Thursday, March 3, 2011

Fear, Inflation and Debt

Greg Hunter
USA Watchdog

Yesterday, gold hit fresh all-time highs at $1,432.10 an ounce. Silver hit a 31 year high, closing at more than $34.50 per ounce. Oil nearly touched $100 per barrel, which is the highest it has been since September 2008. What’s going on? Part of the price spikes are, no doubt, due to riots and rebellions in the Middle East, but it is also the world’s awakening realization America’s crushing debt will never be repaid in real money. The U.S. needs to slash its budgets, but finding politicians on Capitol Hill with the nerve to make deep cuts is elusive, to say the least. Yesterday, the Associated Press reported, “The Republican-controlled House is on course to pass legislation cutting federal spending by $4 billion and averting a government shutdown for two weeks. And Senate Democrats say they will go along. . . . Republicans want to slash more than $60 billion from agency budgets over the coming months as a down payment on larger reductions later in the year, but are settling for just $4 billion in especially easy cuts as the price for the two-week stopgap bill.” (Click here for the complete AP story.)

Over in the Senate, the Banking, Housing and Urban Affairs Committee asked questions of Fed Chief Ben Bernanke about the state of the economy and raising the debt ceiling. It currently stands at $14.3 trillion. Senator David Vitter said “the biggest” problem the nation faced was “reaching our debt limit . . . sometime between late March and May.” Senator Vitter asked Mr. Bernanke, “Would it be better to increase the debt limit and go along our merry way on the present fiscal path or would it be better to increase the debt limit and at the same time pass meaningful budget reform?” I really do not see how cutting $60 billion is “meaningful reform” when PIMCO’s Bill Gross said two months ago on CNBC, “We have a deficit in the $1 trillion plus arena, which means we must borrow at least a trillion dollars additional a year in order to fund the deficit. And, so, the debt ceiling currently at $14.3 trillion, which is 95% of GDP, has to go up by another trillion or so every 12 months.” (Click here to read more about raising the debt ceiling.)

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Pentagon Tries to Blame Financial Crisis on Foreign Financial Terrorists

Domestic Financial Terrorists: Wiki Commons image
Washington's Blog

The Pentagon is paying contractors to claim that it was foreign financial terrorists - instead of fraud by American financial executives - which caused the 2008 financial crisis.

While a Pentagon contractor said, “This is the equivalent of box cutters on an airplane,” Paul Backen - a Yale University professor who has studied economic warfare - said he saw “no convincing evidence that ‘outside forces’ colluded to bring about the 2008 crisis.”

Indeed, the claim that terrorism caused the financial crisis is about as believable as Gaddafi trying to blame the Libyan protests on Osama Bin Laden, or al-Maliki blaming Al Qaeda for the Iraqi protests.

But it's not an isolated incident. In fact, the government is trying in many ways to convince us that financial fraud is isolated, not systemic, and - most of all - not important to rein in.

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Social Crisis in America: Should Public Workers Make Concessions?

As workers all over the U.S. become inspired by the massive demonstrations in Wisconsin, a dangerous idea is being voiced by some working-class allies that could unravel it all. The threat lies in the following argument: to protect the bargaining rights of unions, state and city workers must be prepared to make concessions over wages, benefits, etc. This line of reasoning is not only false to the core, it's suicidal.

Take for example a recent New York Times article on the battle in Wisconsin:

"It is not yet clear whether Gov. Scott Walker of Wisconsin will succeed in his quest to strip public employee unions of most of their bargaining rights. But by simply pressing the issue, he has already won major concessions that would have been unthinkable just a month ago."

This is extraordinary: The Governor makes a radically anti-union threat, and some union leaders are ready to give him EVERYTHING, just not the kitchen sink.

The article continues:

"Some of Wisconsin’s major public sector unions, faced with what they see as a threat to their existence, have decided to accept concessions that they had been vigorously fighting...translating into a pay cut of around 7 percent...But Mr. Walker is not settling for that. He said that those concessions were “an interesting development, because a week ago they said that’s not acceptable.” (February 28, 2011).

So the anti-union Governor is making the unacceptable acceptable, merely by voicing a threat. If this precedent were established, what future do unions have? Especially when one considers that state budget deficits are projected to continue for years.

Imagine the following scenario: A war is declared by a foreign army and the defending General responds by announcing to the invaders, "I will only fight one battle to preserve this particular parcel of land (bargaining rights), and will wave the white flag over all other territory (wages, benefits, etc.).

Of course the foreign army would conclude "the enemy is already defeated!” And fight without mercy for total victory.

This is the situation in Wisconsin and other states. War has been declared on unions and some labor leaders are pretending that they can offer concessions to appease their attackers. Unfortunately, this strategy has failed for years, and is in fact why the right wing felt confident enough to officially declare war.

Every time unions agree to lower wages and benefits -- as they have been doing for years -- they weaken themselves internally, thus opening the way for further, deeper attacks. The right-wing attack on bargaining rights did not appear from nowhere; it was the result of years of concessionary bargaining, which inevitably leads to worker demoralization within the union. An army which concedes every battle will be composed of demoralized soldiers.

The union policy of concessionary bargaining is the policy of committing slow suicide, and after years of providing their executioners with nooses, some labor leaders act stunned when their hanging is announced. They believed that they could befriend the hangman, as long as they didn't create too much trouble by aggressive protesting or well-planned strikes.

But hangmen are hangmen, and they must be treated accordingly.

Labor unions must mobilize the entire community in every state to demand "No Concessions" for all public workers. The fight to save collective bargaining can only be won if workers believe that collective bargaining will save their wages and benefits; the two cannot be separated.

Contrary to what the mainstream media and politicians constantly tells us, the general public would support such a fight. A recent CBS News/New York Times poll found that “Those surveyed said they opposed, 56 percent to 37 percent, cutting the pay or benefits of public employees to reduce deficits." (March 1, 2011).

The battle in Wisconsin proves that private-sector workers do not hate their public-sector brothers and sisters, they passionately support them.

How can labor unions mobilize the general public towards a pro-worker solution to the state budget deficits? By exposing another media lie: that Americans are against ALL tax increases. In fact, the same pollsters discovered in 2009 that 74 percent of respondents "support higher taxes on the rich." (April 6, 2009).

Labor unions must place this demand at the head of their campaign to save collective bargaining rights and workers wages and benefits. Workers will be further encouraged to fight for their wages and benefits when they see that there is a solution to the budget crisis.

Rose Ann DeMoro of National Nurses United agrees:

"So it's time for all of us to say it loud: No More Cuts in Public Sector Pay, Pensions, or Health Benefits; Balance Budgets By Closing Corporate Tax Loopholes, Restoring Fair Share Taxes on Corporations and Wealthy Individuals; Guarantee Retirement Security and Healthcare for All."

Shamus Cooke is a social service worker, trade unionist, and writer for Workers Action ( He can be reached at

Ohio Senate panel approves union-rights bill, sending it to full Senate

COLUMBUS, Ohio - An Ohio legislative committee approved a bill on Wednesday that would weaken the powers of public workers unions to negotiate their contracts. The vote came as union supporters protested the measure for a second day on the grounds of the state capitol in Columbus.

Over the heated protests of Democrats, the state Senate's Insurance, Commerce and Labor Committee approved the bill by a vote of 7 to 5. One Republican and all four Democrats on the committee voted no. Earlier Wednesday, Republican Senate leaders replaced one Republican member of the committee who was ready to vote against the bill, which would have defeated it.

Republicans said the measure will come up for a vote in the full Senate later Wednesday. It includes changes unveiled by its Republican authors earlier this week that reinstate collective-bargaining powers for the state's more than 300,000 firefighters, police officers, teachers and other public workers, but only on the issues of wages, hours and certain terms and conditions.

But the measure also extends a prohibition on strikes to apply to teachers. And it bans binding arbitration, giving the ultimate power to settle contract disputes with elected bodies. In the case of a city, that power would fall to the city council, and in the case of state contracts, it would fall to the General Assembly.

