Signs of the Economic Apocalypse, 2-26-07

From Signs of the Times

Gold closed at 685.70 dollars an ounce Friday, up 1.9% from $673.00 at the close of the previous Friday. The dollar closed at 0.7595 euros Friday, down 0.2% from 0.7611 at the previous week’s close. That put the euro at 1.3167 dollars compared to 1.3140 at the end of the week before. Gold in euros would be 520.77 euros an ounce, up 1.7% from 512.18 for the week. Oil closed at 61.14 dollars a barrel Friday, up 3.1% from $59.28 at the close of the previous Friday. Oil in euros would be 46.43 euros a barrel, up 2.9% from 45.11 euros at the end of the week before. The gold/oil ratio closed at 11.22, down 1.2% from 11.35 for the week. In U.S. stocks, the Dow Jones Industrial Average closed at 12,647.48 Friday, down 0.9% from 12,767.57 at the close of the previous Friday. The NASDAQ closed at 2,515.10 Friday, up 0.8% from 2,496.31 at the close of the Friday before. In U.S. interest rates, the yield on the ten-year U.S. Treasury note closed at 4.67%, down two basis points from 4.69 for the week.

The sharp and steady rise in the price of gold in recent weeks, up more than 7% in 2007, feels ominous coming at a time of building pressure, a time when we are days, weeks or months away from finding out whether the neocons will induce the U.S. empire to commit suicide by attacking Iran.

The ongoing dispute between factions in the U.S. elite, between those that are desperate enough to roll the dice on a last-ditch, all-or-nothing bet and those who feel that the situation can be managed by means of a strategic retreat remains unresolved. One one side the neocons, comprised of both Israel-first likudniks and the U.S. militarist/ nationalists argue that to prevent the loss of the Iraq War and to prevent the replacement of the United States as the “sole superpower” by China, a bold attempt to take over the world must be made now before China and Russia get any stronger. The realists argue that the Iraq War is already lost and steps must be taken to mitigate the damage to U.S. power from that loss, including negotiations with Iran and Syria and between Israel and Palestine (unthinkable steps for neocons).

While the realist faction enjoys overwhelming popular and elite support, the neocons have already captured the crucial levers of power and can make use of information gained in extensive surveillance programs to blackmail and control any opponents. Only an arrest and impeachment of Cheney could stop an attack on Iran, it seems, so the final arguments in the Lewis Libby trial add to the building tension. In response to Libby’s defense attorney, Theodore Wells’s statement that the prosecution was really going after Cheney, Special Prosecutor Patrick Fitzgerald came close to admitting just that in his closing arguments:

"You know what? [Wells] said something here that we're trying to put a cloud on the vice president. We'll talk straight. There is a cloud over the vice president. He sent Libby off to [meet with former New York Times reporter] Judith Miller at the St. Regis Hotel. At that meeting, the two hour meeting, the defendant talked about the wife [Plame]. We didn't put that cloud there. That cloud remains because the defendant obstructed justice and lied about what happened."

So a U.S. Special Prosecutor is accusing the Vice President of a criminal conspiracy to blow the cover of a CIA agent who was working on counter-proliferation, on nuclear weapon material smuggling to Iran of all places. Seems impeachable, but the Israel lobby seems to have complete control of both sides of the aisle in Congress, so it’s hard to imagine any action taken against Cheney until after the attack on Iran has taken place.

While we wait for the big boys to fight it out, the recent two-part series in the World Socialist Web Site on what the rise of China means for world capitalism (part 1, part 2) by John Chan is worth reading. Chang begins by outlining the recent history of large scale strategic competition between the great powers:

Russia’s move on January 8 to shut down one of its major pipelines carrying oil from Siberia to the refineries in Europe via Belarus, demonstrates the potentially explosive character of conflicts over energy. Germany relies on Russia for one-third of its oil imports, mostly through this pipeline, which also provides 96 percent of Poland’s oil imports. Europe as a whole depends on Russia for more than 30 percent of its oil. Last winter Russia threatened to cut off gas supplies to the Ukraine. It was a shock not just to Kiev, but other European capitals. This strategy allows Russia to divide the European Union and counter political pressures on Moscow.

Central Asian challenge

The US ambition to control the huge energy resources of the Middle East and Central Asia would allow Washington to do to its rivals what Moscow is already doing. The US strategy is, however, under challenge, particularly with the American military bogged down in Iraq. China and Russia are forming their own bloc to undermine US influence in Central Asia.

The Shanghai Cooperation Organisation (SCO), which includes Russia, China and the Central Asian republics, brings together Moscow’s vast reserves of oil and gas and Beijing’s rapidly growing economic clout. Neither China nor Russia wants an open confrontation with the US over Central Asia, but both countries have a shared interest in preventing American dominance in a region that is economically and strategically important.

In the 1990s, Moscow did not take a great deal of interest in the SCO, which it regarded as more of a Chinese initiative. But Russian President Vladimir Putin, facing the pressure of pro-Western “colour revolutions” on Russia’s borders, has discovered shared interests with China. Both countries want the US military out of Central Asia, while Russia is a supplier for China’s huge appetite for oil and gas. In turn, China, which is seeking to rapidly modernise its military, has been the main source of income for Russia’s decaying defence industries.

In 2005, as the US debacle in Iraq became transparent, China and Russia started to work closely to counter the US position in Central Asia. After Washington criticised Uzbekistan’s President Islam Karimov over his brutal suppression of anti-government protestors in Andijan, Beijing gave Karimov the red carpet treatment. As a result, the Uzbek president opened two dozen oilfields to Chinese companies and eventually shut down the US air base in Uzbekistan.

The SCO cuts directly across US plans for energy transport routes in the Middle East, the Caspian and Central Asia. Putin’s strategy is to use Russia’s state energy monopolies and its political influence in Central Asia and the Caspian region to establish a network of pipelines not only directed to Moscow’s traditional Western clients, but also to the dynamic economies of the Far East. Putin plans that a third of Russian oil and gas exports will go to the Far East by 2020, with China and Japan the biggest beneficiaries.

With Moscow building oil and gas pipelines to the Far East, and Beijing making huge investments in oilfields and pipelines across Central Asia, the prospect of an SCO regional “energy club,” which would act as a counterweight to US influence, has attracted India, Pakistan and Iran as observers.

Beijing and Moscow have also increased military cooperation. After their first large-scale joint military exercise in 2005, the two countries are planning another later this year, to include SCO member states and other former Soviet republics. Although Russia and China are still far from forming a formal military alliance, their close ties pose a potential challenge to US dominance and will provoke a reaction from Washington.

With Russian assistance, China is acquiring advanced military technology. It surprised the US on January 11 by launching a missile to destroy one of its own satellites. Beijing used the test to demonstrate to Washington that China has the capacity to destroy satellites, on which the US military is heavily dependent for navigation, intelligence and weapons guidance.

Despite Chinese President Hu Jintao’s slogan of the country’s “peaceful rise”, Beijing’s economic dynamism has an objective logic of its own. In order to secure the raw materials and energy supplies needed for the country’s booming industry, China is busy building its presence in Africa, Latin America and the Middle East. It was estimated that last year nearly half the world’s heads of state visited Beijing, while top Chinese leaders visited two-thirds of the members of the United Nations.

With more than $1 trillion in foreign currency reserves, China is very much behind the “Hugo Chavez” phenomenon not just in Latin America, but Africa, Asia and the Pacific. Unlike the US and other Western governments that posture about promoting democracy, Beijing sticks to a policy of “non-interference” in the internal affairs of other nations. It has offered billions of dollars in loans and aid to various countries, as long as they agree to protect China’s economic and strategic interests.

As a result, China has become a new, alternative source of funds for many developing countries. In October, Beijing hosted a summit for the government heads of the 10 South East Asian nations. In November, China invited the leaders of 48 African nations to a lavish gathering, signalling Beijing’s entry into the new scramble for Africa. These leaders came to China not only for money, but also political support.

China is promoting itself as a new role model for developing countries, in which dictatorship rather than “democracy” is viewed as a crucial component of economic success. This is particularly favoured by various corrupt Third World regimes, which are under pressure from the Western powers, for their own reasons, to carry out limited political reforms.

Beijing’s support for, including in some cases the provision of arms, Sudan, Zimbabwe, Myanmar and Venezuela—i.e., to regimes to which Washington is openly hostile—has provoked opposition from the Bush administration. Over a year ago, former US deputy secretary of state, Robert Zoellick, commented: “China’s involvement with troublesome states indicates at best a blindness to consequences and at worst something more ominous.” He warned that if Beijing wanted to “push the US out, they will get a counter-reaction” from Washington.

This “counter-reaction” is already evident in the US push for the strategic encirclement of China. Last year, Bush signed an accord with India on nuclear cooperation and encouraged New Delhi to act as a counterweight to Beijing. Washington has also backed Australia’s escalating intervention in the South Pacific to topple regimes that were inclining towards China and other rivals.

In addition, the Bush administration has actively encouraged Japan to play a more aggressive role in North East Asia, against North Korea and China. The crisis over North Korea’s missile and nuclear tests has been provoked by the Bush administration’s bellicose policy to precipitate a “regime change” in Pyongyang. The long-term consequence of this standoff could well be the re-armament of Japan, including with nuclear weapons.

According to Chan, the increasing power of China comes from China’s rapidly increasing wealth which derives from China’s position as a low-wage industrial zone for the world-economy. The low-cost production of goods in China allowed multinational corporations to postpone the crisis of capitalism for three decades or more.

The danger of imperialist war is compounded by the deepening economic crisis of world capitalism. After three decades of globalised production, the advanced capitalist countries, the US in particular, have discovered that the economic crisis that they sought to avoid by diverting manufacturing to cheap labour countries has returned home on a much larger scale.

China’s foreign currency reserves surpassed the $1 trillion mark last year, while the US trade deficit with China reached a new record of $230 billion. The American and Chinese ruling elites have no progressive means for resolving these massive economic imbalances. Beijing needs to keep foreign capital flowing in and exports expanding, in order to create 24 million jobs a year to maintain social stability. The US economy requires the supply of $2 billion a day from the rest of the world, especially from Asian central banks, to finance its massive trade deficits.

If this process continues indefinitely, the financial system must collapse at some point with incalculable consequences for the world economy. The solution offered by the Democrats in the US Congress to “correct” these imbalances is to promote protectionist legislation against China, which will only heighten political tensions and threaten financial stability.

