Signs of the Economic Apocalypse 1-30-06

From Signs of the Times 1-30-06:

Gold closed at 558.90 dollars an ounce on Friday, up 0.9% from $553.80 at the previous week’s close. The dollar closed at 0.8269 euros on Friday, up 0.3% from 0.8241 euros the week before. The euro, then, closed at 1.2094 dollars, compared to 1.2134 at the previous Friday’s close. Gold in euros, then, would be 462.13 euros an ounce, up 1.3% from 456.40 the week before. Oil closed at 67.76 dollars a barrel, down 1.1% from $68.48 a barrel the Friday before. Oil in euros would be 56.03 down 0.7% from 56.44 euros a barrel the week before. The gold/oil ratio closed at 8.25 barrels of oil per ounce of gold, up 2.0% from 8.09 at the previous week’s end. In the U.S. stock market, the Dow closed at 10,907.21 on Friday, up 2.2% from 10,667.39 the week before. The NASDAQ closed at 2,304.23 for the week, up 1.5% from 2,247.70. The yield on the ten-year U.S. Treasury note ended at 4.51%, up 16 basis points from 4.35 at the close of the previous week.

Gold continued its rise last week and the U.S. stock market rallied on Friday, regaining much of what it lost the previous Friday. Oil eased a bit as well.

Why the stock rally? The corporate shills on television would say it is because the economy is strong. What they mean by that is that corporate profits are good. In their minds that counts for everything. The public is not fooled, however, as a recent American Research Group poll shows:

January 23, 2006

George W. Bush's Overall Job Approval Rating Returns to Record LowAs Americans Turn Less Optimistic About the National Economy

George W. Bush's overall job approval rating has returned to its lowest point in Bush's presidency as Americans again turn less optimistic about the national economy according to the latest survey from the American Research Group. Among all Americans, 36% approve of the way Bush is handling his job as president and 58% disapprove. When it comes to Bush's handling of the economy, 34% approve and 60% disapprove.

Among Americans registered to vote, 37% approve of the way Bush is handling his job as president and 58% disapprove. When it comes to the way Bush is handling the economy, 35% of registered voters approve of the way Bush is handling the economy and 60% disapprove.

A total of 14% of Americans say the national economy is getting better, which is down from 30% in December and 52% say the national economy is getting worse, which is up from 40% in December. When asked about the national economy a year from now, 15% say it will be better, which is down from 28% in December, and 62% say it will be worse, which is up from 39% in December.

The results presented here are based on 1,100 completed telephone interviews conducted among a nationwide random sample of adults 18 years and older. The interviews were completed January 19 through 22, 2006. The theoretical margin of error for the total sample is plus or minus 2.6 percentage points, 95% of the time, on questions where opinion is evenly split.

Overall, 36% of Americans say that they approve of the way George W. Bush is handling his job as president, 58% disapprove, and 6% are undecided.

It makes sense, actually, that the more ruthless and predatory the large multinationals become, the better their profits and the higher their stock. Social health be damned. The people responding to the polls, however, are looking at Ford and General Motors and are realizing that they no longer have any economic security.

Ford to cut 30,000 jobs in North America

By Joe Kay

24 January 2006
Ford Motor Company announced plans on Monday to eliminate between 25,000 and 30,000 jobs by 2012. This amounts to more than 20 percent of the company’s North American workforce, and nearly 30 percent of its manufacturing jobs, where the bulk of the reductions will take place. The Ford plan is only the latest stage in a major assault by US automakers on the jobs, wages and benefits of their workers, an assault that is having devastating consequences throughout the US, Canada and other countries.

The plan, dubbed the “Way Forward,” was outlined in a meeting at the company’s headquarters in Dearborn, Michigan. Citing increased competition and a “crowded and fragmented” global auto market, CEO and Chairman Bill Ford announced that the company “will be making painful sacrifices to protect Ford’s heritage and secure our future.” He pledged that in the future Ford, “will be able to deliver more innovative products, better returns for our shareholders and stability in the communities where we operate.”

Return for shareholders and a shift toward profitability in its North American division are the basic aims of the restructuring. Ford has been under pressure from Wall Street to make major cuts in costs over the past year, and has seen its bond rating reduced to junk status. The job cuts were widely expected, particularly after Ford’s larger US rival, General Motors, announced plans to cut tens of thousands of jobs late last year. The cuts Ford announced Monday went much further than an outline of the plan that it leaked to the press in December and reflected the company’s determination not to undershoot Wall Street demands.

Ford’s stock price was up $0.42 on Monday, or more than 5 percent—a consequence of larger-than-expected profit figures for the fourth quarter, as well as a generally favorable reaction on Wall Street to the new job-cutting plan. David Cole, chairman of the Center for Automotive Research, told Dow Jones’s MarketWatch news service that the restructuring was an “excellent start” for Ford.

…The plan, which will reduce Ford’s North American production capacity by 26 percent, is part of a broader strategy to reduce labor costs. Last year, Ford began eliminating 4,000 salaried workers, and another 5,000 are set to be cut as part of the “Way Forward.” This amounts to about 20 percent of the company’s white-collar workforce.

In addition to jobs, Ford is targeting health care and pension benefits. Bill Ford said on Monday that “health care and legacy costs are enormous” and that “more progress is needed” in making cuts. With the collaboration of the United Auto Workers union (UAW), Ford has already pushed through health care concessions that are estimated to save the company $850 million annually and $5 billion in long-term liabilities. In his statements Monday, Bill Ford directed his appeal for assistance not only to the union, but also to the government, calling on business and government to work together to find a way of reducing corporate health care and pension costs.

Ford’s announcement follows close on the heels of the GM cuts, which include plans for the elimination of 30,000 jobs in North America and the closure or scaling down of nine plants by 2008. The new cuts come only four years after Ford’s last major retrenchment. In January 2002, the company announced plans to eliminate 35,000 jobs worldwide and 22,000 in North America. In 2001, the other major US auto company, DaimlerChrysler, initiated plans to eliminate 26,000 jobs.

The attack on automotive jobs is an international phenomenon, and workers in Europe have also been severely affected. Both GM and DaimlerChrysler have cut thousands of workers in their German divisions, and German automaker Volkswagen has followed suit. Globally, automakers have been struggling to deal with overcapacity and increased international competition, and have responded by cutting jobs and shifting operations to countries with cheaper sources of labor.

The cutbacks at the Big Three have cascaded throughout the auto industry and beyond. Ford’s major parts supplier, Visteon, and GM’s major supplier, Delphi, have both announced major job, wage and benefit cuts in the past year. In his speech on Monday, CEO Ford indicated that his company will continue to escalate pressure on parts and material suppliers to reduce costs. He said that it will seek to reduce overall material costs $6 billion by 2010.

Ford’s suppliers will no doubt be forced to follow through with their own job cuts and cost reductions. It is estimated that a single job at an auto factory supports seven jobs in the wider economy, which will produce a devastating impact on those areas where plants are shut down. These are working class communities that have already suffered from the general stagnation and decline of wages over the past several years and the attack on social programs and benefits.

Michigan workers have been hit hard by the 25-year assault on auto jobs in what was once the center of US auto production. The closure of the Wixom plant, as well as the Windsor plant directly across the Canadian border from Detroit, will be yet one more setback. Tens of thousands of jobs are slated to be lost in Michigan and the surrounding states of the Midwest as part of the GM, Visteon and Delphi cuts of the past year.

The closure of the Atlanta Assembly plant adds to the GM cuts in that city, which include 3,000 workers at its plant in nearby Doraville. And the scale-back at Ford’s St. Thomas Assembly Plant follows GM’s decision to close one of its plants in Ontario and eliminate a shift in another, leading to a total loss of 3,500 jobs in addition to the 1,200 cut by Ford.

In making the new cuts, Ford is responding to the continued atrophy of its share of US auto sales, which have declined steadily over the past decade and are now at an all-time low of 17.4 percent. While Ford was able to post profits in 2005 of $2 billion, this was with a loss of $1.6 billion in North American production. The profits were due in large part to a $2.5 billion net income for Ford’s financing arm.

The US auto industry as a whole is in a protracted state of decline, which began at least 25 years ago. Since 1979, the “Big Three”—GM, Ford and Chrysler—have shed an astonishing 600,000 jobs. The companies have become shadows of their former selves. At its peak, GM employed more than 600,000 workers. After its latest cuts, the workforce will only be about 120,000.

There is increasing talk of the possibility that GM may end up in bankruptcy, a tool that would be used to impose a new contract to eliminate job security guarantees and health care and pension benefits. If GM does declare bankruptcy, Ford would likely do the same. The auto giants may employ a similar tactic to what has been used by the major airlines, which have exploited the bankruptcy courts to escape from their so-called “legacy costs,” including billions in pension obligations.

The decline of the US auto industry is part of a general decline of American manufacturing. As US companies have come under increasing competition from abroad, those sections of the workforce that had previously been able, through major struggles, to win certain concessions on job security, wages and benefits are now considered to be the chief obstacles to restoring profitability.

The working class has been left entirely defenseless as its past gains have been eliminated. Ford and the rest of the auto industry have relied on the collaboration of the UAW and the Canadian Auto Workers in pushing through the required cost cutting. The trade union bureaucracies in the US and in Canada have collaborated with management in imposing cuts, and have taken no steps to oppose the massive assault on auto jobs. Bill Ford said on Monday that Ford would seek to carry out the cuts “with the full collaboration of our union partners,” with a justified confidence that this would be possible.

In response to the announcement of 30,000 job cuts, the UAW issued a statement announcing that the news is “extremely disappointing and devastating” for Ford workers. However, the union did not give any indications that it would seriously oppose the cuts in any way, let alone call a strike to prevent the measures.

The union bureaucracy has pursued a policy of increasingly close collaboration with management over the past quarter century. The unions have sought to channel the anger of US workers behind chauvinist attacks on foreign workers while attempting to keep them tied to the Democratic Party, which has helped oversee the deterioration of living standards. For her part, Democratic Michigan Governor Jennifer Granholm declared her support for Ford’s new plan, calling the cuts “tough business decisions” that “will help the company regain its financial footing so it can continue to be an industry leader.”