"This is a wonderful compromise," said the bill's author, state Sen. Shannon Jones (R) of the Dayton area. "By going to the legislative body, the elected officials who ultimately are responsible for the budgets and the taxpayers' money will be the ultimate decision-makers."

Union organizers and their allies said the changes don't go far enough to give workers the ability to bargain on a wide range of contractual issues, including pensions and health benefits. Making strikes illegal for all public workers, they said, effectively neutralizes the power of collective bargaining and gives workers no incentive to come to the table.

"Not only in the bill that was originally offered, but even more in the substitute, the balance of power shifts to the managing side," said Sen. Tom Sawyer (D). "What are the incentives for public employees to bargain with faith?"

Jones's answer to that question - that the bill encourages both sides "to bargain in good faith" - drew laughter and hisses in the packed hearing room, where firefighters and other union members filled the seats and lined the walls. Committee chairman Sen. Kevin Bacon banged his gavel to restore quiet, as sporadic sounds from demonstrators drifted into the room from the atrium inside the statehouse.

On Tuesday, more than 8,000 union supporters descended on the statehouse in protest, making Ohio the latest flash point in the fight over union rights.

Like their counterparts in Wisconsin, demonstrators here accused lawmakers and the governor, John Kasich (R) , of trying to use a budget crisis to destroy public-sector unions. Government workers did not cause the crisis and should not bear the brunt of it, protesters said. The Ohio measure would go further than the one in Wisconsin by also affecting police officers and firefighters,

But unlike in the standoff in Wisconsin, Democratic lawmakers don't have the numbers to walk out and delay a vote.

"It's great to see so many people willing to come out and get heard," Senate President Tom Niehaus (R) said Tuesday during a Statehouse interview marked by the sound of chanting from outside. "But it doesn't affect our resolve."


Governments in Retreat

Dr. Mark Sircus

Governments, like most egos, believe they are important. But like egos, they separate from the people they serve. Governments, in their heightened sense of separation and alliance with big business become vicious, even against their own people, and it really does not matter the form of government, with democracy being one of the worst offenders. Even the States in America are beginning to fight back against Federal control in their struggle to maintain state rights.

Things are about to change drastically in the U.S. and around the world. Events are getting seriously out of hand and will turn ugly faster than any of us can imagine or believe so from here on hold on for dear life! We’re Rapidly Approaching the Crisis to Which 2008 Was a Warm Up. The entire system, funded by the globalist bankers, is entering into a terminal phase with imminent financial and economic collapse looming up as the probable conclusion. The first waves have struck in terms of events in North Africa but when the full crisis hits who will be swept away and what will be left standing is anyone’s guess. We are literally living on borrowed time as something major is brewing in markets around the world and the stakes have never been higher.

“Incomes, job security, health- and other benefits, pensions, average pay, and of course jobs themselves, everything is rapidly deteriorating. While at the same time bankers and politicians are siphoning off what they can get away with from the public funds that by right belong to the same people who lose their jobs, health care access, pensions and homes. And desperately need those funds. The major financial executives may be raking in record stacks of stolen dough, but average American and European citizens are intensely watching their wealth evaporate into thin air as they become increasingly desperate with every passing day,” writes the Automatic Earth.

Marc Farber, Mr. Doom and Gloom himself, who is well respected in the financial world, spells it out. “I think we are all doomed. I think what will happen is that we are in the midst of a kind of a crack-up boom that is not sustainable, that eventually the economy will deteriorate, that there will be more money-printing, and then you have inflation, and a poor economy, an extreme form of stagflation, and, eventually, in that situation, countries go to war, and, as a whole, derivatives, the market, and everything will collapse, and like a computer when it crashes, you will have to reboot it.”

It is a matter of record! The spate of seething, youth-inspired Middle East uprisings that are toppling governments, reshaping the geopolitical landscape and roiling world markets blindsided the world’s intelligence community. Not the CIA, Joint Chiefs of Staff or National Security Council saw it coming. Mossad and MI5 missed it! None of the mainstream media’s star-studded stable of scholars, experts and think-tank policy wonks were thinking ahead.

Gerald Celente
Trends Research

The only choice we’ve been offered in terms of different forms of government has been between bad and worse. The democracy we see in America offers no more than a huge betrayal of the people’s trust. Yet people around the world thirst for democracy because, in principle, democracy is supposed to be dedicated to the people. The reality is something quite different.

What’s happening in Greece will spread worldwide as economies decline. There are no organizations behind this response, it’s a public response. This is a 21st century rendition of “Workers of the World unite.” Initially the strikes, riots and protests by unions, student groups, the unemployed, pensioners, and the outraged were sloughed off as predictable (but short-lived and ineffectual) responses that would either peter out on their own or be stomped down by the police. The unofficial reality was that, as Gerald Celente has repeatedly warned, “When people lose everything and have nothing left to lose, they lose it.”

Gerald Celente
Trends Research

It is my assertion that the United States government actually looks down in contempt at its own citizens, kicking dirt in their faces. America, in its lust to control the world in British fashion, has turned against everything good. The American people are completely helpless and have no power to stop all the evils being perpetuated by their government, including the endless wars and uncontrolled killing.

Virtually overnight, the revolutions have been glorified as courageous fights for freedom and liberty by democracy-hungry-masses. But it is not hunger for democracy that drives them. Democracy, autocracy, theocracy, monarchy—right, center, left—it is mostly a gut issue—an empty gut issue. When the money stops flowing down to the man in the street, the blood starts flowing in the streets. It’s a simple equation. A few at the top have too much, and too many others have too little.

Gerald Celente
Trends Research

Today governments can no longer afford to ignore their citizens’ concerns surrounding economic disparity, food supply, rising prices and a host of other things including the health and medical care of the people. Governments can no longer be subservient to industrial corporate interests that have never ever been concerned about what is good for the people. But governments seem to not really care what their citizens can afford or what is right and good. Most governments in the end are pathetic, having abandoned their real responsibilities to the people. In America the constitution has become nothing more than a joke—certainly far from “by the people and for the people.”

The jolt felt around the world is in the process of shattering the recovery illusion. Whether deliberately (as calculated policy) or as fallout from fear-based denial, the pieces are not being put together. The current unrest is not confined to the Middle East and North Africa, and as we had forecast, it will spread to Europe and other parts of the world. The more volatile and widespread the insurrections, the greater the probability that some combination of events (e.g., oil shock, terror attack, cyber wars and regional wars) will crash already fragile economies, and roil sound ones.Be Prepared” conditions are spinning out of control.

Gerald Celente
Trends Research

There is little doubt we are being forced back to a more local existence where we and the people around us will have to look after ourselves and survive the anarchy coming from the collapse of paper and digital wealth everywhere in the world at once. This will of course be very difficult in cities where there is total dependency on the system.

In Libya we already have an example where a city, beyond federal control, sees its residents and rebels already hammering out a new way of life and governance. The fruits of their efforts are taking shape. A judge, still wearing his robes, wandered through traffic ordering drivers to put on their seat belts. At another intersection, three young men helped an elderly police officer direct a traffic jam. Dozens of banks opened for business, and by late afternoon, stores, shuttered for days, had started to reopen. Belgium, without a federal government for a record amount of time, is also doing quite well without their government and the people want to keep it that way by dividing themselves down to more local levels of language and control.

People with Their Heads in the Sand
Things are moving so fast in world events that one can hardly make sense or keep track of everything that is going on. But a sense that things are going terribly wrong is growing even though there are still people living in oblivion, thinking everything is hunky dory. Bob Herbert of the New York Times is astounded that people are talking in normal tones about the equivalent of a hurricane ripping through their lives, leaving massive destruction in its wake. No matter how bad the news gets, few seem, outwardly at least, to be particularly concerned.

