Monday, September 18, 2006

Signs of the Economic Apocalypse, 9-18-06

From Signs of the Times, 9-18-06:

Gold closed at 586.00 dollars an ounce on Friday, down 5.4% from $617.90 at the close of the Friday before. The dollar closed at 0.7895 euros Friday, up less than 0.1% from 0.7890 for the week. The euro closed at 1.2666, compared to 1.2674 at the end of the previous week. Gold in euros, then, would be 462.66 euros an ounce, down 5.4% from 487.53 euros for the week. Oil closed at 63.33 dollars a barrel Friday, down 4.6% from $66.25 at the close of the previous Friday. Oil in euros would be 50.00 euros a barrel, down from 52.27 for the week. The gold/oil ratio closed at 9.25, down 0.8% from 9.33 at the end of the week before. In U.S. stocks, the Dow closed at 11,560.77 Friday, up 1.5% from 11,392.11 for the week. The NASDAQ closed at 2,235.59 Friday, up 3.2% from 2,165.79 at the close of the previous Friday. In U.S. interest rates, the yield on the ten-year U.S. Treasury note closed at 4.79%, up two basis points from 4.77 for the week.

Happy days are here again! Oil and gold closed down sharply, stocks up, everything must be great. There’s an election coming up in the United States and it appears that good economic news will continue for about a month and a half.
Stocks at 4-month highs, oil at 5-month lows

By Kevin Plumberg
Fri Sep 15, 6:30 PM ET

NEW YORK (Reuters) - Major stock indexes hit fresh four-month highs on Friday after reports showed inflation was mostly contained while a drop this week in energy prices suggested cost pressures were easing.

The dollar also climbed, largely because traders pared positions against the greenback ahead of a weekend meeting of Group of Seven central bankers and finance ministers. But U.S. Treasuries gave up early gains on a bout of technical selling.

The consumer price index rose 0.2 percent in August, for both the overall and core readings, matching market forecasts. Core CPI excludes food and energy costs.

When the Federal Reserve meets next week, it is expected to keep the key federal funds rate steady at 5.25 percent after halting its rate-increase campaign in August on the view that slowing growth will moderate upward price pressures.

"The inflation news this morning was positive, and that continues to fuel the belief that the Fed is done tightening," said Mark Bronzo, managing director at Gartmore Separate Accounts LLC in Irvington, New York.

"Oil continues to trade down, and with energy costs coming down, a lot of people feel that's going to help the consumer."

The University of Michigan said separately that consumer expectations in September for inflation one year out are the lowest since March 2006.

The Dow Jones industrial average added 33.38 points, or 0.29 percent, to 11,560.77. The Standard & Poor's 500 Index gained 3.59 points, or 0.27 percent, to 1,319.87. The Nasdaq Composite Index rose 6.86 points, or 0.31 percent, at 2,235.59.

European stocks were slightly higher, with the FTSEurofirst 300 Index up 0.3 percent at 1,373.33.

In Tokyo, the Nikkei closed down 0.5 percent at 15,866.93, coming under further pressure after the government downgraded its view on private consumption and exports…

Oil Plumbs 5-Month Lows, Gold At 3-Month Lows

Falling commodity prices helped to bolster the view that inflation pressures are under control.

Oil slid briefly below $63 a barrel, touching its lowest level since March as U.S. fuel stockpiles grew ahead of winter and investors probed for a price that would trigger an OPEC supply cut.

U.S. crude dropped as low as $62.03 per barrel, the cheapest since March 23, before settling up 11 cents at $63.33. London Brent crude was off 21 cents at $63.33.

U.S. crude oil for October delivery closed down 18 cents at $63.40 a barrel.
"The psychology of the market has really turned. It looks like the market will be oversupplied next year unless OPEC does something," said Frederic Lasserre, head of commodity research at Societe Generale.

Gold futures in New York ended the session at a three-month low, as traders ditched more holdings after crude oil tanked and the dollar rose.

COMEX gold for December delivery was down $3.00 at $583 an ounce, after falling to $571.20, its lowest price since June 15.

G-7 upbeat on world economic prospects

Elaine Kurtenbach, AP Business Writer
Sat Sep 16, 3:14 PM ET

SINGAPORE - The United States and other major economies are keeping global growth on track despite risks from high oil prices and other threats, finance chiefs from the Group of Seven industrialized nations said Saturday, while urging China to adopt more flexible currency policies.

The group also urged more action to combat terrorist financing and illicit activities by North Korea and Iran, U.S. Treasury Secretary Henry Paulson said.

"We should intensify our efforts against terrorist financing, money laundering and illicit finance — including the financial networks supporting WMD (weapons of mass destruction) proliferation," Paulson said in a statement after the daylong talks ended.

Despite a sharp slowdown in U.S. growth in April-June, the U.S. economy is growing solidly, underpinned by rising wages, healthy corporate cash flow and investment, he said.