A new book China Shakes the World: The Rise of A Hungry Nation by James Kynge, a veteran China correspondent for the British-based Financial Times, provides some insights into the global impact of China’s enormous economic contradictions. His study found that China resembles, to some extent, the US in the late nineteenth century, in terms of its infrastructure development.

In the 1990s, after discovering that the US interstate highway system had saved American companies $1 trillion over the past four decades, Beijing bureaucratic planners copied the US system across China. When this plan is finished by 2030, China will have 830,000 kilometres of expressways—a little longer than the existing the US system. China is also building railways that duplicate much of the American railroad boom at the turn of twentieth century, including a rail line to Tibet—the “roof of the world”. The scale of China’s electricity power construction is also unprecedented. Every year since 2004, China has been building enough power plants to supply a major European country such as Italy or Spain.

On the other hand, Kynge pointed out, the wages of Chinese workers are far worse when compared to English workers during the Industrial Revolution or an American worker in nineteenth century. Some 200 years ago, a British Weavers Minimum Wage Bill proposed to pay eight shillings a week. After adjusting for time and converting into Chinese currency, Kynge estimated this was double the average wage of a semi-skilled rural migrant worker in China today. A Chicago worker in a lumber yard in the 1850s would have earned between one and half to three times more than a modern Chinese worker doing a similar job today.

The marriage between modern infrastructure and the country’s vast pool of cheap labour is the key to China becoming the new manufacturing centre for global capital. But China is no longer just a cheap labour platform. It is also rapidly developing as a more sophisticated industrial power. According to the Organisation of Economic Cooperation and Development (OECD), mainly due to growing international investment, China last year surpassed Japan to become the world’s second largest spender on research and development. China has also overtaken Germany as the fifth most prolific nation in filing patents for new processes and technologies.

Although its overall capacity for technological innovation still lags far behind industrially developed countries, these figures demonstrate that China is rapidly catching up. Coupled with rampant violations by Chinese companies of intellectual property rights—ranging from DVDs to cars—China’s economy is growing not just at the expense of jobs in South East Asia and Latin America, but increasingly replacing skilled labour in the advanced capitalist countries.

China now exports not only shoes and clothes, but also car components and machine tools that still form the manufacturing basis of Western economies. It is not coincidental that after China’s entry into the WTO in 2001, there has been a continuing drop in wages and a loss of jobs in both advanced and developing countries. In the US, some three million manufacturing workers have lost their jobs. In Europe, China’s impact on small and medium-sized firms, which employ the bulk of workforce, contributed to the continent’s 9 percent unemployment rate.

The process of China moving up the technological ladder, Kynge’s study found, is driven by the necessities of the market. Boeing, the US aircraft manufacturer, for example, initially had to send some production to China and other low-wage countries to maximise the returns to its shareholders. “But in doing so,” Kynge wrote, “it threatened to put out of business many of its small, long-term suppliers [in the US]... The process was self-reinforcing. The more Boeing outsourced, the quicker the machine tool companies that supplied it went bust, providing opportunities for Chinese competitors to buy the technology they needed, better to supply companies like Boeing. Boeing makes money, but ultimately at the expense of the industries and jobs that sustain Middle America.”

The impact of Chinese and Indian cheap labour is having an impact on more than just semi-skilled factory jobs or basic call centre services. IT companies now can outsource even the most skilled professional jobs to any geographical location. According to McKinsey Global Institute, some 9.6 million jobs in the US service sector could theoretically be outsourced overseas. If that happened, it would double the US unemployment rate from around 5 percent to more than 11 percent.

Every year, China produces more university graduates than the US and 60 percent of them cannot find a job. National language no longer offers protection to US workers from global competition. There is already a large pool of English-speaking, educated Indian workers. In China, an estimated 200 million people are learning English. The mere existence of these vast reserve armies of labour has created a huge downward pressure on wages and conditions, even for middle-class professionals in Western countries. In the final analysis, the integration of a new labour force of more than two billion low-cost workers in the global capitalist economy is a major factor behind the eruption of social unrest in France and other countries in 2006.

Kynge wrote in his book that the existing European welfare states are incompatible with competition from China. “Intellectually, many in Europe may find it distasteful that the EU runs a subsidy under which cows get more than $2 a day—more than the average daily income of 700 million Chinese...

“China was able in the five years from the onset of the Asian financial crisis in 1997 to lay off more than 25 million workers from its inefficient and heavily subsidised state-owned enterprises. The fruits of that stern therapy are now evident in the competitive shock that is hitting Europe and America. But China is not a democracy... When workers rioted, protested, petitioned or dissented, it answered with well-honed authoritarian tactics. The result has been that state-financed social welfare has in the space of less than a decade ceased to be a millstone for the corporate sector. The housing, schooling, healthcare and pension obligations that over 300,000 state companies used to meet on behalf of their workers have now been eliminated, reduced or privatised. China today is a great deal less socialist than any country in Europe; the 120 million or so migrant workers, for instance, receive no welfare at all.”

It may well be that the rise of China to superpower status will allow the Powers that Be to implement Chinese-style prison labor camp industrialization world-wide.

The “rise of China” does not signal a new golden age for capitalism. Long before China becomes a mature capitalist power, it will confront violent struggles with other powers for raw materials and geopolitical influence. The US and Japan have already expressed their open hostility toward a more assertive China. Last year Indian Prime Minister Manmohan Singh told Chinese President Hu Jintao that Asia was big enough for the two countries. In fact, the economic dynamism of the two rivals is placing them on a collision course for regional dominance.

China’s socially destructive industrialisation is not based on a historic upward expansion of world capitalism, but is the product of its decay. China’s economic growth will deepen class tensions around the world by intensifying the downward global pressure on wages and working conditions…

If you are part of the global super-elite, “intensifying the downward global pressure on wages and working conditions” doesn’t sound so bad. Paul Craig Roberts published an article summarizing his views on the so-called benefits to developed countries of off-shoring to low-cost countries like China (the article in its entirety with charts can be found here). Not surprisingly, all the benefits that the United States derives from offshoring go to the super-rich. But the economics profession is both intellectually and financially compelled to try to convince the rest of us that that type of globalization is a good thing:

Blind to the Consequences of Offshoring
Economists in Denial

By Paul Craig Roberts

February 19, 2007

At a Washington, D.C., press conference last November, Harvard University professor Michael Porter claimed that globalism was bringing benefits to Americans (Manufacturing & Technology News, Nov. 30, 2006). Porter was introducing the latest report, "Competitiveness Index: Where America Stands" of which he is a principal author, from the Council on Competitiveness.

I recognized a number of Porter's claims to be inconsistent with empirical data. After examining the report, I can confidently state that the report provides scant evidence that America is benefiting from globalism.

This is not to say that the statements in the report and the information in the numerous charts are untrue. It is to say that the data do not support the claim that America is benefiting from globalism.

…The greatest failure in the competitiveness report is the absence of mention of the labor arbitrage and its consequences when U.S. firms offshore their production for U.S. markets. This practice translates into direct job loss and direct tax base loss, and it transforms domestic output into imports. This is capital and technology chasing absolute advantage abroad. This cannot be considered trade based on resources finding their comparative advantage in the domestic economy.

It is this replacement of U.S. workforces by foreign workers that explains the extraordinary rise in CEO compensation and the flow of most of the income and wealth gains to the few people at the top. By offshoring their workforces, CEOs cut their costs and make or exceed their earnings forecasts, thus receiving bonuses that are many multiples of their salaries. Shareholders also benefit. When plants are closed and jobs are offshored, American employees lose their livelihoods, but managements and shareholders prosper. Offshoring is causing an extraordinary increase in American income inequality.

The report acknowledges that "for the first time in history, emerging economies, such as China, are loaning enormous amounts of money to the world's richest country." Historically, it was rich countries that lent to underdeveloped countries. The truth of the matter is that China's loans to the United States are a form of forced lending. China is flooded with dollars from America's dependency on imports of Chinese manufactures and advanced technology products. There is nothing that China can do with the dollars except to purchase existing U.S. equity assets or lend the dollars back to the United States by purchasing Treasury debt. With China's currency pegged to the dollar, China cannot dump the dollars into foreign exchange markets without initiating a run on the dollar and complaints that China is increasing its competitive advantage over the rest of the world.

When I was Assistant Secretary of the U.S. Treasury in the early 1980s, U.S. foreign assets exceeded foreign-owned assets in the United States. By 2005 this had changed dramatically, with foreigners owning $2.7 trillion more of the U.S. than the U.S. owns abroad. For the first time since the United States was a developing country 90 years ago, the country is paying more to foreign creditors than it is receiving from its investments abroad.

The report downplays the extraordinary trade and current account deficits on the grounds that "foreign affiliate sales" do not count against the trade deficit and "intra-firm trade" is a significant proportion of the trade deficit and "is due to trade within American companies."

This argument shows that the report is written from the standpoint of what is good for global firms, not what is good for America.

It made some sense when General Motors claimed that what is good for General Motors is good for America, because when the claim was made General Motors produced in America with American labor. It makes no sense to make this claim today when what is good for a company is achieved at the expense of the American work force.

… A country whose workforce is employed in domestic non-tradable services is a Third World country with nothing to export. How will the United States pay for its heavy dependence on imports of manufactured goods and energy?

As long as the dollar retains its reserve currency role, Americans can continue to hand over paper for real goods and services. But how long can the United States retain the reserve currency role when its economy does not make things to export; when its work force is employed in domestic services; and when its foreign creditors own its assets?

… For developed economies, offshoring is a reversal of the development process. As offshoring progresses, the domestic economy will become less developed and have less demand for university education.

… In the July 2006 issue of CounterPunch, I wrote that jobs offshoring was the new form of class warfare and that it was bringing political instability and social strife to the United States. There is nothing in the Council on Competitiveness' latest report to cause me to alter my view.

So it seems that even if one faction of the U.S. imperial elite can prevent an attack on Iran, U.S. citizens will still fall into third world poverty and economic subordination. On that, the elite seem to be united. There are so many ways this could happen that the process appears over-determined. Offshoring of jobs, massive debt followed by bankruptcies, defaults and foreclosures, and, as the example of Katrina showed, “natural” disasters. Last week we discussed how large scale bird flu outbreaks could, by people working from home overloading the system, lead to a collapse of the internet. The internet would, in effect, be taken over by the authorities and access limited to economically critical a activity, according to an article in Computerworld. This week, the Associated Press reported on the effects such a pandemic would have on the food distribution system in the U.S.