Gonzalo Lira has a partial explanation. “It’s as if it were happening to someone else—it’s as if it were happening to the Canadians, not to America. The American people are taking the whole budget deficit thing so la-di-da.”Heasks, “Why is no one freaking out over the incredible monetization of the federal government debt that is being carried out by Ben Bernanke and the Gnomes at the Federal Reserve? I have a theory—unscientific, but I think it’s true: The American people have thrown in the towel. They collectively realize that the shit is going to hit the fan big time. So in this little window of time before The Big Splatter, everyone’s pretending that nothing’s wrong, everything’s fine—we’re doing hunky dory, couldn’t be better. Any bad news—like the monster deficit—is ignored, blatantly. The American people collectively blew their country. So now everyone’s pretending that everything’s fine,” while waiting for the end to come. “Everybody with any sense knows that The Big Splatter is on its way—everyone knows there’s nothing that can stop it. So when bits of bad news crop up—like the revised deficit numbers—Americans are placid as Hindu cows. And why not? These deficit numbers are nothing!Americans all know that it’s going to get much, much worse. They all know that there’s no sense worrying about the little milestones on the road to hell. They all know that they’re waiting for The Big Splatter.”

“If one is going to fall out of a window, how much it hurts when one hits the ground (and splatters) will depend on how many stories high the window was. Some of those who live a relatively hand-to-mouth existence may find themselves falling out of a ground-floor window. They will dust themselves off and move on. This will be much less painful than falling from the hundredth floor, as many of the better-off will end up doing. People who may have nothing, but also owe nothing, are not so badly off in comparison with those who have a lot, but owe far more than they have. The latter is a very common situation, and will become increasingly common as assets prices fall in a deflationary environment, and debt servicing becomes ever more onerous. Very many seemingly wealthy people are over-stretched ‘like butter spread over too much bread,’ as Bilbo put it in The Lord of the Rings. Essentially, it is far better to have nothing than less than nothing in net monetary terms,” writes Stoneleigh for The Automatic Earth.


Fiscal insanity is now the embedded reality of the United States Federal government and this will lead very soon to big trouble for everyone in the states. It is already a big problem for the rest of the world because of the exported inflation.

“Tense and terrible times inevitably summon an odd coupling of two very different and difficult human conditions, honesty and brutality. Certain painful truths are revealed and often a palpable fury erupts. Our economy, our culture, our entire world is built upon debt. No one ever asked us if that’s how we wanted it; it is simply how the system was designed when we came into it. After careful examination, it becomes evident that debt does not fuel economy; it suffocates it. It does not nurture growth; it stunts and poisons it,” writes the Neithercorp Press.

Gold Reaches New Record High – News Barely Reported by Mainstream Media

Gold prices settled at a new record high yesterday, as unrest in North Africa and the Middle East pushed the safe haven currency to $1,435/oz. Silver surged to new 30-year record nominal highs at $34.74/oz. Prices surged in dollars and all major currencies and look set to reach record highs in other currencies.


Given the continuing strong fundamentals and the concerns of geopolitical instability spreading to Saudi Arabia and other autocratic oil producing nations, gold and silver look set to challenge $1,500/oz and $40/oz in the coming weeks.


Gold’s all time record nominal high yesterday was barely reported in most of the mainstream business and financial press today - slightly more online but there was little or no coverage in print.

This is an indication that gold and silver remain far from the “bubbles” that some have suggested. Speculative manias and bubbles are characterised by mass participation and widespread enthusiasm and “irrational exuberance” by all sectors of society including the media and particularly the retail investor and the “man in the street”.


As seen today, this is clearly not the case at the moment as there continues to be little or no reporting (let alone analysis) about gold and silver – even when they reach record nominal highs.

While the specialist financial press such as Bloomberg, Reuters. Dow Jones, the Wall Street Journal and the Financial Times did report the record highs; it was unreported in the mainstream press in most western countries.

In the UK and Ireland, none of the main papers (including the Times of London, The Guardian, the Daily Telegraph, The Irish Times, the Irish Independent, and the Irish Examiner) reported the record highs.

The Financial Times print edition reported the news with one sentence saying that “concerns were underlined by gold rising to a three-month high”. In fairness to the Financial Times, they do report on the gold market far more than most media outlets.

The media’s continuing non-coverage of gold and silver is a clear indication of the lack of animal spirits in the sector. It is proof, if any were needed, that the mainstream media and the man on the street remains far from bullish on gold and silver.

Indeed, recent years and recent months have seen many so called “experts” warning about the dangers of the gold “bubble”. They have been proven badly wrong and it would be interesting to read a story about how wrong they got it.

The majority of investors and savers in the western world do not know what gold bullion is and could not tell you the price of an ounce of gold or silver in dollars – let alone in pounds, euros or other local currencies.

The majority are unaware of the huge developments in the gold markets (only reported by specialist financial press) such as China’s emergence as one of the largest buyers of gold in the world (see news and our video below) and the fact that central banks and astute hedge funds are some of the largest buyers of gold in the world today.

A bubble only takes place when entire societies , including many - if not the majority - of journalists and media become convinced that you “cannot go wrong” with a certain speculation or investment and it is a risk free way of making returns.

This leads to gushing reportage and commentary about the “sure thing” that is a certain stock, bond, commodity or property market. It is characterised by widespread commentary and a belief not just in the financial press but in the mainstream media (day time radio and television etc) that one must speculate or “invest” by buying a certain security or asset class – whether that be tulip bulbs, Nasdaq, Apple or property in London.

Greed and buying motivated to make a profit or quick buck becomes widespread. This has not happened in the bullion markets as the majority of bullion buying has been safe haven buying for wealth preservation purposes rather than accumulation.

Concerns about a bubble in gold may be justified when it reaches its inflation adjusted high of $2,300/oz. Similarly with silver, concerns about a bubble may be justified when it reaches its inflation adjusted high of $130/oz.

Concerns about a bubble in gold will be justified when gold is covered in a regular manner in not just the specialist press but also in the mainstream. When vested interests selling gold regularly appear in mainstream media advising people to but all their money into gold because it is a sure thing, it will be time to become very cautious about the sector.

Near the top of the gold market (when the price is likely trading at thousands of dollars, euros and pounds per ounce) we are likely to see front pages in the business press (such as Fortune, Business Week etc) devoted to gold and snappy front page positive headlines about how “Gold is King”, “Why Gold is a Must” etc.

When that happens it will be time to be wary of the gold bubble and reduce allocations to gold and silver.

The lackluster, negligent media coverage of gold’s record highs yesterday suggests that we are a long way from there yet.

US ship to 'bolster' Europe's missile defenses

© AFP/Getty Images/File Spencer Platt

WASHINGTON (AFP) - The US military will send a warship to the Mediterranean next week as a first step in a defense shield to protect Europe from a potential strike from Iran's missile arsenal, a defense official said.

The USS Monterey, a guided missile cruiser equipped with Aegis radar designed to detect ballistic missiles, is due to depart next week from its home port in Norfolk, Virginia for a six-month mission, said John Plumb, principal director of nuclear and missile defense policy.

The ship's launch fulfills the US administration's goal of deploying military hardware for the shield in 2011.

After President Barack Obama announced a new missile defense policy in 2009, Plumb said "now here is our first concrete demonstration of our commitment to the missile defense of our deployed forces, allies and partners in Europe.

"We said we were going to do it, and now we're doing it."

The Ticonderoga-class ship, which will conduct exercises with US forces in the region, will form part of a planned "routine presence" by similar vessels supporting the system, he said.

Guided missile cruisers have been sent to the Mediterranean previously but this was the first time such a ship had been deployed to back up the missile defense system, he said.

The NATO alliance endorsed the shield at a summit in Lisbon last year but skeptics of the program have questioned the reliability of the anti-missile weaponry and whether more sophisticated interceptors will be ready on time.

Russia also has voiced opposition to the planned system, which will eventually include additional land-based radars and interceptors along with Aegis ships.

The United States plans to deploy land-based radars later this year in southern Europe but negotiations are still underway, said Plumb, without saying which countries might host the sites.

As part of the "phased" approach, land-based SM-3 interceptors are due to be deployed in Romania by 2015 and in Poland by 2018, with more advanced versions of the weaponry to be introduced at each stage.

The military is still developing a land-based model for the SM-3 interceptor, which is currently deployed on naval ships.

The Obama administration says the missile defense system is primarily aimed at the potential threat posed by Iran's nuclear program and its growing number of medium-range missiles.