Some might see this and the announcement of $17 billion in losses by United Airlines or General Motors’s announcement of $8.6 billion in losses and wonder why stocks are doing as well as they are? What’s to wonder? These losses are setting the stage for bankruptcy-court evasion of pension and health commitments. And, with Alito on the U.S. Supreme Court, corporations will be able to do whatever they want. Why wouldn’t that be good for their stocks?

Insider-Magazine.com last week published an account of the behavior or UnumProvident Insurance in denying claims. Looks like a textbook case of corporate psychopathy:

Giant UnumProvident Insider Trading Bringing the House Down Before Claims and Criminal Charges Hit Fan

By: John Caylor
http://www.insider-magazine.com/
January 21, 2006

Another American Institution Takes Plunge into Greed Pool

According to confidential sources, UnumProvident the nations largest disability and long term insurer is operating in a state of chaos while executives struggle to cash in their chips. Insider trading by the millions, exactly $144 Million according to the United States Securities and Exchange Commission Insider & Rule 144 transactions reported period February 2004 through January 04, 2006.

According to the SEC, UnumProvident Director Hugh O. Maclellan appears to be leading the way with stock sales from his personal portfolio and the families religious foundation, the "Maclellan Foundation a prime stockholder".

Insider Magazines in-depth investigation reveals a monster corporation with a "religious front" to hide away Billions siphoned from investors and policyholders. The Maclellan Foundation definitely has hooks into the Bush White House, IRS, federal courts and the U.S. Department of Labor and it may have received millions from U.S. government sponsored faith based initiatives explained in their "how to get taxpayer money Web site" "http://www.maclellan.net".

Recent corporate moves suggest the company to be quietly liquidating after raising additional capital from investors. Some investors have filed suit for fraud claiming that the company lied to them about soundness of financial statements and claims payments. After years of fending off thousands of lawsuits for bad faith and reckless disregard of medical facts involving denied claims the company recently agreed to reassess 215,000 claims federal and state regulators claim were wrongfully denied.

The U.S. department of Labor has fined the company $14 Million and California Insurance Commissioner has added another $8 Million after refusing to sign a multi-state settlement saying the company was a criminal corporation and charged them with knowingly violating the law. See the Commissioners statement about UnumProvident Click Here for Commissioners Press Release

With mandated reassessment of 215,000 claims valued at approximately $330,000 each, UnumProvident now valued at $57 Billion will not be able to survive a $71 Billion dollar run on it. The multi-state settlement agreement reached after an examination by a Boston Law firm cozy with the company spells out that the claims will be reassessed by a special unit formulated within UnumProvident.

But according to confidential employee sources and claimants who have been through the new loop, business is the same despite the agreement that calls for favorable reinstatement of claimants already on Social Security Disability. But the company had provisions written in the multi-state settlement giving them the option to deny those claims again based upon what it deems as incompetence of Social Security Awards.

According to Linda Nee a former UnumProvident manager and whistle blower, UnumProvident lies to their investors and tells them they pay 98% of all claims when in fact the company is paying only 60% of claims as a rule. Nee who now operates her own disability consulting service for ERISA and other claimants says that UnumProvident is paying those short term claims they must pay for cancer and related disabilities where claimants have a short life span." http://www.disabilityconsulting.net/".

The company's confidential claims manual states that Doctors and medical evidence can be ignored when determining disability under policy provisions and the company's employees will make all such determinations. See UnumProvident's confidential claims manual... click here for manual

The most they'll pay a claim will be for 24 months, that's the extreme even though some contracts call for payments to age 65. So far the company has avoided criminal prosecution and held it a bay, but, according to insider sources prosecutors in Washington, D.C. are in producing a fraud case against the company targeting benefits offset policy provisions.

…The pending felony charges may come from the fact that UnumProvident owns Genex Services a claims management company that uses attorneys and insurance professionals to reduce claims payment and company liability. Genex has become the market leader for reducing claims nationally for many corporate and government agencies.

Several months into the long term disability claims payment process UnumProvident sends a letter informing claimants that they will soon reach the end of a 24 month own occupation period and they must seek social security benefit offsets as required by their policies.

The company routinely sends out "Power Of Attorney Forms" from subsidiary Genex Services to handle the case at no cost to the claimant and tells them they are not required to appear at Social Security hearings and asks the Power of Attorney forms be promptly returned. The claimants are never informed that GENEX Services is a 100% owned subsidiary of UnumProvident and they own the lawyers lock stock and barrel.

Refusal to sign the Power of Attorney Waiver to GENEX has brought about early termination for an untold number of the 215,000 claimants due to be reassessed. Insiders claim the apparent "Fox-N-Henhouse" program led to many denials for disability claims sent over to the Social Security Administration because they say it is deliberate criminal fraud that reduced claims payments by hundreds of millions.

…According to the company's own internal Confidential Claims Manual, Insider-Magazine.com has acquired; UmunProvident has approximately 500 new disability claims per month. Doing the math shows that to be approximately 6,000 new claims per year and there are still 215,000 outstanding claims that have been denied according to the company's own records. Insider sources have told us that many of those were legitimate active claims which were terminated early due to raids by employees seeking the companys covented "Hungry Vulture Awards and bonuses".

The claims figures raise serious doubt if the company has ever paid but very few marginal claims since the inception of the Maclellan "Religious" Foundation in 1945 as an apparent safe haven source to stash billions away from eyes of the IRS and government regulators.

Oddly enough the Provident part of the now merged UnumProvident Insurance giant came about from family founder Thomas Maclellan who demonstrated faith when he bought half of Provident Life and Accident Companies, Inc. The company was in it's fifth year of operation and lacked leadership and organization, but Thomas applied his administrative skills and calm preserve to manage business affairs in Chattanooga, while his partner, John McMasters, used his vibrant, friendly personality on the road selling new policies.

The teams synergy was beneficial, but it was Provident's consistent pledge to integrity and honesty that ultimately brought the company success. In the late 1800's, an insurance company like Provident who promised to "pay all claims promptly" was extraordinary, especially because Provident followed through on that promise. Today UnumProvident provides disability insurance through several subsidiaries:

1. Colonial Life & Accident Insurance Company (all states, except New York)
2. First Unum Life Insurance Company (in New York only)
3. Provident Life and Accident Insurance Company
4. Provident Life and Casualty Insurance Company (in New York only)
5. The Paul Revere Life Insurance Company
6. Unum Life Insurance Company of America

Faith Shattered

"Bad faith" is the intentional deception, dishonesty, or failure to meet an obligation or duty.

In a CBS 60 Minutes interview broadcast in November 2002 California Insurance Commissioner John Garamendi told CBS's Ed Bradley that UnumProvident, the nations largest disability insurer, appears to be under pressure to increase claims terminations. This kind of thing will lead to problems. It’ll lead to fraud by the insurance company against the consumer, against the policy-holder, said Garamendi.

Garamendi elaborated further by saying, "There’s been successful lawsuits against UnumProvident in which federal courts by unanimous verdicts have issued punitive damages for this kind of activity. That’s another, not a warning sign, that’s a clear siren out in the streets saying ‘What is going on here.?"

Bradley responded with, "If this company knows that they’re going to be hit with these lawsuits and they’re going to lose some of them, that there’s going to be bad publicity, why would they do this?"

Garamendi: "It’s an equation, an economic equation. How many will we lose? How much business will we lose? Versus how much will we gain by denying these claims. So they’re doing that economic equation and they’re saying, “We’ll run the risk of the lawsuits. We’ll run the risk of the bad publicity, and probably the departments of insurance are asleep anyway. So let’s go!”

The company has since ousted former CEO Harold Chandler who handed out "Hungry Vulture Awards" to employees who terminated the most cliams. New CEO Tom Watjens has tried quelling the brewing stockholder rebellion with this statement on the company's website...

At its heart, UnumProvident is a company of people serving people. We provide more than a benefit check to claimants...we provide a wide range of benefits and services designed to help people during what is often the most trying time of their lives – loss of income due to illness or injury.

We are committed to paying all valid claims. In 2004 alone, we replaced over $4.2 billion in lost income to help support families. To our knowledge, this is more than any other income protection provider in the world.

Our claims paying philosophy is simple, yet direct:

· Make appropriate decisions by providing a thorough, fair, and objective evaluation of all claims
· Pay all valid claims in a timely manner with a high level of service
· Partner with our customers in their efforts to return to work or to independent living

Our claims process -- we call it "The Benefits Center" -- is unique helping our customers return to work following an injury or illness. We have invested heavily in a highly innovative process that is supported by a significant number of specialty and clinical resources, including our FMLA services, disability reporting/analysis, integrated disability management and more. Within our claims operation, our employees are all working on behalf of the millions of customers who have put their trust in UnumProvident. Through these commitments, we have generated return-to-work results better than industry averages.

UnumProvident is headquartered in Chattanooga, Tennessee, and has offices around the globe with a significant corporate presence in Portland, Maine; Worcester, Massachusetts; and Glendale California. Our subsidiaries include Colonial Life & Accident Insurance Company in South Carolina and Unum Limited in England.

Our focus on helping people return to the fullness of their lives extends beyond our business interests and into the cities and towns where we live, work and play. UnumProvident has long recognized the importance of providing philanthropic support in the communities we call home and encourage our employees to do so, as well. In 2004 we contributed more than $4.5 million to not-for-profit organizations across the United States and United Kingdom through locally made-decisions in our home cities. Through our matching gift program, we matched an additional $896,000 of donations made by North American employees to local organizations and schools. This dedication to helping our communities reach their highest potential is a natural extension of our mission to help our claimants return to the fullness of their lives.

In so many ways, and in all that we do, UnumProvident is working to make a difference...one person at a time.