Grocery industry prepares for bird flu

By Timberly Ross, Associated Press Writer
Mon Feb 19, 12:07 AM ET

Stocking up on food is as simple as a trip to the grocery store, a veritable land of plenty for Americans. But will fresh fruits and vegetables, meat, bread, milk and other household staples still be available if the U.S. is hit with an anticipated bird flu pandemic? If state and federal officials urge people to stay away from public places, like restaurants and fast-food establishments, will they be able to get the groceries they need to prepare food in their homes?

For Becky Jones of Omaha, who stocks up once a week for her family of three, the prospect of not having access to food is frightening. She said most people, herself included, only have food on hand for three or four days.

Unlike other critical infrastructure sectors like water, energy and health care, the food industry isn't getting much help from state and federal governments when it comes to disaster planning. That puts the burden on individual supermarket chains and wholesalers to deal with a potentially large number of sick workers that could affect store operations and disrupt the food supply.

"The industry is actively thinking through contingency plans, so if it should happen, our members would be well prepared to deal with it," said Tim Hammonds, president of the Food Marketing Institute, an advocate for grocery wholesalers and retail supermarkets nationwide.

The U.S. Department of Health and Human Services estimates a third of the population could fall ill if the H5N1 strain of the bird flu mutates into a form that spreads easily from person to person. It's not clear if that will ever happen and no human cases of bird flu have ever been traced to eating properly cooked poultry or eggs.

But if a pandemic emerges, the Department of Homeland Security projects worker absenteeism to reach 40 percent or more over a prolonged period. Hammonds said retail food stores would have to contend with worker shortages and disruptions in the supply chain.

The food and agriculture industry is listed among 13 critical-infrastructure sectors that the Department of Homeland Security says must remain functional during a pandemic.

"Having those critical facilities open — like power, water, food — becomes very important" during a national disaster such as a pandemic, said Keith Hanson, an outreach coordinator for Nebraska's Center for Biopreparedness Education.

Hanson works with local businesses, helping test their preparedness plans. He will speak about the importance of that testing at the Public Health Preparedness Summit in Washington, an annual conference designed to help public health workers prepare for emergencies. This year's meeting started Friday and ends Feb. 23.

Hanson said continued operations of power and water utilities are of the utmost importance, but grocery stores rank highly too. That's because people today keep less food on hand, opting instead to make weekly trips to the grocery store.

Americans are also dining out more than they have in the past. Money spent on food prepared outside the home rose from 34 percent of total food costs in 1974 to about 50 percent in 2004, according to a report by the U.S. Department of Agriculture.

The Food Marketing Institute's Hammonds said a widespread pandemic will likely cause food consumption to shift away from restaurants and fast-food establishments and toward in-home eating, causing a greater demand for groceries.

"That means stores would need to be prepared for an increase in volume," he said.

Hy-Vee, a West Des Moines, Iowa-based supermarket chain that operates more than 200 stores in the Midwest, does not have a disaster plan developed in the event of avian flu. But company spokeswoman Chris Friesleben said the company keeps abreast of the illness through the Food Marketing Institute.

"The food supply is essential to the well-being of the community," said Hammonds. "We've been through a lot about what we need to do as a supermarket."

That includes urging wholesalers and retailers to talk with their suppliers about alternative sources for their products and to anticipate what products will be in high demand in a pandemic situation, such as medicines and food staples.

Stephanie Childs, a spokeswoman for Omaha-based ConAgra Foods Inc., said a company task force was formed more than a year ago to develop an operating plan in the event of a national disaster. The plan specifically addresses bird flu, examines areas that could be affected and how the company could respond, she said.

ConAgra is one of the nation's largest food companies, with brand names that include ACT II popcorn, Banquet, Chef Boyardee, Marie Callender's, Egg Beaters and Orville Redenbacher's.

The company employs about 27,000 people, but Homeland Security projections indicate that number could fall to 16,200 during a pandemic.

Childs said such worker shortages and difficulties with suppliers getting their products to ConAgra plants were among the potential problems the company identified. She did not disclose how the company would address those issues.

The federal government and public health agencies are urging people to stock up on nonperishable food, like canned goods and dried fruit, to ensure they have to food to eat during a pandemic.

Jones, the Omaha woman, said that's a proactive approach, but was worried that people with limited incomes may not be able to afford a large stockpile of food.

She stopped short of calling for the government to oversee the food industry's pandemic planning, but said, "If they see a crisis that is on the horizon, they do have to give us some type of warning."

It certainly feels like we are being prepared for something big coming down the pike. Not only that, but we are also being prepared to get no help at all from government or the lords of capitalism. More than a year after Katrina, the full depth of the abandonment of the citizens of New Orleans and the gulf coast is becoming clear. The insurance companies have paid only a fraction of what they were contractually bound to pay. I once sat next to a couple of claims adjustors returning from New Orleans a few months after the hurricane and one of them told me what he most liked about his job was helping people get back on their feet. It seemed just like the advertisements for the insurance agencies. He described the devastation and I asked him how the insurance companies could absorb such massive exposure and he replied, “Easy. We deny claims.” What a disconnect! The following excerpts from a transcript of the Open Source radio show on the topic show how that has worked out:

‘My wife called my insurance company . . . and they said, “Oh no, this isn’t covered, at all! You don’t get anything!” Now, I went to law school, so I said, “let’s talk to her supervisor.” But think of all the people in New Orleans, all the working class folks who maybe just took that and said, “Oh, I just don’t have a claim.” . . . The rationale was, “it’s just a flood story. It’s a flood story, so we don’t have to pay, we’re the wind carrier.” And actually, our roof was blown off. And they knew this, and they just tried to drive people away.’ -- Allen Kanner

‘It was like being in a place where a neutron bomb had been activated, or some kind of a science fiction movie. Nobody around, incredibly silent, no colors, everything was in sepia tones, and no birds – it was just really creepy. We called Allstate every day, and we waited and waited and waited, and we kept being told that clearly the wind made our house lean, but they needed a report from the engineers. So finally, in February, two individuals from a group called Haag Engineering visited our house, and they left after fifteen minutes without asking us any questions. They just told us that they didn’t need our input. Finally, at about eight months after our house was damaged, I received a letter in the mail, a letter from Allstate, claiming that they were going to deny our claim because of the report from Haag Engineering, which said, among other things, that it wasn’t windy enough during Katrina to make a house lean.’ – Michael Homan

‘About a month ago we filed a complaint against Allstate with the Insurance Commissioner in Louisiana….They get fools like me to pay them money every month for several years thinking I am insuring my house against wind and flood damage, and then after the largest natural disaster in this nation’s history, they don’t pay us. Instead, they pay some hack engineers to say it wasn’t windy enough during Katrina to make a house lean. And when it goes to court, Allstate will be able to claim they were simply relying on the opinion of “experts” and won’t be directly liable. And now Allstate has threatened to pull out of Louisiana if they are not able to drop coverage for 30,000 homeowners who they feel are too much risk. That would leave 220,000 homes without insurance. I had hoped that Katrina would have woken us up, and we would finally realize that our society needs more of a measure than just profit alone.’-- Michael Homan

Signs of the Economic Apocalypse, 2-19-07

Gold closed at 673.00 dollars an ounce Friday, up 0.2% from $671.70 at the close of the previous Friday. The dollar closed at 0.7611 euros Friday, down 1.0% from 0.7688 euros at the previous week’s close. The euro closed at 1.3140 dollars compared to 1.3008 at the end of the week before. Gold in euros would be 512.18 euros an ounce, down 0.8% from 516.37 euros for the week. Oil closed at 59.28 dollars a barrel Friday, down 1.0% from 59.89 at the close of the previous Friday. Oil in euros would be 45.11 euros a barrel, down 2.1% from 46.04 at the end of the week before. The gold/oil ratio closed at 11.35 Friday, up 1.2% from 11.22 for the week. In U.S. stocks, the Dow closed at 12,767.57 Friday, up 1.5% from 12,580.83 at the close of the previous Friday. The NASDAQ closed at 2,496.31, up 1.5% from 2,459.82 the Friday before. In U.S. interest rates, the yield on the ten-year U.S. Treasury note closed at 4.69%, down nine basis points from 4.78 for the week.

Gold continued its rise last week as the dollar continued a gentle slide against the euro. Oil remains weak. The drop in oil from the high last summer of more than $75 a barrel. Now given the unravelling of the U.S. occupation of Iraq since then, and given the threat of an expanded war against Iran in the Persian Gulf one would think that oil would have soared. The mistake people make in thinking about this is to assume that the United States under Bush is trying to keep oil prices low.

What if, in fact, they are afraid of low oil prices? The other mistake people make is to assume that the United States under Bush wants stability in the Middle East. What if, in fact, their decisions have been based on the wish to make the Middle East more unstable? Put these two assumptions together and lots of things make sense that didn’t before. Imagine if the U.S. was “successful” in its invasion and Iraq oil was flowing freely. What would the price of oil look like then? More importantly, what would the profits of Exxon-Mobil look like then?

And since the long-term strategy of Israel to destabilize their Arab neighbors, to encourage Islamic fundamentalism, and to undermine secular regimes dovetails closely with big oil’s interest grabbing control of reserves while keeping supplies low enough to keep prices high, suddenly all the “mistakes” in Iraq don’t seem so much like mistakes.

Juan Cole compiled recent reports on the Iraqi oil industry that show the plan has been a big success. The U.S. has large numbers of soldiers near large deposits and the flow of oil out of the ground has decreased:

Ben Lando of UPI reports on the remarks of former Iraqi petroleum minister Issam al-Chalabi (no relation) at an oil conference in Houston:

The global energy information firm Platts reports Iraq’s production in January dropped to an average 1.66 million barrels a day from nearly 1.9 million in December. Around 96 percent of Iraq`s budget comes from selling oil, and exports dropped to about 1.2 million barrels, Chalabi said...

‘They can`t increase; the only way is for production to go down,’ said Mohamed Zine, regional manager of the Middle East for energy analyst firm IHS.

‘There’s been no improvement, nothing,’ said Zine, whose views on the situation in Iraq are often less dramatic than Chalabi’s. ‘It’s getting worse.’

Before the war, Iraq was producing 2.6 mn barrels a day, with a capacity of 3. In January it could only do 1.6 mn barrels a day. There are widespread reports of rapid deterioration of facilities and fields being polluted with water. Lando adds:

Iraq also pays billions of dollars annually to purchase oil products for transportation, heating and cooking, a change from before the war when Iraq sold such products, Chalabi said . . . Last year an oil ministry spokesman said smuggling is worth $700 million monthly that should go to federal coffers.