© AFP -- Published at Activist Post with License

The Wisconsin Lie Exposed – Taxpayers Actually Contribute Nothing To Public Employee Pensions

Pulitzer Prize winning tax reporter, David Cay Johnston, has written a brilliant piece for exposing the truth about who really pays for the pension and benefits for public employees in Wisconsin.

Gov. Scott Walker says he wants state workers covered by collective bargaining agreements to “contribute more” to their pension and health insurance plans. Accepting Gov. Walker’ s assertions as fact, and failing to check, creates the impression that somehow the workers are getting something extra, a gift from taxpayers. They are not. Out of every dollar that funds Wisconsin’ s pension and health insurance plans for state workers, 100 cents comes from the state workers.


How can this be possible?

Simple. The pension plan is the direct result of deferred compensation- money that employees would have been paid as cash salary but choose, instead, to have placed in the state operated pension fund where the money can be professionally invested (at a lower cost of management) for the future.

Many of us are familiar with the concept of deferred compensation from reading about the latest multi-million dollar deal with some professional athlete. As a means of allowing their ball club to have enough money to operate, lowering their own tax obligations and for other benefits, ball players often defer payment of money they are to be paid to a later date. In the meantime, that money is invested for the ball player’s benefit and then paid over at the time and in the manner agreed to in the contract between the parties.

Does anyone believe that, in the case of the ball player, the deferred money belongs to the club owner rather than the ball player? Is the owner simply providing this money to the athlete as some sort of gift? Of course not. The money is salary to be paid to the ball player, deferred for receipt at a later date.

A review of the state’s collective bargaining agreements – many of which are available for review at the Wisconsin Office of State Employees web site - bears out that it is no different for state employees. The numbers are just lower.

Check out section 13 of the Wisconsin Association of State Prosecutors collective bargaining agreement – “For the duration of this Agreement, the Employer will contribute on behalf of the employee five percent (5%) of the employee’s earnings paid by the State.

Johnston goes on to point out that Governor Walker has gotten away with this false narrative because journalists have failed to look closely at how employee pension plans work and have simply accepted the Governor’s word for it. Because of this, those who wish the unions ill have been able to seize on that narrative to score points by running ads and spreading the word that state employees pay next to nothing for their pensions and that it is all a big taxpayer give-away.

If it is true that pension and benefit money is money that already belongs to state workers, you might ask why state employees would not just take the cash as direct compensation and do their own investing for their retirement through their own individual retirement plans.

Again, simple.

Mr. Johnston continues-

Expecting individuals to be experts at investing their retirement money in defined contribution plans — instead of pooling the money so professional investors can manage the money as is done in defined benefit plans — is not sound economics. The concept, at its most basic, is buying wholesale instead of retail. Wholesale is cheaper for the buyers. That is, it saves taxpayers money. The Wisconsin State Investment Board manages about $74.5 billion for an all-in cost of $224 million. That is a cost of about 30-cents per $100, which is good but not great. However it is far less than many defined contribution plans, where costs are often $1 or more per $100.”

If the Wisconsin governor and state legislature were to be honest, they would correctly frame this issue. They are not, in fact, asking state employees to make a larger contribution to their pension and benefits programs as that would not be possible- the employees are already paying 100% of the contributions.

What they are actually asking is that the employees take a pay cut.

That may or may not be an appropriate request depending on your point of view – but the argument that the taxpayers are providing state workers with some gift is as false as the argument that state workers are paid better than employees with comparable education and skills in private industry.

Maybe state workers need to take pay cut along with so many of their fellow Americans. But let’s, at the least, recognize this sacrifice for what it is rather than pretending they’ve been getting away with some sweet deal that now must be brought to an end.

UPDATE: Since this post was published earlier today, many commenters have made the point that, while it is true that it is state employees’ own money that funds the pension plan, when the pension plan comes up short it is up to the taxpayer to make up the difference.

There is some truth in this – but not as much as many seem to think. Because the pension plan is a defined benefit plan – requiring the state to pay the agreed benefit for however long the employee may live in retirement- if the employee lives longer than the actuarial plan anticipated, the taxpayer is on the hook for the pay-outs during the longer life.

But is this the fault of the state employees? The pension agreements are the result of collective bargaining. That means that the state has every opportunity to properly calculate the anticipated lifespan and then add on some margin for error. What’s more, the losses taken by the pension funds over the past few years can hardly be blamed on the employees.

Take a look at what Sue Urahn, an expert on the subject at the Pew Center on the States, has to say about this when describing the $1 trillion gap that existed between the $2.35 trillion states had set aside to pay for employees’ retirement benefits and the $3.35 trillion price tag of those the end of 2008-

To a significant degree, the $1 trillion reflects states’ own policy choices and lack of discipline:

  • • failing to make annual payments for pension systems at the levels recommended by their own actuaries;
  • • expanding benefits and offering cost-of-living increases without fully considering their long-term price tag or determining how to pay for them; and
  • • providing retiree health care without adequately funding it

Via Pew Center on the States

That is the point. While the governor of Wisconsin is busy trying to shift the blame to the workers in an effort to put an end to collective bargaining, the reality is that it was the state who punted on this – not the employees.

Further, by the state employee unions agreeing to the deal proposed by Walker on their benefits (as they have despite Walker’s refusal to accept it) they are taking on much - and possibly all – of the obligation out of their own pockets.

As a result, the taxpayers do not contribute to the public employee pension programs so much as serve as insurers. If their elected officials have been sloppy , the taxpayers must stand behind it. But if the market continues to perform as it has been performing this past year, don’t be surprised if the funding crisis begins to recede. If it does, what will you say then?

Announced U.S. Job Cuts Rose 20% From Year Ago, Challenger Says

Employers in the U.S. announced more job cuts in February than in the same month last year, led by a surge at government agencies.

Planned firings increased 20 percent to 50,702 last month from February 2010, the first year-over-year gain since May 2009, according to a report today from Chicago-based Challenger, Gray & Christmas Inc. Announcements at federal, state and local government offices almost tripled from last year.

“More job cuts at the federal level are expected in the months ahead as pressure mounts to cut costs and rein in the soaring national debt,” John A. Challenger, the outplacement company’s chief executive officer, said in a statement.

Dismissals of government workers may contribute to a slowdown in consumer spending, which accounts for 70 percent of the economy. Combined with the highest gasoline prices in two years, the threat of a pause in purchases may already be causing retailers, which had the second-biggest number of announcements last month, to pare payrolls, said Challenger.

“If gasoline tops $4 per gallon in the coming weeks, consumers may be forced to make significant changes to their spending habits,” said Challenger. “At this stage of the recovery, that could be an extremely damaging setback.”

Compared with last month, which saw the fewest firings for any January since record-keeping began in 1993, job-cut announcements climbed 32 percent. Because the figures aren’t adjusted for seasonal effects, economists prefer to focus on year-over-year changes rather than monthly numbers.

Government Firings

Government and non-profit agencies led the February job cuts with 16,380 announced reductions, according to Challenger. Retail firms had 8,360.

Michigan led all states with 6,381 announced job cuts, followed by the District of Columbia, with 5,946.

Today’s report also showed that employers announced plans in February to hire 72,581 workers, up from 29,492 the prior month. The surge reflects Home Depot Inc.’s announcement that it planned to add 60,000 temporary workers, Challenger said.

While touring an Intel Corp. semiconductor manufacturing facility in Hillsboro, Oregon, last month, President Barack Obama said the U.S. must foster a business climate that encourages job creation and assures companies can draw on an educated workforce.

“In a world that is more competitive than ever before, it’s our job to make sure that America is the best place on earth to do business,” Obama said Feb. 18 at the factory.

Hiring Plans

Intel, the world’s largest chipmaker, announced plans during Obama’s visit to build a $5 billion microprocessor plant in Arizona and hire 4,000 employees in the U.S. this year.

Employers hired 193,000 workers in February, and the unemployment rate rose to 9.1 percent, according to the median estimate of economists in a Bloomberg News survey ahead of a March 4 employment report from the Labor Department.

