund such insanity? Remember, zero interest rates have nowhere to go but upward. Adding more to the soup 40 states are essentially broke. Do you really think the crisis is over with 22.5% unemployment? We do not think so. There is no easy exit short of a purge of the system, which is inevitable. Any kind of stringent financial reform will bring the system down. Aggressive bank lending would bring about more monetization and more inflation. The markets believe it is back to business as usual. The only events that can bring us back to reality is a purging of the system and the end of Wall Street and the banking control of our country. The revolving door between Washington and NYC has to be dismantled. The credit system is broken and has to be changed and fixed. The shift has begun. The reign of Goldman Sachs over our government is in the process of ending. The successor will be JP Morgan Chase, which has been and will be every bit as bad as Goldman as been. The control is going to change but not the looting of the American people. The changes won’t come and the system will collapse, that is how the elitists retain control over our country. The final war for our freedom is underway.
Just as an example, if M3 is to remain at current levels and quantitative easing ends, where are the funds going to come from to recreate the credit structure? Who is going to supply the capital to fund a real estate revival? Foreigners are not increasing purchases of Treasury and Agencies. Who will fund that? By the looks of it the American saver will be tapped as government swallows up their retirement savings. What do they do in a few years when that wealth is gone? Will Americans use their savings to buy Treasuries; we don’t think so. How can over-indebtedness be corrected and at the same time consumption increased? It can only be accomplished by prolonged economic distress as debt is repaid and savings increased. Then again if government has to gobble up those savings, what is left for business to fund and expand? For a long time in the future in order to stay solvent, government will have to crowd out business in the quest for interest and debt repayment and in the creation of more debt. Presently our government is insolvent and that means devaluation and default has to eventually occur. The stimulus you have seen in various forms for the past 2-1/2 years is a façade. It has not produced permanent growth, only an extension of the problem. Thus far we see no recovery - only bogus government statistics. There has been no job and income growth and prices are increasing. How can recovery take hold as M3 is increased by only 3%, or 50% of the growth rate over the past 50 years? You have to say to yourself – does the Fed now want a deflationary depression? Only time will tell.
Last week was not a good one for the stock market as the Dow lost 4.1%; S&P lost 4.3%; the Russell 2000 fell 3.4% and the NASDAQ 100 lost 3.9%. Banks fell 0.8%; broker/dealers 2.8%; cyclicals fell 6.9%; transports 4.4%; consumers 2.1%; utilities 1.4%; high tech 4.5%; semis 4.6%; Internets 4.2% and biotechs 2.2%. Gold bullion fell $36.00 and the HUI fell 8.6%. The USDX gained 1.3% to 78.29.
Two-year T-bills fell 7 bps to 0.75%; the 10-year notes fell 7 bps to 3.60% and the 10-year German bunds fell 5 bps to 3.21%.
The Freddie Mac 30-year fixed rate mortgage rates fell 7 bps to 4.99%. The 15s fell 5 bps to 4.40%, as 1-year ARMs fell 7 bps to 4.32% and the 30-year jumbos fell 6 bps to 5.96%.
Fed credit increased $5.1 billion to a record 52-week high of $2.231 trillion. It is up $181.6 billion from a year ago. Fed foreign holdings of Treasury and Agency debt fell $5 billion again to $2.946 trillion. Custody holdings for foreign central banks rose $405 billion, or 15.9% yoy.
M2 narrow money supply declined $9.4 billion to $8.452 trillion; it is up 2% year-on-year.
Total money market fund assets fell $46 billion to $3.240 trillion. Year-on-year it has fallen $654 billion, or 16.8%.
Total commercial paper outstanding fell $10 billion to $1.092 trillion, having dropped $596 billion yoy, or 35.3%. Asset backed CP added $3.5 billion last week to $430 billion and yoy fell 42.6%.
As of December, 9.1% of borrowers had missed at least three payments, versus a year-on-year 6.5%. If the trend continues the FHA may run out of cash, forcing the federal government to use taxpayer money to cover the losses.
Our President’s projected 11% deficit for each of the next two years is equal to the country’s entire economic output. That condition will prevail over the next ten years. This erosion and the ongoing foreign wars will finally destroy America as the world’s preeminent power. Quite frankly, we believe any forecast outside of two years in today’s environment is useless. All we know is we do not see how conditions can improve.
Each day brings more revelations of efforts of the NY Fed and Goldman Sachs to hide the details of the criminal conspiracy of the AIG bailout. The Fed and Blackrock are becoming the administration’s Halliburton and KBR. This is a real crisis on the scale of Watergate. Corruption at its finest.
It should be noted the Blackrock has bought over a 5% stake in over 1,800 US equities.
New York University Professor Nouriel Roubini, who anticipated the financial crisis, called the fourth quarter surge in U.S. economic growth “very dismal and poor” because it relied on temporary factors.
Roubini said more than half of the 5.7 percent expansion reported yesterday by the government was related to a replenishing of inventories and that consumption depended on monetary and fiscal stimulus. As these forces ebb, growth will slow to just 1.5 percent in the second half of 2010, he said.
“The headline number will look large and big, but actually when you dissect it, it’s very dismal and poor,” Roubini told Bloomberg Television in an interview at the World Economic Forum’s annual meeting in Davos, Switzerland. “I think we are in trouble.”
Wall Street firms are loosening terms of their lending to mortgage-bond investors as markets heal, an RBS Securities Inc. executive said. Repurchase agreement, or repo, lending against the debt has expanded so much since freezing in late 2008 that some banks now offer as much as 10-to-1 leverage and terms as long as one year on certain securities backed by prime jumbo-home loans, said Scott Eichel, the Royal Bank of Scotland unit’s global co-head of asset- and mortgage-backed securities. ‘It’s getting very competitive,’ Eichel said we’re at the point where I don’t think we would feel comfortable if things go too much further.
Real estate borrowers are leading the rally in U.S. corporate bonds as investors add to bets property companies will weather an increase in commercial mortgage defaults. Bonds sold by real-estate investment trusts, shopping-mall owners and office landlords have gained 3.27% this month, exceeding 3.18% for all of the fourth quarter.
Sales of commercial mortgage-backed securities will likely remain below $15 billion in 2010 as borrowers struggle with declining property values, according to analysts. Debt sales backed by skyscraper, hotel and shopping mall loans may be as low as $10 billion this year, according to Alan Todd, a JP Morgan analyst.
Annuities: The official retirement vehicle of the Obama administration.
As slogans go, it’s hardly “Keep Hope Alive,’’ or even “Change We Can Believe In.’’
But there were annuities, in a report from the administration’s Middle Class Task Force that came out this week. They are among the tools the administration is promoting as it tries to give Americans a better shot at a more secure retirement.
At its simplest, an annuity is something you buy with a large pile of cash in exchange for a monthly check for the rest of your life.
If the biggest risk in retirement is running out of money, an annuity can help guarantee that you won’t. In effect, it allows you to buy the pension that your employer probably stopped offering, and it can help pick up where Social Security leaves off.