The U.S. is "vigorously doing its part" to raise savings and cut its budget deficits, repeating a prescription for resolving trade imbalances long advocated by Washington and other members of the G7 — Britain, Canada, France, Germany, Italy and Japan.

…The G-7 statement was upbeat in its assessment of world economic prospects.
"In our economies, performance remains strong amid moderating growth in the United States," the statement said.

"The positive outlook, however, is not without potential downside risks, e.g., tight and volatile energy markets, rising inflation expectations in some economies, and the spread of protectionist tendencies," it said.

And the economy is that bad, as long as you don’t think about the future. It doesn’t feel great, though, looking ahead, as alluded to at the very end of the previous article . We non-billionaires in the United States can only feel anxious reading about the drop in housing prices and headlines like these:
Ford to cut one-third of work force
By Poornima Gupta
Fri Sep 15, 1:25 PM ET

DETROIT (Reuters) - Ford Motor Co. said on Friday it will slash $5 billion in costs and one-third of its work force as it warned its auto business would not make a profit in North America for another three years.

The automaker also ruled out an immediate sale of its Jaguar brand, disappointing investors who wanted Ford to press ahead with asset sales to raise cash.

Ford shares dropped as much as 15 percent Friday, the biggest single-day percentage decline in almost four years.

Ford also suspended its dividend and pledged to revamp its vehicle line-up, an area of weakness widely cited by analysts.

In its third turnaround plan in five years, the No. 2 U.S. automaker said it would close 16 North American factories by 2012, two more than originally scheduled.

Ford said it will cut 10,000 white-collar jobs on top of the 4,000 jobs already cut this year. All of Ford's 75,000 factory workers are being offered buyouts under a deal with the United Auto Workers union. Ford hopes to cut 30,000 factory jobs by 2008.

The steps were the latest sign of the financial stress on the traditional Big Three.
General Motors Corp. is on track to shutter 12 plants and cut $9 billion in recurring costs as part of its turnaround plan.

DaimlerChrysler AG's Chrysler Group said Friday it could lose about $1.27 billion this year, a much deeper loss than it forecast in July because of mounting inventory and slower truck and SUV sales.

Ford warned its North American operations would not post a full-year profit before 2009, a year later than first projected. It also targeted $6 billion in materials cost savings by 2010 by streamlining purchasing.

As Kate Randall put it,
That Wall Street responded so coolly to Ford’s bloodletting should be taken by workers as a warning of the unprecedented scale of the attacks on jobs and living standards that are coming, as American capitalism seeks to place the burden of its crisis squarely on the backs of the working class. These attacks will hit very broad sections of the working population, as demonstrated by Ford’s decision to slash an additional 10,000 white collar jobs, over and above the number it announced in January. These jobs are to be cut within a mere six months.

Jerome White, a socialist candidate for Congress in Michigan, has this to say:
Ford’s job massacre: A corporate crime
16 September 2006

Ford Motor Company’s plan to wipe out 44,000 hourly and salaried jobs and shut down 16 manufacturing facilities in North America is a brutal attack on the working class. Once again, tens of thousands of workers and their families are being forced to pay for the mismanagement and avarice of the corporate bosses and the crisis of American capitalism.

The human impact of these cuts will be devastating. In communities throughout the Midwest and South, as well as in Canada, many thousands will lose their incomes and their homes. They will be forced to pull their children out of college or go without health care. Public schools will be robbed of the tax dollars they depend on, and small businesses will be forced to close.

Michigan, which is already reeling from the downsizing of General Motors and auto parts maker Delphi, will be particularly hard-hit, with the idling of the Wixom assembly plant and the uncertain future of Wayne Assembly, the Michigan Truck plant, and other facilities.

Michigan’s 7.1 percent unemployment rate is the highest in the nation, and median household incomes have fallen 11.9 percent since 2000, the worst decline in the US. Auto industry centers like Detroit and Flint, which once ranked among the highest cities in the US in home ownership and per capita income, are now among the poorest.

Home foreclosures in the Metro Detroit area have soared 137 percent in the first eight months of the year. In Macomb County, the heart of my congressional district, foreclosures are up a staggering 234 percent! The rate of foreclosures will accelerate in the coming months as mortgage rates rise and home values decline.

Ford is targeting not only assembly line workers, but also white-collar employees, who were told that a college education and technical skills would guarantee them a secure job. At least 14,000 salaried jobs—one third of Ford’s total white-collar workforce—are being axed.

The slashing of these jobs will do nothing more than push Ford—once an international industrial icon—further down the road to oblivion. But the big Wall Street investors who have demanded such massive cuts are not concerned with the long-term health of the company. Their only concern is making as much profit as possible, as quickly as possible.