All the elements of classic psychopathy are there. Pretend you are a psychologist and UnumProvident is a person, how could a diagnosis of psychopathy be avoided?

I sat next to a claims adjustor coming back from post-Katrina Louisiana a few months ago. He seemed like a good guy. He said that the thing that made him like his job was giving a check to family that needed it. At some point in the conversation, I asked him how the insurance companies were going to survive what I thought was huge liability after a natural disaster like Katrina. He answered quickly and simply: “by not paying claims.”

The psychopath repeats words of compassion and caring, but their actions tell a different story. The psychopath also likes to elicit pity from its victim (“the poor corporation has to pay pensions and healthcare for all those retirees who dare to live so long”). UnumProvident even has a false religious front, as do many psychopaths. At least they’re predictable. What the rest of society, the non-psychopathic part, must decide is if we are going to let them be in charge. There are more of us than there are of them. It is estimated that psychopaths, people with no conscience, comprise between 4 and 6 percent of the population. But people with consciences have been fooled by neoliberalism into thinking that good will come of psychopathic corporate behavior. People who adopt the neoliberal view accept behavior in corporations that they wouldn’t accept in human beings. In fact, this fascist form of neoliberalism is, like all fascisms, ultimately suicidal.

Here’s an excerpt from an interview with Emmanuel Todd regarding the U.S. government’s response to Katrina:

"We were able to observe the inadequacy of the technical resources, of the engineers, of the military forces on the scene to confront the crisis. That lifted the veil on an American economy globally perceived as very dynamic, benefiting from a low unemployment rate, credited with a strong GDP growth rate. As opposed to the United States, Europe is supposed to be rather pathetic, clobbered with endemic unemployment and stricken with anemic growth. But what people have not wanted to see is that the dynamism of the United States is essentially a dynamism of consumption."

…"American industry has been bled dry and it's the industrial decline that above all explains the negligence of a nation confronted with a crisis situation: to manage a natural catastrophe, you don't need sophisticated financial techniques, call options that fall due on such and such a date, tax consultants, or lawyers specialized in funds extortion at a global level, but you do need materiel, engineers, and technicians, as well as a feeling of collective solidarity. A natural catastrophe on national territory confronts a country with its deepest identity, with its capacities for technical and social response. Now, if the American population can very well agree to consume together - the rate of household savings being virtually nil - in terms of material production, of long-term prevention and planning, it has proven itself to be disastrous. The storm has shown the limits of a virtual economy that identifies the world as a vast video game."

Is it fair to link the American system's profit-margin orientation - that "neo-liberalism" denounced by European commentators - and the catastrophe that struck New Orleans?

"Management of the catastrophe would have been much better in the United States of old. After the Second World War, the United States assured the production of half the goods produced on the planet. Today, the United States shows itself to be at loose ends, bogged down in a devastated Iraq that it doesn't manage to reconstruct. The Americans took a long time to armor their vehicles, to protect their own troops. They had to import light ammunition. What a difference from the United States of the Second World War that simultaneously crushed the Japanese Army with its fleet of aircraft carriers, organized the Normandy landing, re-equipped the Russian army in light materiel, contributed magisterially to Europe's liberations, and kept the European and German populations liberated from Hitler alive. The Americans knew how to dominate the Nazi storm with a mastery they show themselves incapable of today in just a single one of their regions."

The neoliberal looting of social capital, of industrial capacity in the broad sense, will doom the society of the United States and any other country that adopts neoliberal prescriptions to third-world ineffectiveness.

Signs of the Economic Apocalypse 1-23-06

From Signs of the Times, 1-23-06:

Gold closed at 553.80 dollars an ounce on Friday, down 0.6% from $556.90 the Friday before. The dollar closed at 0.8241 euros on Friday up less than 0.1% from 0.8236 euros at the end of the previous week. That put the euro at 1.2134 dollars, compared to 1.2142 the week before. Gold in euros would be 456.40 euros an ounce, down 0.5% from 458.66 at the end of the previous week. Oil closed at 68.48 dollars a barrel, up 7.1% for the week from $63.92 the Friday before last. Oil in euros would be 56.44 euros a barrel, up 7.2% from 52.64 euros the week before. The gold/oil ratio closed at 8.09 Friday, down 7.7% from 8.71 the previous Friday. In the U.S. stock market, the Dow dropped sharply on Friday, closing at 10,667.39, down 2.7% for the week from 10,959.87 the Friday before. The NASDAQ closed at 2,247.70, down 3.1% from 2,317.04 for the week. The yield on the ten-year U.S. Treasury note was 4.35%, unchanged for the week.

The problems with Japanese, then U.S. stocks combined with a sharp rise in oil prices, may be a sign that the real players feel that the collapse is occurring. They have seen it coming for a while now, but there is always money to be made staying in the markets until the small investors get scared and everyone dumps. They may be sensing that the small investors, having seen rises in oil, gold and drops in stocks and wages are becoming spooked, no matter how much happy talk about the economy comes out of the mainstream media. In fact, even in the mainstream media the talk is less and less happy:

Iran Sanctions Could Drive Oil Past $100

By BRAD FOSS and GEORGE JAHN, Associated Press Writers
Sun Jan 22, 6:39 PM ET

A surge in oil prices last week to almost $70 a barrel on concerns about the restart of Iran's nuclear program only hints at what may lie ahead.

Prices could soar past $100 a barrel, experts say, if the U.N. Security Council authorizes trade sanctions against the Middle Eastern nation, which the West accuses of trying to make nuclear bombs, and Iran curbs oil exports in retaliation. A sharp global economic slowdown could follow.

That's the dilemma the United States and European nations face as they decide whether to act. But Iran would also pay a hefty price if the petro-dollars that now represent 80 percent of export revenues are reduced, potentially stirring civil unrest in a nation with a 14 percent unemployment rate.

"They would shoot themselves in the foot," said Mustafa Alani, director of national security and terrorism studies at the Dubai-based Gulf Research Center. "It's one thing to test the market psychology, it's another to take the actual step and stop oil exports."
Iran, the second-largest oil producer within the Organization of Petroleum Exporting Countries, exports roughly 2.5 million barrels per day — 1 million barrels more than current excess production capacity worldwide. It also controls the strategic Strait of Hormuz, a critical shipping lane in the Middle East.

"Even if Iran pulled a small amount of its oil off the market, say it pulled a half million barrels a day, I could see oil prices literally jumping over the $100 per barrel mark," said James Bartis, a senior researcher at Rand Corp.

But other oil analysts say prices would likely not climb much higher than $75 a barrel before strategic reserves would be released and demand would begin to taper off as economic activity slowed around the world.

Higher fuel prices will most likely cause stagflation, inflation together with recession. Usually, inflation accompanies economic booms, but since hydrocarbon fuels are input at every step of agriculture or manufacturing, a sharp rise in oil prices can cause inflation even during times of low demand. Stagflation presents problems for economic policymakers since the usual method for fighting inflation (interest rate increases, employment decreases leading to wage decreases) make any recession much worse. For the average person, stagflation is difficult because prices of food, energy and goods go up when wages and employment fall.

Here’s an example from the United Kingdom of how the lag between the rise in energy prices and higher prices for finished products reduces profits:

Fuel prices put the squeeze on manufacturers

By Jamie Chisholm, Economics Reporter

Published: January 16 2006

The stubbornly high cost of fuel is continuing to put the profit margins of UK manufacturers under pressure, the latest factory gate price data showed on Monday.

The Office for National Statistics said that prices charged by producers climbed 2.4 per cent in the year to December, but fell by 0.2 per cent compared with the previous month.

However, input prices rose 17.2 per cent on an annual basis, the highest since records began in 1991, and increased 1 per cent in December on a month-on-month basis.

December’s month-on-month decline in factory gate prices marked the third month in a row that companies have had to charge customers less.

The trend may be considered good news for the Bank of England as industry’s difficulty in pushing through price rises should help curtail increases in headline inflation. A report on consumer prices is due on Tuesday morning.

Investors, however, are likely to be concerned that companies’ inability to pass on the higher costs of materials and fuels means their margins are being compressed.
Howard Archer at Global Insight thought that the factory gate numbers did not bode well for future activity in the manufacturing sector.

“Clearly, manufacturers are still finding it extremely difficult to pass on their high input costs amid continuing intense competition within the sector and relatively soft demand, but a key question going forward, is will these higher input prices increasingly filter through the supply chain? Meanwhile, the increased squeeze on manufacturers’ margins threatens to further weigh down on employment and investment in the manufacturing sector.” said Mr Archer.

George Bush and the Neocons seem to be doing everything in their power to increase oil prices. They are also doing their best to bankrupt the United States Treasury as quickly as possible. There are a lot of reasons to think a collapse is inevitable even with wise leadership. How can it be avoided with that gang in power?

According to Bellaciao, bank employees in the United States have been instructed in what to say and do when the collapse hits:

Collapse of U.S. Economy Imminent

In its attempt to establish a world empire dominating every nation on the planet, the U.S. has exhausted its ability to finance the expansion and the country now faces imminent financial collapse. From all indications, it looks like 2006 will spell the end for America.

… Bank Of America and Compass Bank managers (probably all other U.S. banks too) have been instructing their employees in the last few weeks on how to respond to customer demands in the event of a collapse of the U.S. economy - specifically telling the employees that only agents from the Department Of Homeland Security will have authority to decide what belongings customers may have from their safe deposit boxes - and that precious metals and other valuables will not be released to U.S. citizens. The bank employees have been strictly prohibited from revealing the banks’ new "guidelines" to anyone. (however, employees have been talking to friends and family)

The next time you visit your bank, ask them about it - then ask yourself, why is this information being kept secret from customers and the public - what’s really going on?

Summary: The U.S. economy is broken, the United States is bankrupt - the unchecked spending by this administration, the illegally waged wars against Afghanistan and Iraq, the cost of unprecedented weapons and military build-up - have all contributed to an irreversible emergency which is threatening our nation’s existence and our very lives.

