Tuesday, December 27, 2005

Signs of the Economic Apocalypse 12-26-05

From Signs of the Times 12-26-05:

Gold closed at $505.90 an ounce on Friday, up less than 0.1% from $505.50 the week before. The dollar closed at 0.8425 euros last week, up 1.2% from 0.8323 at the previous Friday’s close. That put the euro at 1.1869 dollars, compared to 1.2015 the week before. Gold in euros would be 426.24 euros an ounce, up 1.3% from 420.72 euros an ounce the Friday before. Oil closed at 58.43 dollars a barrel Friday, up 0o.6% from $58.06 the week before. Oil in euros would be 49.23 euros a barrel, up 2.1% from 48.23 euros a barrel the Friday before last. The gold/oil ratio closed at 8.66 Friday, down 0.6% from 8.71 at the previous Friday’s close. In U.S. stocks, the Dow closed at 10,883.27 on Friday, up less than a tenth of a percent for the week from 10,875.59. The NASDAQ closed at 2,249.42, down 0.1% from 2,252.48 the week before. The yield on the ten-year U.S. Treasury note closed at 4.38%, down six basis points from 4.44 the week before.

Friday saw the release of the U.S. new housing sales numbers for November. The numbers were surprisingly bad:
New Home Sales Plummet in November

Sales of new homes plunged in November by the largest amount in nearly 12 years, providing the most dramatic evidence yet that the red hot housing market over the last five years is starting to cool down.

The Commerce Department reported Friday that new single-family homes were sold at a seasonally adjusted annual rate of 1.245 million units last month, a drop of 11.3 percent from October, when sales had surged to an all-time high.

Last month's decline was even bigger than the 8.7 percent drop-off that Wall Street analysts had been expecting. While sales of both new and existing homes are still on track to set records for a fifth straight year in 2005, analysts are forecasting sales will decline in 2006 as the housing boom quiets down.

Prices for houses declined as well, an unsold inventory is building up rapidly.

The New York transit strike dominated the news in the early part of the week, with the corporate media attacking the workers for being heartless and greedy. To put that charge in perspective, we need to look at those workers in the context of the whole New York economy:
Christmas in New York
Billions in bonuses for Wall Street execs; mayor denounces “selfish” transit workers

By Jerry Isaacs23 December 2005

Earlier this week New York’s Mayor Michael Bloomberg denounced striking transit workers as overpaid and selfish “thugs” who were indifferent to the impact of their walkout on the city’s working poor. These comments were rather rich coming from a mayor who, with a net worth of $5 billion, is rated number 34 on Forbes magazine’s list of wealthiest Americans.

But Bloomberg wasn’t speaking just for himself. The transit strike was viewed as a virtual slave rebellion by New York’s entire financial elite, which has been enriching itself beyond imagination for the last quarter century.

For transit workers, already struggling to make ends meet in one of the costliest cities in world, this Christmas will be a toned down affair, particularly with the threat of heavy fines hanging over their heads, including the loss of two days pay for every day on strike. For Wall Street executives, however, this will be a very merry Christmas.

December is the month for year-end bonuses for Wall Street’s traders, brokers and investment bankers and this year the top layers are expected to pocket some $17 billion in incentive payouts. According to Johnson Associates Inc., a compensation consulting firm, the average bonus for a managing director will be $1.2 million, with top investment bankers and prime brokers seeing checks padded by as much as 20 percent more than 2004’s bonuses. Specialists in energy markets, hedge funds and proprietary trading will likely earn even more.

According New York magazine, Goldman Sachs has put aside $11 billion for bonuses. With 22,000 employees worldwide, that would amount to $500,000 a piece. But not everyone makes the same. Goldman’s top officials—250 partner managing directors—get an average bonus of $2 million to start. Top producers can expect incentive awards of up to $40 million. The next tier of management—executive managing directors—can ring in 2006 with bonuses of up to $3 million.

After the Enron and other corporate scandals there was a certain media and legal attention paid to the massive payoffs on Wall Street. As the scrutiny of such excesses has all but disappeared, so has any reticence over grabbing as much as possible.

“People have had enough of listening to bad news,” said Glenn Mazzella of World Wide Yacht Corporation. “They want to go yachting, and they want to go skiing and they want to drive a Maybach (a German car that retails for $325,000). They’re tired of feeling embarrassed.”

“There’s someone on Wall Street that’s taking 20 of his closest buddies for his bachelor party, renting a yacht, cruising the Caribbean and ending up in Sandy Lane in Barbados on the golf course,” says Tatiana Bryon, president of the New York event planner 4PM Events. The cost: $200,000.

The windfall has also sparked sales of Hummer sport utility vehicles and luxury sports cars. John Bruno Jr., general sales manager of Hummer of Manhattan, says he sold 29 percent more of the General Motors Corp.-made sport utility vehicles this September compared with a year ago. The majority of sales are of the H2, with luxury packages starting at more than $61,000, and the military-specification H1, which sells for $129,000 or more. “We get a lot of Wall Street guys,” says Bruno.

The $200,000 Italian-made Lamborghini Gallardo is this year’s hottest car at Gotham Dream Cars LLC, says Noah Lehmann-Haupt, president. Clients including mortgage brokers and traders pay $1,750 a day to drive the 200-mile-per-hour machines. Lehmann-Haupt says he is planning to almost double the Upper West Side exotic car rental company’s fleet next year to 11, including the new Gallardo Spyder.

The mayor of New York has nothing to say about this grotesque consumption while he denounces transit workers who earn $50,000 a year. Bloomberg, like the rest of New York’s elite, lives in an entirely different universe from the working class of the city who struggle to meet the high cost of living.

According to salary.com, New York is the least affordable metro area in the US. “Employers in New York typically pay 15.5 percent higher than the national average, BUT the cost of living in New York is 94 percent higher. This means that an average worker currently earning $50,000/year in the average US city would have to earn approximately $37,000 more a year in New York to maintain his or her standard of living. A $37,000 raise is a hard thing to come by, even in the Big Apple.”

It’s a hard thing to come by for most, but it’s a pittance for some, particularly on Wall Street.

On the transit picket lines, workers readily answered the billionaire mayor’s remarks. “Bloomberg is a jerk,” said Grant, a train repairman in Queens. “He’s talking like we’re his servants and we’re getting out of hand. They have all the money. They’ll never see the wear and tear on their bodies that we go through. They work in clean rooms, in cushy chairs, with temperature control. On some days during the summer it’s over 100 degrees in the depot. It’s like you’re in a box and have to be bent over every day.

“What’s Christmas like for New York’s elite? They fly their friends to the Bahamas and buy their girlfriends drinks costing thousands of dollars, like the one I saw on TV that is a glass of diamonds with alcohol poured over them. In one drunken night some of these guys spend more money than we earn all year.

“More than half of our incomes go for housing. It costs $1,500, $1,600 or $1,700 a month for rent. People are going to have to live in group communes just to afford the rent. Then you have to pay higher prices for food, gas and things our children need. We work to pay our bills so we can go to work again. There’s never enough just to go to a movie or buy some new shoes or take the kids where you really want to go.

“Four percent wage increases hardly keep up with the rate of inflation of food and other costs. Now they want to mess with our pensions so one day when you’re in a nursing home they’ll just shove you in the street when you run out of money.

“That’s why we went on strike. We shut down the city to show them that we won’t take any more.”

Now why would Goldman Sachs alone pay out 12 billion in bonuses? That’s more than the annual revenue of all but the largest corporations. This money comes directly out of the pockets of investors (including large institutional funds like pension funds). Can there be any doubt that Wall Street siphons too much out of the system through parasitical, yet mostly legal, insider schemes? Some will argue that the year-end bonuses are compensation for performance. But why so much? But even if you accept that, why does Wall Street and their mouthpieces in the media begrudge transit workers the subsistence wages they are earning? Here is some of what the media mouthpieces were pushing:

Behind the media onslaught on the transit workers

By Peter Daniels

23 December 2005

While New York City’s striking transit workers were winning broad sympathy and support from millions of working people this week, the mass media swung into action with a predictably unanimous campaign of hysterical slanders against the strikers.

This may have been predictable, but it was no less significant. Both print and broadcast media, in every case the organs of billion-dollar corporate empires, did their best to ignore the public support for the workers, while manufacturing their own version of public opinion.

Rupert Murdoch’s New York Post was perhaps the crudest along these lines, with an overline, “A message from New York commuters to striking workers,” followed by the screaming two-word headline, “You Rats.”

On television, ABC News found someone unable to get to his brother’s wake, which was blamed on the strikers. Television reporters cornered an emergency medical technician and attempted to get him to say that the workers had endangered the life of a patient whose trip to the hospital was slowed by traffic. Several individuals were featured in 20-second sound bites with one-word punch lines like “outrageous” and “unconscionable,” referring to the strike. No transit workers or supporters were interviewed on camera.

The Daily News, owned by multimillionaire Mortimer Zuckerman, took the prize for rabid labor-baiting verging on incitement to violence, with an editorial entitled, “Throw Roger from the train!” referring to TWU Local 100 President Roger Toussaint.

“Roger Toussaint, we dare you to take to the Brooklyn Bridge this morning to tell the cold, walking throngs why you chose to disrupt the lives of millions, jacked up the expenses of tens of thousands, shuttered and crimped business, opposed the subway system to terrorism and generally threatened the public health and welfare,” the News editors shrieked.

“It would be delicious watching you try to justify the reckless, lawless transit strike that you have inflicted on the city—assuming your fellow New Yorkers didn’t hurl you over the railing into the icy waters before you got a word out ...”
In fact, although those crossing the Brooklyn Bridge no doubt include some disgruntled middle class and wealthy commuters, it’s a safe bet that transit workers would also be met with warm support there, as evidenced by drivers honking in support of transit pickets, and even in numerous letters to the same papers whose editors denounced the workers.

What passes for the “liberal” press joined in the attacks on the union. The New York Times headlined its nervous editorial, “An Unnecessary Transit Strike,” while Newsday denounced this “outrageous and illegal action.”

The media attacks against the workers fall into two main categories: First, the transit workers, averaging more than $50,000 annually in wages, are greedy. Second, in the pious and hypocritical words of Mayor Michael Bloomberg, “we live in a country of laws where there can be severe consequences for those who break them.”