President Obama did not discuss annuities in his State of the Union message on Wednesday night, but the mere mention of them by the task force was enough to send executives at the insurance companies that sell the products into paroxysms of glee.
The announcement from the White House did make it clear the administration was looking to promote “annuities and other forms of guaranteed lifetime income.’’
That suggests the administration is open to other solutions, though there are not many others that are as simple as the basic fixed immediate annuity that delivers a regular check for life.
Still, all of this attention from the president is a stunning turn of events for a rather unloved product. Many consumers reflexively run in fear when salesmen turn up pitching high-cost and complex variable annuities, which evolved from their simpler siblings decades ago.
So what are these soon-to-be retirees so afraid of? And what makes the White House so sure it can change their minds?
Let’s start with the fears. Early on, the knock on annuities was that once you died, the money was gone.
The industry solved this by coming up with variations on the policy, allowing people to include a spouse in the annuity or guarantee that payouts to beneficiaries would last at least 10 or 20 years. This costs extra, of course.
Others worried about inflation, so now there are annuities whose payments rise a few percentage points each year or are pegged to the consumer price index. These cost extra, too.
Even if you get over all these mental hurdles, however, the hardest one may be the difficulty of seeing a big number suddenly turn small.
“It’s the wealth illusion, the sense that my 401(k) account balance is the largest wad of dollars I’ll ever see in my lifetime, and I feel pretty good about having that,’’ said J. Mark Iwry, senior adviser to the secretary and deputy assistant secretary for retirement and health policy for the Treasury Department. “Meanwhile, I feel pretty bad about the seemingly small amount of annuity income that large balance would purchase and about the prospect of handing it over to an entity that will keep it all if I’m hit by the proverbial bus after walking out of their office.’’
So how might the Obama administration solve this? It could get behind a Senate bill that would require retirement plan administrators to give account holders an annual estimate of what sort of annuity check their savings would buy.
Tax incentives could help, too. A House bill called for waiving 50 percent of the taxes on the first $10,000 in annuity payouts each year. “If this is behavior that the administration is trying to inspire, then it’s not that long of a leap to think that maybe they’ll start to promote some version of these bills,’’ said Craig Hemke, president of BuyaPension.com, which sells basic annuities.
Annuities won’t be right for everyone, and they’re not right for everything because it rarely makes sense to put all of your investment eggs in one basket.
The city of Lynn, Massachusetts spent $22 million this year on retirement costs. That’s more than the cash-strapped city allotted for any other department, including the police, fire, and public works departments.
Lynn has an unfunded pension liability of $257 million, the largest of any Massachusetts community north of Boston. And its annual pension contribution next year is due to increase by $1.5 million on July 1 to $23.5 million, according to the state’s Public Employee Retirement Administration Commission, which oversees 106 public pension systems.
U.S. construction spending fell more steeply than expected in December to its lowest level since 2003, dragged down by a sharp drop in private residential and state and local government construction, a government report showed on Monday,
The Commerce Department said construction spending dropped 1.2 percent to $902.5 billion, falling for a second straight month. November's construction spending was revised down to show a 1.2 percent decline, instead of a 0.6 percent fall.
Economists surveyed by Reuters had forecast construction spending falling 0.5 percent in December.
For the whole of 2009, construction spending fell by a record 12.4 percent.
In December, spending on private home building dropped 2.8 percent, the largest decline since May, after falling 1.4 percent the prior month. Residential investment is showing signs of renewed weakness and made a modest contribution to gross domestic product in the fourth quarter compared to the previous three-month period.
Private nonresidential spending, which has been buffeted by high vacancy rates and tighter access to credit, rose 0.2 percent in December after falling 0.9 percent the prior month. Spending on state and local government construction projects fell 1.5 percent in December after falling by the same margin in November.
Hopes that America's factories will help drive the economic recovery drew support Monday from news that manufacturing activity grew for a sixth straight month in January, to its strongest point since 2004.
Other data, though, offered a reminder that the recovery lacks strength. Construction spending dropped sharply in December to its lowest level in more than six years. And gains in personal income and spending were too modest in December to signal that consumers can fuel a strong rebound.
Manufacturing activity has become a pocket of strength for the economy, though some of it flows from temporary factors such as customers needing to add to depleted stockpiles of goods.
The Institute for Supply Management said its manufacturing index read 58.4 in January, compared with 54.9 in December. Analysts polled by Thomson Reuters had expected a level of 55.5. A reading above 50 indicates growth.
New orders, a sign of future growth, jumped to 65.9 in January, the highest level since 2004, from 64.8 in December. Current production surged to 66.2 from 59.7, also to its peak since 2004. Order backlogs grew, and prices that companies paid rose.
"Consumers continue to save far more than in recent years and allocate their spending very carefully," Julia Coronado, an economist at BNP Paribas, wrote in a note to clients.
The Commerce Department said Monday that incomes rose by 0.4 percent, the sixth increase in a row. That's slightly better than analysts' expectations of 0.3 percent growth.
Income growth was spurred by a large, one-time social security payment, the department said. Wages and salaries rose by only 0.1 percent, or $9.1 billion, after increasing 0.4 percent, or $27 billion, in November.
Consumer spending, meanwhile, increased by 0.2 percent, less than analysts' forecasts of 0.3 percent. The department also revised November's figure to show a 0.7 percent increase in spending, higher than the initial estimate of 0.5 percent.
Consumer spending is closely watched because it accounts for about 70 percent of total economic activity. Spending has grown in the past six months but consumers remain cautious as they seek to rebuild savings battered by a steep decline in household wealth.
Americans saved 4.8 percent of their incomes in December, the department said, up from 4.5 percent the previous month. That's up sharply from the spring of 2008, when the savings rate fell below 1 percent.
Rising spending helped the economy grow at a rapid pace in last year's fourth quarter, the department said last week. Consumer spending increased by 2 percent in the October to December period, after a 2.8 percent increase in the third quarter.
That helped boost the nation's gross domestic product, the broadest measure of the economy's output, by 5.7 percent in the fourth quarter, the department said. It was the fastest growth in six years. The economy grew at a 2.2 percent rate in the third quarter after a record four straight quarters of decline.
Spending by U.S. consumers increased in December for a third consecutive month, signaling the biggest part of the economy will contribute more to growth in coming months.
The 0.2 percent increase in purchases was less than anticipated and followed a 0.7 percent gain in November that was larger than previously estimated, Commerce Department figures showed today in Washington. Incomes climbed 0.4 percent, exceeding expect at Wells Fargo & Co., unlike its three biggest competitors, is so convinced interest rates will rise that it sacrificed as much as $1 billion last year cutting back on fixed-income investments.
The nation’s fourth-largest bank, whose biggest shareholder is Warren Buffett’s Berkshire Hathaway Inc., reduced investments in mostly fixed-income securities by $34 billion in 2009’s second half, company filings show. JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. boosted their holdings by an average of $35.5 billion.
The housing recovery remains slow and painful, with other data showing the percentage of empty privately owned homes rose to 2.7 percent in the final three months of 2009 from 2.6 percent in the third quarter.