Challenger’s data do not always correlate with figures on payrolls or first-time jobless claims as reported by the government. Many job cuts are carried out through attrition or early retirement. Some employees whose jobs are eliminated find work elsewhere in their companies and many announced staff reductions never take place because business improves. The totals also include foreign affiliates.

The Dollar, and The Next Ten Days

I’ve never been much of a fan of technical analysis. It’s always struck me as something akin to reading tea leaves—and just as batty. But on the other hand, I’ve seen enough technical analysis deliver accurate predictions that I can’t really dismiss it completely.

Right now, the world is going through a pre-crisis mode—you can practically feel it in the air. The limitless deficit spending by the U.S. Federal government, which has instituted systemic +10% of GDP deficits year after year; the insane Federal Reserve policy of Quantitative Easing 2, which is nothing more than debt monetization as I wrote here, enabling the Federal government’s addiction to deficit spending; the popular uprisings sweeping through the Middle East and North Africa, affecting—wouldn’t you just know it—oil producing countries one after the other; the steadily rising food inflation, which in fact triggered those uprisings in Tunisia, Egypt and Libya, and which are beginning to affect the entire globe; the inevitability of a collapse of the euro—the other major world currency—because of the systemic tensions affecting the European continent, between the strong economies of the north, and the weak economies of the peripheries.

All these issues are bringing renewed pressure on the dollar—though which direction the dollar will react to that pressure is the issue up for debate right now.

The next ten days will be key: Will the dollar spike up? Become the safe haven of everyone fleeing from the world’s troubles? Or will the dollar nosedive, the first big step down in its death spiral?

This is where we’re at—and this turning point is happening now: Right now. Consider this chart, sent to me by my friend in Hong Kong, Michael Hampton:

Click to enlarge.
Technical analysts have all sorts of pet names for various formations—“cup and handle”, “head and shoulders”, etc. I have no idea how tea leaf-readers would call this bouncing off the bottom trendline that we see in this three-year cart—“dribbling the floor”? “Harlem Globetrotting”?

Whatever cutesy name you want to call it, it shows something sort of ominous: It shows the dollar index touching a bottom trendline, just as problems in the rest of the world are peaking.

The two simultaneous problems that are peaking in the rest of the world are rising commodity prices, and rising unrest in oil producing countries.

Michael is a great guy, a very smart man: He’s of the opinion that these two issues ultimately lead to the same thing—extremely high inflation, if not hyperinflation, as I have argued.

But he thinks that, before high inflation starts hitting us all at the grocery store and the gas pumps, there’ll be a risk deleveraging. As a result of this, he’s thinking that there will be a snap-back of the dollar (and the Treasury bond), as people run for cover and/or try covering their risk-on bets.

He sent me another chart, highlighting the euro:

Click to enlarge.
His conclusion off of this chart was that the euro—because of the systemic problems of the continent, of which we’re all aware of—was poised to sink lower: The top trendline was the ceiling it couldn’t breach, just as the dollar’s trendline of the previous chart was the floor it couldn’t break through (for now).

So to Michael, considering the macro perspective of the world’s situation, the risk-on leveraging that has gone on because of the Fed’s ZIRP, and the inevitable flight to safety that will occur/is occurring because of the troubles in the Middle East, there will be a flight to the dollar and dollar-denominated assets (ie. Treasuries)—and a spike up of the dollar index.

At the same time, the euro will spike down, for precisely the same reasons: After all, Europe is one of those global trouble spots.

The above two charts would seem to bear out this analysis: Dollar up, euro down.

Sounds sensible.

But what if we flip the analysis: What if—rather than both trendlines being the floor of the dollar and the ceiling of the euro—these trendlines were broken over the next few days? What if the dollar fell—and the euro rose?

This is not so impossible: Keep in mind that the Germans are particularly averse to inflation—and they are uniquely positioned to do something about it. The eurozone producer price index came out today—and it is rising, signalling an imminent rise in the eurozone consumer price index. Coupled to that objective metric of euro inflation, the ECB has used up its juice with the Germans, insofar as bailing out the PIIGS is concerned—Berlin has no interest in bailing out another eurozone member, no matter how bad the situation gets.

So the ECB will have to stand tough on the euro, or risk hell with the Germans—which the ECB and the other eurozone members cannot afford.

On the other hand, the Federal Reserve is signalling it won’t raise rates even after it has finished buying up Treasuries via QE-2. In fact, it’s not even a sure thing that the Fed will end QE-2, as there are already rumblings of an extension of the policy.

So what if the euro breaks upward, because of the German phobia of inflation? What if the dollar breaks downward, because of Federal Reserve irresponsibility?

As of this morning, the situation looks grim, if you know what to look for: Gold is trading at record levels, after rising overnight. The dollar index has broken below 77, but not decisively, hanging around the 76.8 and thinking it over. Libya’s Gaddafi is striking back at the Eastern Rebels, which is interrupting oil production in the country. And as I mentioned before, this morning, the euro producer price index rose enough to freak out the Germans.

Therefore, today—Wednesday, March 2, 2011—is a key date: Over the next eight trading days, we will see if the dollar rebounds above 77 on the index, or if it bounces back up.

If it bounces back up, we’ve kicked the can down the road a bit.

But if it break lower, then this is the beginning of the death-slide of the dollar.

Stay tuned to your Bloombergs, it’s gonna be a bumpy ride.

If you’re interested, you can find my recorded presentation “Hyperinflation In America” here. I discuss in detail what I would do, if and when the dollar crashes.

Odious debt created by Predatory Capitalism and Bogus Govt. Bailouts should be repudiated by the American people!

Odious debt In international law;

Odious debt is a legal theory which holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, such as wars of aggression, should not be enforceable. Such debts are thus considered by this doctrine to be personal debts of the regime that [are] incurred [by]them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.

As Alex Newman explains,

Icelandic voters went to the polls over the weekend and delivered an overwhelming blow to bankers and governments attempting saddle the people with billions of dollars in debts to foreign states stemming from the failure of a private bank.

Partial referendum results were announced Sunday, revealing that more than 93 percent of Icelanders rejected the proposal to pay back $5.3 billion allegedly owed to the British and Dutch governments. Less than two percent voted yes. And afterward, Icelanders celebrated in the streets with fireworks.

"This is a strong 'No' from the Icelandic nation," said economist Magnus Arni Skulason with InDefence, a group which rallied opposition to the plan. "The Icelandic public understands that we are sovereign and we have to be treated like a sovereign nation — not being bullied like the British and the Dutch have been doing."

According to the organization and other critics of the proposal, the debts are not the responsibility of the Icelandic people, and the government bailouts to British and Dutch depositors on behalf of Iceland may have been illegal.

Under the 5.5-percent-interest repayment plan worked out by governments before talks fell apart last week, each Icelander would have been forced to pay about $135 per month for almost 10 years — about a fourth of average family income, according to an Associated Press report.

When the economic crisis began, Iceland’s overstretched banks began to feel the crunch. The currency was almost obliterated as furious Icelanders protested in the streets and brought down the government. The three largest banks collapsed.

Eventually, British and Dutch authorities began a series of actions culminating in a bailout of citizens who had money deposited in the banks, particularly the Landsbanki Internet bank known as IceSave. Some analysts even pinned at least part of the blame for the collapse of IceSave on the British government, which froze the bank’s assets using anti-terror laws back in 2008.

But still, European authorities asked the Icelandic government to force its 320,000 citizens to pay back the British and Dutch treasuries for the bailouts.

And while the Icelandic parliament agreed to make Icelanders foot the bill, President Olafur Grimsson refused to sign the repayment agreement because he objected to the terms. This sparked the referendum. Grimsson also noted that the people were not happy about being forced to repay the debts of “greedy bankers.”

"It was a very clear message and we fully respect that," Icelandic Finance Minister Steingrimur Sigfusson said after the referendum. "We want to find a solution that can be acceptable to everyone." But despite the vote, he claimed the Icelandic people would still be forced to repay the debts. Other officials echoed the sentiment as well.