Talk of greed is a bit ironic from a man who just spent more than $70 million to buy his reelection, or more than $100 for each ballot cast in his favor. Bloomberg is mayor of the capital of world finance for one overwhelming reason—his enormous wealth. No one who stops to consider his background and qualifications, even accepting his claims to managerial expertise, can doubt for a moment that he would never have been considered for the post, nor would his name even be known to the vast majority of the population, if not for his wealth. He convinced his fellow billionaires that he would do an effective job in defending their interests, and he then bought the election, something that was not very difficult considering the nature of the American two-party system and the complete political disenfranchisement of the working class majority.

Shameless is too mild a word to describe the arrogance of the billionaires who scream greed against workers who are paid barely enough to live on while carrying out work that is physically and psychologically stressful. Meanwhile, at this very moment, the Wall Street brokerage houses are handing out million-dollar year-end bonuses to several thousand traders whose work includes nothing productive.

It is interesting to note, by the way, that in recent years the newspapers have generally trumpeted the appearance of these year-end bonuses in the financial services sector, pointing to them as a sign of vitality for the local economy. This year, in the midst of the strike of the “greedy” transit workers, the Wall Street bonus story seems to have disappeared.

What about the charge of illegality? We are ruled by a government in Washington that was illegal and illegitimate from its first day in office nearly five years ago. The figurehead for this cabal is a man who has been secretly authorizing illegal wiretapping of thousands of US citizens over the last several years. Last weekend George W. Bush proudly reaffirmed his right to make his own rules and ignore laws he opposes.

None of the newspaper reporters covering the transit strike has asked Bloomberg, the Republican mayor, for his opinion on the rule of law in this case. Perhaps that is what he meant when he said that “there can be severe consequences” for breaking the law. It does not follow automatically. The workers who courageously defy an anti-strike law, a law comparable to the laws defied by the millions who organized trade unions in the 1930s and fought against Jim Crow segregation in the 1950s and 1960s, must be punished. A president who moves toward the destruction of the most basic democratic rights is another matter entirely.

Behind the lies spread against the transit workers are very definite material interests and a definite strategy being pursued by dominant sections of the US political and financial establishment. The aims are spelled out in the Wall Street Journal, the mouthpiece of extreme reaction.

The December 21 editorial explains what is at stake in the transit strike. The editors are somewhat contemptuous even of Republican Governor George Pataki and Mayor Bloomberg for having “caved” to the municipal unions in the past. By this they mean that the big business politicians have been unable to push through the kinds of attacks on the wages and benefits of public employees that are deemed necessary.

The incredible polarization and explosion of wealth for a tiny handful on Wall Street is not enough to assure the health of the capitalist system. The system, by its own admission, in the words of the Journal, requires a relentless and unending series of attacks on every gain that has been made by working people over the past century. The editors seethe with fury over workers’ salaries of $50,000 a year. Pensions and health care also have to go, especially to set a precedent for literally millions of government workers elsewhere. Public transit itself has to go, according to the Journal. “Pataki and Bloomberg ... could use this strike as an opportunity to end the public transit monopoly by legalizing all forms of private competition—including jitneys.”

And this type of society, pathocratic investment capitalism (where those who trade various instruments of ownership rights take home everything while the people who make things and make things run can barely make ends meet) is spreading to Europe, too.

“Life is good for the wealthy”
Germany: Social inequality is constantly growing

By Dietmar Henning

19 December 2005

A new report has found that the gap between rich and poor in Germany has grown considerably and will continue to do so. The report, published recently by the Economics and Sociological Institute (WSI) of the trade-union financed Hans Böckler Foundation, was titled “Life is good for the wealthy.”

Dr. Claus Schäfer, author of the WSI report, presents various statistics that show the level of social inequality in Germany today, as well as the growth of inequality under the previous Social Democratic Party (SPD)-Green Party coalition government. The policies of the incoming grand coalition of the Christian Democratic Union (CDU) and Social Democrats will further widen the gulf between wage earners and those with property or incomes from business activities.

The overall share of wages as a proportion of income of all types has fallen constantly since 2000, dropping below 70 percent last year, for the first time since 1990. In the first half of 2005, it amounted to only 65.7 percent.

The net wages ratio—the proportion of wages and salaries (after the deduction of social security contributions and payroll taxes) as a share of all income—and which approximates to how much disposable income remains in workers’ pay packets, has followed a similar pattern. It has dropped from 48.1 percent in 1991 to 41.5 percent last year. In the first half of 2005, the net wages ratio sank even further, to under 39 percent. How far workers’ disposable incomes have fallen can be seen by the fact that in 1960 the net wages ratio amounted to 55.8 percent.

While wages and salaries are falling, incomes derived from business profits and wealth are rising. Since the stock market collapse in 2000 and 2001, such incomes have risen strongly, both relatively and absolutely, with a net share of the national income of approximately 32 percent (29.3 percent in 1992, 24.4 percent in 1960).

…Company profits are hardly subject to taxation in Germany today. Some 25 years ago, in 1980, company profits were taxed on average at a rate of 32.7 percent. In 1990, the year of German reunification, this had fallen to around 21 percent. Under the SPD-Green Party government, this fell temporarily to 6.3 percent, with the virtual abolition of corporation taxes in 2001 and 2002. Last year, the rate had risen to 9.2 percent, but is still at a “historically extraordinarily low level,” according to the report’s author, Claus Schäfer. Moreover, it is a well-known fact that for a long time the largest companies, like DaimlerChrysler, have paid no taxes at all.

Schäfer notes that only a few countries have such low levels of corporation tax as Germany: “At 1.3 percent of GDP, this level of corporation tax places Germany in 29th position out of all OECD countries, making it a tax haven—above Iceland or Latvia or Lithuania.”

Schäfer also points out that the repeated lowering of business taxes has had quite a different effect than government propaganda would make out. The result has not been an inflow of new investments and the creation of new jobs, but “a continuous increase in payments to shareholders” as well as the “rising acquisition of financial assets and increasing executive board salaries”—in other words, an enormous redistribution from below to above.

Schäfer deals only briefly with the record gains of companies listed on the German DAX stock exchange, and the corresponding number of jobs being slashed. A recent media report by the news station N24 announced on November 29, “In the third quarter, large companies like chemicals giant BASF, auto concern BMW or sports goods manufacturer Adidas-Salomon have reported excellent profits.” However, “The classical rule that companies with rising profits invest more and create new jobs no longer functions.”

Increasing poverty

The spending cuts contained in the coalition agreement between the CDU and SPD will lead to a further rise in poverty in Germany. This applies not only to cuts in social expenditure, directly affecting the unemployed, the sick or pensioners, but also indirectly through other austerity measures.

For example, savings by the federal state on public transport will be passed on to the customer. Fare increases or the abandonment of whole routes—like the increase in value-added tax—will above all be to the detriment of low- and average-wage earners. The wealthy do not need a welfare state or public services.

According to the government, approximately 13.5 percent of all Germans already count as poor. Schäfer puts this number even higher, since it is calculated on the basis of positive incomes. Some 8 percent of the population who are considered highly indebted are not taken into consideration. Although their income lies over the poverty line, their debts mean they struggle to survive, making the real level of poverty somewhere between 13.5 and 21.5 percent.

The credit agency Schufa recently pointed out that serious personal debt is increasing drastically. They note that some 10 percent of the 62 million people for whom they have records—approximately 6 million—experienced financial difficulties in the past three years. Approximately 2.6 million people are registered with Schufa under the “red” risk level, and cannot receive a cent in credit because they have already initiated private insolvency proceedings or have declared bankruptcy.

When the SPD-Green Party government came to office in 1998, it initiated an accelerating downward social spiral: the public purse “becomes impoverished” because of one-sided tax breaks for the wealthy and big business. The empty public coffers and rising national debt then serve as the reason for a new round of savings and a more unequal distribution of fiscal charges. The grand coalition under Angela Merkel (CDU) has set itself the task of increasing the rate of this downward spiral and breaking any resistance to it.

For this reason, a word should also be said regarding the conclusions that the report draws. Schäfer, who was employed by the trade-union-financed Hans Böckler Foundation, suggests a national solution for the problems of rising poverty and social polarisation: the strengthening of domestic demand. According to this argument, it is only necessary to reverse the redistribution process—e.g., by “reviving wealth tax, increasing the taxes on inheritance, businesses and those with high private incomes, while lowering the tax burden for employees,” etc.

Schäfer expressly rejects the significance of international factors: “It is not ‘uncontrollable’ external forces such as globalisation that are responsible for the lack of German growth and the job market misery, but a counterproductive national policy that has weakened the domestic demand of private households and the public sector,” he concludes.

This is absurd, as can be seen from the fact that there is not a single government worldwide—either social democratic, liberal or conservative—that follows the prescriptions suggested by Schäfer. The globalisation of production, trade and the financial markets has undermined the mechanisms which in the past ameliorated social contradictions within the national framework. More and more, a powerful international finance oligarchy, which does not accept any restrictions on increasing the rate of profit, determines policy in each individual country. It would react to higher taxes and state spending by withdrawing its capital, throwing the economy into a deep crisis.

If this is happening in the heart of social-democratic western Europe, then we really can see the operation of a “powerful international finance oligarchy.”
Given the fact that the proceeds of any economic growth, anywhere on earth, will only go to the super-rich owners, why should we be happy when we read articles like the following touting the fact that the economy is growing? Given the way the elite have acted and spoken in New York, it doesn’t look like they are going to let any wealth trickle down. In any event, notice that this headline, which looks like good news is referring to the third quarter of 2005 and that the numbers were adjusted downwards from the earlier published estimates.
Economy Grows at Fastest Pace in 1 1/2 Years


The U.S. economy turned in a remarkably strong performance in the summer despite surging energy prices and the battering the Gulf Coast states took from hurricanes, although business growth was slightly lower than the government previously estimated.

The Commerce Department reported Wednesday that the gross domestic product, the nation's total output of goods and services, rose at an annual rate of 4.1 percent in the July-September quarter. It was the fastest pace of growth in 1 1/2 years.

While down slightly from the 4.3 percent GDP estimate made a month ago, the new figure demonstrated that the economy kept expanding at a strong pace during the summer, led by solid increases in consumer demand, especially for autos, and business investment.