The National Association of Realtors's Pending Home Sales Index, based on contracts signed in December, rose 1.0 percent to 96.6 after falling sharply in November when a boost from the initial tax credit for first-time buyers ebbed.
Analysts polled by Reuters had forecast pending home sales, which lead existing home sales by one to two months, would rise 1 percent. Compared to December 2008, the index was up 10.9 percent.
The tax credit, which had been scheduled to end in November, was expanded and extended until June. Its expected expiry had pushed down sales of existing homes in December, when they dropped to their slowest sales pace in four months.
"We expect pending home sales to improve, suggesting a positive outlook for the existing home sales market. We continue to believe that the U.S. housing market recovery remains intact," said Ian Pollick, economics strategist at TD Securities in Toronto.
U.S. stock indexes fell slightly, while Treasury debt prices and the dollar were little changed.
A raft of weak housing reports for December had fanned worries that the housing market, at the center of the worst economic downturn since the Great Depression, could take a step back and harm the broader economic recovery.
Further signs that the housing market is struggling came in the Commerce Department's data on Tuesday showing the rise in vacancies in the last quarter of 2009. The rate has risen for the last two quarters.
However, the Realtors group said the tax credit was skewing housing data and the market remained on a firm recovery path.
"There are easily understood swings in contract activity as buyers respond to a tax credit that was expiring and was then extended and expanded," Lawrence Yun, the group's chief economist. "These swings are masking the underlying trend, which is a broad improvement over year-ago levels."
Richard Russell says the bear market rally is in the process of breaking up and panic is on the way. He sees a full correction of the entire rise from the 2002 low of 7,286 to the bull market high of 14,164.53 set on October 9, 2007. The halfway level of retracement was 10,725. The total retracement was to 6,547.05 on March 9, 2009. He now sees the Dow falling to 7,286 and if that level does not hold, “I see it sinking to its 1980-82 area low of Dow 1,000.” This he believes is a strong resistance area. This is where Richard Russell stands for better or worse. The current action is the worst he has ever seen.
Bob Chapman is a frequent contributor to Global Research. Global Research Articles by Bob Chapman
Persons who are curious about what may or may not have happened on Sept. 11, 2001 must separate evidence from narrative. Because the 911 narrative has been strongly established, an unbiased researcher must not begin with any "official" narrative (one that tells you what happened). Start from scratch by putting aside all aspects of the narrative you have seen and heard on TV or read in mainline news sources. This is what THESE PEOPLE have done.
I know your intitial response: "What about (phone calls, 'hijacker' tape, 19 flight-school Muslim terrorists ..."). Many of us have been asking questions, perhaps the same ones you have, and seeking answers for several years. I'd like to recommend to you a recent book, The Hidden History of 911, edited by Paul Zarembka. Unless your mind is closed ("I know it must be true 'cause the government tells me so"), before you read the book spend time with bigeye.com's 911 links. If you know little of the real 911, you can easily educate youself by watching videos on THIS PAGE.
When you grasp the WHY of 911 you will have less emotional resistance to discovering who murdered over 3,000 of our citizens. The late Aaron Russo's documentary videos offer a broad theory of the WHY. They need to be seen, although it seems unrealistic that a controlling oligarchy would risk employing technical expertise to execute 911. A more plausible theory, starting from CUI BONO, (Who Benefits? - the Latin starting argument in determining guilt) was propounded at the end of 2003 by Professor Paul J. Balles. Motive and benefit may be shared by both the guilty and the innocent. To accomplish as sophisticated an event as 911 requires means and opportunity, as well as motive (benefit).
That day's tragedy is past. The WHY question (motive) must be understood, not only in America but throughout the world, by men and women who strive for Liberty.
Despotic governments have always become the biggest problem for human beings in their attempts to create communities providing peace and prosperty for themselves and for their children. What is all but impossible for people to grasp is the unimaginable evil and horror recounted in R.J. Rummel's book.
It is commonly asserted that George Washington declared, in his Farewell Address, something to the effect that, Government is not reason, it is not eloquence, it is force; like fire, a troublesome servant and a fearful master, despite the fact that no such statement appears anywhere in his published Farewell Address (he never actually spoke one). In fact, there is no evidence that Washington ever wrote or said such a thing.
I never cease to be astounded by human gullibility. People are prone to believe whatever furnishes them comfort and uncomplicated answers to life's uncomfortable questions. 911 offers no exception. When it comes to the nature of government, I find some solace in Albert Jay Nock's Our Enemy, the State.
Most people will go on believing whatever they want to believe. That holds as true for the events of 9/11 as it does for the conviction that America's first president expressed an analogy between fire and government.
The Greeks realized and accepted the power of myths. Ours come from television.
Puts pressure on Congress to raise the limit from its current level of $12.4-trillion
The U.S. Treasury
Treasury said it is working closely with Congress to raise the ceiling. The Senate has approved legislation to increase it by $1.9-trillion to $14.3-trillion. A ceiling that high would equal about $45,000 for every American. The House is expected to vote on the increase Thursday.
Congress approved a smaller increase of $290-billion in late December, allowing the government to borrow for about two more months.
Matthew Rutherford, Deputy Assistant Secretary for Federal Finance, said a $1.9-trillion rise would enable the government to continue borrowing into 2011.
The Treasury's announcement comes after the Obama administration on Monday released a budget that projects this year's deficit will reach $1.56-trillion, an all-time high. That's equivalent to 10.6 per cent of the economy, the highest proportion since World War II.
The deficit is projected to decline to $1.27-trillion in the 2011 budget year and $828-billion in 2012.
Despite the record deficits, Mr. Rutherford said the department's financing needs will likely decline this year. Treasury will no longer increase the size of the debt auctions it uses to fund the gap, he said, after increasing it for two years. The department has anticipated this year's huge deficit and “we're well prepared to handle it,” Mr. Rutherford said.
“Going forward, we expect the fiscal situation is going to improve, and as it does, our financing needs are going to decline,” he said.
The Treasury also announced that it will raise $81-billion in its quarterly refunding operation next week. That ties a record set last quarter for the largest quarterly auction. The department will auction $40-billion of three-year notes on Tuesday, $25-billion in 10-year notes on Wednesday and $16-billion in 30-year
In response to interest from investors, the Treasury said it will also consider issuing more inflation-protected securities, known as TIPS. The value of those securities is designed to match any increases in the consumer price
The department might add two additional auctions of 10-year TIPS, a Treasury official said, bringing the number of 10-year auctions to six. Treasury already plans to hold two auctions of five-year TIPS and two of 30-year TIPS.
It also includes about $1-trillion in tax increases and $250-billion in spending cuts in an effort to reduce the deficit over the next 10 years.
If the state budget were a giant tire, now would be a good time to send someone out for a bigger patch.
Already facing a revenue shortfall of about $65 million one quarter of the way through the two-year budget cycle, state officials will have to plug another $45 million hole now that the New Hampshire Supreme Court has rejected the state’s bid to tap into the treasury of the state’s medical insurance underwriter.