Hospitals are closing, major corporations are declaring bankruptcy and/or moving their companies overseas, the monopolized news media spews nothing but lies, and our fearless leaders have turned out to be only ruthless criminals hell-bent on destabilizing our country and robbing us all.

Be aware - we stand at the threshold of total ruin - the international bankers and war profiteers care little for our lives and families - these demons worship money and all things vile and evil - they have very much to gain from war, misery, disease, famine, chaos and death (our deaths).

We are right on the edge - the Treasury is already overextended - the U.S. government cannot (and will not) care for its own citizens’ needs, nor secure our borders against illegal aliens - plus, the whole "terrorist" thing is a cruel hoax perpetrated against a trusting citizenry - and only designed to instill fear and garner support for the genocide taking place in Iraq.

Should America (along with British & Israeli forces) launch a war against Iran, or another country, without yet paying for, or even recovering from the current losses in Iraq and elsewhere - the costs of such of an invasion will overwhelm an already crippled economy and push the U.S. over the edge into oblivion.

Question: Considering the U.S. Treasury Notes that China currently holds (which keeps the U.S. economy going)...

Do you think China will continue to support a country’s economy (the U.S.) whose military launches a nuclear strike against its neighbor (Iran) - thus delivering a blanket of radioactive fallout over western Chinese provinces - killing hundreds of thousands, if not millions of its citizens?

I think not.

Factoring in the aforementioned points of "preparation" engineered by U.S. authorities, I’d say there’s a stinking rat in the woodpile ...can you smell it too?

How different is the above passage in a radical website from what we can read in mainstream outlets like this one from the Chicago Tribune?

HURRICANE KATRINA: THE STORM AND THE METAPHOR

Shelter anyone? We're not prepared for an economic hurricane either

By Alan Tonelson, a research fellow at the U.S. Business and Industry Council Educational Foundation and the author of "The Race to the Bottom"
Published January 22, 2006

AS ITS BROKEN LEVEES AND drowned pumping systems made so painfully clear, if the Big One was widely predicted in New Orleans, it was never genuinely feared. After Hurricanes Katrina and Rita, disaster preparedness and prevention are no longer completely academic subjects.

If only such realism could be injected into U.S. policymaking before a widely predicted economic disaster finally strikes.

Hurricane-force winds of overspending are building storm surges of debt that tower over the levees and pumps available to American leaders. These mounting imbalances could wash over the economy and leave America and the world submerged in a deep, long-term downturn.

This building economic storm has generated at most pro forma acknowledgments. Even worse, discussing crucial international dimensions of the looming emergency is usually considered taboo, even though numerous, ongoing policy mistakes on this front have heightened America's and the world's vulnerability.

Ironically, these failures were showcased in the most prominent way possible just before Katrina, when key global economic aristocrats gathered for an annual gabfest in Jackson Hole, Wyo.

Beneath the Tetons, bankers, policy experts, finance whizzes and academic gurus alternated fly-fishing outings and nature hikes with sweeping discussions, such as "The Greenspan Era: Lessons for the Future." The subtext of the discussion: Has the U.S. economy become a bubble inflated by investors and consumers who have totally forgotten the concept of risk? And have Alan Greenspan's policies encouraged these excesses?

Upon returning to the real world, however, these folks disregarded any eloquently voiced concerns. They simply refused to acknowledge that specific U.S. foreign economic policies are inexorably widening the gap between the nation's desires and its ability to pay for them responsibly.

America's dangerously weak finances stem partly from the public's ravenous appetite for material goods and government services, combined with a bipartisan determination in Washington to feed them. The world's willingness to keep showering an overstretched America with cheap credit has been central as well.

Flip side: Inadequate income

However, the flip side of overspending is under-earning, i.e., inadequate income. And whether the problem is domestic wage stagnation or lagging exports, a major contributor has been a national trade strategy that tends to be championed by business and policy elites.

Inflation-adjusted median wages today have fallen back to 1967 levels, according to Department of Labor statistics. The only way for the typical American family to maintain its living standards has been to spend down its savings, double its outstanding household debt since 1992 (after adjusting for inflation), according to The Wall Street Journal, and often send a second wage earner into the workforce.

Surely at least some blame belongs with globalization policies that have resulted in the outsourcing of millions of the nation's best-paying jobs and job opportunities, and that have directly or indirectly exposed most other workers to the undertow of the "China price."

…Containing today's likeliest economic disasters is even more important than preventing or containing natural disasters. An economic hurricane like the one gathering strength could flatten the world economy, not just local or regional economies. And unlike imminent natural disasters, economic disasters are directly strengthened by each new policy mistake and the excesses it breeds.

As widely observed but clearly not genuinely believed the larger a bubble becomes, the more destructive its bursting.

The resulting political storm will dwarf the ongoing post-Katrina finger-pointing because Mother Nature will be completely off the hook.

The analogy of the U.S.-led world economy to Hurricane Katrina may be more apt than most suspect. Just as many New Orleans residents heard an explosive charge at the moment the levee broke, leading many to suspect a deliberate trigger to the disaster done under the cover of a natural disaster, could it be that there is a deliberate triggering of economic collapse going on? If so, why?

In any case, what many in the United States have begun to realize since Katrina (now that it’s perhaps too late to do anything about it) is that their economy has been tranformed into a third world economy operating to the benefit of a kleptocracy (rule by thieves):

Neoliberalism, Katrina and the Asian Tsunami
Casualties of War

By PETER FENG
The recent controversy surrounding the plan to rebuild New Orleans and the passage of the first anniversary of the Asian tsunami cap a year in which a host of catastrophic disasters caused widespread death and destruction and garnered worldwide media attention. In so doing, these disasters revealed certain fundamental truths regarding economic development in both the developed and developing world. Two of the most well-publicized disasters in particular, the Asian tsunami and Hurricane Katrina, exposed the extent to which public welfare and security were undermined by governments' deference to the interests of private profit, militarism, and laissez faire capitalism. These events have opened the door for a fundamental reevaluation of the current neoliberal model of economic development being pursued in the United States and elsewhere.

While most people in the U.S. generally give little thought to issues of so-called Third World development, they would do well to pay closer attention, because politicians and policy makers in this country have employed many of the same austerity measures that have been inflicted on Third World countries for decades to instill fiscal discipline in the domestic economy. As in the global South, however, these strategies are driven less by notions of fiscal conservatism than by a stubborn adherence to a set of economic policies that have successfully trapped developing countries in a spiral of poverty, debt, environmental degradation, and social instability for decades. It follows that the application of these selfsame austerity measures in the developed world over the last 30 or so years will have reduced First World nations like the U.S. to the same level as Third World countries.

The Near Abroad

As the leading proponent of neoliberalism, an economic paradigm that promotes corporate governance over state governance through (1) financial market liberalization, (2) the privatization of public industries and services, (3) the withdrawal of government intervention in the market economy, and (4) unrestrained foreign trade, the U.S. has itself adopted many of the same austerity measures it has helped to impose on developing countries around the world. In 1979, for instance, Federal Reserve Chairman Paul Volker inaugurated an era of falling living standards and increased joblessness in the U.S. when he raised interest rates to unprecedented levels on the pretext of fighting inflation. In reality, Volker undertook this course of economic shock therapy in order to suppress wages in the labor market and to restore profitability to the financial sector, which had been losing money on low-interest loans whose margin of return was diminished by the high inflation rates of the 1970s. What followed was higher unemployment, greater poverty, increased homelessness, lower rates of economic growth, and the creation of the Rust Belt. The effects of this particular passage of U.S. economic history still linger on today, and a comparison between the U.S. and several countries that rank among the world's poorest will serve to illustrate the fact that the U.S. is the one developed country in the world that bears the most similarity to a Third World nation.

According to the 2004 United Nations Human Development Report, Sierra Leone is the poorest country in the world with a national debt of about $1.7 billion. In comparison, the U.S. national debt stands at $7.8 trillion. Niger, the world's second poorest country, has a population of about 12 million people. Contrast this with the 37 million people in the U.S. who are now living below the poverty line.
By official measures, the federal poverty rate currently stands at $9,310 a year for individuals and $18,850 a year for a family of four in the 48 contiguous states. Although it is possible to live quite well in the Third World on these sums of money, citizens subsisting at these levels in the U.S. often find themselves engaged in a daily struggle to maintain food, clothing, and shelter. This is because the basis for the federal poverty rate has remained unchanged since 1964, despite substantial increases in the cost of living. Adjusted for inflation, the federal poverty rate amounts to no more than $3,000 a year. In the lexicon of international development, that amounts to less than $9 a day.

High Poverty and Inequality

Before the arrival of Hurricane Katrina, New Orleans was home to about 500,000 inhabitants, a majority of whom were African American. Of that number, roughly one-third (100,000 people) lived in poverty. This same number of poor people were left to fend for themselves in the wake of the hurricane and were unable to evacuate the city, because they had neither the means nor the ability to do so.

This situation highlights the following fact: Just as Third World countries are characterized by high levels of poverty and enormous income gaps between rich and poor people, so too is the U.S. Indeed, the 2004 UN Human Poverty Index found that the U.S. has the highest level of poverty and income inequality in the entire Western world.

The rankings were determined by tallying up the following four factors among "high income" countries claiming membership in the Organisation for Economic Co-operation and Development (OECD): (1) probability at birth of not surviving to age 60; (2) percentage of adults lacking functional literacy skills; (3) percentage of people living below the income poverty line, which is defined as 50% of median adjusted disposable household income; and (4) long-term unemployment, which is defined as 12 months or longer.