It may be that we need to re-examine the assumption that nation-states act in their perceived best interests. Certainly, the state actors are acting in their best interests, but, in a world dominated by a global kleptocracy (rule by thieves) they may not be acting in the best interests of the institutions they run. Just as an officer of a corporation almost always acts in the best interest of him- or herself, but may not act in the best interest of the corporation. In the example of Iraqi oil, Cheney or Bush may be acting in the best interests of Exxon-Mobil (or Israel) but not that of the United States. Another way of putting it would be that all states are failed states.

The US and Israel: The Real Failed States

By Paul Craig Roberts

February 5, 2007

Growing references by the US and Israel to the Muslim Middle East as a collection of failed states are part of the propaganda campaign to strip legitimacy from Muslim states and set them up for attack. These accusations spring from the hubris of many Israelis, who see themselves as "God's Chosen People," a guarantee of immunity instead of a call to responsibility, and many Americans, who regard their country as "a city upon a hill" that is "the light of the world." But do the US and Israel fit the profile of successful states, or are they failed states themselves?

A compelling case can be made that the US and Israel are failed states. Israel allegedly is a democracy, but it is controlled by a minority of Zionist zealots who commit atrocities against Palestinians in order to provoke terrorist acts that are then used to perpetuate the right-wing's hold on political power. Israel has perfected blowback as a tool of political control. The Israeli state relies entirely on coercion and has no diplomacy. It stands isolated in the world except for the US, which sustains Israel's existence with money, military weapons, and the US veto in the United Nations.

Israel survives on life support from the US. A state that cannot exist without outside support is a failed state.

What about the United States? The US is an even greater failure. Its existence is not dependent on life support from outside. The US has failed in another way. Not only has the state failed, but the society as well.

…The United States is a failed state, because in the US it is not possible for leadership to emerge. Politics is controlled by powerful interest groups, such as AIPAC, the military-industrial complex, transnational corporations, and "security" agencies that are accumulating vast amounts of unaccountable power. The American people spoke in November and it means nothing whatsoever.

The people are enfeebled because the media no longer has independence. The US media serves as propagandist for the state. It cannot be otherwise in a highly concentrated media run not by journalists but by advertising executives protecting stock values that derive from federal broadcast licenses granted by the state.

Like the three monkeys, Congress sees no evil, the media speaks no evil, and the people hear no evil. In the US "news" consists of the government's propaganda. "News" in America is exactly like the "news" in George Orwell's 1984.

The US is a failed state, because it is not true to any of the principles upon which it was established. All over the world today, America is seen as a rogue state, a hegemonic evil, and as the greatest threat to peace and stability. In its new identify, America is the total opposite of the Founding Fathers intention. There is no greater failure than that.

Academics differentiate between failed states and rogue states. The US and Israel meet both criteria. The US and Israel lead the world in aggressive military actions and in killings of civilian populations. Both countries meet the main indicators of failed states as published in Foreign Policy's 2005 Failed States Index.

The leading indicators of failed states are inequality (not merely poverty), "criminalization or delegitimization of the state, which occurs when state institutions are regarded as corrupt, illegal, or ineffective," and "demographic factors, especially population pressures stemming from refugees" and "internally displaced populations."

All economic indicators show that income and wealth inequality is rapidly increasing in the US. The growth in inequality is the result of the state's policy that favors shareholders and corporate executives at the expense of American workers.

The income differences between Israelis and ghettoized Palestinians are huge.
Trials and investigations of leading political figures in the US and Israel are an ongoing occurrence. Currently, the former chief-of-staff of the vice president of the US is on trial for lying to the FBI in an attempt to obstruct an investigation into the Bush Regime's illegal disclosure of an undercover CIA operative. The accused claims he is the fall guy for higher ups.

In Israel the president of the country is accused of rape and faces indictment.
Both the US and Israel routinely ignore international law and are accused of committing war crimes by human rights organizations. The US Congress stands revealed as totally ineffective and unwilling to constrain the executive. The American people have learned that they cannot change the government's policies through elections. By fomenting the demise of the civil liberties that they are sworn to uphold, President Bush and Attorney General Gonzales have delegitimized the American state, turning it into an instrument of oppression.

Israel's policies in the West Bank have displaced a million Palestinians, forcing them to be refugees from their own land. Jordan is filled with Palestinian refugees, and Palestinian existence in the West Bank is being increasingly confined to ghettos cut off from farm land, schools, medical care and from other Palestinians. President Jimmy Carter has described Israeli-occupied Palestine as "apartheid."

For decades in the face of public opposition the US government has encouraged massive legal and illegal immigration of diverse peoples whose failure to assimilate is balkanizing the US population. Economic refugees from Mexico are changing the culture and allegiance of entire sections of the American southwest, and racial animosities are on the rise.

In a recent interview, Noam Chomsky defined one characteristic of a failed state as a "democratic deficit, that is, a substantial gap between public policy and public opinion." We see this gap in Bush's decision to escalate the war in Iraq despite the opposition of 70% of the American public. What does democracy mean if elected leaders ignore public opinion?

Another characteristic of failed states is the failure to protect their own citizens. Israel's aggressive policies against Palestinians provoke terror attacks on Israeli citizens. These attacks are then used to justify more oppression of Palestinians, which leads to more terror. Bush's military aggression in the Middle East is the main cause of any terror threats that Americans now face.

Another characteristic of a failed state is the departure of citizens. Many Israelis, seeing no future for Israel in the government's hostility to Arabs, are leaving Israel. Among Israelis themselves, the legitimacy of the Israeli state is so endangered that the Knesset has just passed a law to revoke the citizenship of "unpatriotic" Israelis.

In the US a large percentage of the population has lost confidence in the government's veracity. Polls show that 40% of Americans do not believe the government's story that the 9/11 attacks were the work of Arab terrorists. Many believe the attack was a "false flag" operation carried out by elements in the Bush Regime in order to create public acceptance for its planned invasions in the Middle East.

…The case against Israel and the US does not preclude some Muslim states from also meeting the criteria for failure. However, Iraq, an artificial creation of Western colonial powers, was driven into failure and civil war by American aggression. Iran, a nation with a 5,000 year history, is certainly not a failed state. The main failed states in the Middle East are those that are US puppets. They represent American hegemony, not the interests of their people.

What the US and Israel are attempting to do is to turn the entire Muslim Middle East into failed states, that is, into puppet regimes. By extending their hegemony in the Middle East, the US and Israel hope to prolong their own failed existence.

Roberts said in the article above that the U.S. is not dependent on outside sources for its existence, but it could be said that it is dependent on foreign central bank purchases of U.S. government debt for its economic and political strength. Max Fraad Wolf has some interesting numbers and observations about that:

Imbalance and Privilege: Hedge Fund America

Max Fraad Wolf

February 15, 2007

There are some strange facts about the asset and trade positions of the US economy in our globalizing world. The US runs massive and growing trade deficits, is borrowing at a clip that would arouse the suspicions of a casino pit boss, and has been selling her assets to anyone who will buy. In the last 24 months the US balance on goods and services comes in just shy of -$1.5 trillion. Across the same period we have sunk further into debt to the rest of the world.

As a result of all that short fall we have been selling assets and borrowing. The Net International Investment Position (NIIP) is the Bureau of Economic Analysis (BEA) broadest measure of US owned foreign assets less foreign owned US assets. The chart above uses data from line 2 of the BEA data on market valuation of US NIIP in millions of dollars taken annually 1982-2005… [T]here has been a dramatic and sustained deterioration in the US NIIP over the last several decades. Between 1986 and 1988 America transformed herself from creditor to the world to debtor extraordinaire. We have never looked back, nor have we been forced to.

We have enjoyed positive net income from our increasingly larger negative total holding of foreign assets. This has partially insulated us from instability, Dollar plunges and rising interest rates. Declines in our currency get help from those most hurt- foreign owners of US assets. As Greenbacks fall we increase our positive income stream because the value of our assets rises and the value of our liabilities falls. Our imports are linked closely to or pegged to the dollar and our export markets are less so. Thus, falling dollars impose massive cost on asset holders and trading partners, reducing the regularity and severity of episodes. At least that has been true thus far. Spiking interest rates and falling Dollars have neither regularly nor, painfully recurred. There has been no forced rebalancing as economic theory suggests. Herein lays the source of much trouble and many sound forecasts gone awry.

Many have seen the growing negativity of net assets and predicted a coming dollar downdraft and violent rebalancing. Dollar slides have occurred- sometimes rapidly and to destabilizing effect. There have been episodes of rebalancing, but they are few and the trend is still clearly away from balance. US NIIP has continued down, beyond the targets advertised as hard constraints. We have avoided the forecast costs. How? Why?

There are many and complex answers to this question. Key among the factors is our persistent ability to attract copious capital- at fairly low interest rates and with no risk premium associated with rising indebtedness. Our trade deficit’s net outflow of dollars comes back as purchases of US assets and loans to US borrowers. The world buys our debt, at low yields and across maturities. They don’t just buy, they hold. They hold come hell or high water. Our foreign friends also undertake direct investment here. Their returns, even unadjusted for currency, are terrible. Our returns on foreign investment are much, much higher. It is estimated that American assets overseas outperformed foreign assets invested in the US by 210 basis points 1952-2004 and by just shy of 300 basis points 1973-2004. Thus, our dwindling net assets are more than offset by vastly superior yields. It has helped us that we tend to acquire riskier assets, equities and Foreign Direct Investment (FDI), while they snap up debt. Rather amazingly, over past decades, the return to US FDI is over 400 basis points higher than the return to foreign FDI in the US.

We are also allowed to borrow in Dollars. Our foreign assets are over 75% non-Dollar denominated. This means our assets grow and our liabilities shrink in value as the Dollar falls. Most importantly, we have managed to earn more with less and less net foreign assets than they have managed to earn with more and more net US assets… In other times and places such arrangements have been referred to as tribute and were not handled through global “free” asset markets. Today they are. It might be worthy of note that the more unstable floating exchange rate period has been very kind to the US. Money comes to America for safety and to fund the world’s consumer demand. Thus, we invest according to portfolio theory getting maximum cash returns and they maximize across a broad range of non-cash-return considerations.