Last week, in a much-anticipated decision, the state’s high court voted 3-2 to uphold a lower court ruling and block the administration from using $110 million of the $152 million surplus held by the New Hampshire Medical Malpractice Joint Underwriting Association.
Previously, a superior court judge ruled the state’s bid represented an unconstitutional taking of private property. This time, the court majority rebuffed the state on the grounds that seizing surplus funds dating back to the formation of the JUA would violate the contract clause of the state constitution.
Originally, the state had intended to use $65 million to balance the previous two-year budget and divide the remaining $45 million equally over the next two years. Last week, however, the Legislative Fiscal Committee decided to withdraw $65 million from the state’s Rainy Day Fund in order to close the books on the 2008-09 budget year that ended June 30.
Reaction to the court’s ruling was both partisan and predictable.
Democratic Gov. John Lynch expressed his disappointment, noted the amount represented less than 1 percent of the state’s $11.5 billion budget and promised that “we’ll manage through it.”
Republicans renewed their criticism of the governor for engaging in such a risky scheme, claimed the budget shortfall is much larger than projected and called for a reduction in spending – not “more taxes, fees and tricky financial gimmicks,” in the words of Senate Republican Leader Peter Bragdon, of Milford.
At the risk of saying we told you so, we thought this budget was headed for trouble even without rolling the dice on the JUA money.
Back in June, with only a week remaining before the start of the fiscal year, we called on lawmakers to “reject this work of fiction, get back to the table immediately and spend the next week putting together a two-year budget more rooted in reality.”
We didn’t believe the rosy revenue projections, nor did we believe the administration had done enough to reduce the bottom line. At a time when governors were recommending budgets showing an average decrease of 2.5 percent, according to a report by the National Governors Association and the National Association of State Budget Officers, state lawmakers were preparing to put their stamp of approval on a spending package that was up slightly from the previous two-year budget.
Clearly, lawmakers from both parties are going to have their hands full trying to maneuver this budget to a soft landing when the two-year budget closes June 30, 2011.
Unless the economy stages a rapid recovery – which seems pretty unlikely at the moment – some analysts believe the shortfall could grow to between $200 million and $300 million by the end of the biennium.
That would be challenging enough even if we weren’t in an election year, which means you can expect the political rhetoric to be hot and heavy this summer in anticipation of New Hampshire voters heading to the polls Nov. 2. Of course, none of that political posturing is going to help one iota in crafting a solution to the state’s mounting budget problems.
Given that, we would encourage our elected officials to put aside the urge to play the blame game, recognize that New Hampshire – like virtually every state in the country, be they led by a Democrat or a Republican – is reeling under the weight of a recession of historic proportions, and pledge to work together for the common good.
That’s one pledge we would like to think everyone can get behind.
This is the cover article for the January/February issue of Tikkun magazine. For more on the article and the magazine go here.
An unnatural economic and psychological disaster has struck America. Five contributors, each interacting with and shaping the others, have devastated the American moral, economic, psychological, and social landscape. Each is fed by related streams, but each contributes its own force to the disaster. The American dream in which each generation surpassed the previous generation in real wages has all but disappeared, along with dreams of an intact family, a steady job, a home, and an honest supportive community.
This article looks at each of five collaborators in the crisis in order to answer the following questions:
How did this happen? What forces are responsible?
Why are Americans passive as millions lose their homes, their jobs, their families, their hopes of justice, and the American dream?
Why do Americans remain disorganized at home while their European and Asian counterparts flood into the streets and strike in militant, organized protest? Why do others believe in their potential to reclaim their lives while we do not?
What happened is a result of at least five major, interrelated forces. One is a transformation of American morality, and with it the loss of belief that the social and political realms could be shaped by morality, ethics, and secular spirituality. Another is an economic depression. A third is a transformation of the family, which has been the foundation of American emotional life. A fourth is the decimation of Americans' social participation in all areas, from bridge clubs and PTAs to political parties. A fifth is the tranquilizing and numbing of the American population with psychotropic medications.
1. The Crisis in Morality and Social Ethics
Let us begin with the first of our contributors: American ethics, morality, and spirituality. The same forces that decimated our economic, psychological, and social landscapes have transformed our sense of morality and social ethics. The shared dream of an ethical, moral society that dominated the United States until the 1970s has systematically eroded. In the 1960s it was common to believe that morality and spirituality include a concern for all human beings, rich and poor alike. The biggest push against those social ethics began with Reagan's presidency in 1981. It continued in Reagan's second term and was reinforced by each president until its (we hope) final act in the presidency of George W. Bush.
Reagan's basic ideology was that people are poor because they lack incentives. He claimed that poor people's noble drive to get rich is eroded by social programs that permit them to survive or, in his term, "freeload." In this framework, income tax cuts increase the incentive to work and get rich, so all are expected to benefit from them. In 1980 the highest incomes were taxed at 73 percent. In 2009 those same high incomes were taxed at half that rate, 35 percent. Of course the percentage of tax on the highest incomes is actually even lower, since the wealthiest Americans can hire tax accountants to help them evade taxes. Reagan used his famous veto power to cut a huge range of social programs from biomedical research, to social security for disabled Americans, to clean water, to expanded Head Start. At the same time, he increased the military budget while decrying big government.
That pattern has been repeated ever since, which is how, according to the Organization for Economic Cooperation and Development, the United States went from being the most egalitarian western industrialized society in 1970 to the least egalitarian in 2009.
In addition, the Soviet model of socialism failed. It did not provide the kind and ethical societies that are part of a socialist vision. The mass of people believed that the Soviet Union was communism. Left-wing class analyses of the failure of Soviet Communism, such as Bettelheim's in the late 1970s or Resnick and Wolff's in 2002, were not widely read or embraced. Both of those analyses demonstrate that the USSR and its satellites exemplified class societies in which a bureaucratic class appropriated wealth and made crucial decisions affecting the lives of the mass of people. They explain that the USSR failed because it was not a communist society. It was not a society in which the people in each workplace decided what to produce, and also collected their own profits and decided together how to distribute those profits. Because these left-wing class interpretations were few and largely unembraced, a socialist or communist dream seemed doomed to end in rigid, bureaucratic, and undemocratic societies that were rejected by their own people. People lost faith in a secular dream.
George Bush and Dick Cheney may get your vote as the worst, the dumbest, the most venal, and the most dangerous bunglers in foreign affairs in U.S. history. But this book will show you that their equals have appeared before. Author Stephen Kinzer's Overthrow: America's Century of Regime Change From Hawaii to Iraq (Times Books, 2006) is an infuriating recitation of our government's military bullying over the past 110 years -- a century of interventions around the world that resulted in the overthrow of 14 governments -- in Hawaii, Cuba, the Philippines, Puerto Rico, Vietnam, Guatemala, Nicaragua, Honduras, Panama, Chile, Iran, Grenada, Afghanistan, and ... Iraq.
Stephen Kinzer, who spent years on various front lines for The New York Times, calls these regime changes "catastrophic victories," but of course some were more catastrophic than others.