The third quarter performance was up substantially from a 3.3 percent GDP growth rate in the April-June quarter and was the best showing since the economy expanded at a 4.3 percent rate in the first three months of 2004.

The Bush administration, which has been on a concerted campaign to highlight the economy's strong points to bolster the president's approval ratings, said the 4.1 percent GDP growth rate was evidence of a vibrant economy.

"Today's GDP is more proof that businesses are booming and investors are confident," Commerce Secretary Carlos Gutierrez said in a statement. "The U.S. economy demonstrated its resilience in the last several months."

Analysts believe growth has slowed substantially in the current quarter to between 3 percent and 3.5 percent, reflecting slower increases in consumer spending now that attractive auto incentives have been removed.

So after trumpeting last summer’s good growth numbers, only when we read deeply into the article do we see that growth has dropped “substantially” in the fourth quarter.
…An inflation gauge tied to the GDP rose at a rate of 3.7 percent in the third quarter, the fastest pace in more than a year and up from a 3.3 percent rate of increase in the second quarter.

However, excluding food and energy, the GDP inflation measure was up a more moderate 1.4 percent, the slowest increase in almost two years.
Prices by this inflation measure had been estimated to have increased by an even lower 1.2 percent a month ago.

They want us to look at how good the inflation numbers are if you exclude two of the three necessities of life: food and energy. That leaves housing, and we can’t look at a drop in housing prices as good news for the economy!

While the news out of Europe and the United States is bad, things are looking up, at least for now, in Latin America. The election in Bolivia of Evo Morales can only be a good thing. Here is a translation of one of his speeches:

Evo Morales: "I Believe Only in the Power of the People"
The Bolivian indigenous leader's speech at "In Defense of Humanity" forum in Mexico City

Recorded by Adam SaytanidesTranslated by Ricardo Sala
October 25, 2003

Thank you for the invitation to this great meeting of intellectuals "In Defense of Humanity." Thank you for your applause for the Bolivian people, who have mobilized in these recent days of struggle, drawing on our consciousness and our regarding how to reclaim our natural resources.

What happened these past days in Bolivia was a great revolt by those who have been oppressed for more than 500 years. The will of the people was imposed this September and October, and has begun to overcome the empire's cannons. We have lived for so many years through the confrontation of two cultures: the culture of life represented by the indigenous people, and the culture of death represented by West. When we the indigenous people ­ together with the workers and even the businessmen of our country ­ fight for life and justice, the State responds with its "democratic rule of law."

What does the "rule of law" mean for indigenous people? For the poor, the marginalized, the excluded, the "rule of law" means the targeted assassinations and collective massacres that we have endured. Not just this September and October, but for many years, in which they have tried to impose policies of hunger and poverty on the Bolivian people.

Above all, the "rule of law" means the accusations that we, the Quechuas, Aymaras and Guaranties of Bolivia keep hearing from our governments: that we are narcos, that we are anarchists. This uprising of the Bolivian people has been not only about gas and hydrocarbons, but an intersection of many issues: discrimination, marginalization , and most importantly, the failure of neoliberalism.

The cause of all these acts of bloodshed, and for the uprising of the Bolivian people, has a name: neoliberalism. With courage and defiance, we brought down Gonzalo Sanchez de Lozada ­ the symbol of neoliberalism in our country ­ on October 17, the Bolivians' day of dignity and identity. We began to bring down the symbol of corruption and the political mafia.

And I want to tell you, companeras and companeros, how we have built the consciousness of the Bolivian people from the bottom up. How quickly the Bolivian people have reacted, have said ­ as Subcomandate Marcos says ­ ¡ya basta!, enough policies of hunger and misery.

For us, October 17th is the beginning of a new phase of construction. Most importantly, we face the task of ending selfishness and individualism, and creating ­ from the rural campesino and indigenous communities to the urban slums ­ other forms of living, based on solidarity and mutual aid. We must think about how to redistribute the wealth that is concentrated among few hands. This is the great task we Bolivian people face after this great uprising.

It has been very important to organize and mobilize ourselves in a way based on transparency, honesty, and control over our own organizations. And it has been important not only to organize but also to unite. Here we are now, united intellectuals in defense of humanity ­ I think we must have not only unity among the social movements, but also that we must coordinate with the intellectual movements. Every gathering, every event of this nature for we labor leaders who come from the social struggle, is a great lesson that allows us to exchange experiences and to keep strengthening our people and our grassroots organizations.

Thus, in Bolivia, our social movements, our intellectuals, our workers ­ even those political parties which support the popular struggle ­joined together to drive out Gonzalo Sánchez Lozada. Sadly, we paid the price with many of our lives, because the empire's arrogance and tyranny continue humiliating the Bolivian people.

It must be said, compañeras and compañeros, that we must serve the social and popular movements rather than the transnational corporations. I am new to politics; I had hated it and had been afraid of becoming a career politician. But I realized that politics had once been the science of serving the people, and that getting involved in politics is important if you want to help your people. By getting involved, I mean living for politics, rather than living off of politics.

We have coordinated our struggles between the social movements and political parties, with the support of our academic institutions, in a way that has created a greater national consciousness. That is what made it possible for the people to rise up in these recent days.

When we speak of the "defense of humanity," as we do at this event, I think that this only happens by eliminating neoliberalism and imperialism. But I think that in this we are not so alone, because we see, every day that anti-imperialist thinking is spreading, especially after Bush's bloody "intervention" policy in Iraq. Our way of organizing and uniting against the system, against the empire's aggression towards our people, is spreading, as are the strategies for creating and strengthening the power of the people.

I believe only in the power of the people. That was my experience in my own region, a single province ­ the importance of local power. And now, with all that has happened in Bolivia, I have seen the importance of the power of a whole people, of a whole nation. For those of us who believe it important to defend humanity, the best contribution we can make is to help create that popular power. This happens when we check our personal interests with those of the group.
Sometimes, we commit to the social movements in order to win power. We need to be led by the people, not use or manipulate them.

We may have differences among our popular leaders ­ and it's true that we have them in Bolivia. But when the people are conscious, when the people know what needs to be done, any difference among the different local leaders ends. We've been making progress in this for a long time, so that our people are finally able to rise up, together.

What I want to tell you, compañeras and compañeros ­ what I dream of and what we as leaders from Bolivia dream of‹ is that our task at this moment should be to strengthen anti-imperialist thinking. Some leaders are now talking about how we ­ the intellectuals, the social and political movements ­ can organize a great summit of people like Fidel, Chávez and Lula to say to everyone: "We are here, taking a stand against the aggression of the US imperialism." A summit at which we are joined by compañera Rigoberta Menchú, by other social and labor leaders, great personalities like Pérez Ezquivel. A great summit to say to our people that we are together, united, and defending humanity. We have no other choice, compañeros and compañeras ­ if we want to defend humanity we must change system, and this means overthrowing US imperialism.

That is all. Thank you very much.

So, what’s in store for Evo Morales? For some clues, here is a song, since it’s Christmas, about Jesus from Woody Guthrie, the man who fought fascism with a guitar:

Jesus Christ

Jesus Christ was a man who traveled through the land

A hard-working man and brave

He said to the rich, "Give your money to the poor,"

But they laid Jesus Christ in His grave

Jesus was a man, a carpenter by hand

His followers true and brave

One dirty little coward called Judas Iscariot

Has laid Jesus Christ in His Grave

He went to the preacher, He went to the sheriff

He told them all the same

"Sell all of your jewelry and give it to the poor,"

And they laid Jesus Christ in His grave.

When Jesus come to town, all the working folks around

Believed what he did say

But the bankers and the preachers, they nailed Him on the cross,

And they laid Jesus Christ in his grave.

And the people held their breath when they heard about his death

Everybody wondered why

It was the big landlord and the soldiers that they hired

To nail Jesus Christ in the sky

This song was written in New York City

Of rich man, preacher, and slave

If Jesus was to preach what He preached in Galilee,

They would lay poor Jesus in His grave.

Words and Music by Woody Guthrie© 1961 (renewed) and 1963 (renewed) by TRO-Ludlow Music, Inc.

Monday, December 19, 2005

Signs of the Economic Apocalypse, 12-19-05

From Signs of the Times, 12-19-05:

Gold pulled back last week, closing at 505.50 dollars an ounce, down 5.2% from $532.00 last week. The dollar closed at 0.8323 euros on Friday, down 1.7% from 0.8466 euros the week before. The euro, then, was worth 1.2015 dollars at Friday’s close, compared to 1.1812 the previous week. Gold in euros, then, would be 420.72 euros an ounce, down 7.1% from 450.39 the Friday before. Oil closed at 58.06 dollars a barrel, down 2.9% from $59.76 at the previous week’s close. Oil in euros would be 48.23 euros a barrel, down 4.9% from 50.59 euros the week before. The gold/oil ratio closed at 8.71, down 2.2% from 8.90 the previous week. The yield on the ten-year U.S. Treasury note was 4.44%, down nine basis points from 4.53 the week before. In the U.S. stock market, the Dow Jones Industrial Average closed at 10,875.59 on Friday, up 0.9% from10,778.58 at the previous Friday’s close. The NASDAQ closed at 2,252.48, down 0.2% from 2,256.73 the week before.

Another strange week. With the price of gold falling more than 5% and oil down about 3%, both markets that are susceptible to short term manipulation, it looks like they want us to keep our heads in the sand for a few more weeks or at least until after Christmas. But the people don’t seem to be falling for it completely this time, as holiday retail sales are okay but not great, due to consumer anxiety:

Malls Full but Sales Not Spectacular


December 18, 2005
NEW YORK (AP) -- Retailers remained anxious Sunday, after the last full weekend of shopping before Christmas appeared robust but not spectacular, despite generous bargains for many goods.

The retail industry -- which had an uneven start to the holiday season and has seen disappointing crowds at the malls since -- was hoping for a big sales bonanza. But with lean inventories and the final critical days still yet to come, stores are not panicking.

Again, merchants are relying on procrastinators during the final days before Christmas and post-holiday sales -- expected to be boosted by the redemption of gift cards.

''This was a healthy weekend, but it wasn't something to knock your socks off,'' said Marshal Cohen, chief analyst at NPD Group Inc., a market research company based in Port Washington, N.Y. ''But stores aren't panicking because the season has more time to go. The trickiness of the season is that consumers are calling the shots on where they were going shopping.''