…There are a few leading “explanations” for the superior returns of US assets abroad. The least interesting is called the “Dark Matter” theory and basically explains away the size of our NIIP as a failure to accurately measure complex and non-quantitative US assets held abroad. This merits little comment and recalls the classic line from Young Frankenstein, when the hunchback responds to the obvious question with “what hump?” On the more plausible side are explanations focused on the privileged and unique position of the US as the guarantor of liquidity and the printer of the global reserve currency. America is able to borrow cheaply and lend dear with lower risk premiums attached to her debt. This allows us to act as banker to the world skimming off an “intermediation” fee that allows positive returns on portfolio maturity and quality composition. This has some explanatory power. However, it would seem we are doing everything possible to cancel this advantage without appearing to lose the returns associated. A more rigorous and complex version of the history and measure of this oddity is well told with supporting data in World Banker to World Venture Capitalist, by Pierre-Olivier Gourinchas and Helene Rey/

Gourinchas and Rey divide the reasons for persistent positive returns on declining US owned assets abroad into two broad categories. The first source of positive returns has to do with the relative composition of US versus foreign held assets. The second has to do with the returns on these assets. Here we discover that the US has a preference for equity and foreign direct investment (FDI), while the rest of the world has accumulated trillions in US Government debt securities. We hold riskier assets as a much larger portion of our portfolio. In addition, US FDI investment abroad earns much higher returns than foreign FDI in the US. We run much more leverage, higher risk and therefore, earn higher returns. The US even enjoys superior returns on its FDI compared to foreigners’ FDI here. The US functions like a leverage loving hedge fund, hunting down and eating alpha. What this says about the others in the global portfolio allocation game, I leave to you to decide. All are acting in self-interest and all are aware of what they are doing. None seem to see a palatable alternative.

Others have added valuable elements to our understanding of NIIP anomalies. Some suggest that profits are reported outside the US where taxes are lower, artificially reducing the reported returns here. Many hold that foreign firms buy here for political reasons or to gain access to our market. I would add funding our trade shortfall as a leading motivation. Many who buy and hold do so to defend favorable exchange rates, curry favor and provide credit to the US State and consumer. This is a payment to continue the world economic and political order.

Before leaving you to ponder all this, we need to address what it means that we are no longer above water in terms of the income from our negative net assets. It likely means building pressure on the dollar. If and when this occurs, it means pain to foreign creditors and possible political risk. The sheer size of our negative NIIP is flirting with offsetting the past advantage of positive net income. Rebalance will occur, our relative returns will rise further, or this former support will stay a drag. This signals the end of a support for our over indebtedness, although that may make time to manifest. It begs a bigger question for the rest of the world. Why is it so vital for them to subsidize us so much and for so long? What will happen to their swollen positions in low yielding Dollar assets? Last but not least, if America is a leveraged hedge fund among nations, should Uncle Sam really be casting stones at the private sector firms mirroring US macroeconomic strategy?

One way to boil down what Wolf said is that no state is really acting in its own best interests, not the United States and not those countries buying U.S. debt. Nothing makes sense if we assume that states act in their nation’s best interest but much more makes sense if we assume that state actors (whoever they really are) act in their own best interests.

Inflation, currency collapses, they don’t care about that. Money can be made and power expanded in any situation as long as you know the timing of the shifts in direction. U.S. debt cannot be expanded forever, nor can a currency collapse and economic depression be postponed forever. It will probably happen soon triggered by some “unforeseen” event that many people will actually have foreseen.

The point we may be at now is the point in blowing up balloon that the size doesn’t grow as much but the internal pressure increases more rapidly. This is the point just before a balloon pops, if more air (money?) is pushed in. The massive, global size of this balloon means that the “shock and awe” will stun the public into accepting the clampdown. If they succeed in their plans, global total despotism will spell the end of neoliberal free-market globalism. Of course, the internet will have to go, too.

In fact, there has been some odd weather on the internet lately. Two of the biggest alternative news sites (Signs of the Times and another one) were down for several days last week. The recent attack on the root DNS nodes of the internet still troubles the sleep of those who think about such things. Here is an interesting post from Kevin at Cryptogon:

The New PSYOP Payload: Bird Flu and the Collapse of the Internet

February 14th, 2007

I’m still paying attention to the fallout from the incident involving the root DNS nodes. In the course of following that story, I came across the Strong Angel III operation, which proposed a scenario involving a pandemic avian flu outbreak with follow-on strategic information warfare attacks.

Today, Slashdot linked to a story from last June that I hadn’t come across:
Would the Bird Flu Kill the Internet, Too? Long quote, but stick with it, especially the part near the end:

If a bird flu pandemic sweeps the nation, we could avoid infection by working from home via the Internet.

Or, hammered by overuse, the Internet could shut down within two to four days of an outbreak, eliminating telecommuting as a viable option.
Disturbingly, that was one finding of a simulation, or war game, held in January in Davos, Switzerland, by the World Economic Forum and management consulting firm Booz Allen Hamilton Inc. More than 30 senior industry and governmental executives played out the arrival of the flu in Germany from Eastern Europe — and the results weren’t pretty.

“We assumed total absentees of 30% to 60% trying to work from home, which would have overwhelmed the Internet,” said participant Bill Thoet, vice president of Booz Allen Hamilton. “We did not assume that the backbone would be gone, but that the edge of the network, where everyone was trying to access their office from home, would be overwhelmed. The absence of maintenance was also a factor. The person who brought up the problem was himself a CEO of an Internet service provider.

“The conclusion [of imminent collapse] was not absolute, and the situation was not digitally simulated, but the idea of everyone working from home appears untenable,” Thoet said.

On this side of the Atlantic, predictions about how the Internet would fare in the face of a pandemic are less dire.

“We don’t believe that the Internet will be compromised within a matter of hours or days,” said Brent Woodworth, worldwide manager for IBM’s Crisis Response Team, which does consulting on disaster preparedness. “Most Internet traffic is reroutable, and as different areas are affected at different rates by a pandemic, the networks could anticipate increased traffic and adjust accordingly — with the caveat that critical components will be maintained.”

I’m not going to even deal with the fact that Booz Allen Hamilton Inc. was involved with this, or that the topic was addressed at the annual World Economic Forum gathering in Davos, Switzerland. Someone could probably make a career out of following up those points alone.

I want to focus on nine words from the excerpt above. I’m sure you propellerheads already know which nine words I’m talking about:

…With the caveat that critical components will be maintained.

One more time, from my informal essay on information warfare written in 2002:

You always hear that the Internet was designed to route information around dead or crowded nodes. Well, what you don’t hear is that this theory only applies when the amount of traffic on the system DOES NOT OVERWHELM the routers, switches and communications media. If transcon and intercity OC-192s and OC-768s start going down, the sudden traffic overflow onto the lower tiered intercity connections will bring everything to a grinding halt. Couple that with attacks on root DNS nodes and DOS attacks on systems still standing…

Put a fork in it, ladies and gentlemen. It’s done.

But wait, there’s more. This was just published yesterday: Flu Pandemic Could Choke Internet, Requiring Usage Restrictions:

Many companies and government agencies are counting on legions of teleworkers to keep their operations running in the event of an influenza pandemic. But those plans may quickly fall apart as millions of people turn to the Internet for news and even entertainment, potentially producing a bandwidth-choking surge in online traffic.

Such a surge would almost certainly prompt calls to restrict or prioritize traffic, such as blocking video transmissions wherever possible, according to business continuity planners who gathered on Friday at a SunGard Availability Systems hot-site facility in northern New Jersey to consider the impact of a pandemic on the Internet.

Businesses as well as home users likely would be asked to voluntarily restrict high-bandwidth traffic, the planners said. And if asking didn’t work, they warned, government action to restrict traffic might well follow.

“Is there a need for a YouTube during a national emergency?” asked John Thomas, vice president of enterprise systems at a large, New York-based financial institution that he asked not be identified.

Whether the avian flu will morph into a human pandemic is unclear. But if it does, hundreds of thousands, if not millions, of deaths could result worldwide. To try to limit a pandemic’s spread, many people will seek to work from home. Consequently, “the demand for communication will soar,” said Renate Noone, vice president of professional services at SunGard’s Availability Services unit.

Out of the vast cloud banks of speculative collapse theories, They seem to like this Bird Flu / Internet Collapse dog and pony show the most.

Remember what I said about that astonishing Brzezinski episode?

I don’t think that it’s possible to know which trick is going to be pulled with any precision. But they’re going to have to try to fit ten pounds of shit into a five pound bag, and soon. The question is how to blame “the terrorists” for the crash without the thing leading to nuclear war. I’m guessing that this Brzezinski thing is like saying, “Don’t do it ‘that’ way. Go back to the drawing board. We don’t want it to play out like ‘that.’” Iraq is clearly out of control. Add Iran to the mix? I don’t see how they maintain any level of control (militarily, politically, economically, take your pick) with an order of magnitude increase in the chaos on the ground. I think this crossed Brzezinski’s mind, and the minds of his handlers.

Is it possible that “the terrorists” have become too ridiculous of a meme for even the average imbecile on the street to believe anymore? The problem with 9/11 is that the dust settled too quickly. Uncomfortable questions started appearing way too fast… I don’t personally know anyone who believes the official 9/11 story anymore.

…So, how could They improve on “the terroristst” PSYOP payload?

It’s impossible to know for sure…

But if the Internet goes down, life as you know it ends and soldiers are going door to door making sure that you have received your required “vaccination” against whatever .mil engineered plague has just been released, you’ll pretty much have your answer.

As Kevin points out, those who are trying to take complete control need just enough chaos to open the door for their clampdown but not too much chaos. That might lead to unforeseen events. There lies the window of opportunity for those who want a freer, more creative future. But that opportunity can only be seized if enough people have practical, accurate knowledge of human nature and of the nature of that “other human race,” the psychopaths. To get an idea of what that type of knowledge would entail, see Andrew Lobaczewski’s Political Ponerology.