Most of these coups were triggered by foreign combatants and then taken over and finished by us. But four of them, in many ways the worst of the lot, were all our own, from conspiracy to conclusion. "American agents engaged in complex, well-financed campaigns to bring down the governments of Iran, Guatemala, South Vietnam, and Chile. None would have fallen -- certainly not in the same way or at the same time -- if Washington had not acted as it did.
"Each of these four coups was launched against a government that was reasonably democratic (with the arguable exception of South Vietnam). ... They led to the fall of leaders who embraced American ideals, and the imposition of others who detested everything Americans hold dear. They were not rogue operations. Presidents, cabinet secretaries, national security advisers, and CIA directors approved them. ... The first thing all four of these coups have in common is that American leaders promoted them consciously, willfully, deliberately, and in strict accordance with the laws."
For all 14 regime changes, Kinzer assigns blame to the smug American belief that we are the most righteous people in the world and that we are obliged to force our version of righteousness on nations we judge to be backward -- especially if they have a bountiful supply of minerals that our corporations want (i.e., oil in Iran, copper in Chile). In short, our military conquests have been launched under the glorious banner of Bible-thumping Christian capitalists.
Yes, of course, you immediately think of George Bush, but he is just the last of a long line.
Though World War I is beyond the scope of this book, it must be mentioned simply to bring in the pronouncement of President Woodrow Wilson as he prepared to lead us into that war: "There is a mighty task before us. .... It is to make the United States a mighty Christian nation, and to Christianize the world." (Some of the more radical senators of that era doubted his piety and were convinced he wanted to help England and France win so that they could pay their huge debts to our arms merchants.)
Of the four regime changes launched independently by the United States, two were concocted in the sedate office of John Foster Dulles. (That office, as Kinzer reminds us, has been moved and reconstructed, down to Dulles' silver tea set, at the University of Texas, at the Harry Ransom Center.) Of this book's several candidates for the title Most Dangerous Nutcase, my odds-on favorite is Dulles, President Eisenhower's secretary of state. His influence over Ike in foreign affairs seems to have been as strong as Cheney's influence over Bush.
Dulles was the grandson and son of preachers, and, being exceedingly devout himself, he would have gone into the clergy if he had not decided to enter an even more suspect profession: law. For years he worked for some of the world's richest corporations, and as secretary of state he continued to serve them.
In 1953 the brutal, venal shah of Iran, Mohammad Reza Pahlavi, was pushed into exile by Mohammad Mossadegh, the democratically elected prime minister.
"Modern Iran has produced few figures of Mossadegh's stature," Kinzer says.
Iranians loved Mossadegh. He made clear that his two ambitions were to set up a lasting democracy and to strengthen nationalism -- by which he meant get rid of the Anglo-Iranian Oil Co., which had been robbing Iran for half a century. Indeed, the British company had been earning each year as much as all the royalties it paid Iran over 50 years. Mossadegh intended to recapture those riches to rebuild Iran.
In a scheme to get rid of Mossadegh, the British enlisted Secretary of State Dulles; he in turn enlisted his brother, CIA Director Allen Dulles, and what ensued was a truly masterful piece of skullduggery. First came a propaganda campaign to convince the West that Mossadegh was a communist, which in the U.S. of the 1950s put him on the level of a child molester. Actually, Mossadegh hated communists, but most of our press swallowed the lie. Time Magazine had previously called Mossadegh "the Iranian George Washington" and "the most world-renowned man his ancient race had produced for centuries." Now it called him "one of the worst calamities to the anti-communist world since the Red conquest of China."
The propaganda program on the outside was followed by a bogus "revolution" inside Iran, with a CIA agent-provocateur hiring such a huge army of thugs and terrorists to roam the streets of Tehran that the town fell into violent anarchy. The CIA plotters ousted Mossadegh and restored the shah to his Peacock Throne.
For Secretary of State Dulles and his old law clients -- including Gulf Oil Corp., Standard Oil Co. of New Jersey, Texaco Inc., and Mobil Corp., who were subsequently allowed to take 40 percent of Iran's oil supply -- the shah's return was a happy and very lucrative event. But, Kinzer reminds us, "The shah did not tolerate dissent [to silence some, he simply killed them] and repressed opposition newspapers, political parties, trade unions, and civic groups. As a result, the only place Iranian dissidents could find a home was in mosques and religious schools, many of which were controlled by" radical fundamentalists. So when the revolution against the shah finally broke out in 1979, it was inevitable that these clerics led it.
They then went on to sponsor acts of terror from Saudi Arabia to Argentina, mostly to humiliate the United States, and "their example inspired Muslim fanatics around the world, including those who carried out the attacks on the United States on September 11, 2001. None of this ... might have happened if Mossadegh had not been overthrown."
At roughly the same time Secretary of State Dulles was destroying democracy in Iran, he was also busy destroying democracy in Central America, and once again it was on behalf of a renegade industry: United Fruit Co. If any bureaucrat deserved to spend the rest of his life in prison for conflict of interest, it was Dulles. And several of his bureaucratic buddies would have been right there beside him breaking rocks.
"Few private companies have ever been as closely interwoven with the United States government as United Fruit was during the mid-1950s," writes Kinzer. For decades, Dulles had been one of its principal legal counselors.
(At one time Dulles negotiated an agreement with Guatemala that gave United Fruit a 99-year lease on a vast tract of land, tax free.) Dulles' brother -- Allen, the CIA Director -- had also done legal work for the company and owned a big block of its stock. So did other top officials at State; one had previously been president of United Fruit. The head of our National Security Council was United Fruit's former chairman of the board, and the president of the International Bank for Reconstruction and Development was a former board member.
These fine chaps and their numerous colleagues in our government were, not surprisingly, very upset when between 1944 and 1954, Guatemala entered what would be known as its "democratic spring," denoting the presidencies of Juan JosÃ© Arevalo and -- after the first peaceful transfer of power in Guatemalan history -- Jacobo Arbenz.
What those two did was nothing less than breathtaking. Under Arevalo, the National Assembly was persuaded to establish the first social security system, guarantee the rights of trade unions, fix a 48-hour workweek, and even slap a modest tax on the big landholders -- meaning three American companies: a huge electric monopoly, a rail monopoly, and, of course, United Fruit, which controlled the other two.
Arbenz was even bolder. He persuaded the National Assembly to pass the Agrarian Reform Law, which gave the government the power to seize and redistribute uncultivated land on estates larger than 672 acres. United Fruit owned more than 550,000 acres, about one-fifth of the country's arable land, but cultivated less than 15 percent -- while many thousands of Guatemalans were starving for land. So in 1953, Arbenz's government seized 234,000 uncultivated acres of United Fruit's land, for which the government offered in compensation (one can imagine the vengeful hilarity this must have stirred in Arbenz's circle) a paltry $1.185 million -- the value United Fruit had declared each year for tax purposes.