Over the last five years, most of corporate America has been enjoying a “golden age of profitability,” according to Wall Street analysts. The higher profit margins have been achieved at the expense of labor, which has seen its share of national income sharply decline.

Unsatisfied with the rate of return on its investments in the auto sector, the financial elite has demanded an end to the “social contract” in the auto industry, through which workers had enjoyed decent wages, a measure of job security, health care benefits, and pensions. Workers in the “new” auto industry are to be paid half as much, and will enjoy none of the benefits the previous generation had secured through decades of struggle.

When Ford announced last January its “Way Forward” plan—which included cutting 34,000 jobs in North America and the shutdown of 14 plants over the next seven years—Wall Street shrugged its shoulders and demanded more blood. To drive home their point, big investors drove down the company’s share value by $1.4 billion in the first six months of the year.

Ford’s directors responded by dumping William Clay Ford Jr. and handing the CEO position to Alan Mulally, the former Boeing executive who oversaw the destruction of thousands of jobs at the airline maker. Under the accelerated job-cutting program, dubbed “Way Forward II,” Wall Street investors expect to see their earnings rise by 25 cents per share for every 5,000 workers Ford throws onto the street.

The claim that there is no money to sustain decent living standards for auto workers is a fraud. Even as Ford was losing hundreds of millions of dollars last year, its top five executives raked in $26 million, including $13 million for William Clay Ford Jr.

Mulally will get $2 million in salary and expenses in his first two years. In addition, Ford agreed to pay him a $7.5 million signing bonus and an additional $11 million to cover performance pay and stock options he left behind when he retired from Boeing.

No ruling class in the world is as parasitic and corrupt as the American corporate oligarchy. Rather than investing the necessary resources to build safer, less expensive and more fuel-efficient vehicles, as well as to provide workers with economic security and a high level of education and training, the auto bosses and Wall Street investors would sooner destroy one of the world’s best known industrial companies as long as they can extract the maximum loot for themselves out of the ruins. This only underscores the socially destructive character of the profit system.

While the auto executives have acted with utter ruthlessness to defend their interests, the leaders of the United Auto Workers union (UAW) have responded with spinelessness and complicity. The UAW, which long ago abandoned the defense of the working class, has functioned as a junior partner with Ford, helping the company shutter plants and force out its older workforce. In exchange, UAW officials have been promised an opportunity to collect union dues from younger, lower-paid workers and continue at least some of the labor-management ventures that have provided a steady stream of income for the UAW bureaucracy.

My political opponent in the November election, twelve-term Democratic Congressman Sander Levin, has done nothing to oppose the unrelenting assault on auto workers’ jobs. An ally of the UAW bureaucracy, Levin has long sought to divert workers from a struggle against the corporate owners by blaming the loss of jobs on Asian and European imports and alleged trade barriers to US carmakers.

Like the UAW, Levin and the Democrats have tried to sell this bill of goods in order to pit American workers against their brothers and sisters in other countries in a race to the bottom, to see who will work for the lowest wages and worst conditions. “Standing up for the American auto industry” really means sacrificing the jobs and living standards of American workers to defend the corporate executives and their multi-million-dollar salaries.

I reject the national chauvinism of the union bureaucracy and Democrats and call for the international unity of auto workers to defend their jobs and living standards. Workers in every country face a common struggle against the global auto giants. Over the last month, for example, Volkswagen workers have been engaged in bitter struggles against mass layoffs in Brazil and Mexico.

Autoworkers are not responsible for the crisis of the auto industry. Under the capitalist profit system, the corporate executives and Wall Street investors have a monopoly over the decision-making process, but they are not the ones who pay for their disastrous choices.

The first step in protecting the interests of working people is to institute democratic control over all business decisions affecting work, safety, salaries, hiring, and hours. These decisions cannot be made by the wealthy few—whose interests are antithetical to the needs of working people—but by committees of factory floor workers, technicians and other experts committed to the interests of the working class. The establishment of industrial democracy presupposes the opening of the books of all corporations for inspection by the workers, and the ratification of corporate leadership by a democratic vote of all employees.

The massive industries upon which millions of workers and their families depend can no longer be the personal assets of America’s wealthy elite, who dispense with them as they see fit. If the auto industry is to be run for the good of society, not personal profit, it must be transformed into a publicly owned utility. This will not only guarantee a good standard of living for auto workers and their families, but the production of safe, high-quality and affordable vehicles for consumers.

The ongoing transfer of wealth into the pockets of the richest one percent in American society must be halted and the revolutionary advances in technology and globally integrated production put to use to meet the requirements and solve the problems of modern mass society.

That would require quite an awakening from the majority of people who have at least the potential of a conscience. A far deeper understanding of the enemy is needed than is offered by any left party, no matter how radical, before we can hope to accomplish a wrenching of economic and political power from the pathocracy (rule by those without consciences or psychopaths).


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