To put this information into perspective, in China the richest 10% of the population was about 12 times wealthier than the poorest 10% at the end of the first quarter of 2005. In comparison, the richest 5% of the U.S. population was already 19 times richer than the bottom 20% by 1999. Moreover, the U.S. Federal Reserve reported that between 1998 and 2001 the income gap between the top 10% and the bottom 20% grew by 70%. Additional studies have further shown that the richest 1% of the population in the U.S. has appropriated 94% of the growth in total income since 1973.
This also gibes with findings by the U.S. Census Bureau which show a decrease in the Gini coefficient between 1947 and 1968 followed by a marked increase between 1968 and 1999. Developed by Italian statistician Corrado Gini, the Gini coefficient is used internationally to measure income inequality. On the Gini scale, the number zero corresponds to complete income equality, meaning that income is perfectly distributed amongst all citizens: the number one (1) corresponds to perfect income inequality, meaning that only one person has all the income.

The developed nations that rank ahead of the U.S. in the UN Human Poverty Index have coefficients between 0.24 and 0.36. In 2004 the U.S. had a Gini coefficient of 0.45, worst among all the developed nations in the world and ranking behind even Cambodia (0.40). China currently has a Gini coefficient of about 0.48.

Joining the Third World

One of the obvious consequences of this large income gap is that one out of ten households in the U.S. experiences hunger or the risk of hunger. Nationally, this translates to about 36 million people or 11% of the population, roughly the same number of people currently living in poverty. Remarkably, this is almost three times greater than the number of people in southern Africa who went without food in 2002. Unfortunately, these numbers are likely to increase in the U.S., as Republicans seek to further reduce spending on public subsidies for the food stamp program. This, despite the fact that more than 25 million people rely on the program to provide them with food, and that hunger has risen four years in a row.

Another consequence of the large income gap in the U.S. is that every year at least 3.5 million people lack clothing and shelter. That is, they are homeless. The U.S. is not alone in this regard. Indonesia has a population of about 242 million people, which approximates the 296 million people living in the U.S., and it generates roughly the same number of homeless people as the U.S. The difference, of course, is that the U.S. is a First World country. Or is it?

In the developed world homelessness is mitigated through a vigorous and well-funded public education system, job training, a comprehensive public housing policy, income protections such as unemployment benefits and public pensions, and most importantly a universal health care system that provides medical care, mental health services, drug treatment, and domestic violence counseling. Additionally, joblessness has traditionally been alleviated via government spending on public works projects.

… The analogy of the U.S. as a Third World country becomes even clearer, when one considers that in the developing world regulations protecting the environment and the safety and health of consumers and workers are either minimal or non-existent. At a time when developed countries in Europe and Asia are expanding these protections by requiring companies to assume complete liability for the environmental impacts of any product sold in the European Union for the life of that product, a concept known as Extended Producer Responsibility (EPR), public officials in the U.S. are intent on rolling back or eviscerating many of the landmark environmental regulations in this country such as the Clean Air Act, the Clean Water Act, and the Endangered Species Act.

The fact that public officials at the local, state, and federal level cannot persuade private companies ranging from computer makers to manufacturers of cosmetic beauty products whose merchandise is often comprised of toxic chemicals and other carcinogenic compounds to comply with regulations regarding recycling and labeling that they have already submitted to in Europe, Japan, Taiwan, and Korea demonstrates exactly how far behind the rest of the developed world the U.S. truly is.

Greater Disparities, Shorter Lives

All of these factors likely help to explain why despite spending 15% of its gross domestic product on health care, more than any other country in the world, the overall health of the U.S. population continues to worsen. For many years, Dr. Stephen Bezruchka, an emergency room physician and University of Washington senior lecturer, has argued that when the wealth of a society becomes concentrated in fewer hands, larger numbers of citizens lose the ability to access the resources essential to their well-being. This leads to higher stress levels which, in turn, increase the risk of heart disease, back pain, mental illness, and other diseases.

…As if that wasn't bad enough, a movement is underway in the U.S. to do away with pension programs altogether. In the public sector, Republicans in the White House and in state governments like California have plans to privatize pension systems such as Social Security and the California Public Employees' Retirement System (CalPERS). Success in any of these arenas will result in a windfall for the financial industry worth billions of dollars, while retirees will wind up with fewer benefits and more meager payouts. Meanwhile, in the private sector a federal bankruptcy judge recently gave permission to United Airlines to default on its pension obligations to company employees. The decision will likely pave the way for similar actions in the airline industry and other corporate sectors.

While some may argue that inequality is an inevitable part of life, those who expound this point of view frequently tend to discount the effects of income inequality in their own lives. For example, Bezruchka points to the fact that in 1960, when the income gap between rich and poor was smaller, the U.S. ranked 13th in the world in life expectancy. Then in 1997 the U.S. fell to 25th. This development did not go unnoticed in international circles. In a press release issued in 2000 Dr. Christopher Murray, director of the World Health Organization's (WHO) Global Programme on Evidence for Health Policy remarked that: "Basically, you die earlier and spend more time disabled if you're an American rather than a member of most other advanced countries."

The big questions remain. Will the United States expand its war in the Near East? If so, will China continue to pay for it? Or can the ruling class in the United States purge itself of the madness by impeaching Bush and Cheney and imprisoning the Neocons? The questions are more political than economic but the answers to our questions about the economy are dependent on the answers to the political questions.

Signs of the Economic Apocalypse 1-16-05

From Signs of the Times 1-16-06:

Gold continued its rise, closing at 556.90 dollars an ounce on Friday, up 2.7% from $542.20 the Friday before. The dollar closed at 0.8236 euros on Friday, virtually unchanged from 0.8239 the week before. The euro, in turn, closed at 1.2142 compared to 1.2137 the week before. Gold in euros would be 458.66 euros an ounce up 2.7% from 446.73 at the previous week’s close. Oil closed at 63.92 dollars an ounce, down 0.6% from $64.31 the week before. Oil in euros would be 52.64 euros a barrel, down 0.7% from 52.99 at the end of the previous week. The gold/oil ratio closed at 8.71, up 3.3% from 8.43 the Friday before. In the U.S. stock market, the Dow Jones Industrial Average closed at 10,959.87, virtually unchanged from 10,959.31 the week before. The NASDAQ closed at 2,317.04 up 0.5% from 2,305.62 at the close of the previous week. The yield on the ten-year U.S. Treasury note was 4.35 at Friday’s close, down two basis points from 4.37 the week before.

Besides gold, everything in the numbers looks pretty normal. Gold, however, has risen 10% since Christmas. The economic crisis is here. So why is the stock market doing so well? Steven Lagavulin of the Deconsumption blog points out that the U.S. Federal Reserve Board has pumped more money into the system than they have since September 11, 2001:

Fed Flood

I've been watching this handy thumbnail graph of Federal open market actions for some time now and thought it might be of interest to pass along. It basically reflects the daily liquidity that's being created--measuring the power of the proverbial printing presses. And frankly, they've been kicked into high gear for the past couple weeks. I assumed this was just to give a quick boost to the stock market going into year's end, but I gotta tell ya.....yesterday's action was massive...I mean the kind of liquidity you wouldn't see unless there was real Fear at the Fed.

To give you some perspective you might eyeball the bottom black lines on this longer-term chart....and note that the last time we saw 60 billion was in the second week of Sept. 2001....

Michael Nystrom confronts the high stock price question and also concludes that it is due to the massive increase in the M3 money supply:

Is This Rally for Real? And Other Thoughts

by Michael Nystrom, January 10, 2006

Cambridge, MA

"The tape moves in mysterious ways, the multitude to deceive" - WD Gann 2006 -

Year of the Bear

As most of you are aware, there are a number of bearish omens hanging over US economy and stock market for 2006. Here is the list, off the top of my head:

1. Rising short term interest rates
2. Inverted yield curve
3. Housing bubble slowdown / pop in the works (See this excellent article by Gary Schilling)
4. Massive slowdown and/or bankruptcy at GM and/or Ford on the horizon
5. Rising unemployment in home building, financial services, and manufacturing due to 3 & 4
6. Rising energy costs
7. Corresponding slowdown in consumerism due to 5 & 6
8. Stock market's four year / presidential cycle pointing down
9. Rising trade deficit
10. Rising budget deficit
11. Rising national debt
12. New Iranian oil bourse in the works to price oil in euros this spring
13. Falling dollar as a result of most of the above, but especially #12
14. New guy on the job at the Fed to deal with all of the above.

I won't belabor these points; I think we're all well aware of them. Anyone with eyes and a brain knows what they mean. All the evidence is lined up against the economy and the stock market.

But just when things are looking the most bearish, when we all expect the market to start the year off with a loud thud and keep on going, what does it do? It confounds everyone with new highs. So no matter how bearish one may be (and I am pretty bearish for 2006), there is one thing that bears cannot argue with right now, and that is new highs. And that is exactly what we've seen so far in the new year on all the major indices. The Dow is perched above 11,000 for the first time since 2001, just 8% away from a new all time high.

Gold likewise put in a new closing high today, over 550. A number of commentators have already pointed out that these gains have been accompanied by huge increases in M3. That money has to go somewhere, and it looks like for the time being it will continue to flow into stocks, gold, and other commodities. This means inflation as long as the Fed keeps pumping. But have you noticed that everything seems to deflate after they lay off the gas just a little bit?

Rather than being a forecast, I prefer to call this a roadmap for 2006, and rather than discussing specific targets, I'm going to give a scenario of what might happen this year, in line with the Gann quote above. No one can tell with any certainty what is going to happen, especially in this volatile environment, so what I'm going to do is tell you a story. First I am going to lay out what I see happening now then give you my best guess and some perspective as to what might happen in the future. And like any good story, this one has a moral…

Nystrom's Scenario for 2006 1Q

From a long-term perspective, things look pretty dismal for 2006. Most mainstream analysts seem, if not bullish, certainly not bearish, while most internet commentators sense trouble ahead. Count me among the the second camp. In the short term however, we've got a little rally on our hands in the stock market. While I have no idea how long this current rally could last, it appears fairly clearly correlated with M3:

M-3 has been launched into outer space, up another $56.3 billion last week, up $92.4 billion over the past two. This is some real horsepower. Over six weeks, the meaningless figure, ahem, is up $177.8 billion. These annualized growth rates are 28.7 percent, 23.6 percent, and 15.3 percent respectively.