"This has no impact on the life of the government," Prime Minister Johanna Sigurdardottir said of the referendum, adding that the current government would remain in power despite the results. “Now we need to get on with the task in front of us, namely to finish the negotiations with the Dutch and the British."

British officials also seemed confident that they would get the money despite the referendum result. “We've tried to be reasonable,” said British Treasury chief Alistair Darling. “The fundamental point for us is that we get our money back, but on the terms and conditions and so on, we're prepared to be flexible." However, he told the BBC, “There is no question we will get the money back.”

The International Monetary Fund has jumped in the fray on the side of governments and bankers, promising to loan Iceland more than $4 billion to revive its economy if it agrees to pay back the foreign governments it allegedly owes. But the Icelandic people are clearly not convinced and do not necessarily agree that the foreign governments should be reimbursed by taxpayers.

"I think it's the same kind of message that people all over the world would like to give to their government about the bailouts: 'We don't want to pay for a system that isn't working'" said one Icelandic voter interviewed by the BBC after the vote. "I think that what's happened is that people have said that they are not willing to accept being put into any sort of debt slavery," said another. A third said that people should not be forced to pay for the debts of a few “idiots.”

Iceland is at a crossroads. It can either suffer years of unnecessary economic pain by accepting the fraudulent claim that the people are responsible for the “odious debt” incurred by bankers and governments; or it can reject that notion and start over again.

Some commentators are hopeful that the Icelandic people could even throw off the whole corrupt system of debt-based fiat money and fractional reserve banking. Others predict that the nation will eventually cave in to the demands of governments and the banking elite.

But the results of this referendum illustrate that a rebellion against debt slavery is brewing. With any luck, it will spread beyond the isolated volcanic island and take hold among the American people and beyond.

Properly reforming the banking and monetary systems of the world would be the single best step that could be taken toward liberty, sound money, and a prosperous economy. And with financial problems hitting home for more and more people, the time to bring about true change has never been better.


Accidental Death Becomes Suicide When Insurers Dodge Payouts

Jane Pierce spent nine years struggling alongside her husband, Todd, as he fought cancer in his sinus cavity. The treatments were working. Then, in July 2009, Todd died in a fiery car crash. He was 46. That was the beginning of a whole new battle for Jane Pierce, this time with Todd’s life insurance company, MetLife Inc.

A state medical examiner and a sheriff in Rosebud County, Montana, concluded that Pierce’s death was an accident, caused when he lost control of his silver GMC pickup after passing a car on a two-lane road.

Their findings meant Jane was eligible to collect $224,000 on the accidental death insurance policy that Todd had through his employer, power producer PPL Corp. MetLife, however, refused to pay. The nation’s largest life insurer told Pierce on Dec. 8, 2009, that her husband had killed himself. The policy didn’t cover suicide, the insurer said, Bloomberg Markets magazine reports in its April issue.

“How dare they suggest such a thing,” says Pierce, 44, a physician assistant in Colstrip, a Montana mining and power production city of 2,346 people.

She says she’s insulted that the man who courageously battled his disease for a decade was accused by an insurance company of abandoning his wife and two sons -- one a U.S. Marine, the other a National Guardsman -- and giving up on his fight to live.

Pierce Sues

Pierce argued with MetLife for months. She supplied the insurer with the autopsy report, medical records and a letter from the medical examiner saying the death was accidental. MetLife still said no. Finally, in May 2010, she sued.

In July, a year after Todd’s death, MetLife settled and paid Pierce the full $224,000 due on the policy. The New York- based insurer, as part of the agreement, denied wrongdoing and paid Pierce no interest or penalties for the year during which it held her money.

Life insurers have found myriad ways to delay and deny paying death benefits to families, civil court cases across the U.S. show. Since 2008, federal judges have concluded that some insurers cheated survivors by twisting facts, fabricating excuses and ignoring autopsy findings in withholding death benefits.

Insurers can make erroneous arguments with near impunity when it comes to the 112.8 million life and accidental death policies provided by companies and associations to their employees and members. That’s because of loopholes in a federal law intended to protect worker benefits.

ERISA Loopholes

Under that law -- the Employee Retirement Income Security Act, or ERISA -- insurers can win even when they lose in court because they can keep and invest survivors’ money while cases are pending.

Congress enacted ERISA in 1974, after bankruptcies and union scandals caused thousands of employees to lose benefits. The law requires employers to disclose insurance and pension plan finances, and it holds company and union officials personally accountable for sufficient funding.

In order to achieve ERISA’s goals, federal courts have ruled that employees must surrender their rights to jury trials and compensatory and punitive damages if they sue an insurer for wrongfully denying coverage. Judges have reasoned that companies and insurers should have these protections to encourage them to continue providing benefits.

ERISA puts these issues under federal jurisdiction, so state regulators sometimes say they can’t help consumers.

‘Law Backfired’

“The most important federal insurance regulation of the past generation is ERISA,” says Tom Baker, deputy dean of the University of Pennsylvania Law School in Philadelphia. “If ever a law backfired for the public, ERISA is the perfect example.”

Life insurers do pay most claims in full -- more than 99 percent of the time, according to data from the American Council of Life Insurers, a Washington-based trade group. Nobody keeps track of how often companies delay making those payments or how often they use spurious reasons.

As of 2009, the latest year for which figures are available, insurers in the U.S. were disputing an accumulated total of $1.3 billion in claims, the ACLI reports. Included in that amount was $396 million in death benefits turned down in 2009. In the same year, insurers paid out $59 billion, the ACLI reports.

What those numbers don’t measure is the trauma survivors like Jane Pierce face when wrongfully denied, says Aaron Doyle, a professor of sociology and criminology at Carleton University in Ottawa.

Most Don’t Sue

Most survivors don’t have the stamina and knowledge to file a lawsuit, says Doyle, who has spent a decade interviewing life insurance customers, employees and regulators in the U.S. and Canada. Often, survivors are dissuaded by their insurers from taking their grievances to state regulators or to court, Doyle says.

“The company tells the customer, ‘Oh no, that’s not an unusual practice, so you don’t really have a complaint,’” he says.

Insurers have an obligation to policyholders and shareholders to challenge death claims they consider fraudulent, says John Langbein, a professor at Yale Law School who co- authored Pension and Employee Benefit Law (Foundation Press, 2010). Insurers maintain a reserve of money to cover benefits.

‘Conflict of Interest’

“It’s their job to protect the insurance pool by blocking undeserved payouts,” Langbein says. That doesn’t give them the right to wrongly deny claims, he adds. “There’s a profound structural conflict of interest,” he says. “The insurer benefits if it rejects the claim. Insurers like to take in premiums. They don’t like to pay out claims.”

MetLife and Newark, New Jersey-based Prudential Financial Inc. declined to answer all questions on cases cited in this story, as well as all queries about ERISA and accidental death policies.

“We pride ourselves on delivering on our promises, paying claims in accordance with the terms of the policy and applicable law,” says Joseph Madden, a MetLife spokesman.

“Our insurance businesses’ primary focus is on paying claims,” says Simon Locke, a Prudential spokesman. “Contested claims represent a small fraction of the overall number of claims that are paid. Prudential’s claims professionals are trained to conduct an appropriate review and follow applicable laws, regulations and the terms of the policy.”

Locke says Prudential denied 33 claims for misrepresentation in 2010, while paying out on about 255,000 policies. He declined to say how many claims Prudential denied for other reasons.

$7.7 Trillion

Company-provided life insurance is a big business. Employers can offer either accidental death policies -- which cover just fatalities an insurer deems to be an accident -- or term life insurance, or both. Group policies in the U.S. have a total face value of $7.7 trillion, or about 40 percent of all life insurance in the nation, according to ACLI data.

ERISA contracts bring the industry about $25 billion in annual revenue. MetLife says it has 20 percent of the ERISA market.

So eager are the largest insurers to get these ERISA contracts that they sometimes cross a line, according to prosecutors in California and New York. MetLife and Prudential have made improper undisclosed payments to brokers to win business with companies, according to settlements.