Signs of the Economic Apocalypse, 2-12-07

Gold closed at 671.70 dollars an ounce Friday, up 2.9% from $652.60 at the close of the previous Friday. The dollar closed at 0.7688 euros Friday, down 0.3% from 0.7713 euros at the end of the week before. The euro closed at 1.3008 dollars, compared to 1.2966 at the close of the previous week. Gold in euros would be 516.37 euros an ounce, up 2.6% from 503.32 for the week. Oil closed at 59.89 dollars a barrel Friday, up 1.4% from $59.09 at the close of the previous Friday. Oil in euros would be 46.04 euros a barrel, up 1.0% from 45.57 at the end of the week before. The gold/oil ratio closed at 11.22 Friday, up from 11.04 for the week. In U.S. stocks, the Dow Jones Industrial Average closed at 12,580.83 Friday, down 0.6% from 12,653.49 at the close of the previous week. The NASDAQ closed at 2,459.82 Friday, down 0.7% from 2,475.88 for the week. In U.S. interest rates, the yield on the ten-year U.S. Treasury note closed at 4.78% Friday, down four basis points from 4.82 for the week.

The U.S. markets were shaken a bit last week by more signs of mortgage defaults and rising foreclosure rates in the U.S. housing market. The dollar, stocks and interest rates went down, while gold and oil went up:

Stocks drop as more home loans go bad; Micron warns

Amanda Cooper

Fri Feb 9, 8:12 PM ET

U.S. stocks fell on Friday after Countrywide Financial Corp. became the latest mortgage lender to warn of rising defaults, while chip maker Micron Technology Inc.'s poor forecasts shook the tech sector.

Countrywide, the No. 1 U.S. mortgage lender, said foreclosures hit their highest since at least 2002, while delinquencies hovered near a five-year high, fanning concern over the erosion of the U.S. housing market after two of the top three U.S. subprime mortgage lenders warned on Thursday about the impact of bad loans on their bottom line.

Investors were jolted after Britain's HSBC Holdings Plc and New Century Financial Corp. issued their warnings, which punished shares of major U.S. banks like Citigroup and JPMorgan Chase & Co. for a second day in a row.

The much anticipated market debut of Fortress Investment Group LLC, the first hedge fund to go public, did little to dispel the worries about what further deterioration in the housing market could do to the economy.

"The market was looking for a reason to go down and I guess you could point to that. You could even point to oil trading above $60 a barrel," said Angel Mata, managing director of listed equity trading at Stifel Nicolaus Capital Markets in Baltimore.

HSBC "obviously had an effect on the psychology of the market here," Mata said.

Micron said it believes prices for memory chips used in consumer electronics will fall 30 percent to 40 percent this quarter from the last one. That projection sent Micron's stock down more than 3 percent in their biggest one-day percentage slide in more than three months.

The Dow Jones industrial average slid 56.80 points, or 0.45 percent, to end at 12,580.83. The Standard & Poor's 500 Index dropped 10.25 points, or 0.71 percent, to finish at 1,438.06. The Nasdaq Composite Index tumbled 28.85 points, or 1.16 percent, to close at 2,459.82.

For the week, the Dow fell 0.57 percent, while the S&P 500 declined 0.71 percent and the Nasdaq slipped 0.65 percent.

Last week we pointed out the signs that the ruling groups in Germany are poised to follow the U.S. example of neoliberal privatisation, growing inequality of income and the dismantling of social insurance. The United States, neoliberal in social and economic policies and neoconservative in foreign policy, would seem to be a poor model to follow now that the disastrous effects of a generation of such policies are impossible to ignore. Yet the signs are there that even France will go in that direction, again, like Germany, against the wishes of her citizens, if Sarkozy manages to get installed as president.

France: Nicolas Sarkozy goes to London

By Antoine Lerougetel
5 February 2007

Nicolas Sarkozy’s first foreign excursion since his designation as official presidential candidate of France’s ruling Gaullist UMP (Union for a People’s Movement) was a trip to London. He spent January 30 visiting the Marylebone Jobcentre Plus, lunching with Prime Minister Tony Blair and addressing an election rally organised by the London branch of the UMP, which attracted 2,000 French expatriates.

The first round of the French presidential elections will be held April 22.
The Guardian newspaper noted: “Mr Sarkozy’s choice of London for his first foreign trip since launching his presidential campaign is seen as deeply symbolic. He is keen to present himself as an international statesman, a friend of Mr. Blair and close to the US-British alliance.”

Sarkozy is reported to have met Blair for discussions on no less than eight occasions. Their personal friendship is underlined by unofficial meetings, “including while on holiday in Florence and during Sarkozy’s trip to London to celebrate his reconciliation with his wife Cecilia.”

When Blair’s wife goes to Paris, she has dinner at the ministry of the interior Sarkozy presides over.

The London visit, and particularly the rally at the end of day, provides a snapshot of Sarkozy’s social base. There are 60,000 registered voters among the big French expatriate community in Britain (some 300,000), mainly living in London and the prosperous southeast. Many of them are drawn by the low taxes and deregulated economy stripped of labour and social rights, where the business of accumulating wealth is untrammelled. The January 30 Guardian editorial comments, “The expatriate [French] community in Britain is one of the biggest outside France. Whizz-kid bankers and businessmen fleeing a homeland in a state of political (and entrepreneurial) torpor are natural voters for the man who has promised to break the mould of French politics.”

According to the Daily Telegraph, “Many of the new arrivals work in the Square Mile [the City, London’s banking and financial district], where bonuses mean that they can earn five times what they would for the same job at home.”

The Guardian gave this description of Sarkozy’s audience: “Hundreds of well-heeled city financiers, students from Paris’s posh suburbs, restaurant workers and teachers living in Britain filled a hall at Old Billingsgate market.”

The Telegraph reported, “Upwards of 2,000 chic, prosperous supporters chanted ‘Sarko president’ as he told them he wanted their support for his candidacy and his vision of a new France.”

Raphaël Leclerc, 21, studying politics at the London School of Economics, told the Guardian that he had grown up in a smart Paris suburb and came “from a privileged background and rightwing family” and had played football against Sarkozy’s sons. Alex Poitier, 29, a trader at a foreign bank, told the Daily Telegraph, “In terms of salary and the amount of responsibility I’m given there is no comparison with France, but I love the whole philosophy of the place.”

This philosophy, dominant in these social layers, is well expressed by a piece by the French, London-based think tank Cercle d’outre-Manche in the January 30 Financial Times January 30. It asserts that Britain has overtaken France as a place for money-making:

“The UK generates 76 billion euros more gross domestic product..... Twenty-five years ago the UK’s GDP was 75 percent that of France.”

The article then explains the secret of this success: “Margaret Thatcher broke down many rigidities and reintroduced market practices in the economy. With Tony Blair at the helm and Gordon Brown at the purse, market fluidity has been introduced in almost all aspects of the economy.”

Here we see the significance of Sarkozy’s visit to the job centre. The destruction of job protection is lauded with the euphemism “hiring people has been made easier.” Forcing people to accept any low-paid job offered by the job centre, on pain of withdrawal of benefits for those who do not, is approvingly described: “Welfare resources are targeted to make it easier for the long-term unemployed, older workers, young people and single mothers to get back to work with a carrot and a stick policy.”

These are the people for whom Sarkozy speaks and who want him to do in France what Thatcher first did in Britain. What they applaud in Thatcher and also Blair is that, as the Cercle d’outre-Manche puts it, “they have held firm in the face of opposition.”

Here we see clearly the anti-democratic nature of the neolib/neocon elite. The opposition in the face of which they have held firm is that of the vast majority of citizens.

The cynicism of Sarkozy’s claim, in recent statements, to have the interests of workers at heart and even to approve of better remuneration for work, is clearly revealed in a January 31 interview in the International Herald Tribune: “I want people to be recompensed and respected for their work. I want people to understand the value of work. I’m concerned with people who want to work hard, and I want to speak to them. When people work hard, they have to be recompensed for this. And that’s why I want to do away with inheritance laws, because if someone has worked hard throughout his or her life, then it must be possible to pass onto your children the fruits of your work.... I don’t accept that someone is poor if they worked really hard.”

Sarkozy’s message is not for working people, but for the upwardly mobile and the financial elites who will have substantial wealth to leave to their children. His call for hard work to be rewarded is in fact a call for the rich to be allowed to get richer. He employs the same bogus claims of a commitment to a meritocracy as Blair, where a supposed equality of opportunity for social advancement and wealth accumulation is counterposed to calls for greater social equality—which is denounced for holding back the “hard working” and rewarding the lazy and shiftless.

Anyone who defends social equality is out of step with the times, Sarkozy declares: “My ideas are the ideas of today’s world: respect for work, social promotion, equal opportunities. Let me tell you, I don’t like egalitarianism. I don’t like people being unnecessarily helped. I don’t like lowering in the interests of equality. I want to bring everyone upwards.”

And when quizzed as to his commitment to deregulation and privatisation, Sarkozy reassures his interlocutor, “I’m not an enemy of the state. A great country needs the state, but let me put things very simply. I believe in capitalism. I believe in the market economy. I believe in competition.”

When asked why in a recent poll 51 percent of the people said they were afraid of his policies and actions, he vaunted his success in the opinion polls and attributed this to his readiness to confront social and political opposition:

Speaking of how he faced up to 27 days of rioting in Paris and major French cities, he replied, “Fortunately I’m worrying. If I were reassuring what would things be...you come along and you say, ‘Mr. Sarkozy, why are you frightening people? Why are people worried? What should be done not to frighten people?’ I’ve been number one, so presumably, there must be some reassurance; at least that’s the perception of some.

Notice that Sarkozy's answer makes absolutely no sense.

“I’m not frightened of ideologies, credos. I’m not going to bow down to the latest fad, and I’m not frightened of facing up to difficulties,” he boasted.

It is on this basis of his role as a strongman, an authoritarian figure, that Sarkozy is making his pitch for presidential office.

…Sarkozy’s bombastic displays of self-confidence are not due to any inherent strength or to the popularity of his elitist policies—he leads in the polls, but with only 38 percent of respondents. They are the product of the lack of any meaningful opposition from the official left parties: Socialist Party, Communist Party, Greens, the trade unions and their hangers-on in the so-called “far left” and radical movements (the LCR—Revolutionary Communist League, LO— Workers Struggle, the PT—the Workers Party, José Bové and the anti-globalisation associations).

A recent poll has found that more than 70 percent of French people do not believe in the free market as a condition for social well-being. This was also expressed in the rejection of the European constitution in the May 2005 referendum, the mass protest movements of 2003 against pension cuts, and in 2006 against the dismantling of labour and social rights and protections.

…What Sarkozy is seeking to learn from Blair is how to make a policy of the destruction of rights and living standards, imposed by an authoritarian state, palatable to the electorate by dressing it up in pseudo-progressive and liberal garb. He needs Blair’s advice on how to make enough voters believe that his credo “I believe in competition” can also encompass what he described to the IHT as “an ethical form of capitalism.”