I doubt the Fed is going to abruptly shut off the spigot, and this pace should be enough to keep the rally going at least through most of the first quarter. From a technical perspective, the SPX (futures) looks to have around 60 - 80 points of rally in it, the NDX around 150 points and the Dow around 600 - 800. Bull or bear I think we'd all like to see the old Dow make a good run at its all time high, if just for nostalgia's sake. It would be something exciting to cheer for in this dreary winter of 2006 - free and better than a movie. Of course if the Dow does beak to a new all time high, the psychological boost to the markets could be much greater, and prices might move much higher. But we will cross that bridge when and if we come to it.

What I would like to caution bears on is not to underestimate the possible extent of this rally. Think back to last year at this time and how just about everyone was bearish on the dollar. The Economist had a cover that showed pictures of paper airplanes made of dollars, crashing from the sky. Warren Buffet went short the dollar, and Bill Gates was quoted as saying, "the ole' dollar - its going down." (As if he knew.) But while the "fundamentals" said it should be in for a fall, instead it did the exact opposite. For the whole year. That's how markets go sometimes. As the old saying goes, "the market can stay irrational longer than investors can stay solvent." And so it is with the stock market as we start this new year. So I caution bears not to take this rally lightly. Prices are going up now. If you're a nimble trader, you can go with the flow (up), but if your a bear don't try shorting until you see clear signs of a top.

The Reason the Most "Conservative" Investors Get Caught Buying at the Top

I know that a lot of bears out there can't believe their eyes, can't believe that this market is still going up, not with the deteriorating economic picture, and not with that 14-point list up there. But the market has confounded just about everyone of late, because that is part of its job. So let's imagine that the market has a nice run over the next several months, and the conservative investors on the sidelines see others making money while they're missing out. Then those "conservative" investors will start to get a little antsy. Every day the market moves higher they'll get more uncomfortable. By the time they're finally convinced that the advance is real and they buy in, the top will be in and the rally will be over. The prime point for this to occur would be as the Dow approaches its all time high, looking like its going to bust right through it without looking back. The other prime point would be tomorrow morning.

Please note, all of this is pure speculation, but it is the best way I can imagine for a bear market rally to fool the maximum number of people. So if this first quarter rally does materialize, keep your eyes peeled for signs of economic weakness and recession. The factors on that list above are real, and barring some kind of miracle, they are not going away. The first quarter is when Iran's oil bourse comes online, it is not unprecedented for markets to peak in the spring. The Nasdaq's all time high came on March 10, 2000 as investors started to look ahead to first quarter earnings and decided they didn't like what they saw. Oil is rallying again, and whether it makes a new high or not, I think the damage has already been done to the economy -- we just haven't seen it yet. If oil makes new highs, then forget it - recession is practically inevitable.

Changing of the Guard at the Fed

Greenspan's last meeting as Fed Chairman comes on January 28, and I suspect the huge increase in M3 has something to do with ensuring a smooth transition between himself and Bernanke. If you recall, Greenspan also flooded the pipeline just before Y2K. He is a cautious man. He wanted to make sure to stem any potential panics, so he did what any banker would do - throw money at the problem in the hopes that it would go away (and we all know what that did to the market). The changing of the guard at the Fed will likely go smoothly -- everyone will be on their best behavior -- and the markets will politely welcome in the new guy. At least for the first few days.

Greenspan took over Chairmanship of the Fed on August 11, 1987. If memory serves me correctly, the market peaked around August 25th of that year, but waited a full two months before the big welcome party in the form of the October 1987 crash. Bernanke takes over February 1st, 2006, and his first meeting as Fed Chairman comes on March 28th, 2006. We're all expecting him to have a trial by fire, but who knows what will trigger it? Maybe he'll spook the market with his overly direct manner of speaking, in stark contrast to what Jim Grant called Greenspan's "central banker Esperanto." Or maybe he'll disappoint the market by continuing with the short term rate hikes in an attempt to live down his inflationist reputation. Whatever the case, by the time the market peaks, most people will be so intoxicated by the rising stock market that they won't notice the deteriorating economic conditions. Or if they do notice, they'll do what they always do - they'll ignore them and say that this time they don't matter. The market always climbs a wall of worry, but when prices diverge massively from underlying reality, the stage becomes set for a crash. Bernanke won't be the cause of it (if it happens), but if he doesn't fix it, he'll certainly get the blame for it!

The Credible Threat

Last night I reread the text of Bernanke's Fed speech on deflation (Deflation: Making Sure "It" Doesn't Happen Here). I remember the first time I heard his printing press remarks -- I was blown away. I didn't know who this guy was, other than that he was a new guy and that I thought the line about the printing press was an extremely irresponsible thing to be saying. I was sure that he would be fired, or at least repremanded for his remarks, but look where he is now. Shows you how much I know.

This is what I gleaned from the speech last night: Bernanke tells a story, that if an alchemist invented a way to make gold in unlimited quantities, then released this news to the world and said he was going to start making and selling unlimited amounts of gold, the price drop immediately, before the Alchemist made or sold a single ounce. He goes on to compare the Fed to that alchemist. He talks about the printing press, then says, "By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services."

Then it struck me - this elimination of M3 in March is the credible threat.. Its a bluff. First they juice M3 like it is the end of the world (or 1999), and then they turn the lights out on the statistics. Since we're all in the dark, the only thing we can assume is that the Fed is monetizing debt like there is no tomorrow. But they really don't want to do that -- it is not good for their balance sheet -- so instead they engineer this bluff. Everyone believes it, and they (we) act accordingly, bidding up stocks and gold.

If you don't think the Fed is that clever, I encourage you to read Bernanke's speech. It is a long treatise on stimulating demand and causing inflation in the event that interest rates fall to zero. After reading the speech, you may find that they are beyond clever. They are insane!

Max Fraad Wolf adds to the usual catalog of bearish omens a couple more: Latin America standing up to neoliberalism and the end of pensions in the United States:

Sleeping dogs wake?
Wisdom holds that the 2005 miracle avoidance of long deferred bills will continue. The admitted fly in the ointment seems to be growing consensus that housing markets may not be able to furnish double digit growth in prices, cashout refinancing and home equity extraction. Fingers are crossed - assurances are made - that this will not have serious near term macro dampening effects.

My interest, however, is to call attention to facts so long ignored they have been forgotten. The quick and dirty summary is: coming pension problems and the economic impact of losing Latin America might merit mention and concern. If these are odd subjects, almost never discussed, therein rests their import.

As we slide into what could be the 6th year without real median income growth, under funded pension plans, rising co-pays and decelerating housing gains are likely to coincide with rising interest rates and high energy prices, a combination sure to squeeze debt laden family budgets. Precious little attention has been paid to the earnings footprint of new pension and health care cost accounting. New accounting rules set to take effect will require firms to move discussion of pension costs from ignored footnotes to the general content of financial statements and filings. This will add a powerful incentive for many to follow the leads of IBM, Motorola, Verizon, airlines, autos, auto parts and the foiled NYC MTA to off-load present and future pension costs. Stop and ponder what this means and you will see why markets should be paying a lot closer attention to these developments. Pensions are massive buyers of equities and fixed income products. If they shrink and more dollars are turned over to negative savings rate America, what will follow? If there is no slack in pressured household budgets, and retirement security looms large, how smooth will the pension offload sailing be? These pressures are unfolding as baby boomers move into retirement cash out mode and US indexes lag foreign competitors. Anyway this shakes out, pensions are a huge issue likely to grab headlines and cause turmoil in 2006 and well beyond.

At some point the string of massive and costly foreign policy missteps of the last five years will be discovered by our ever prescient, wise and forward looking friends in the financial markets. Chief among the nasty little items that will occur to folks when they decide to look around again will be that US influence, prestige and potency in Latin America has plummeted to previously unthinkable lows. From Argentina and Bolivia to Uruguay, those associated with and friendly toward Washington have been dropping like flies. Our loss of influence and access have neither gone unnoticed nor, unexploited by foriegn rivals. China’s freshly inked contract with Bolivia offers an example of a global reshuffling that is proceeding briskly while America sleeps and congratulates herself over imaginary victories. I believe that losing a continent matters. Others will too when they get around to discovering it. I fear a too little, too late and heavy handed response is likely to materialize. If the past offers guidance, it will further worsen the situation.

A significant part of the way we squeezed out 2004 and 2005 was through a combination of perception management and inter-temporal shifting. Perception management entails prima facia rejection of bad news and exaggerated embrace of the positive. Inter-temporal shifting is defined by shifting costs into the future and consumption into the present. Both are overdue to hit the wall. Perception management is exemplified by the rising dollar proving stability and desirability of US assets. This is done in neglect of an approaching $800 billion current account deficit, distortion created by one time repatriations of foreign held multinational cash under a now expired tax provision and the increasingly uncomfortable fact that US equity market returns are lower than other region’s returns. Not to worry, all good things are fundamentally based and eternally true. Bad news is hype and ephemeral. Our inter-temporal shifting is actually growth and wisdom; future costs are exaggerated and fleeting. The time transfer I refer to is the new national past time, forget baseball. We accomplish this stunning economic achievement through credit markets and the break down of time honored lending standards and credit constraint. Debt trades more today for less tomorrow. We live in a national economy that is swapping ever more today’s consumption for ever less tomorrow's wealth. This defines our relations with the rest of the world and has been accelerating for years. The inter-temporal sleeping dog will wake and 2006 promises several kicks to slumbering canine. Korea and China have recently signaled discomfort with the hundreds of billions in our future wealth and earnings they have taken on to facilitate massive American consumption of their exports. The prospects of some recovery in Japan and Germany suggest to all that there may be other places to park capital.

Households live on transferring today’s shortfalls into the future with rising debt. They trade growing future streams of repayment to spend today. Expansive houses, shiny new cars, high end appliances, Swiss Watches and flat screen TVs have been amassed against pledges of future income. We will gladly pay you Tuesday 2010 for a Toyota today. This is perception management and time transformation of earning and payment par excellence! Surety of future income to cover rising debt service is peaking amid historically low and rising interest rates, falling retirement income security, stagnant real median earnings and rapidly shifting global economic realities.