The winners and losers this weekend were the same ones throughout the season. Discounters and electronics stores drew in the most crowds, while mall-based apparel stores were a mixed bag, Cohen said. Luxury stores did well, though he believes their sales gains aren't as robust as a year ago.

Wal-Mart Stores Inc., the world's largest retailer, said Saturday that December sales growth is still on track to be up anywhere from 2 percent to 4 percent. But it noted that food sales continue to outpace general merchandise sales. That may not bode well for profits, as food carries thin profit margins.

….Nevertheless, analysts have been worried about disappointing business at the mall, a sign that shoppers are frugal amid high energy costs, though they have fallen in recent weeks.

According to the most recent data from ShopperTrak RCT Corp., which tracks sales at more than 40,000 stores, predominantly in malls, average weekly sales for December fell 9 percent through Dec. 10.

''I did more shopping this year in drugstores and small stores like that rather than department stores,'' said Sharon McKinley of Baltimore, who was at Mondawmin Mall in Baltimore.

She noted that higher gasoline prices and heating costs played a factor.

''I found out I had to pay more for gas and electric. It made a difference,'' she said.

Amid a challenging economy, stores offered more generous discounts from the start of the season than a year ago, but most bargains have been planned, according to Tamara Pattison, vice president of products for Cairo.com, an online shopping resource that helps consumers track deals locally.

J.C. Penney Co. Inc., which opened its doors for 17 hours straight on Saturday, offered up to 60 percent off on merchandise. At Macy's Herald Square, sweaters were marked half off.

''Because most things are 50 percent or 75 percent off, you can really get a deal. I think this is the best time yet,'' Denise Jones of Baltimore said Saturday.

The U.S. consumer’s scepticism of the claim that the U.S. economy is healthy is reflected in the U.S. citizen’s scepticism that the war in Iraq is going well, even with George Bush saying the United States is winning it. These two things: the Iraq War and the U.S. economy are not as unrelated as it might seem. George Bush bet the fortunes of the entire ruling elite in the United States on the outcome of the invasion of Iraq and now, nearly three years later, the outcome doesn’t look good for them. This is why the institutions like the Democratic Party and the New York Times think they have no choice but to go along with Bush’s war, EVERTHING was bet on it.

While seizing control of Iraq’s oil was a huge part of the plan to maintain U.S. imperial dominance, it wasn’t the only one. There was also to be an intimidating display of technological military dominance (shock and awe) directed at potential rivals all over the world. There would also be healthy profits for military contractors of all types that would stimulate a stumbling economy. To top it all off, the pretext for the war, the conveniently times 9/11 attacks, allowed the Bush regime to eliminate any vestiges of the Bill of Rights that U.S. citizens had. What Bush is signalling in his speeches of the past couple of weeks is that they still think they can pull it off.

As Professor Pan put it:

If we analyze the spreading chaos in Iraq from a perspective of qui bono -- i.e. "who benefits?" -- the picture painted is quite clear. Not only is the Bush Cult not grossly incompetent, out of touch, and inept, but, in fact, they are brilliant strategists. And they've gotten everything they wanted.

Permanent bases? Not likely, unless Iraq degenerates into a permanent state of chaos and civil war. How to insure permanent chaos and civil war? Enter death squads, torture teams, psyops (recall the British soldiers caught with costumes, fake beards, and explosives), and voila! A country so unstable and violent that the U.S. is required to remain. Permanently.

And while we're there, we'll conveniently siphon off the black gold/Texas tea.

The Bush Cult has conceived and executed a plan to destabilize and permanently occupy a precious piece of resource-rich land that has been coveted by Western countries since the beginning of the oil economy. It's a wrap. They got the brass ring. Whether or not the administration crumbles under it's perverse criminality, the U.S. is never going to pull out of Iraq. Yes, some troops will come home. But if you think any administration -- even a Democratic one -- is going to voluntarily extract itself from the second largest source of oil on the planet, I've got a copy of the Carter Doctrine I'd like you to read.

The Achilles heel of the plan is the fiscal and economic weakness of the United States, a weakness exacerbated by the wholesale plundering of assets by the very groups who were hell-bent on waging this war. That is why seizing the oil was so important. In case there is any doubt that “terrorism” or “democracy” is behind the invasion of Iraq, the following shows clearly the ‘before’ and ‘after’ of the plan, the ‘before’ being the meetings Cheney had with heads of U.S. oil companies in the spring of 2001 where the invasion of Iraq was promised, months BEFORE September 11. The ‘after’ is the so-called “Production Sharing Agreement” (PSA) with U.S. and British oil companies and the “government” of Iraq, a agreement that cannot be overturned by any future Iraqi government.

Report outlines plans for corporate plunder of Iraqi oil

By James Cogan8 December 2005

A report published in November by the London-based environmental and social justice network Platform makes clear that the invasion and occupation of Iraq was, and remains, a war for oil. The document, entitled “Crude Designs: the rip-off of Iraq’s oil wealth”, is a concise review of how Iraq’s vast energy resources, worth hundreds of billions of dollars, will be handed to transnational companies over the next several years.

“Crude Designs” found that if just 12 of Iraq’s undeveloped fields are contracted in a similar fashion to comparable oil fields in Libya, Oman and Russia, transnationals will reap profits of between $74 billion and $194 billion in 2006 dollars over a 30-year period. The estimate, which the report describes as “conservative”, is based on an oil price of $40 per barrel. The current price is closer to $60 per barrel.

The actual bonanza for the oil giants from the invasion of Iraq could run into the trillions. Out of the country’s 80 known fields, just 17 are currently in production. A further 63 undeveloped fields have an estimated 75 billion barrels of oil, while industry experts believe between 100 billion and 200 billion barrels lie in unexplored fields. The country also has enormous untapped reserves of natural gas.

The Platform report establishes that control over these resources was the primary motive for the war. The first chapter draws attention to the discussion in US and British ruling circles on the strategic importance of dominating the oil and gas of the Persian Gulf. It cites the May 2001 report of the Bush administration’s Energy Task Force, which was headed by Vice President Dick Cheney. The findings declared: “The Gulf will be the primary focus of US international energy policy.”

The terror attacks on New York and Washington on September 11, 2001, just four months later, were used to set in motion long-held plans for the military conquest of the region.

In the months before the March 20, 2003 invasion, the looting of Iraq’s oil was the key consideration in Washington. The US State Department established a “Future of Iraq” project as early as April 2002. The project’s Oil and Energy group decided in four meetings between December 2002 and April 2003 that Iraq’s oil industry “should be opened to international oil companies as quickly as possible after the war”.

Among the group’s participants was Ibrahim al-Uloum, an Iraqi exile with a PhD in petroleum engineering from New Mexico University. Al-Uloum was appointed oil minister in the US-controlled Coalition Provisional Authority (CPA) and, with US backing, fills the same post in the current “transitional” government of Prime Minister Ibrahim al-Jaafari. The reason for Washington’s support is not hard to explain. In September 2003, Uloum told the British-based Financial Times that American energy companies should have “priority” over Iraqi oil fields.

The contractual form agreed on by the US experts and Iraqi exiles for the development of Iraq’s oil industry was the Production Sharing Agreement (PSA).

Platform characterises PSAs as an “ingenious arrangement”. They were first introduced in the 1960s as a means for circumventing constitutional obstacles or political opposition to the privatisation of nationalised oil industries. Under a PSA, the oil remains legally the possession of the state where it is extracted. Only the operation of the field is controlled by the foreign operator, generally for a period of 25 to 40 years.

PSAs have proven to be a far more lucrative form of contract for transnational energy conglomerates than royalty arrangements. Under most royalty deals, the state takes a fixed percentage of the value of each barrel of oil extracted, regardless of the company’s costs or profit margin. Under a PSA, because the state still ostensibly “owns” the oil, the revenue from sales is firstly used to pay the company in full for its exploration, production and other capital costs. The remaining profits are split between the state and the company, according to an agreed ratio.

The profit split generally appears to be to the advantage of the state with ratios of 60:40 or even higher. The companies, however, are guaranteed a return, as all their costs are covered before any profit-sharing begins. Moreover, they can increase their share of the total revenue by inflating their costs or by subcontracting work to their own subsidiaries.

A PSA contract can also contain clauses that overtly advantage the company. One such PSA was signed by the Russian government during the 1990s. The agreement, which gave Shell control of the Sakhalin II project near Sakhalin Island in Russia’s Far East, stipulated that the Russian government would receive no share at all until the company had achieved a specified profit margin.

Moreover, the Platform report notes that a PSA can specify that any disputes be resolved in international tribunals such as the US-based International Centre for the Settlement of Investment Disputes or the French-based International Chamber of Commerce. These bodies are controlled by the major powers rather than the nation-state where the oil is being extracted.

Summing up the essential characteristic of a PSA, a British academic cited by Platform wrote: “The government can be seen to be running the show—and the company can run it behind the camouflage of legal title symbolising the assertion of national sovereignty.”

Naked corporate plunder

The decision by the US occupation to apply this PSA model to Iraq amounts to naked corporate plunder. While common in countries that do not possess large reserves of oil and gas, or where the cost of the development of fields is substantial—such as offshore oil wells—PSAs are virtually unheard of in large oil-producing states like Iraq. Such nations either exploit their energy resources directly or use their bargaining power to negotiate far more equitable contracts.

Platform points out that of the seven largest oil producers—Saudi Arabia, Iran, Kuwait, Iraq, the United Arab Emirates, Venezuela and Russia, which collectively sit on top of 72 percent of the world’s known reserves—only Russia has ever signed PSAs. During the first stage of capitalist restoration in the 1990s, when the Stalinist regime literally liquidated the state-owned assets of the former Soviet Union, Moscow entered three such agreements. All have cost the Russian state billions of dollars in lost revenues and are the subject of bitter recriminations.

The most expansive period in the history of the Iraqi oil industry was between 1970 and 1979. Financed directly by the government, the state-owned Iraqi National Oil Company increased production from 1.5 million barrels per day to 3.7 million barrels per day, and explored eight of the largest new fields that still have not been developed.

Iraq’s new constitution, however, was written by US officials and Iraqi collaborators with the occupation to exclude any possibility of this being repeated.