He has promised, if elected, to curtail the right to strike and picket, to generalise the New Job Contract at present only enforceable in small businesses—a contract similar to the First Job Contract (CPE), which had to be withdrawn because of the mass movement of youth and workers against it in the spring of 2006. He proposes to withdraw benefits from unemployed workers who reject a second offer of a job from the state employment agency, lengthen working hours and make further drastic inroads into pension rights.

Blair is the most despised politician in Britain for his lying and complicity with US President George W. Bush in justifying the illegal invasion and colonial-style occupation of Iraq against massive national and world opposition. He is also hated for his social policies.

Sarkozy’s visit to such a discredited figure is another aspect of his alienation from the concerns of ordinary French citizens.

It seems that Sarkozy, backed by neocons in Israel and the United States, has infiltrated the security services in France and is backed financially by the Israeli/Russian mafia, according to Wayne Madsen :

February 6, 2007 -- Right-wing French presidential candidate Nicolas Sarkozy received money from international American fugitive and Russian-Israeli Mafia kingpin Marc Rich, according to informed French sources. The money was transmitted through the Luxembourg-based Clearstream clearing division of Deutsche Borse. Sarkozy cleverly proclaimed his innocence in the French-Taiwan frigate bribery and money laundering affair, accusing French Prime Minister Dominique de Villepin of being behind a political dirty trick. However, in squawking loudly about his innocence in the Taiwan scandal, Sarkozy diverted attention away from his receipt of funds from the Russian-Israeli Mafia Clearstream accounts of Bank Menatep, the bank owned by jailed Russian tycoon Mikhail Khodorkovsky.

Sarkozy, a committed neo-con who favors a hard line towards Arabs domestically and internationally, is reported to have received funds from Switzerland-based Marc Rich, via Menatep's Clearstream accounts, prior to and after Menatep's collapse in 1998. Menatep has been linked to a number of Russian-Israeli mafiosi figures, including Semyon Mogilevich, considered to be the most dangerous Russian-Israeli Mafia leader in the world. Rich's former attorney, I. Lewis "Scooter" Libby, is on trial in Washington, DC for perjury and obstruction of justice in the outing of a covert CIA officer.

French tax police are homing in on off-shore accounts operated by former Yukos Oil and Menatep official Alexei Golubovich, who was under house arrest in Italy before he returned to Russia. Golubovich agreed to testify against Khodorkovsky in return for Russian prosecutors dropping charges against him. In what may be related to the money laundering scandal, Yuri Golubev, a Yukos co-founder, died in London last month under what Russian prosecutors believe are suspicious circumstances.

In December, WMR reported, "Sarkozy has been accused of receiving illegal funds through dubious bank accounts in Luxembourg and some of those funds have Russian-Israeli mafia fingerprints all over them."

Sarkozy is in a tight race with French Socialist Party candidate Segolene Royal. The taint of money and bribery scandals continue to cling to Sarkozy.

Last October, Madsen reported the following about Sarkozy’s infiltration of France’s security services, acting in the interests of Israel:

Neo-con agents of influence have infiltrated the DGSE and other intelligence services with a view to changing their Arabist viewpoints to more pro-Israel perspectives. This has been accomplished with the help of Sarkozy. The Interior Minister has managed to weaken some of the strict requirements stipulated in the past for service in the French security services -- allowing those with dubious foreign connections to become employed by the DGSE and Direction de la surveillance du territoire (DST).

French intelligence sources also report that Sarkozy is running a band of agents provocateurs who have been responsible for starting two recent riots in and around Paris that were similar to the riots that plagued France last year. Many of last year's riots were also provoked by Sarkozy agents.

…In August, French Socialist presidential candidate Segolene Royal, who lives in a Paris apartment with her male partner, Socialist Party Secretary General Francois Hollande, complained that Sarkozy's Interior Ministry leaked information to the press about the break-in and ransacking of their Boulogne-Billancourt apartment. The break-in occurred while Royal and Hollande were on their August vacation. Royal said that nothing was missing from their apartment but it had been ransacked in a manner that suggests someone was searching for something that they did not find. Royal said, "This was not a burglary, but an intrusion and a full-scale search of my home in which nothing was stolen."

According to French intelligence sources, Royal and Hollande are now under total communications and physical surveillance by Sarkozy's DST agents and unofficial agents from organizations, including foreign intelligence services, supporting Sarkozy's anti-Arab and neo-con agenda. DGSE agents opposed to Sarkozy appear content to allow Sarkozy and his friends to continue to carry out their subterfuge in the hope they will make a major mistake and be caught, thus dooming Sarkozy's presidential hopes.

The people of France should know that once you let these types of people in power, they will never leave. Just look at the United States and Great Britain.

Signs of the Economic Apocalypse, 2-5-07

From Signs of the Times, 2-5-07:

Gold closed at 652.60 dollars an ounce Friday, up 0.1% from $651.80 at the close of the previous Friday. The dollar closed at 0.7713 euros Friday, down 0.4% from 0.7743 at the end of the week before. The euro closed at 1.2966 dollars compared to 1.2916 for the week. Gold in euros would be 503.32 an ounce, down 0.3% from 504.65 at the end of the previous week. Oil closed at 59.09 dollars a barrel Friday, up 6.3% from $55.57 at the close of the previous Friday. Oil in euros would be 45.57 euros a barrel, up 5.9% from 43.02 for the week. The gold/oil ratio closed at 11.04 Friday, down 6.3% from 11.73 at the end of the week before. In U.S. stocks, the Dow closed at 12,653.49 Friday, up 1.3% from 12,487.02 at the close of the previous Friday. The NASDAQ closed at 2,475.88, up 1.7% from 2,435.49 for the week. In U.S. interest rates, the yield on the ten-year U.S. Treasury note closed at 4.82%, down five basis points from 4.87 at the end of the week before.

Yesterday was Super Sunday in the United States, which means the Super Bowl was played. In the run-up to the game, each year we see a headline telling us that so many billions were “lost” to the economy because workers were talking about football. Each year Salon’s sports columnist, King Kaufman, skewers the idiocy of such headlines with a short lesson in stupid economic statistics:

The Super Bowl of bad math: Hundreds of millions in lost productivity!

Huge economic boost for the host city!

Jan. 30, 2007

Forget Bears-Colts. This is the week of the Super Bowl of Credulity.

We just need a better name for it. How about the Super Bowl of outlandish claims? Of facts and figures for people who are bad at math. Special bonus: Free lottery tickets for all participants! Only $1 each!

If it takes you five minutes to read this column, you've cost corporate America $81 million. That's the estimate this year from Challenger, Gray & Christmas, the Chicago outplacement firm that's very good at three things:

1) Making inane, outrageously inflated estimates of productivity lost by American businesses in advance of major sporting events.

2) Getting its name in the papers.

3) Getting spanked like a monkey for it by this column.


This column needs to get better at getting its name in the papers, apparently, because once again the national media is pretty much swallowing hook, line and stinker Challenger Gray's latest estimate, which is that Super Bowl 41 is costing American business -- ready for it? Think of a crazy number. Double it.

Wrong! Too low. It's $810 million. That's $162 million a day.

And that's nationwide. You should see the estimates for Chicago and Indianapolis. I won't show them to you. You'd go blind. Suffice to say, if Challenger Gray is right, Chicago can't possibly survive the catastrophe. If there's such a thing as Chicago, Ill., a week from today, it'll be a damn miracle.

What Challenger Gray does is estimate that employees spend 10 company minutes a day on the big game during Super Bowl; then it figures that 57 million of the 90 million viewers are workers, multiplies by an average hourly wage of around $17 to get 28.4 cents per minute and, abracadabra, 10 times .284 times 57 million times five equals: $810 million.

Actually it equals $809.4 million, but what's $600,000 worth of baloney between gullible friends?

You're spending half of your daily allotment of Super Bowl wasted time on this column, so that's $405 million for the week, $81 million just today. I hope you're happy.

We've been over this before. Never mind that Challenger Gray pulls that 10 minutes estimate out of its Christmas. And never mind that what makes the Super Bowl such a huge television event is that it attracts millions of people, probably a majority of the audience, who spend not one second thinking about football before kickoff. A Super Bowl party at a neighbor's house this weekend is exactly the same to this great mass of people as if it were a midsummer Sunday barbecue. Just something fun to go do that day.

They're not spending 10 minutes a year thinking about the Super Bowl, never mind 10 minutes a day for a week.

Never mind all that. Just pay attention to how Challenger Gray bases its nutty, headline-friendly assumptions on the idea that workers who spend 10 minutes talking about the Super Bowl have carved those 10 minutes out of their productive work time.

So if you're talking with your cubicle-mate about Peyton Manning, discussing the differences in the cover 2 -- sorry, cover II -- defenses of the Bears and the Colts with the computer guy, pondering silently whether the Bears quarterback will be Super Rex or Bad Rex, that's time you would have spent working if this weren't Super Bowl Hype Week Deux.

You wouldn't have been instant messaging with your friend in accounts receivable during those 10 minutes. Nope. No way you'd have been on the phone with your brother talking about the family reunion this summer. Not a chance you'd have been sneaking a peek at the stream of last night's episode of -- Nuh-UH! His dad's Farmer Hoggett?! -- "24."

…Challenger Gray's lost-productivity estimates are just silly publicity stunts. They're good ones, and I'm happy to participate. The Web site is at challengergray.com if you're interested in hiring an outplacement firm that doesn't mind playing fast and loose with the numbers if it can benefit.

A little more sinister are those estimates of how much money the Super Bowl brings in to the host city each year. This year's estimate for Miami: $350 million, according to the Web site (PDF) of the South Florida Super Bowl XLI Host Committee.

As Dave Barry put it in the Miami Herald: "What does that mean, in layperson's terms? It means the host committee has been smoking crack."

And since that press release came out in the fall, the estimate has been kicked up to $400 million. I mean, what's $50 million worth of baloney, right?

The trouble with figures like those is that the only people who ever argue for them are in the employ of either the NFL, a host city or some affiliated entity, like a private host committee, a tourism board, a stadium commission. Economists without a personal interest in inflating those numbers are something very like unanimous in saying they're vastly inflated.

The short version is that these rosy figures account only for the positives, the money actually spent on Super Bowl weekend. They don't take into account the business that already would have been conducted -- Miami is a place that has been known to draw a few tourists even in those Februaries when the Super Bowl is elsewhere, for example. They don't take into account the business that's lost when locals steer clear of the crowds by staying home, or skedaddle altogether, or when convention business stays away for two weeks because the weekend in the middle is jampacked.