Just like everyone else, I don’t know how much further beyond prudence this can stretch. Unlike a lot of folks I don’t believe sleeping dogs lie forever still. When they do stir to life, expect much bite and little bark.

Charley Reese gave us a little common sense on Latin America last week:

Latin America is beginning to turn left, and you can't blame it. So-called globalization is nothing more than financial colonialism. Big capital comes in, exploits the people's labor, loots the country of its resources and leaves nothing behind except the bribes it paid the country's leaders to sell out their own people.

That's really what globalization is — all of the heifer dust spread about it by lickspittle journalists and professors notwithstanding. The same process is going on in the United States. The robber barons are back, and their morals haven't changed, only their tactics.

More important than debt, the housing bubble, pensions or Latin America, though, is the looming attack on Iran. The consequences of such an action go far beyond any sort of financial numbers. The world economy, to the extent it survives at all, will be based on rationing, the black market, and day-to-day scraping by, no matter what economic class you belong to now.

George Ure is worried, too:

The Melt Down Ahead

To see what's coming, you only need to read a few stories, in the right order, and think through the picture being painted. Because it's a weekend, bear with me for a few minutes, and let me walk you through the highlights, ok?
---
More than a few of us who have been buying gold since the Manufacturers Resource War broke out (with 9/11/2001) have been expecting gold to begin making its "big move". With prices surging past 24-year highs on Friday, this very well could be it. If it is, our inclination is to wait until the Dow and the Price of Gold (POG) are even, then we'll figure out where to deploy both of our dollars next.

I have to agree with one poster over at LeMetropole Cafe who noted that the surge in prices was not directly attributable to Iran tensions. He noted if that was the case, we would have seen oil spike up in a similar meaningful way. It hasn't, so he figures, something else is at work.

What's really going on, as best I can judge, is that the Fed has partially lost control of the money supply (which is why they will stop their weekly confessionals of M-3 in March of this year - it will be too scary for "regular people" to stomach by then. This week's report shows that M-3 has increased by 7.84% compared with year ago levels. It's really worse: The November to December change in M-3 pencils out to an 11.5% annual rate. In simplest terms, the money supply is going nonlinear now. That's why gold is up.

You might be asking what is so frightening about that - we've had bouts of inflation before, so no big deal. Well, not quite. You see in the same period, the amount of M-1 (basically cash in the system) has actually decreased by about 2-10th's of one percent in the same period!.

In other words we have deflation and inflation simultaneously in the money figures. The divergences are staggering. You've got less paper money in hand, yet easy credit - so the purchasing power of cash goes up and the consumers are forced more and more into debt to make ends meet.

It doesn't take a rocket surgeon to figure out that this condition in the economy can't go on forever. Thus, later this weekend, when the new web bot run (future forecasting techniques of http://www.halfpasthuman.com/ based on linguistic shifts on the internet which seem to precede major social/psychological turnings points, such as 9/11, the anthrax attack, and others) we expect that a very large unexpected event will seen happening between now and April 1st.

Why? Because its clear to the international banksters that their game is falling apart and they need an "event" of some kind in order to maintain their cover and remain in functional control of the country through their shadow government proxies. Care to take a guess what that will be?

Let me help you...

Leading to Iran

One of our brilliant sources makes a very sage observation: Don't be surprised by war with Iran around the time of the dark moon this month. His reasoning? Well, this bright fellow looks at Navy ship reports, a few selected posts, and notices how many small landing craft and small carriers are out of port at the moment. Then he catches that some jet jockeys have rotated out of country for duty. To his way of thinking, this is a tip off - or a none-too-subtle hint to Iran that the US is not kidding around on the uranium enrichment issue.

Still, Iran seems to be sticking by its guns on this and says there is no basis for other countries to restrict what it does on its own soil, whether we like it or not.

Still, it all potentially leads to a regional conflict, which could easily go "theater nukes" which means the genie is out of the bottle and there's no bets at that point. But isn't that what the Powers that Be are after? The demand destruction and continued concentration of wealth in the hands of the few? Of course!

A move against Iran, and I hope not in response to another false flag terrorist event, would keep the public's mind off the bankers and will provide a mechanism for the spinsters to blame economic duress on indigenous people and the Muslim faith which are fighting for what they see as control of their natural resource base and against Western/corporate exploitation.

The greed of the money changers and usurers would be shielded from public scorn by opening of an Iran front, especially if there was an "event" and thus their continuance in power would be assured. That's why the Texas Cell Phone story from Friday is so important - we can almost see something coming. (Along with ID to buy a cell phone, for sure!) Simple, huh?

Now be a good citizen and run out and charge something on that 21% credit card, would yah? You've got 20-minutes yet before you're due back in the squirrel cage to line the corporate thieves pockets.

Signs of the Economic Apocalypse 1-9-06

From Signs of the Times, 1-9-06:

Gold closed at 542.20 dollars an ounce on Friday, up 4.3% (and more than 7% for the past two weeks) from $519.70 at the end of the week before. The dollar closed at 0.8239 euros on Friday, down 2.4% from 0.8440 the week before. That puts the euro at 1.2137, compared to 1.1849 at the previous Friday’s close. Gold in euros would be 446.73 euros an ounce, up 1.9% from the previous week’s 438.60. Oil closed at 64.31 dollars a barrel on Friday, up 5.4% from $61.04 the week before. Oil in euros would be 52.99 euros a barrel, up 3.0% from 51.43 for the week. The gold/oil ratio was 8.43 down 1.0% from 8.51 the week before. In the U.S. stock market, the Dow closed at 10,959.31, up 2.3% from 10,717.50 the week before (down when denominated in gold and oil, though). The NASDAQ closed at 2,305.62 on Friday, up 4.5% from 2,205.32 at the previous week’s close. The yield on the ten-year U.S. Treasury note was 4.37%, down two basis points from 4.39 the week before.

Another odd week where the Mainstream Media in the U.S. are trying to push their rosy economic scenario while gold and oil are up sharply and the U.S. seems to be careening from two disastrous and expensive military defeats while planning several more. Iran, Syria, Venezuela, Cuba? Which will it be? And it is doing this planning with a major constitutional crisis looming (that is, if there is any constitution left to have a crisis).

Speaking of Iraq, lost in the bad news for the U.S. on the battlefield was the news that the International Monetary Fund’s prescription for Iraq is working like a charm in producing the classic “IMF Riot:”

IMF Occupies Iraq, Riots Follow
By Matthew Rothschild The Progressive
Tuesday 03 January 2006

Bad enough that the US military is occupying Iraq.
Now the IMF is occupying the country.

In December, the International Monetary Fund, in exchange for giving a loan of $685 million to the Iraqi government, insisted that the Iraqis lift subsidies on the price of oil and open the economy to more private investment.

As the IMF said in a press release of December 23, the Iraqi government must be committed to "controlling the wage and pensions bill, reducing subsidies on petroleum products, and expanding the participation of the private sector in the domestic market for petroleum products."

The impact of the IMF extortion was swift and brutal.

"Since the Dec. 15 parliamentary election, fuel prices have increased five-fold, mostly because the outgoing government of Prime Minister Ibrahim Jafari has cut subsidies as part of a debt-forgiveness deal it signed with the International Monetary Fund," the Los Angeles Times reported on December 28.

"The move has shocked Iraqis long accustomed to hefty subsidies of gasoline, kerosene, cooking gas, and other fuels."

Iraqis are getting a nasty taste of the IMF's medicine. "Over the summer, gas was selling for about five cents a gallon," the LA Times noted. "Now it's about 65 cents, and at the end of the price increases, gasoline will cost about the same in Iraq as it does in other countries in the Persian Gulf, about $1 per gallon. The prices of kerosene, diesel, and cooking gas have seen similar or steeper increases." The price of public transportation has also gone up significantly.

Not surprisingly, these enormous price hikes have led to riots around the country, with police firing on 3,000 protesters in Nassiryeh, according to an account on Daily Kos, Iraq's oil minister quit to protest the government's capitulation to the IMF. According to Daily Kos, Oil Minister Ibrahim Bahr al-Uloum asked, "Is this how we repay the Iraq citizens who risked their lives to participate in the elections, by raising fuel prices in this way?"

The indestructible Ahmad Chalabi, a longtime favorite of Donald Rumsfeld and Dick Cheney, replaced al-Uloum.

The Bush Administration is four-square behind the IMF deal.

"This arrangement will underpin economic stability and help lay the foundation for an open and prosperous economy in Iraq," said US Treasury Secretary John Snow.

What it is actually underpinning is economic instability. "It's crazy, socially and politically," Robert Mabro, former chairman of the Oxford Institute of Energy Studies, told the LA Times.

Even the Pentagon's "National Strategy for Victory in Iraq" recognized the need for "balancing the need for economic reform - particularly of bloated fuel and food subsidies - with political realities."

But "political realities" on the ground - such as inciting riots and increasing discontent - don't appear to concern Bush.

For the Bush Administration, the endorsement of the IMF price increase represents a schizophrenia that's almost clinical.

Bush is desperate to rescue his floundering Iraq policy, and yet backing the IMF plan is like throwing a drowning patient both ends of a lifeline.

The Iraqi people are sick and tired of the US occupation already, to put it mildly.

Now that they are seeing their standard of living plummet, thanks to the IMF, they are going to be even more irate at the United States, which they know controls the IMF.

Caught between deciding whether to try to win hearts and minds or whether to cling to free market fantasies, Bush has once again chosen to live in fantasyland.