That did it. The Dulles gang back in Washington, all "products of the international business world and utterly ignorant of the realities of Guatemalan life, considered the idea of land redistribution to be inherently Marxist," writes Kinzer. So they began using the same techniques as in Iran, although much more elaborately played out -- first portraying Guatemala as having fallen into the hands of Communists, a falsehood that was supported by the U.S. press, including a series in The New York Times. Dulles even got Francis Cardinal Spellman, the most powerful and most hysterically anti-communist priest in America, to recruit Guatemala's Catholic clergy to "rise as a single man against this enemy of God and country." Then the CIA launched a bogus "invasion" by an "anti-Communist" force, followed by a bogus "revolt."
Arbenz was forced into exile and replaced by Col. Carlos Armas, who promptly canceled reforms and established a police state. He was soon assassinated, but bedlam continued. By overthrowing Arbenz, writes Kinzer, "the United States crushed a democratic experiment that held great promise for Latin America. As in Iran a year earlier, it deposed a regime that embraced fundamental American ideals but that had committed the sin of seeking to retake control of its own natural resources."
The dismantling of Arbenz's administration was named, with the usual buffoonery of our undercover government, "Operation Success."
When Guatemalans saw that democracy was dead, thousands revolted, took to the hills, and, inspired by Fidel Castro's victory in Cuba, formed guerrilla bands. "To combat this threat," writes Kinzer, "the Guatemalan army used such brutal tactics that all normal political life in the country ceased. Death squads roamed with impunity, chasing down and murdering politicians, union organizers, student activists, and peasant leaders. Thousands of people were kidnapped... and never seen again. Many were tortured to death on military bases ... This repression raged for three decades, and during this period soldiers killed more civilians in Guatemala than in the rest of the hemisphere combined." A United Nations commission put the toll at 200,000.
It was a great victory for Dulles' side; today 2 percent of the people in Guatemala still own half the arable land.
To maintain that status quo, the United States from 1960 to 1990 gave Guatemala hundreds of millions of dollars in military aid, including training and arming its death squads. Guatemala didn't need an air force; we dispatched our own planes from the Canal Zone to drop napalm on suspected guerrilla camps.
"This bloodiest of all modern Latin American wars would not have broken out if not for Operation Success," writes Kinzer. "Operation Success taught Cuban revolutionaries -- and those from other countries -- that the United States would not accept democratic nationalism in Latin America. It gave them a decisive push towards radicalism."
Never mind the regime change in Vietnam. The heart of it was simply the stupidity and administrative paralysis of the Kennedy administration. At the very moment when a close watch on the turmoil in South Vietnam was vitally needed (hey, it was supposedly "our" government), Kennedy and his important cabinet members were out of town, playing golf, sailing, or at a baseball game. In their absence, lesser officials sent word to dump Ngo Dinh Diem, our unpopular puppet president of South Vietnam. (Diem, by the way, was another protÃ©gÃ© of Dulles and Francis Cardinal Spellman.) When the Kennedy insiders returned to their duties, they dithered for four days, largely agreeing that the dumping was a bad idea, but doing nothing to cancel it.
Nor, writes Kinzer, were any of the counselors bright enough to suggest that it might be a perfect time to walk away from the mess and leave it all to the Vietnamese. "That," writes Kinzer, "would probably have led to the establishment of a Communist... rule over the entire country, but that is what ultimately happened anyway." And a withdrawal at this point "would have saved hundreds of thousands of lives... and spared the United States its greatest national trauma since the Civil War."
Once dumped, Diem was assassinated. With a bizarre measurement of historical events, this seemed to bother Kennedy the most. Historian Ellen Hammer writes that he was "shaken and depressed" to realize that "the first Catholic ever to become a Vietnamese chief of state was dead, assassinated as a direct result of policy authorized by the first American Catholic president."
What a pleasure it is to move away from sheer stupidity and back to sheer meanness, supplied by the man many love to hate, Henry Kissinger, and his part in Kinzer's fourth featured regime change, in Chile. Misplaced piety cannot be blamed for any part of this. The motivation was entirely capitalistic. "For us there are two sorts of people in the world," Dulles once said. "There are those who are Christian and support free enterprise, and there are the others." Leaving out the Christians, Kissinger would have agreed.
The Chilean foreign minister once accused him of knowing nothing about the Southern Hemisphere. Kissinger nodded, saying, "And I don't care ... The axis of history starts in Moscow, goes to Bonn, crosses over to Washington and then goes to Tokyo. What happens in the South is of no importance."
Unless it carried the odor of Soviet influence. And Kissinger, then secretary of state, was certain he detected the odor of communism in the election of Salvador Allende Gossens to the presidency of Chile. "Kissinger would be more directly responsible for what happened in Chile than any other American," writes Kinzer, "with the possible exception of Nixon."
Chile was one of the most stable countries in South America, with a high literacy rate, a relatively large middle class, and a strong civil society. But millions of its people lived in desperate poverty, and Allende made no secret of his ambition to lift that class -- and to do it by controlling some of the giant corporations operating in Chile but owned by yanquis.
Topping his hit list, besides consumer-product companies like PepsiCo Inc., were the world's two largest copper mining companies, Kennecott Corp. and Anaconda Mining Co., and International Telephone and Telegraph Co., all owned by U.S. interests. Allende wanted the Chilean government to take them over.
The men running these outfits, along with swingers like Kissinger's close friend David Rockefeller of Chase Manhattan Bank, which had multibillion-dollar interests in South America, struck back and got all the help they needed. Banks were persuaded to put a devastating credit squeeze on Allende's government. The CIA (though some of its officers wanted nothing to do with these dirty tricks) was turned loose, hiring assassins, paying for strikes that caused severe shortages of food, gasoline, electricity, and other materials. "Within two years, one-third of Chile's buses and 20 percent of its taxis were out of service due to lack of spare parts." Much, but not all, of the Chilean military was corrupted. Ditto the Chilean press.
Kinzer's account of these rebellious years ends with the death of Allende in La Moneda, the presidential palace and traditional seat of Chilean democracy. He had been president for 1,042 days. He refused an offer of free passage out of the country and committed suicide.
So Kissinger and Nixon and Rockefeller and their friends got what they wanted: a Chile run by Gen. Augusto Pinochet, who took office after the coup of September 11, 1973. His first act was to order a nationwide roundup of tens of thousands of leftists and other supporters of the Allende regime. Thousands were tortured in prison. Many were never seen again.
In 1976, Kissinger met privately with Pinochet in Santiago to assure the dictator that although his upcoming speech to the Organization of American States "would include a few perfunctory references to human rights, it was 'not aimed at Chile ...' We are not out to weaken your position.'"
Okay, so after that depressing encounter with Kissinger, you need to get back to someone who can offer you piety, comedy, and, well, brutality of a different sort. Meet the inflated president, William McKinley, elected by midwestern industries. He launched the Spanish-American War in 1899, which brought Cuba, Puerto Rico, and the Philippines into the U.S. kennel. Later he would admit he saw the war as "a commercial opportunity," but at first he peddled the war as a sacred duty, telling a group of Methodist missionaries that while he wrestled with the question of taking the Philippine archipelago (which he at first had trouble finding on the map), he fell to his knees in the White House on several evenings and "prayed Almighty God for light and guidance. One night late, it came to me that there was nothing left for us to do but to take them all, and to educate the Filipinos and uplift them and Christianize them."