The Settlements

MetLife and Prudential each paid $19 million to settle accusations by the New York Attorney General’s Office in 2006 that they had illegally paid brokers to get new corporate clients. In a similar case, MetLife paid $500,000 and Prudential spent $350,000 to settle with three California counties in 2008. In those cases, the insurers didn’t admit wrongdoing.

On April 15, 2010, in a San Diego case, MetLife admitted that it broke the law by paying a dealmaker to win insurance contracts, and it agreed with the U.S. Department of Justice to pay $13.5 million to avoid criminal prosecution.

“MetLife made illegal payments that should have been fully disclosed,” says Karen Hewitt, who was then the U.S. attorney in San Diego and is now a partner at Jones Day. “Because they were not, the transactions were criminal.”

MetLife’s Madden says the company improved its broker compensation reporting starting in 2004. Prudential says it cooperated with investigators and enhanced disclosure.

The money life insurers refuse to pay to people like Jane Pierce is emblematic of how the industry is increasingly making efforts to delay paying out benefits. In the past two decades, insurers have made a common practice of keeping money owed to survivors in their own investment accounts, even after claims are approved.

Withholding Benefits

Instead of sending lump-sum checks to survivors, companies send them “checkbooks.” More than 130 insurers held $28 billion, as of July 2010, owed to families in these so-called retained-asset accounts.

Prudential, which has a contract with the U.S. government to provide life insurance to 6 million soldiers and their families, has sent such “checkbooks” to survivors requesting lump sums since 1999. MetLife uses the same system for payments to survivors of the 4 million federal employees it covers.

In September, seven weeks after Bloomberg Markets magazine reported that Prudential was sending “checkbooks” to families of those killed in combat, the U.S. Department of Veterans Affairs changed its policy and required that Prudential pay a lump sum when survivors make such a request.

Jane Pierce’s Battle

Jane Pierce’s battle with MetLife began two months after her husband died. Todd Pierce, a power plant mechanic for Allentown, Pennsylvania-based PPL, was diagnosed in 1999 with a skin cancer called squamous cell carcinoma, in his nasal cavity. The treatment of the disease itself was a success. Within two years, he was cancer-free.

During the next eight years, Todd had more than 40 surgeries to rebuild his jaw and palate following his medical therapies.

“He was a fighter,” Jane says.

On July 5, 2009, Todd was at a family reunion in Bismarck, North Dakota, 350 miles (560 kilometers) east of Colstrip. While there, he made plans to go pheasant hunting three months later with his father, Donald, and elk hunting with an old friend after that.

“He had a lot planned,” Jane says.

It was sunny and hot that day as Todd drove home. He had been on the road for more than four hours when, at 5:25 p.m., 18 miles north of Colstrip, he lost control of his pickup on Highway 39, according to state police records. The vehicle rolled down an embankment and burst into flames.

Letters and Calls

He died of smoke inhalation, according to the autopsy report. No one else was hurt in the accident.

A month later, MetLife sent Jane Pierce a “checkbook” for her to tap the $224,000 from Todd’s term life insurance policy through PPL. She didn’t receive any form of payment on Todd’s accidental death policy. Instead, for four months, MetLife officials flooded Jane with letters and phone calls.

They asked her to send them the state’s accident report, the death certificate, toxicology reports, medical records from 20 doctors and Todd’s drug prescription files.

Jane, who lives in a three-bedroom ranch house filled with framed photos of Todd and her sons, says she did everything she could to get MetLife all the facts. She didn’t know what the company was after and says she felt the insurer was trying to wear her down.

‘Misconstruing Information’

“I was just so frustrated,” she says. “MetLife was taking and misconstruing information to see if I would give up.”

At one point, a MetLife employee told her by telephone that Todd’s medical files showed he had toxic levels of Tramadol, a pain reliever, in his body when he died. Jane told him that a doctor had prescribed the drug for Todd.

At Jane’s request, Thomas Bennett, Montana’s associate medical examiner, explained the high readings of the pain medicine to MetLife.

“This Tramadol elevation is an artifact of the severe damage Mr. Pierce’s body received following the crash and is not a result of taking sky-high levels of the drug,” Bennett wrote. He said the drug wasn’t the cause of death.

Jane recounts the ordeal as she sits at her kitchen table with Debra Terrett, a family friend. Laid out before them are stacks of neatly organized health and insurance file folders.

“She not only lost Todd,” Terrett says. “Every time she had to go through the paperwork, she had to walk through losing him again.”

The Denial

The toughest day turned out to be Dec. 8, 2009. That’s when MetLife sent her an unsigned letter containing this sentence: “We will not pay benefits for any loss caused or contributed to by intentionally self-inflicted injury.” MetLife concluded that Todd had killed himself taking an overdose of Tramadol.

Jane says she was dumbfounded. She cried for days.

“It’s bogus,” she recalls thinking. “How can a responsible company possibly lie in such a terrifying way?”

Not only was Todd an upbeat man who had defeated a dreadful disease, he also opposed suicide as a matter of faith, Jane says. Todd and Jane attended St. Margaret Mary Catholic Church every Sunday, and they were members of a Bible study group.

“After a suicide in our town, Todd and I used to talk about it,” Jane says. “As Catholics, we agreed that was no way to heaven.”

A co-worker referred Jane to a lawyer, Don Harris, in Billings, Montana. Under ERISA, Harris had to first file an appeal directly with MetLife, which the insurer ignored, Harris says. Pierce sued the company in federal court in Billings for breach of contract in May 2010.

‘Very Quickly’

The insurer hired a local Montana lawyer who rebuffed Jane again, six weeks later. Harris says he had a rational telephone call with the lawyer about the facts.

“Very quickly, he realized that they didn’t have a leg to stand on,” Harris says. After that, MetLife agreed to pay out the full policy amount. The case never went to trial.

Because ERISA prevents compensatory and punitive damages, Pierce wasn’t entitled to receive anything more. Harris -- who was paid a fee of $4,500 for his seven months -- estimates that a jury not bound by ERISA would have awarded punitive damages of more than $1 million, or 5 to 10 times the death benefit.

“They accused her husband of committing suicide, which is outrageous,” he says. “They had no facts to support it. They just literally made it up.”

‘Nothing We Can Do’

Pierce never requested help from Montana’s insurance department. If she had, she would have been turned away, says Amanda Roccabruna Eby, a spokeswoman. She says the agency can’t assist people like Pierce because of ERISA’s federal preemption.

“There’s nothing we can do,” she says. “We don’t have any authority.” The department doesn’t even track ERISA complaints.

Prudential used the ERISA shield when it denied payment to the widower of a middle school teacher in Rochester, New York. Lois Brondon died of a heart attack at age 49 while refereeing a soccer game in May 2007.

The company refused to pay her husband, Christian, the $50,000 death benefit, saying the educator had failed to disclose her “heart trouble” when she applied for insurance.

Christian, who knew his wife had no history of a heart condition, sued Prudential in U.S. district court in Rochester.

“Mrs. Brondon had absolutely no symptoms referable to cardiac disease or heart trouble,” Judge Michael Telesca ruled on Nov. 9, 2010. He said her records showed common and mild thickening of the aorta that required no medical treatment and didn’t limit her activities in any way.

False Grounds

The judge said she’d been truthful on her application for insurance and ordered Prudential to pay the full $50,000.

The judge said Prudential’s reasoning created false grounds the company could use to wrongfully deny death benefits to others.

“Indeed, under such a scenario, only Prudential would be allowed to define what constitutes ‘heart trouble,’” the judge wrote.

Three weeks later, a judge in Lexington, Kentucky, ruled on a case that shows how inventive insurers can be in their denials -- even to the point of invoking drunk-driving laws when the person who died wasn’t in a car.

U.S. District Court Judge Joseph Hood ruled that Prudential had wrongly denied a $300,000 accidental death benefit to the family of Ernest Loan.

Loan, a medical sales representative for Bayer AG, fell down a staircase in his house after drinking three glasses of wine on June 29, 2006, according to court records. Prudential told his wife, Mimi, in a Nov. 7, 2006, letter that 53-year-old Ernest was drunk by state driving intoxication standards.