The clauses referring to oil and gas establish the legal mechanisms for PSAs. Article 108 proscribes the direct privatisation of the energy resources by declaring that oil and gas “are the ownership of all the people of Iraq in all the regions and governorates”. Clause two of Article 109, however, stipulates that the different branches of Iraq’s government “formulate the necessary strategic policies to develop the oil and gas wealth in a way that achieves the highest benefit to the Iraqi people using the most advanced techniques of market principles and encourages investment” (emphasis added).

Under PSAs, the transnational companies will not “own” Iraq’s oil and gas. Rather, they will develop the reserves according to “market principles” on the basis of one-sided contracts that “encourage investment”.

Furthermore, the first clause of Article 109 stipulates that the Iraqi federal government only has authority over the “management of oil and gas extracted from current fields”. Article 111 declares that “all powers not stipulated in the exclusive authorities of the federal government shall be the powers of the regions and governorates”. The implication is that the federal government will control the 17 currently producing fields, while the 63 undeveloped fields, as well as any new discoveries, will be under the jurisdiction of the regions and provinces.

In other words, PSAs can be signed for the exploitation of new fields with regional governments such as the Kurdish Regional Government (KRG) in northern Iraq, or the provincial governments in the predominantly Shiite Arab and oil-rich south. The Platform report notes that of the 25 new fields named by the Iraqi Ministry of Oil in 1995 for “priority development”, 11 were in the south, 11 in the north and just 4 were in the central region.

The constitution was ratified by referendum on October 15. Significant portions of Iraq’s oil can therefore be hived off to transnational energy giants regardless of who makes up the government in Baghdad after the elections on December 15, or how long the anti-occupation insurgency continues in the predominantly Sunni Arab provinces of central Iraq.

Last week, this process began. The KRG announced that drilling had begun on the Tawke field in northern Iraq on the basis of a PSA signed with the Norwegian company DNO in June 2004. The agreement gives 60 percent profit to the Kurdish region and 40 percent to the company. The project is the first oil development by a foreign company in Iraq for 20 years.

A veritable rush of PSAs can be expected over the coming period, with the terms likely to be even more favourable to the transnational companies than anything seen elsewhere.

“Crude Designs” states: “The key issue here is bargaining power. The Iraqi state is new and weak, and damaged by ongoing violence and by corruption, and the country is still under military occupation ... the oil companies will inevitably wish to focus on the current security situation to push for a deal comparable to—or better than—that in other countries in the world, while downplaying the huge reserves and low production costs that make Iraq an irresistible investment.”
Now we see where the intentional destabilization of Iraq by the U.S. and the Britain comes in.

The report points to a blatantly neo-colonial contractual clause that is likely to be inserted into PSAs on the demand of the US and other occupying powers—a stipulation against government interference over oil production rates.

Platform observes: “Iraq would not be able to control the depletion rate of its oil resources—as an oil dependent country, the depletion rate is absolutely key to Iraq’s development strategy, but would be largely out of the government’s control. Unable to hold back foreign companies’ production rates, Iraq would also be likely to have difficulty complying with OPEC (Organisation of Petroleum Exporting Countries) quotas which would harm Iraq’s position within OPEC and potentially the effectiveness of OPEC itself.”

A key objective of the major powers since the oil crisis of the 1970s has been to shatter the ability of the main oil-producing states to ever again ration world oil supplies.

In the lead-up to the March 2003 invasion, the propaganda of the Bush administration and its international allies was that the war was motivated by the need to eliminate the threat posed by Iraq’s “weapons of mass destruction”, particularly its alleged efforts to acquire nuclear weapons. The invading powers also claimed to possess evidence of links between the regime of Saddam Hussein and the Al Qaeda terrorist network.

These lies were the justification for a predatory and illegal war. While Platform did not dwell on the report’s political implications, “Crude Designs” provides ample data to underscore that the unanimity in the American political establishment that the occupation of Iraq must continue is bound up with vital economic and strategic interests of the most powerful sections of the American corporate and financial elite.

“Crude Designs: The rip-off of Iraq’s oil wealth” is available in html and PDF format from Platform’s Unravelling the Carbon Web.

The problem faced by the criminals perpetrating this theft is how to destabilize Iraq enough to keep control without destabilizing it too much to get any economic value out of it. Bush, along with much of the U.S. ruling elite, still thinks that whether or not the United States wins in Iraq has to do only with U.S. “will” and “resolve.” They are leaving the Iraqi people’s will and resolve (not to mention Russia and China’s) completely out of their equation. They also have little respect for the will and resolve of the American people to force a withdrawal, and in that they may be right, but to keep the U.S. public mollified they need to keep the economy propped up and to do that they have to get the oil flowing in Iraq. Thus far, they can’t pump and transport near enough oil out of Iraq to save the U.S. economy.

If they fail in their tightrope walk and the economy crashes, it might be a good idea to learn from those who have gone through the process: the Russians. Remember the other “superpower?” They already went through and survived their economic collapse and have been doing fairly well lately from higher oil prices. See this past weekend’s Signs page for a remarkable essay by a survivor of the Soviet collapse, Dmitry Orlov who tells us what we can expect and gives us some advice on how to survive it. Here are a few bits from a piece well worth reading in full:

A decade and a half ago the world went from bipolar to unipolar, because one of the poles fell apart: The S.U. is no more. The other pole – symmetrically named the U.S. – has not fallen apart – yet, but there are ominous rumblings on the horizon. The collapse of the United States seems about as unlikely now as the collapse of the Soviet Union seemed in 1985. The experience of the first collapse may be instructive to those who wish to survive the second.

… [W]hat must inevitably come to pass if the Goddess of Technology were to fail us [is] a series of wars over ever more scarce resources… Let us not argue that this has never happened, but did it ever amount to anything more than a futile gesture of desperation? Wars take resources, and, when resources are already scarce, fighting wars over resources becomes a lethal exercise in futility. Those with more resources would be expected to win. I am not arguing that wars over resources will not occur. I am suggesting that they will be futile, and that victory in these conflicts will be barely distinguishable from defeat. I would also like to suggest that these conflicts would be self-limiting: modern warfare uses up prodigious amounts of energy, and if the conflicts are over oil and gas installations, then they will get blown up, as has happened repeatedly in Iraq. This will result in less energy being available and, consequently, less warfare.

Take, for example, the last two US involvements in Iraq. In each case, as a result of US actions, Iraqi oil production decreased. It now appears that the whole strategy is a failure. Supporting Saddam, then fighting Saddam, then imposing sanctions on Saddam, then finally overthrowing him, has left Iraqi oil fields so badly damaged that the "ultimate recoverable" estimate for Iraqi oil is now down to 10-12% of what was once thought to be underground (according to the New York Times).

…But these are all details; the point I really want to make is that proposing resource wars, even as a worst-case scenario, is still a form of denial. The implicit assumption is this: if all else fails, we will go to war; we will win; the oil will flow again, and we will be back to business as usual in no time. Again, I would suggest against waiting around for the success of a global police action to redirect the lion's share of the dwindling world oil supplies toward the United States.

Outside this last circle of denial lies a vast wilderness called the Collapse of Western Civilization, roamed by the Four Horsemen of the Apocalypse, or so some people will have you believe. Here we find not denial but escapism: a hankering for a grand finale, a heroic final chapter. Civilizations do collapse – this is one of the best-known facts about them – but as anyone who has read The Decline and Fall of the Roman Empire will tell you, the process can take many centuries.

What tends to collapse rather suddenly is the economy. Economies, too, are known to collapse, and do so with far greater regularity than civilizations. An economy does not collapse into a black hole from which no light can escape. Instead, something else happens: society begins to spontaneously reconfigure itself, establish new relationships, and evolve new rules, in order to find a point of equilibrium at a lower rate of resource expenditure.

Note that the exercise carries a high human cost: without an economy, many people suddenly find themselves as helpless as newborn babes. Many of them die, sooner than they would otherwise: some would call this a "die-off." There is a part of the population that is most vulnerable: the young, the old, and the infirm; the foolish and the suicidal. There is also another part of the population that can survive indefinitely on insects and tree bark. Most people fall somewhere in between.

Economic collapse gives rise to new, smaller and poorer economies. That pattern has been repeated many times, so we can reason inductively about similarities and differences between a collapse that has already occurred and one that is about to occur… I hope that my thought experiment will allow me to guess correctly at the general shape of the new economy, and arrive at survival strategies that may be of use to individuals and small communities.

Again, well worth reading in full.

Monday, December 12, 2005

Signs of the Economic Apocalypse, 12-12-05

From Signs of the Times, 12-12-05:

Gold closed at 532.00 dollars an ounce on Friday, up 4.6% from the week before. The dollar closed at 0.8466 euros for the week, down 0.8% from 0.8534 at the previous Friday’s close. That put the euro at 1.1812 dollars, compared to 1.1718 the previous week. Gold in euros would be 450.39 euros an ounce, up 3.8% from 433.86 at the close of the week before. Oil closed at 59.76 dollars an ounce, up 0.7% from 59.32 the Friday before. Oil in euros would be 50.59 euros a barrel, compared to 50.62 the previous week. The gold/oil ratio was 8.90 at Friday’s close, up 3.9% from 8.57 the week before. The yield on the ten-year U.S. Treasury note was 4.53%, up two basis points from 4.51 the previous week. In the U.S. stock market, the Dow closed at 10,778.58, down 0.9% from 10,877.51 the Friday before. The NASDAQ closed at 2,256.73, down 0.7% from 2,273.37 at the previous week’s close.

It’s happening. Much of what we’ve been predicting for the past year seems to be taking place. The housing bubble has popped, gold and other precious metals are shooting up in price as those with money are rushing to seek shelter.

Gold prices seem to have broken through any past barriers. Here is Steven Lagavulin:

A Crisis of Confidence Gold is on an unbelievable tear lately, blowing right through $500/oz and surging higher every day. And while I don't much talk about day-to-day market news, I think this is an incredibly significant event, and therefore one to take note of. For one thing it means gold has likely broken free of the chains the monetary-control stormtroopers have had it in for more than a decade. Now there's a whole host of reasons why it's in the interest of certain federal authorities to keep gold on a tight rein, but suffice it to say they all boil down to one thing: confidence. Authority is built on a foundation of popular confidence, and the major flagpost of that confidence is monetary strength (ie. strength in the dollar--or at least 'perceived' strength since in the larger scope controlled weakness is actually the integral purpose of the system...).