Again, no shortage of storm clouds on the horizon, but those of us who have been predicting a collapse in 2005 have had to explain why one didn’t happen. In some ways predicting the timing of a crash is even more difficult than predicting the exact timing of an earthquake. As with an earthquake, we can observe and measure the buildup of pressures at fault lines, and so forth, but we do not know exactly which event will release the pressure. There are, however, many potential triggers to choose from, both endogenous (coming from withing the economic system) and exogenous (from outside the system). Unlike with earthquakes (we hope), with the economy we have the added complexity that many of the most markets are fixed, for all practical purposes. That being the case, the timing of a crash—a fact of great value financially to whoever knows this in advance—becomes even less linear and predictable.

For those of us who did predict a crash in 2005 and are predicting one in 2006, the fact that it has not yet happened is no cause for joy, since those of us who believe that reality cannot be ignored forever, or, to put it more accurately, that reality won’t ignore us forever, believe that the longer the “rebalancing,” as some put it delicately, is postponed the worse it will be.

Leaving aside the deluded position that all is well with the U.S. economy, there seem to be two opinions as to what will happen: a gradual crash or a sudden crash. Ran Prieur posted a good summary of the gradual scenario for 2006 on his website:

January 5. Predictions for 2006

…Tensions will increase between China and Taiwan, Russia and Europe, Israel and its neighbors, and the USA and everyone, especially Latin America, but I don't see any big wars this year. The Bush gang will continue to make threats and spread rumors about attacking Iran, but I'll be shocked if they do it. Also, there's no way they'll pull out of Iraq.

Meanwhile, Republicans and neocons will endure more and bigger scandals, which will not affect their ability to keep passing laws to strengthen the central control of corporations and the federal government. Democrats will make gains in and only in states with paper trail voting, and the dominant media will continue to ignore that issue.

Housing prices will fall, more Americans will slide into permanent debt, and the price of almost everything will rise, but the effects on daily life will be subtle -- boarded up neighborhoods here and there, and more people living with friends and family. I don't know how they're doing it, but somehow they'll keep airline prices cheap, and traffic will not get noticeably better. Gas prices could go above $3 a gallon, but will not hit $3.50.

As in recent years:

· Something big will happen that nobody guessed, and then they'll look closer and see that someone did guess it.
· Global warming will manifest locally as extreme and unusual weather, including extreme cold.
· Some big disease will make a lot of headlines and motivate more laws to strengthen central control, but 99.99% of humans will not die from it.
· Some disaster will lead people to learn to get along with each other and be more autonomous, until they are crushed by the military, and the dominant media will report it as horrifying "chaos" made "peaceful."

In general, I see 2006 as a year of words, not action, the year the TV starts talking about the stuff that's been happening all along as if it's new -- a little year disguised as a big year.

We should be so lucky. Prieur’s analysis to too linear, I think. The “balance” of recent years (between inflation and deflation, for example, or between the deficits of the U.S. government and the lending of asian governments) has been increasingly unstable, since the balance is achieved by balancing extreme opposing forces, like an arm wrestling match or a tug of war that ends with a rapid unbalaning. More likely, then, to my mind, is the scenario summarized by a QFG member:

Yes it could get pretty ugly. Governments will topple, I would besurprised to see the US survive in any recognizable form. Most peoplewould have no incentive to go to work since the only pay would beworthless paper money. A lot of confusion much like the aftermath wesaw in New Orleans would become commonplace.

It's hard to imagine how they could manage to enforce any propertyrights; everyone would be defaulting on their mortgages and creditcards. They could use martial law to try and suppress violence butare there really enough soldiers to evict virtually everyone out oftheir homes? Can we really have millions of people roaming aroundhomeless while millions of homes sit vacant? It doesn't make sense.

There is probably more to this picture we are missing and no doubt thePTB have some plan for the masses based on wishful thinking. I hope Iam wrong, we'll have to wait and see, meanwhile I'm looking to get ahold of some organic seeds and get serious about a kitchen garden.

There are two scenarios of collapse: one with decentralized anarchy with no centrally-maintained rule of law and one with autocratic control, complete with labor camps, rationing and the like. Judging from their behavior and from the passage of Patriot Act legislation, it seems that the PTB, the powers that be, having milked most all the wealth out of the majority of us for the past three decades, are putting measures in place to be able to control the post-collapse environment with the rule of law in an iron-fisted autocracy. Al Martin explains the milking this way:

The year 2005 has been another stellar year for the top 20% of the United States of America. It can also be reported that the goal, or the "magic number" has finally been reached. That number relates to what George Bush Senior said in 1992 – the goal of having the top 1% of the nation controlling 70% of all the private wealth in the nation... Bushonomics should be lauded for accomplishing its agenda.

… The original Reagan-Bush Regime started the mechanism of wealth transfer through disproportionate tax cuts. The Bush-Cheney Regime increased the tempo by making tax cuts as disproportionate as they have ever been in the history of taxation in the United States. As such, all Bushonian tax cuts, individual so as to separate them from corporate, proffered under the Bush-Cheney Regime, including the most recent 70 billion, 68% (or more than 2/3rds) of the economic value of those tax cuts have inured to citizens earning more than $250,000 per annum, or with a net worth exceeding $5 million.

…Furthermore, under this regime, of course, the Federal Reserve has cooperated marvelously (there is no other way to put it) by maintaining, and still maintaining, despite 13 Fed rate increases, what is known as an easy-money policy, which allows plenty of liquidity in the system, so that asset values rise, even though the demand, or the number of people being able to afford an appreciating asset is declining. The value of the assets, nonetheless, can continue to rise even though the number of people who can afford to purchase them can fall.

The reason why that can happen is that the ability to finance the purchase of the item has been made easier.

… Essentially the same theorem works with almost any tangible item of value. It could be securities, debt instruments, commodities, or real estate. However this is due to the combination of disproportionate tax cuts combined with an easy-money policy -- the maintenance of an easy or liquid money policy combined with exceptionally low interest rates relative to the underlying rate of inflation, i.e., exceptionally low real interest rates or interest rates minus inflation.

This is what Bushonomics I under Bush Senior started to do in 1988. This was a very similar type of period. When they saw the end of the asset boom coming, they began to squeeze the lower 80% even harder by fostering even more disproportionate tax cuts and more restrictive bankruptcy laws. This having been done in 1988 was also done again in 2005.

To further facilitate the transfer of wealth, the Bush-Cheney Regime, as of October 17, 2005, had the bankruptcy laws changed, which the banking industry had been repeatedly asking for. In return the banks were forced to give nothing back

War spending, particularly with all the outsourcing to private contractors the Pentagon has done recently, provides excellent opportunites for upward wealth transfers.

As wealth was transferred upwards, wages fell for those who have to work for a living. Politically this can be a problem, since Bushonomics could never sell itself based on what it really is, a way to loot the public treasury for the benefit of a gang-like super-elite. Instead, the Bush regime has been able to stay in power by maintaining a base of around 30-40% of the voters, those with fascist sympathies, to keep them within vote-stealing distance of 50%. Martin again:

As of December 2005, year over year, real wages (wages net of inflation) have been absolutely zero. In other words, zero-percent growth rate in wages over the past 12 months. The regime has done a remarkable job in keeping down wage growth, wherein, now, over the past 5 years, real aggregate, 5-year real wage growth, is now a minus number.

And that's a remarkable job for a regime to stay in power and be able to do that: to diminish wages of the bottom 50%, to increase the net aggregate tax burden of the bottom 50%.

That can be explained by understanding that Bushonian regimes have always been kept in power by the continuous creation of foreign diversions, like wars.

It should be noted that American author Sinclair Lewis said that fascism would come to the United States wrapped in a flag and carrying a cross. And isn’t that what we've seen under this regime? As George Bush Sr. used to say -- We should thank God for our flag. Oh, how many Bushonian sins it hides!

…They have taken voters that constitute about 30% of the nation, which we call the Fippies, Nifwics and Rens. To explain that again, the Fippies are the fear, ignorance and prejudice brigades. And their erstwhile cousins, the Nifwics, are the naive flag-waving crowd, supported by their chums, the Rens, right-wing religious nuts. They’re about 30% of the vote.

The Republican Party has formulated control over this new little bloc by using the flag. That’s how they were able to get the PATRIOT Acts passed despite the fact it is within this working class that Republicans have suffered because of Bushonomics. However, the regime is able to maintain the line: "We are at war. We must expect sacrifices." There is still a third of the population, the flag-wavers, that are prepared to accept that.

Combined with the Rens, the right-wing religious nuts, which, nationally, can deliver perhaps, maybe 6 to 8% of the vote and you add onto that the traditional corporate vote combined with the top 20%, which is what I would call the Republican money vote, whose ranks have swelled under this regime, and you find out that what the regime is consistently able to deliver is between 50 and 53% of the vote. Forget the polls. I’m just saying what they can deliver in the voting booths.

It is after all a moot point that the Republicans run the voting machine companies. The conspiracy theorists like to say the Republicans run the voting machines and thus the voting process. That’s true. That’s a true conspiracy.

What I'm saying is they need that. They can actually only deliver in the voting booths 50 to 53%. And that’s on a good day. They need the ability to control voting machines, to control the voting process, to be able to manipulate potentially up to 3% of the vote nationwide to ensure that they could maintain majority.

The politics of the nation have certainly changed under Bushonomics. The PATRIOT Acts have turned the Constitution on its head, turned it upside down, inside out, whatever words you want to use. Now what we have is a regime that, public support notwithstanding, doesn’t have to really concern itself anymore with political opinion polls or even, or as Henry Kissinger once put it, "the inconvenience of a vote."

… Thus, armed with the power, the regime no longer has to be concerned about public opinion polls. You would note that, despite public opinion polls showing support for the regime at less than 40%, the regime has not caved in. The regime has not come to any compromise with the Democrats or moderate Republicans on any of its economic agenda. It claims that it will continue to prosecute war in Iraq forever, or until such time as it deems otherwise, despite the $100 billion per annum expenditure. It also maintains that it will continue to proffer tax cuts for the Republican Rich.

Such is the plan, perhaps, but wishful thinking is the Achilles heel of the power-hungry crowd. Maybe those who think they are in control of the process have less control than they think.

In any case, something has to give soon.