Court Reversal

The Loan family sued Prudential in January 2008. Hood initially dismissed the case, saying Prudential’s argument was sufficient under ERISA guidelines. The judge was reversed by the Sixth Circuit Court of Appeals, which said drunk-driving law doesn’t outlaw conducting chores around the house.

“A legal definition specifically intended to apply to someone who is driving a motor vehicle is not rational as applied to someone who is in his home and is not operating machinery,” the court wrote.

On Nov. 30, 2010, Hood ordered Prudential to pay the family $300,000.

The threshold for what judges will accept as evidence in an ERISA case can be so low that an insurer can use Internet searches and not interview witnesses.

Pfizer Employee

Brad Kellogg, an employee of Pfizer Inc., died in September 2004 when he drove his Dodge Caravan into a tree in Merced, California. MetLife paid his wife, Cherilyn, $443,184 under Kellogg’s term life policy. The insurer then received a letter from Stephen Morris, Merced County’s deputy coroner.

“Mr. Kellogg died as a result of traumatic injuries sustained in a motor vehicle accident,” Morris wrote. “His death is considered to be accidental.”

MetLife refused in November 2005 to cover his $438,000 accidental death policy, saying Kellogg’s death was caused by a seizure while driving. The insurer referred to a police report citing an eyewitness to the crash.

“It appears that Mr. Kellogg may have possibly had a seizure,” police wrote.

Cherilyn wrote to MetLife, disputing its conclusion, on Jan. 13, 2006. MetLife again refused to pay.

She sued in U.S. District Court in Salt Lake City on July 26, 2006, for breach of contract. MetLife didn’t provide medical evidence and didn’t specify what kind of seizure, court records show.

‘The Low End’

Judge Dale Kimball found that MetLife’s medical research was limited to Internet searches. The company failed to interview witnesses, the coroner, the police or responding paramedics and didn’t obtain Kellogg’s medical records, the judge wrote.

Even with those findings, Kimball dismissed the case. He said the insurer met the standard of proof under ERISA.

“The court need only assure that the administrator’s decision falls somewhere on the continuum of reasonableness -- even if on the low end,” the judge wrote.

The U.S. Court of Appeals for the 10th Circuit reversed that decision in December 2008.

“MetLife wholly ignored Kellogg’s counsel’s request for documentation,” the court wrote. “The car crash -- not the seizure -- caused the loss at issue, i.e. Brad Kellogg’s death.”

Kimball then ordered the insurer to pay the full face value of the accidental death policy, as well as $75,377 in legal fees and 10 percent interest.

Medical Errors

Under ERISA, insurers have also been able to dispute the nature of deaths that involve medical errors. In February 2007, Trudy Barnes, a 31-year-old housewife in Wills Point, Texas, had elective surgery for scoliosis, an abnormal curvature of the spine.

During the procedure at Baylor Regional Medical Center in Plano, an anesthesiologist incorrectly inserted a catheter into her chest causing massive internal bleeding, a medical examiner found. She died two days later.

Barnes’s husband, Clint, an aircraft mechanic, had purchased an American International Group Inc. accidental death insurance policy for Trudy in 2004. The coverage came through a group plan from his employer, L-3 Communications Holdings Inc., a New York-based company that maintains Air Force planes.

It was Trudy’s only life insurance policy.

AIG sent a letter to Clint on Sept. 6, 2007, saying it wouldn’t pay out on the policy.

‘We Regret’

“This is an accident-only policy and does not cover sickness or disease,” AIG, then the world’s largest insurer, told Clint in a letter. “We regret that our decision could not be favorable.”

Clint Barnes says he couldn’t believe an insurer could make up such an excuse.

“How could they say that when the death certificate says it’s an accident?” he asks. He needed $16,000 for his wife’s funeral, he says, and he expected to get the money from her insurance.

Barnes sued AIG for breach of contract in July 2008 in New York. His lawyer, Michael Quiat, says insurers face no risk when denying claims under ERISA.

“From a business standpoint, it makes perfect sense for them,” he says.

On Feb. 4, 2010, U.S. District Court Judge Denny Chin granted Barnes’s motion for summary judgment, meaning he found the facts against AIG so overwhelming that there was no need for a trial.

‘Arbitrary and Capricious’

“This was an unintentional, unexpected, unusual and unforeseen event -- an accident,” the judge ruled. “AIG’s determination to the contrary must be set aside as arbitrary and capricious.”

AIG paid Barnes the $148,000 death benefit, along with unspecified interest and attorney fees of $50,533. New York- based AIG spokesman Mark Herr declined to comment on the case.

“It is AIG’s practice to conduct a good faith review of all claims submitted to determine whether a particular claim is covered,” Herr says. “If a claim is not covered by the policy in question, we do not pay it.”

Barnes says he can see why life insurers would routinely deny legitimate claims.

“They know the average person doesn’t know what to do,” he says. “They figure you’re the little guy. Just pay us your money, and we’ll keep it.”

One of the highest-profile cases of an insurer refusing to pay a death benefit claim involved television correspondent David Bloom. He reported live from Iraq for NBC News for 18 days in 2003.

‘Trauma Plates’

He spent up to 20 hours a day sitting with his knees bent, jamming his 6-foot (1.8-meter) frame into a 2-foot-by-3½-foot space inside an M88 tank recovery vehicle, says his cameraman, Craig White.

“We were unable to straighten our legs, and we weren’t able to stand,” White says. “Added to this, we were required to wear chemical gear, flak jackets with trauma plates and helmets.”

On April 2, 2003, Bloom hurt his left foot leaping down from the vehicle to the sand, White says. Four days later, the journalist collapsed and died. He was 39.

A blood clot from his leg, called a deep vein thrombosis, had traveled through his bloodstream to his lungs, causing a fatal pulmonary embolism, his autopsy report says.

MetLife, which provided insurance for General Electric Co., then the parent company of NBC, paid Bloom’s wife, Melanie, $2.9 million on his term life policy. The insurer refused to pay on Bloom’s $1.2 million accidental death policy.

MetLife’s Doctor

In a denial letter dated July 23, 2003, MetLife said Bloom had died because his genetic background had put him at three to six times greater risk for a deep vein thrombosis than the average person. MetLife relied on Clayton Hauser, a St. Petersburg, Florida, family physician.

Hauser is the same doctor who in 1994 performed a drug test that resulted in a new employee at Bankers Insurance Group losing her job because of what she ate for breakfast. The insurer dismissed Julie Carter after Hauser determined she had tested positive for morphine.

Actually, Carter was clean; she’d just eaten two poppy seed bagels. Carter sued Bankers under a federal law protecting workers wrongly accused of drug use. She won $859,000 from the insurer.

“That’s not my fault,” Hauser says. “That’s what the lab reported. I collected a urine sample.”

Bloom’s Experts

In the Bloom case, Abraham Jaros, Melanie’s attorney, asked three medical experts to examine Bloom’s death, and each determined it was accidental. Kenneth Hymes, a professor at New York University School of Medicine, concluded that MetLife was wrong to blame Bloom’s genes for his death.

“That would be like saying the cause of a fire was oxygen rather than gasoline or a match,” Hymes wrote on Nov. 18, 2003. “Almost every person has some genetic mutation. Mr. Bloom had this gene mutation for 39 years, traveled extensively on airplanes with cramped conditions and experienced no problems.”

Melanie Bloom sued MetLife in federal court in New York in July 2004. The company settled for an undisclosed amount in October 2005. Melanie declined to comment in detail.

“Given the painful and deeply personal nature of this matter, I am not able to participate,” she says.

In Colstrip, Jane Pierce says the odds are stacked against families when insurers wrongfully deny benefits.

“I think it’s just a racket,” she says.

Sitting at her kitchen table, she recalls how her husband’s health had been improving just before his death and how she and Todd were looking forward to skiing in the winter. Two years after Todd died, his voice is still on their home answering machine.

Jane says she got the strength to fight a life insurance company from Todd, who would never give up.

“He’d amaze me,” she says.

Editors: Jonathan Neumann, Gail Roche