So it seems appropriate now to paint this picture in the proper light.

In the financial markets there are two ends to every stick as far as price movement is concerned, and such is especially the case with the price of gold. The common-man's viewpoint (which is also the view of the mass media) is simply that the "price" of gold is going up, but this incorrectly implies that the value of the dollar (or any other currency against which it's being measured) is holding stable and that it's only gold itself that is in rising demand. But in the price of any security or commodity, both the thing itself and the underlying currency in question are in flux, as neither one is of stable value. Therefore the price only reflects their value at a particular point relative to each other. This is why it can be observed that in a high inflation environment -- and all things being equal -- the Dow Jones Industrial Average will naturally tend to rise, but that it's a false assumption to believe that it's actually increasing in value. It's simply 'adjusting' itself to the declining value of the dollar.

However our particular case is special in that gold is generally held to be the most stable reference of value we know (when it's not being manipulated), for a host of practical reasons we probably don't need to go into. So the other end of the stick, which is actually the more valid point of view, holds that gold is the reference point by which the value of the dollar is being judged.

So long story short, I think there are a couple of scenarios: either gold has finally broken free of the gold-police and is racing to discover its real value in relation to the dollar and other currencies, or else we're witnessing a decisive plunge in currency confidence -- not just the US dollar but paper currencies in general, since investors are not simply fleeing one currency in favor of another but are effectively fleeing currencies altogether for real asset value (which, by the way, might suggest a possible connection with the recent decline in the real estate market -- the most recent wildly-popular avenue of "real asset value"...).

Of course fans of paper-money (you know, the Gub-mint) could argue that neither case is true, that this is simply an isolated surge in the demand for gold, an investment trend or secular commodity trend or such. But I'd protest that a move of this strength occuring in combination with strong movements in other precious metals, and in further conjunction with widespread social, political and economic crises, that what we're actually seeing is a combination of both these scenarios. In other words, a general crisis of confidence and flight to quality which has overwhelmed the Fed's ability to control the market any longer.

For those who are interested (and who don't regularly follow the deconsumption news room) I'll reference this November Barron's interview with Toqueville Gold Fund manager John Hathaway back in November, where he very effectively makes a case, as I interpret it, that gold is destined to rise simply because investors are fast running out of other options. And that my friends is a crisis of confidence, in a nutshell.

Also I think it's also important to note that in my experience market moves like this almost invariably anticipate a more general awareness in the social sphere....so I would expect to see this important tipping-point echoed in a myriad other ways over the next few months. And I might further add that there are many gold market analysts who have long held that a strong surge in gold would likely place some of those aforementioned monetary-control-freaks in a very disconcerting short-covering situation.

As for the housing bubble:

Housing market decline may cost 800,000 jobs, study says

December 8, 2005

Associated Press

A sustained decline will hit the U.S. housing market next year, costing the nation as many as 800,000 jobs, according to an economic report released Wednesday.

The slowdown is likely to last several years, with as many as 500,000 construction jobs and 300,000 financial sector positions lost, the quarterly Anderson Forecast predicted.

"We expect housing to start slowing the economy this quarter or the next," said Edward Leamer, director of the study done at the University of California, Los Angeles.

...The report cited several signs the decline could be under way:

- New construction of housing in October was down 5.6 percent from the previous month, with new construction of single-family housing accounting for a 3.7 percent dip.

- New-home sales have declined.

- Applications for home mortgages have trended downward since late September as rates increased.

- In some regions, homes are remaining unsold longer and the pace of housing construction is outpacing population growth, which could spell a decline in demand.

"On all these grounds, we believe housing is due for a sustained decline," economist Michael Bazdarich wrote in the forecast. "The remaining questions are how hard the fall will be and when it will begin."

Let’s take a closer look at the signs in the crucial Boston market, one of the bubble regions, where asking prices are beginning a free-fall, dropping by a third in many cases, and foreclosures are up sharply:

Foreclosures up 35 percent this year

By Ken Maguire Associated Press Writer

December 7, 2005

BOSTON -- Home mortgage foreclosure filings are on the rise in gritty cities and leafy suburbs, according to a new report showing a 35 percent increase statewide through October.

Filings in suburban Reading more than tripled and there's been a 113 percent increase in Lawrence compared with the same period last year, according to Land Court filings tracked by Framingham-based ForeclosuresMass.

"It spans the whole gamut of income levels," said Jeremy Shapiro, president of ForeclosuresMass.

The number of foreclosures filed through Oct. 31 was 9,459, compared with 7,003 in the same 10-month period last year, the report said. Essex County had the largest increase, at 50 percent.

Adjustable-rate and interest-only loans, which are riskier than traditional fixed-rate loans, are partly to blame. They've become popular because they cost less up front, but they require higher payments typically after a year or two.

"A lot of people don't realize what they're getting themselves into," said Jim Wilde, executive director of the Merrimack Valley Housing Partnership, which administers homebuying classes to residents of Lowell, Lawrence and the surrounding towns.

Interest-only loans, in which homeowners don't pay down the principle right away, are "gimmicks in order to qualify (homebuyers) for the first six months or year," Wilde said. "When the principle payments kick in, they're behind the 8-ball."

Wilde said that on Wednesday alone he talked one couple out of signing a "no documentation" loan that would have cost $2,000 a month. The prospective buyers had an annual household income of just $28,000.

"They would have never been able to make the payments," he said.

Among the state's three largest cities, Worcester had the largest increase with 52 percent, while filings were up 42 percent in Boston, and 20 percent in Springfield, Shapiro said.

In the suburbs, Reading had 28 filings compared with just eight in the first 10 months of 2004, the report said. Burlington's filings tripled, from nine to 27. Seekonk had a 163 percent increase, while Wareham was up 103 percent.

Another sign that the crash is happening is that asking prices in the Boston area are dropping in many cases by more than $100,000.

Sellers chop asking prices as housing market slows

Cuts of up to 20% are now common as analysts see signs of a 'hard landing'

By Kimberly Blanton Globe Staff December 9, 2005

Boston-area homeowners trying to sell their houses are sharply reducing asking prices -- in some cases, by $100,000 or more -- in response to the sudden slowdown in the real estate market.

Demand for single-family homes has declined as prices have risen in recent years and interest rates have begun to climb, causing the number of properties on the market to pile up.

The median price of a single-family home in Massachusetts has dropped 7 percent in the past two months, to $349,000 for sales that closed in October. But reductions in asking prices of 10 percent or 20 percent are now common in both high and moderately priced neighborhoods, according to real estate agents and listings of homes for sale. In Cambridge, price cuts averaged $300,000 in a sampling of a dozen houses listed in the $1.25 million to $4.3 million price range. In suburbs like Tewksbury and Hopkinton, homes originally listed for around $500,000 have been slashed to the low $400,000s.

"The evidence -- both early data and the anecdotes -- are pointing more toward a hard rather than a soft landing" in the housing market, said Nicholas Perna, an economic consultant in Ridgefield, Conn. "Prices could come down. Could it be 10 to 15 percent? There's no way of knowing, but what we're getting is more clues that you've got a decline in prices underway.

Agents said price cutting began last summer but accelerated in the past two months and is far more frenzied than in 2004, a year of record sales volume.

Today, homeowners in no rush still have the option of letting their listing expire, unsold, and putting the house back on the market in the spring when brokers hope conditions will improve.

But those who need to sell quickly -- couples in the midst of a divorce, employees who are relocating to another region, or owners who are purchasing another home, for example -- may have no choice but to entertain offers they would have scoffed at months or even weeks ago.

"It's unbelievable," said Polly Drinkwater, an agent with Coldwell Banker Cambridge, who has dropped the price on one of her listings $550,000, or 22 percent, since March. These "are very large drops," she said.

Last February, Gary and Susan Kazmer were confident of selling their Foxborough home for $949,900. He had landed a high-level job in Manhattan, and the couple planned to relocate their three daughters during the summer to a house they purchased in Mendham, N.J., with a bridge loan.

They built the Foxborough house on a pond in 1997 and filled it with extras: two marble fireplaces and hardwood floors with dark cherry borders. ''We called it our wow house," he said.

But it attracted little interest at that price, and Gil Campos of Re/Max Real Estate Center in Foxborough lowered the price to $899,000 in early August. Since then, it has been reduced four times, to $800,000. ''That's an unbelievable spiral," he said.

The Kazmers' limbo ended this week, when they accepted an offer, which Campos declined to disclose.

In spite of the collapse (I think we no longer need call it an "impending collapse" - it’s happening), consumer confidence is rising to allow producers and retailers to extract some more surplus for one last holiday season. A reader wrote in:

Regarding retail sales and gas prices: [While gasoline prices have fallen, they're still above last year's levels, and home heating costs are also expected to be high.] It'll be interesting to see what happens to gasoline prices about two weeks after the shopping season is over. I've heard it suggested that gas prices fell to accomodate the retail interests and ensure a fairly good Christmas shopping season.

In other words, gas prices fell because one corporate sector (oil) is scratching the back of another corporate sector (retail, Wal Mart) for a couple of key profit months. I wouldn't be the least bit surprised if gas prices went back up to $2.50-2.60 a gallon [after the holidays].

That seems to be the case and it seems to have worked, given the fact that economic optimism is on the rise in the United States during the crucial holiday shopping season:

Poll Shows New Optimism About the Economy

By JEANNINE AVERSA AP Economics Writer

People are feeling better about the economy and their own financial situations, a hopeful sign they'll act more like Santas than Grinches while holiday shopping. The RBC CASH Index, based on polling by Ipsos, showed that consumer confidence clocked in at 85.5 in December, the second-highest reading of this year.

The pickup builds upon the rebound in consumer confidence staged in November, when the index jumped to 81. That revival came after confidence had been stuck in the doldrums in September and October, reflecting worries about sky-high energy prices and other fallout from the Gulf Coast hurricanes.

Economists attributed the December improvement to a retreat in gasoline prices, a ramp up in hiring and solid growth being logged by the overall economy.

"I think shoppers will be in a better frame of mind and may be more inclined to spend. It should be a reasonably merry Christmas," said Bill Cheney, chief economist at John Hancock Financial Services. "I imagine shoppers are feeling pretty good about the holiday even if there is some background insecurity driven by heating bills."