Kinzer points out that McKinley obviously didn't realize that most Filipinos were already practicing Catholics. Nor did he have a clue as to the natives' feelings about being "saved" by force. McKinley's missionary invasion ended only after three and a half years of horrific fighting (deaths: 4,374 American soldiers, 16,000 guerrillas, and at least 20,000 civilians) in which both sides engaged in wholesale torture. Abu Ghraib was a cakewalk compared with some of the things our soldiers did in that war. "The most notorious was the 'water cure,' in which sections of bamboo were forced down the throats of prisoners and then used to fill the prisoners' stomachs with dirty water until they swelled in torment. Then soldiers would jump on the prisoner's stomach to force the water out."
Actually, the people of the Philippines and Cuba didn't need our help to whip Spain. The natives of those places had been hitting their Spanish overlords so hard for so many years that Spain was already willing to give Cuba home rule. The chief organizer of the rebellion at that stage, JosÃ© MartÃ, encouraged his fighters to push on, not only to win freedom from Spain but "to prevent, by the independence of Cuba, the United States from spreading over the West Indies and falling, with that added weight, upon other lands of our America."
Uh oh. That kind of talk scared the devil into American businessmen who had more than $50 million -- big bucks in those days -- invested in Cuban agriculture. Obviously a war to pre-empt the MartÃ crowd was needed. That was nicely cooked up by a "friendly" visit of the U.S. battleship Maine to the Havana harbor, where an explosion killed 250 of its sailors, and the Hearst newspapers were filled with mendacious stories fixing the guilt on Spain. Hearst and his loud crowd called for all-out war. McKinley enthusiastically complied.
But there were enough members of Congress, touched by the Cubans' long fight for freedom, who refused to back a pro-war resolution until McKinley agreed to an amendment promising that at war's end, we would leave the government and control of the island to its people. When the promise was made, our military's brief, Hollywood-style part in the liberation of Cuba took place. Kinzer tells us, "in three one-day battles, the most famous being one in which [Teddy] Roosevelt, dressed in a uniform he had ordered from Brooks Brothers, led a charge up Kettle Hill" and "American cruisers destroyed the few decrepit Spanish naval vessels anchored at Santiago" in a single day.
"Just 385 Americans had been killed in action, barely more than Sioux Indians had killed at Little Big Horn in the country's last major military engagement, twenty-two years before." No wonder the American statesman John Hay called it "a splendid little war."
As for our promises to let Cuba rule itself, we quickly backed off on that. Republicans in Congress and much of the press greatly exaggerated our part in whipping Spain and argued, successfully, that Cubans had little to do with it and deserved to rule themselves only so long "as they allowed the United States to veto any decision they made." Castro was still a long way off. A couple of Kinzer's regime changes are pure comic opera.
Grenada for example -- a tiny, former British colony in the Caribbean. On October 21, 1983, eager to get away from Washington for a few rounds of golf at Augusta, President Reagan hurriedly signed an order for a naval task force heading for Lebanon to change course and go to Grenada to ... Well, nobody was exactly sure, but apparently a couple of wacky "Marxist" cliques were in a shooting donnybrook to see who would have political control down there. And maybe a couple of hundred American students at a medical school on Grenada were in danger. Actually, when polled by their dean, 90 percent of the students said they felt perfectly safe. But the naval task force steamed on.
The invasion -- named Operation Urgent Fury -- would not be easy. The Pentagon had no up-to-date maps of Grenada, so some of our troops had to use photocopies of tourist maps. About 6,000 troops landed in Grenada, "at least twice the number needed for the job," writes Kinzer. A mental hospital was accidentally bombed, killing more than a dozen patients. Several dozen others stumbled away, dazed, and some were still wandering days later.
Oops! Neither Reagan nor any other American official had told the Brits what we were up to. "The United Nations General Assembly overwhelming passed a resolution 'deeply deploring' ... a flagrant violation of international law."
But Representative Dick Cheney of Wyoming said the invasion made "a lot of folks around the world feel we are more steady and reliable than heretofore."
Reagan was doggone proud, too. In a speech to the Congressional Medal of Honor Society in New York, he proclaimed, "Our days of weakness are over! Our military forces are back on their feet, and standing tall."
Except for the 250 Marines who had been killed by a bomb in Lebanon at the same time we were invading Grenada.
And finally we musn't forget our very first regime change, in 1893, when a few dozen sugar planters and descendants of missionaries, wanting more control of island commerce, overthrew Queen Liliuokalani of Hawaii. It wasn't a fair fight. The sugar planters got the help of 162 American Marines and sailors who were passing through. The queen's "army" consisted of the Honolulu police chief.
Moody’s Investors Service fired off a warning on Wednesday that the triple A sovereign credit rating of the US would come under pressure unless economic growth was more robust than expected or tougher actions were taken to tackle the country’s budget deficit.
In a move that follows intensifying concern among investors over the US deficit, Moody’s said the country faced a trajectory of debt growth that was “clearly continuously upward”.
Steven Hess, senior credit officer at Moody’s, said the deficits projected in the budget outlook presented by the Obama administration outlook this week did not stabilise debt levels in relation to gross domestic product.
“Unless further measures are taken to reduce the budget deficit further or the economy rebounds more vigorously than expected, the federal financial picture as presented in the projections for the next decade will at some point put pressure on the triple A government bond rating,” the rating agency added in an issuer note.
This week, the White House forecast a $1,565bn budget deficit for 2010, which represents 10.6 per cent of gross domestic product and is the highest such ratio of debt to GDP since the second world war.
While the budget gap is forecast to fall to about 4 per cent by 2013, it is based in part on economic growth not falling below government expectations, Congress agreeing to tax rises and a spending freeze on non-security discretionary spending.
Crucially, projections of the overall debt-to-GDP ratio for the US are seen rising from 53 per cent in 2009 to 73 per cent in 2015 and 77 per cent by 2020.
Moody’s, however, says this understates the overall US debt level.
“Using the general government measure, including state and local governments as well as the federal government, which is used internationally, this ratio would be well over 100 per cent in 2020.”
The issue of sovereign risk dominated many discussions in the Davos World Economic Forum last week. While much attention focused on the fiscal crisis in Greece, considerable concern was also voiced about the outlook for countries such as the US and UK.
“Everyone has reason to be concerned about the US economy right now and the US dollar,” said Tony Tan, deputy head of the Government of Singapore Investment group. “We still think that the US economy is the most diversified and resilient in the world, but it is going through a difficult time.”
At the heart of investor concerns is whether countries such as the US with its rising debt burdens has the political will, or the sense of consensus, to take decisive measures to cut debt.
Some investors at Davos suggested it might be helpful if the credit rating agencies were to step up their threats about a potential future downgrade in countries such as the US and UK, since it would force politicians to act – and turn the issue into an election topic.