The fresh consumer confidence reading came after a string of good economic news.

Last week, the government reported the economy added 215,000 jobs in November, a clear sign businesses got back in the hiring groove after a two-month hurricane-spawned lull.

Another government report last week showed the economy grew at an energetic 4.3 percent rate in the July-to-September quarter despite the hurricanes' ill effects.

Many economists are confident solid economic momentum is being maintained in the current October-to-December quarter.

Against this backdrop, the National Retail Federation is predicting holiday sales this year will increase by a solid 6 percent from last year.

Still, just how generous shoppers may be feeling during the holidays will be influenced in part by how much home heating bills — pushed up by record high natural gas prices — crimp household budgets, analysts said.

Despite the December rise in consumer confidence, it is still lower than it was last December, when consumer confidence stood at 93.9.

...The biggest over-the-month improvement came from a measure looking at consumers' economic expectations over the next six months, including conditions where they live or work and their own financial positions.

That expectations measure rose to 53.9 in December, up from 44.5 in November. This gauge, which faltered dramatically in September and fell into negative territory, has risen since then but is well below the 70.5 reading registered in December 2004.

Consumers' feelings about jobs remained buoyant at 116.5 in December, following a strong reading of 119.8 in November. A year ago, this measure was at 111.1

A gauge looking at consumers' sentiments about current economic conditions rose to 92.8 in December. That was up from 91.1 in November, but was down from 102.7 in December 2004.

Another measure tracking consumers' feelings about making a purchase, saving and other investment decisions increased to 89.5 in December from 82.8 in the prior month. A year ago, this gauge stood at 99.2.

How can people be so optimistic? Is it all tied to oil prices? Are we that easy? Chad Hudson, in Can Consumers Save Christmas? suggests, as does the reader quoted above, that this is no accident:
Every time it appears that consumers will start to retrench, some form of stimulus has been injected to spur consumer spending. With the housing boom starting to get long in the tooth, the last boost to consumer spending will diminish. While it is likely consumers will come through for the holiday season, it might prove to be the last hurrah. For retailers, the expansion of retail space over the past several years will exacerbate any slowdown in spending.

How many more types of stimuli to consumer spending can there be? Here’s Paul Craig Roberts:

An Economy Driven By Debt

Don't Confuse the Jobs Hype with the Facts


December 3/4, 2005

The November payrolls job report was announced Friday with the usual misleading hype. Spinmeisters made the most out of the 215,000 jobs. Looking beyond the glitter at the real facts, this is what we see. 21,000 of those jobs were government jobs supported by taxpayers. There were only 194,000 new jobs in the private sector.

Of those new jobs, 37,000 are in construction and only 11,000 are in manufacturing. The bulk of the new jobs--144,000--are in domestic services.

Wholesale and retail trade account for 20,000. Food services and drinking places (waitresses and bar tenders) account for 38,000. Health care and social assistance account for 27,000. Professional and business services account for 29,000. Financial activities gained 13,000 jobs. Transportation and warehousing gained 8,000 jobs.

Very few of these jobs result in tradable services that can be exported or help to close the growing gap in the US balance of trade.

The 11,000 new factory jobs and the 15,000 of the previous month are a relief from the usual loss. However, these gains are more than offset by the job cuts recently announced by General Motors and Ford.

Despite the gain in jobs, total hours worked declined as the average workweek fell to 33.7 hours. The decline in the labor force participation rate, a consequence of the shrinkage in well-paying jobs, masks a higher rate of unemployment than the reported 5 percent. The ratio of employment to population fell again in November.

Average hourly earnings (up 3.2 percent over the last year) are not keeping up with the consumer price index (up 4.3 percent).

Consequently, real incomes are falling.

This is not the picture of a healthy economy in which growth in high productivity, high value-added jobs fuel the growth in consumer demand and provide savings to finance Washington's red ink. What we are looking at is an economy that is coming unglued from the loss of jobs that provide ladders of upward mobility and from massive trade and budget deficits that are resulting in unsustainable growth in indebtedness to foreigners.

...Populations are hard pressed when the prices of goods rise relative to the price of labor, because this makes it impossible for the population to maintain its standard of living.

The US economy has been kept alive by low interest rates, which fueled a real estate boom. Consumers have kept growth alive by refinancing their home mortgages and spending the equity in their houses. Their indebtedness has risen.

Debt-fueled growth is qualitatively different from economic growth that results from an increase in high value-added jobs. Economists who look at the 3+ percent economic growth rate and conclude that things are fine are fooling themselves and the public. When the real estate boom ends, what will be the source of new spending power?

But U.S. consumers are not total fools, as consumer credit has begun to fall:

Consumer credit slides in October

Wednesday December 7

WASHINGTON (Reuters) - U.S. consumer credit unexpectedly slid by a record $7.20 billion in October, on a big drop in loans taken for cars and boats, a Federal Reserve report showed on Wednesday.

The central bank said total consumer debt outstanding fell 4 percent to a seasonally adjusted $2.157 trillion from a revised $2.164 trillion in September. The rate of decline was the steepest since December 1990, and the dollar drop was the largest fall on record, the Fed told reporters.

Wall Street analysts polled by Reuters had expected a rise of $5.0 billion in consumer credit in October.

The Fed said non-revolving credit -- made up of closed-end loans for cars, boats, education expenses and holidays -- fell $5.58 billion in October.

Revolving credit, which includes credit and charge cards, dipped $1.63 billion.

Any time recently that consumers have gotten too confident, they start scaring us about Bird Flu. Then, when people get too scared to spend, they start circulating positive economic stories. It looks like we are about to shift from positive stories to scare stories about Bird Flu:

Reports detail bird flu effects on US

By Maggie Fox

A pandemic of bird flu could cause a serious recession of the U.S. economy, with immediate costs of between $500 billion and $675 billion, according to two estimates released on Thursday.

Both assume the H5N1 avian influenza now destroying flocks of poultry across Asia and parts of Europe makes the jump into humans and causes serious disease.

So far, H5N1 has killed 69 people and infected 135, but world health experts say it is very close to mutating into a form that easily passes among people.

If it does, it would likely closely resemble the 1918 pandemic strain of flu that killed anywhere between 20 million and 100 million people during World War I, both reports say. This means 30 percent of the population would be infected and more than 2 percent would die, the report from the Congressional Budget Office presumes.

"Further, CBO assumed that those who survived would miss three weeks of work, either because they were sick, because they feared the risk of infection at work, or because they needed to care of family or friends," the report reads.

"In addition to workers' absences, many businesses (such as restaurants and movie theaters) would probably suffer a falloff in demand because people would be afraid to patronize them or because the authorities would close them."

Doctor's offices and hospitals would be overcrowded, the CBO predicts.

"Currently, the United States has approximately 970,000 staffed hospital beds and 100,000 ventilators, with three-quarters of them in use on any given day. As a result, shortages could occur in critical areas such as ventilators, critical care beds, and drugs to treat secondary infections," the report reads.


Hospitals would have difficulty controlling infection and might become sources for spreading the illness, the CBO said -- a fear echoed by another group, the National Center for Policy Analysis.

A second report from New Jersey based WBB Securities LLC estimated 35 percent of the population would become ill and 5 percent would die.

It predicts a one-year economic loss of $488 billion and a permanent economic loss of $1.4 trillion to the U.S. economy.

"If the influenza affected humans at the same level of virulence as the current H5N1 strain, practically all patients would require hospitalization, which would result in a shortage of some 6.5 million hospital beds per day during the pandemic," the WBB report reads.

"Police, fire, sanitation and other critical service providers will be strained with short staff and overtime work, which will impact municipal and state budgets," it adds.

"There may even be civil disturbances caused by people who either believe they can take advantage of the situation or who feel they have little chance of survival so they may as well enjoy themselves while they can."

What the heck is that last statement all about? "Enjoy themselves?" I guess we can expect to see some agents provocateur providing the excuse for a crackdown during an epidemic.

Finally, in honor of the 25th anniversary of John Lennon’s assassination, here is a song he wrote about economics, class power and the Pathocracy. (See also the amazing interview of John Lennnon by Tariq Ali and Robin Blackburn in Counterpunch last week).

Working Class Hero

John Lennon

As soon as you're born they make you feel small,

By giving you no time instead of it all,

Till the pain is so big you feel nothing at all.

A Working Class Hero is something to be,

A Working Class Hero is something to be.

They hurt you at home and they hit you at school,

They hate you if you're clever and despise a fool,

Till you're so f------ crazy you can't follow their rules.

A Working Class Hero is something to be,

A Working Class Hero is something to be.

When they've tortured and scared you for twenty odd years,

Then they expect you to pick a career,

When you can't really function you're so full of fear.

A Working Class Hero is something to be,

A Working Class Hero is something to be.

Keep you doped with religon, sex and T.V.,

And you think you're so clever and classless and free,

But you're still f------ peasants as far as I can see.

A Working Class Hero is something to be,

A Working Class Hero is something to be.

There's room at the top I'm telling you still,

But first you must learn how to smile as you kill,

If you want to be like the folks on the hill.

A Working Class Hero is something to be,

Yes , A Working Class Hero is something to be.

If you want to be a hero well just follow me.

If you want to be a hero well just follow me.

© Northern Songs Ltd

Tuesday, December 06, 2005

Signs of the Economic Apocalypse, 12-5-05

From Signs of the Times, 12-5-05:

Gold closed at 508.40 dollars an ounce on Friday, breaking the $500 barrier and closing up 2.3 percent, after rising 2.2 percent the week before. The dollar closed at 0.8534 euros for the week, down 0.2% from 0.8547 at the previous Friday’s close. The euro, in turn, closed at 1.1718 up from 1.1700 the week before. Gold in euros, then would be 433.86 an ounce, up 2.1% from 424.87 the week before. Oil closed at 59.32 dollars a barrel, up 2.2% from 58.03 at the previous Friday’s close. Oil in euros would be 50.62 euros a barrel, up 2.1% from 49.60 the week before. The gold/oil ratio would be 8.57 at Friday’s close, unchanged from the Friday before. In the U.S. stock market, the Dow Jones Industrial Average closed at 10,877.51 on Friday, down 0.5% from 10,931.62 at the previous Friday’s close. The NASDAQ closed at 2,273.37 up 0.5% from 2,263.01 the week before. The yield on the ten-year U.S. Treasury note was 4.51%, up seven basis points from 4.44 the week before.