US treasury bonds were relatively steady on Wednesday with the yield on the 10-year note rising 3 basis points to 3.67 per cent.
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The case, against the Australian Federation Against Copyright Theft, could have had major implications for the way internet providers police their users.
If AFACT had won, providers would likely have been forced to penalise or disconnect users who illegally downloaded copyrighted material such as movies and songs.
However Federal Court judge Justice Dennis Cowdroy today found iiNet was not responsible for the infringements of its users.
"It is impossible to conclude that iiNet has authorised copyright infringement... (it) did not have relevant power to prevent infringements occurring," Justice Cowdroy said in his judgment.
Justice Cowdroy recommended the application be dismissed and that AFACT pay the court costs.
"This case has been important, not just for iiNet, but the entire internet industry," it said.
"We do not, and never have supported, encouraged or authorised illegal sharing or downloading of files in breach of the copyright laws."
AFACT hit back by saying the ruling hinged on a technicality.
"We believe this decision was based on a technical finding centred on the court’s interpretation of the how infringement’s occur and (iiNet's) ability to control them," said executive director Neil Gane.
"We are confident that the Government does not intend a policy outcome where rampant copyright infringement is allowed to continue unaddressed and unabated via the iiNet network."
Mr Gane said AFACT would review the decision before deciding how to proceed. It is expected to appeal the decision in the High Court.
AFACT was representing in the case a group of movie and TV studios including Village Roadshow, Universal, Warner Bros, Paramount, Sony Pictures and the Seven Network.
The global crisis is understood as a banking crisis brought on by the mindless deregulation of the U.S. financial arena. Investment banks leveraged assets to highly irresponsible levels, issued questionable financial instruments with fraudulent investment grade ratings, and issued the instruments through direct sales to customers rather than through markets.
The crisis was initiated when the U.S. allowed Lehman Brothers to fail, thus threatening money market funds everywhere.The crisis was used by the investment banks, which controlled U.S. economic policy, to secure massive subsidies to their profits from a taxpayer bailout and from the Federal Reserve. How much of the crisis was real and how much was hype is not known at this time.
As most of the derivative instruments had never been priced in the market, and as their exact composition between good and bad loans was unknown (the instruments are based on packages of securitized loans), the mark-to-market rule drove the values very low, thus threatening the solvency of many financial institutions. Also, the rule prohibiting continuous shorting had been removed, making it possible for hedge funds and speculators to destroy the market capitalization of targeted firms by driving down their share prices.
The obvious solution was to suspend the mark-to-market rule until some better idea of the values of the derivative instruments could be established and to prevent the abuse of shorting that was destroying market capitalization. Instead, the Goldman Sachs people in charge of the U.S. Treasury and, perhaps, the Federal Reserve as well, used the crisis to secure subsidies for the banks from U.S. taxpayers and from the Federal Reserve. It looks like a manipulated crisis as well as a real one due to greed unleashed by financial deregulation.
The crisis will not be over until financial regulation is restored, but Wall Street has been able to block re-regulation. Moreover, the response to the crisis has planted seeds for new crises. Government budget deficits have exploded. In the U.S. the fiscal year 2009 federal budget deficit was $1.4 trillion, three times higher than the 2008 deficit. President Obama's budget deficits for 2010 and 2011, according to the latest report, will total $2.9 trillion, and this estimate is based on the assumption that the Great Recession is over. Where is the U.S. Treasury to borrow $4.3 trillion in three years?
This sum greatly exceeds the combined trade surpluses of America's trading partners, the recycling of which has financed past U.S. budget deficits, and perhaps exceeds total world savings.
It is unclear how the 2009 budget deficit was financed. A likely source was the bank reserves created for financial institutions by the Federal Reserve when it purchased their toxic financial instruments. These reserves were then used to purchase the new Treasury debt. In other words, the budget deficit was financed by deterioration in the balance sheet of the Federal Reserve. How long can such an exchange of assets continue before the Federal Reserve has to finance the government's deficit by creating new money?
Similar deficits and financing problems have affected the EU, particularly its financially weaker members. To conclude: the initial crisis has planted seeds for two new crises: rising government debt and inflation.
A third crisis is also in place. This crisis will occur when confidence is lost in the U.S. dollar as world reserve currency. This crisis will disrupt the international payments mechanism. It will be especially difficult for the U.S. as the country will lose the ability to pay for its imports with its own currency. U.S. living standards will decline as the ability to import declines.
The financial crisis is essentially a U.S. crisis, spread abroad by the sale of toxic financial instruments. The rest of the world got into trouble by trusting Wall Street. The real American crisis is much worse than the financial crisis. The real American crisis is the offshoring of U.S. manufacturing, industrial, and professional service jobs such as software engineering and information technology.
Jobs offshoring was initiated by Wall Street pressures on corporations for higher earnings and by performance-related bonuses becoming the main form of managerial compensation. Corporate executives increased profits and obtained bonuses by substituting cheaper foreign labor for U.S. labor in the production of goods and services marketed in the U.S.
Jobs offshoring is destroying the ladders of upward mobility that made the U.S. an opportunity society and eroding the value of a university education. For the first decade of the 21st century, the U.S. economy has been able to create net new jobs only in domestic non-tradable services, such as waitresses, bartenders, sales, health and social assistance and, prior to the real estate collapse, construction. These jobs are lower paid than the jobs were that have been offshored, and these jobs do not produce goods and services for export.
Jobs offshoring has increased the U.S. trade deficit, putting more pressure on the dollar's role as reserve currency. When offshored goods and services return to the U.S., they add to imports, thus worsening the trade imbalance.
The policy of jobs offshoring is insane. It is shifting U.S. GDP growth to the offshored locations, such as China, thus halting growth in U.S. consumer incomes. For the past decade, U.S. households substituted an increase in indebtedness for the lack of growth in income in order to continue increasing their consumption. With their home equity refinanced and spent, real estate values down, and credit card debt at unsustainable levels, it is no longer possible for the U.S. economy to base its growth on a rise in consumer debt. This fact is a brake on U.S. economic recovery.
Stimulus packages cannot substitute for the growth in real income. As so many high value-added, high productivity U.S. jobs have been offshored, there is no way to achieve real growth in U.S. personal incomes. Stimulus spending simply adds to government debt and pressure on the dollar, and sows seeds for high inflation.
The U.S. dollar survives as reserve currency because there is no apparent substitute. The euro has its own problems. Moreover, the euro is the currency of a non-existent political entity. National sovereignty continues despite the existence of a common currency on the continent (but not in Great Britain). If the dollar is abandoned, then the result is likely to be bilateral settlements in countries' own currencies, as Brazil and China now are doing. Alternatively, John Maynard Keynes' bancor scheme could be implemented, as it does not require a reserve currency country. Keynes' plan is designed to maintain a country's trade balance. Only a reserve currency country can get its trade and budget deficits so out of balance as the U.S. has done. The prospect of U.S. default and/or inflation and decline in the dollar's exchange value is a threat to the reserve system.
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