Another week with a range of supposedly good economic news for the United States, leading to some officially-sanctioned cheerleading by the media. Job growth for November was said to be 215,000. Wayne Madsen wrote that we shouldn’t believe these numbers:

Bush unemployment stats phony as Iraqi intelligence claims. Today, the White House is crowing about the latest job statistics. It is basing its claims on the most recent job figures issued by the Labor Department. The Bush administration is claiming 215,000 jobs were added in November with unemployment hovering at 5 percent. However, a former economist with the Bureau of Labor Statistics said the bureau, which determines the monthly unemployment figures, has been totally politicized by the Bush administration. The numbers are "tainted," said the former official, adding, "the Bush people changed the credibility and independence that past administrations insisted upon for the monthly unemployment figures."
No surprise there. Why should we believe anything these people say? George Ure takes a closer look at the numbers, and they don’t look so good close up.

Nonfarm payroll employment grew by 215,000 in November, and the unemployment rate was unchanged at 5.0 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Over the month, job growth was widespread, with large gains in construction and food services.

Unemployment (Household Survey Data)

The unemployment rate was unchanged in November at 5.0 percent. The jobless rate has ranged between 4.9 and 5.1 percent since May. The number of unemployed persons, 7.6 million, was essentially unchanged in November. The unemployment rates for adult men (4.3 percent), adult women (4.6 percent), teenagers (17.2 percent), whites (4.3 percent), and Hispanics or Latinos (6.0 percent) showed little or no change in November. The jobless rates for blacks (10.6 percent) and, specifically, for adult black women (9.1 percent), rose over the month. In November, the unemployment rate for Asians was 3.6 percent, not seasonally adjusted. (See tables A-1, A-2, and A-3.)

Total Employment and the Labor Force (Household Survey Data)

Total employment, 142.6 million, and the civilian labor force, 150.2 million, were little changed in November. The employment-population ratio also was little changed over the month at 62.8 percent, and the labor force participation rate held at 66.1 percent.

But it's not all backslaps and glee at BLS. Buried in the U-6 report (Alternative Measures of Labor Underutilization) we see that the unemployed plus marginally attached workers (and the MBA's flipping burgers) increased from 8.1% of the workforce to 8.4% in November. That's a tad over 1.26 million not following their calling, and that's not counting people who have fallen off the statistics because they have run out of benefits. We reckon honest unemployment is somewhere north of 10%.

Don’t forget that pay is down for the vast majority of people, that pensions are being taken away and the price of health care, energy and college educations are soaring. How are we U.S. consumers going to keep the housing bubble going? Evidence is mounting that houses are staying on the market much longer than they did a year ago in the bubble markets. Note also that the areas of strong job growth were in construction and food service. How long are construction jobs going to keep growing?George Ure again:

There was good news and bad in the Tuesday housing figures released by the Commerce Department. On the one hand, sales were much brisker than normal, yet on the other, and somewhat buried in the data, the median price of a home was up to $231,300, up a scant 0.9% from year ago levels. Now, in case your double
Americano tall hasn't soaked into the bloodstream yet, the problem is that with inflation running 4% for the year to date, that means that in purchasing power terms (which is the only thing that matters to us) the home prices have dipped about 3% year on year (YoY).

Add to that the report that consumer confidence was up substantially (and a bit unexpectedly, I'll admit) driven by lower gasoline prices, and word that online e-tailing is alive and well, and you get something akin to what the NY Times paints as an optimistic outlook.

Next week, as the Federal Reserve meets (if we get that far unscathed), the Fed is likely to raise rates another quarter point, encouraged to do so by the global(ist) Organization for Economic Cooperation and Development, which figures the Fed should increase rates another 75-basis points; 3/4's of a percent if you're not a bankster.

This is where I start to run into concerns because a 3/4% increase in the Fed rates would likely spell the end of the housing bubble, for good. This flies straight in the face of the policy of the Fed which is to protection of any asset which could be used(as in refinanced) to keep the economy afloat just a bit longer.

It's a lot like a physics problem: unstoppable force (pressure to raise interest rates) meets immovable object (protection of an asset class to prevent an instant Depression). There are only a few possible outcomes: Our expectation is that rates will go up.

Also something to ponder would be the timing about now of any Huge Exogenous Event (HEE). What ever it is, it would need to come from outside the market and be of sufficient magnitude to take the blame for whatever happens next in the markets. In other words, if you were going to be forced by global economics to raise rates more than the expected 25-basis points, wouldn't it be convenient to have some big event take place which could be blamed instead of the rate move for an unexpected lurch in the markets?

What the web bot runs (from http://www.halfpasthuman.com/ ) have forecast for around this window we're now in is something that would be roughly two to three times the size of the hurricane disasters and would focus American attention on something other than moves that are out of the ordinary.
Retail sales for the holiday season are also somewhat troubling, although not bad. See the following from the Houston Chronicle:

Spotty holiday sales results are making retailers jittery

Discounting may be the only way to woo buyers

By Anne D'Innocenzio

Associated Press
NEW YORK - The holiday shopping outlook was hazy Thursday after the nation's retailers reported a mixed start to the season that showed consumers were willing to spend only when they found bargains.

One thing was certain, however — retailers are likely to resort to heavy markdowns in hopes of meeting their sales targets. Many of last month's winners were stores that heavily discounted over the Thanksgiving weekend, including Wal-Mart Stores and J.C. Penney Co.

November had some surprises — upscale retailers were among the disappointments, including Nordstrom, usually a top performer. On the upside, Limited Brands had solid gains after struggling for months with its fashions. Limited's sales were fed by a combination of aggressive price cutting and a makeover at its Express division.

"You had some very good performances by only a handful of stores, but you also had a fair amount of weakness. Most of the business was driven by promotions," said Michael Niemira, chief economist at the International Council of Shopping Centers.

"More of the season's sales now ride on December, which is dicey because of the weather and promotional activity," which could hurt stores' profits, he said.

The UBS-International Council of Shopping Centers' November sales tally of 65 retailers rose 3.5 percent last month; the results matched Niemira's forecast, but beat a meager 1.8 percent increase a year ago. The sales tally is based on sales at stores open at least a year, known as same-store sales.

Niemira added, "The economic numbers look better, but on the other hand you worry about consumers' ability to spend."

While gasoline prices have fallen, they're still above last year's levels, and home heating costs are also expected to be high.

What few people in the mainstream media are pointing out is that, now that the housing boom has peaked and interest rates are rising thereby putting pressure on consumer spending, the economy is being kept alive by the Iraq War. Ure again:

Out from the Department of Labor's Bureau of Labor Statistics:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 4.3 percent in the third quarter of 2005, according to preliminary estimates released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 3.3 percent.

The GDP estimates released today are based on more complete source data than were available for the advance estimates issued last month. In the advance estimates, the increase in real GDP was 3.8 percent (see "Revisions" on page 3).

The major contributors to the increase in real GDP in the third quarter were personal consumption expenditures (PCE), equipment and software, federal government spending, and residential fixed investment. The contributions of these components were partly offset by a negative contribution from private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased.

…If our CPI expectations come true, we will see a year that is about a push - increase in GDP being about equal to inflation. On the other hand, we also note that without the War in Iraq, the economy would not be doing nearly as well:

"Real federal government consumption expenditures and gross investment increased 8.1 percent in the third quarter, compared with an increase of 2.4 percent in the second. National defense increased 10.3 percent, compared with an increase of 3.7 percent. Nondefense increased 3.6 percent, in contrast to a decrease of 0.2 percent. Real state and local government consumption expenditures and gross investment increased 0.4 percent, compared with an increase of 2.6 percent."

The GDP figures were also touted as evidence that the Bush economy is strong. But if its strength in the last couple of years comes from military spending and consumer credit, and the housing bubble is about to pop and the war is going very badly, what do they do next? Perhaps they can react to Ure’s HEE (Huge Exogenous Event). The result: a military dictatorship, of course, with rationing, Civilian Inmate Labor Camps (CILF’s), and currency controls. Here’s Al Martin:

In a post-PATRIOT III environment, the FEMA-OEM combination could at any time exert absolute control over the production and distribution of food and fuels, by the power already given to them under PATRIOTs I and II.

In a post-PATRIOT III environment, they could act under the existing declaration of a national emergency signed by George Bush in September 2001 that gives them enough to hang their hat on, legally speaking, to exert control over the production and distribution of food, water, medicine, etc. in the nation. As we have mentioned
before, the OEM has done surveys of all the large food distribution companies in the United States, asking them the total number of outlets they have, the square footage, the production volume, etc. They would then have the information ready so the FEMA-OEM super-combo agency (the State Security Agency), after PATRIOT Act III, would have the information necessary to take control of food and water distribution, production, etc. in the nation if they so chose to do.

All of this is combined with what we have been writing about–the various edicts of the U.S. Treasury to increasingly restrict citizens’ ability to own gold, to take gold out of the country, to force them to use a soft dollar in a post-economically collapsed environment, knowing that that is the ultimate goal.

Why is all of this is being done? Why is the regime moving to a militarized police state and to a dictatorship?

It is because of what Comptroller General David Walker said, that after 2009, the ability of the United States to continue to service its debt becomes questionable.

Although the average citizen may not understand what that means, when the United States can no longer service its debt it collapses as an economic entity. We would be an economically collapsed state.

The only way government can function and can maintain control in an economically collapsed state is through a military dictatorship. Government has never been able to maintain control throughout history of a post-economically collapsed environment other than in a military dictatorship. We have seen many examples of this south of the border, in Eastern Europe and in Asia throughout the twentieth century.

There is really nothing new about this. People act like this is something new. The people who believe that, of course, are the naive flag-wavers. They also believe that what has happened on the rest of this planet throughout history can’t happen in the United States. Of course, it can. And it will happen because Bushonomics ensures that it will happen.

Bushonomics is ensuring the need for a military dictatorship in the nation. The United States, in order to survive in a post-economically collapsed environment, would have to have the ability to repudiate the trillions of Bushonian debt that has been accrued. It couldn’t survive as an economic state and still service that debt.

Seems like a winning proposition for the Bush cabal. First, steal everything that is not tied down, then pull the plug and enslave the survivors. Welcome to the Pathocracy.