Everyone agrees there's usually an economic benefit to hosting the Super Bowl, but the estimates of how much by people with no conflict of interest are much more modest than the estimates by interested parties. About a quarter of the publicly proclaimed benefit, on average, one study found. Move the decimal point one place to the left, one econ professor suggested this week.

The good news is the media's gotten pretty good at reporting on this skepticism. Just in the past few years, the "economists cast doubt on the economic boom hype" story has become a staple sidebar of Super Bowl Hype Week 2.

The bad news is these inflated figures are tossed around when the NFL is trying to strong-arm a city somewhere into building a new stadium for one of its teams. Build that stadium and we'll make sure you get a Super Bowl, the league says. That's a $400 million boon to your local economy.

Well, $400 million, $40 million. Minus the cost of the stadium -- the going rate's around half a billion these days. But hey, what's $360 million worth of baloney between friends?

The Super Bowl does give the general consumer economy a chance to sell a bunch of $1200 dollar televisions to people who in a year may wish they had spent that money on firewood or sacks of oats. But while many in the United States do see hard economic times coming, their behavior has yet to adjust. This week the personal savings data for 2006 were released and it turns out that personal savings hit a 74-year low. Let’s see, 2006 minus 74 is 1933. Hmm… what was the economy like then?

2006 personal savings drop to 74-yr. low

By Martin Crutsinger, AP Economics Writer
Thu Feb 1, 8:56 AM ET

People once again spent everything they made and then some last year, pushing the personal savings rate to the lowest level since the Great Depression more than seven decades ago.

The Commerce Department reported Thursday that the savings rate for all of 2006 was a negative 1 percent, meaning that not only did people spend all the money they earned but they also dipped into savings or increased borrowing to finance purchases. The 2006 figure was lower than a negative 0.4 percent in 2005 and was the poorest showing since a negative 1.5 percent savings rate in 1933 during the Great Depression.

For December, consumer spending rose a solid 0.7 percent, the best showing in five months, while incomes rose by 0.5 percent, both figures matching Wall Street expectations.

In other news, the Labor Department reported that the number of newly laid off workers filing claims for unemployment benefits dropped by 20,000 last week to 307,000. That improvement pushed the four-week average for claims to the lowest level in a year, indicating that the labor market remains healthy.

The savings rate has been negative for an entire year only four times in history — in 2005 and 2006 and in 1933 and 1932. However, the reasons for the decline in the savings rate were vastly different during the two periods.

During the Great Depression when one-fourth of the labor force was without a job, people dipped into savings in an effort to meet the basic necessities of shelter and clothing.

Economists have put forward various reasons to explain the current lack of savings. These range from a feeling on the part of some people that they do not need to save because of the run-up in their investments such as homes and stock portfolios to an effort by many middle-class wage earners to maintain their current lifestyles even though their wage gains have been depressed by the effects of global competition.


Whatever the reason for the low savings, economists warn that it the phenomenon exists at a particularly bad time with 78 million baby boomers approaching retirement age. Instead of building up savings to use during retirement, baby boomers are continuing to spend all their earnings.

The savings rate is computed by taking the amount of personal income left after taxes are paid, an amount known as disposable income and subtracting the amount of spending. Since the figure has dipped into negative territory, it means consumers are spending all of disposable income and then some.

For December, the savings rate edged down to a negative 1.2 percent, compared to a negative 1 percent in November. The savings rate has been in negative territory for 21 consecutive months.

The 0.7 percent rise in personal spending was the best showing since a similar gain in July. It followed increases of 0.5 percent in November and 0.3 percent in October and reflected solid spending by consumers during the Christmas shopping season.
Consumer spending posted a solid rebound in the final three months of the year, helping to lift overall economic growth to a rate of 3.5 percent during that period, up significantly after lackluster growth rates in the spring and fall.

Incomes were up 0.5 percent in December, the best showing since a similar increase in September.

On the inflation front, a gauge tied to consumer spending that is preferred by the Federal Reserve edged up by 0.1 percent in December. This gauge, which excludes volatile food and energy prices, was up 2.2 percent over the past 12 months ending in December, still above the Fed's comfort zone of 1 percent to 2 percent.

Europe is becoming more and more like the United States lately, and I mean that in a bad way. Corporate lobbyists have come to German politics, and the UK is building casinos in depressed urban areas. More on the casinos in a bit, but first this on German politics:

Who runs Germany?
The intersection of politics and business interests

By Dietmar Henning

1 February 2007

“Money rules the world” is a well-known saying. However the exact role of the major companies and banks in political life is often hidden behind a veritable torrent of references to the “independence of the people’s representatives” who are responsible “solely to their consciences,” and “the people” who are, after all, the “supreme sovereign power in politics.”

Recent reports and studies by journalists now demonstrate, very concretely, how financial interests govern Germany and what interests are at stake. The fact that there exists a measure of corruption and nepotism in politics and business is not exactly new, but the new material gives a revealing picture of the extent to which business interests determine political policy.

In the German capital of Berlin, for example, many of the leading politicians have numerous additional jobs with which they are quite legally able to earn large sums of money, but are nevertheless reluctant to discuss. In addition, politicians frequently shift from their parliamentary activities into leading positions in business.

Former chancellor Gerhard Schröder (Social Democratic Party-SPD) is a prime example. After standing down as chancellor in 2005 he immediately took over the chairmanship of the German-Russian Baltic Sea gas pipeline on the payroll of the Russian energy company Gazprom. In addition, Schröder took up well-paid posts as an advisor to the Swiss publisher Ringier and the Ruhr Coal Company—alongside his former economics minister, Werner Müller.

Schröder’s state secretary in the Treasury, Caio Koch Weser, switched to the executive of Germany’s biggest bank, Deutsche Bank. During his period as treasury secretary in the SPD-Green Party government (1998-2005) Koch Weser was responsible for the sales of Russian debts to credit and finance institutes, including, predictably, the Deutsche Bank. Former economics minister Wolfgang Clement (SPD) has assumed posts on the executives of the RWE power group and the Dussmann group. Hans Martin Bury (SPD), state minister in the chancellery, took over as managing director of the banking house Lehmann Brothers.

The Green Party Bundestag (parliament) deputy and chair of the party group in the state of Hesse, Matthias Berninger, resigned his posts in February in order to take up a leading position with the animal fodder and chocolate manufacturer Masterfood (makers of Mars, Ballisto and Snickers bars). The list could be extended virtually without end.

The fusion of business and political interests in Germany has been considerably expanded in recent years through a worked-out system of lobbying, which provides big business direct access to the centers of political power. The number of such lobbyists has literally exploded within the past few years. According to broadcaster Joachim Wagner, writing in Die Zeit in 2003, these lobbyists have more influence “than ever before in the history of the Federal Republic.” Virtually all of Germany’s 30 biggest companies represented on the German share index DAX have lobbying offices in Berlin.

Approximately 2,000 lobby federations are currently registered with the German Bundestag, and amongst other rights are permitted to participate in legislative procedures. Should a total of five deputies or a leader of the parliamentary group give guarantees for a lobbyist, then he or she is entitled to a so-called “parliamentary identification document” for admission to the Bundestag and the offices of deputies. Around 4,500 business representatives in Berlin possess such identification documents, amounting to seven lobbyists for every Bundestag deputy.

In his article for Die Zeit Wagner reports that a considerable proportion of the lobbyists are in fact former ministers, state secretaries, office managers, press spokesmen and journalists, who are using their established contacts in the service of their new masters.

Die Zeit reports on TUI (travel company) representative Wolf-Dieter Zumpfort, who proudly announced that he and his fellow lobbyists were able to reduce the taxes for the running of cost-free official cars—while in the same breath giving a nod to all of the prime ministers from German states where the automobile industry has large-scale interests: Edmund Stoiber (Bavaria), Erwin Teufel (Baden-Württemberg), Kurt Beck (SPD, Rhineland-Palatinate) and Sigmar Gabriel (SPD, Lower Saxony, and the current environment minister).

Not only do the lobbyists block laws, they also draft them. “Sometimes lobbyists receive the rough draft of proposed laws before the members of the Bundestag,” Wagner writes. “It is therefore not unusual for the Telekom representative, Maldaner, to draw up ‘alternative suggestions’ for draft laws on behalf of his company, which are then presented to the ministries and experts from parliamentary groups.” This is not the only case of such practices.

The barrister and independent lobbyist Anja Hollmann works in the “health sector.” For a price she will sell her list of the most important 50 or 100 partners in ministries, parliamentary groups and state parliaments to the main companies active in the German health sector. “When desired she also arranges lunch—for a price, naturally.”

Corporate lobbies are especially prevalent in the health sector. This is clear from other figures. Recently the Federal Audit Office criticized that ministries were not willing to reveal the names of their business sponsors. Between August 2003 and the end of 2004 German government ministries received more than €55 million in the form of sponsorship donations…

Business representatives active in German ministries

A program on German television devoted to political exposures recently dealt with a new variety of lobbyism, which, according to Monitor, can hardly to be bettered in terms of effectiveness for business enterprises: “Lobbyists try to influence policies in order to benefit their employers ... in order to do so they call by at the ministries. For some lobbyists, however, that is no longer necessary—they are already there.”

According to Monitor, “temporary workers” from the most important German enterprises are active in virtually all German government ministries. At least 100 of them are sitting in the same or neighboring offices as Bundestag officials, busy drafting laws, peering into secret documents, and even undertaking important state functions.

“Siemens or DaimlerChrysler, Lufthansa or the Deutsche Bank, nearly all the big players are there,” Monitor reports, and then gives details in a number of cases. An employee of DaimlerChrysler, for example, works in the German Transport Ministry. In 2002 he had his own desk in the ministry and evidently enjoyed access to internal documents, which he had “also evidently taken home.”

The man from DaimlerChrysler was director of his company’s department for corporate strategy and transport policy and sat in the German Transport Ministry between April and May 2002, a period when a tender was announced for a €1 billion contract for a new highway tracking system. DaimlerChrysler belonged to the consortium, which subsequently won the order. This could hardly be a coincidence.

The political scientist Nils Ehlers, who was working on a separate project at the ministry at the time, told Monitor: “I also got wind of how he telephoned and said things to the effect that we evidently cannot not get this or that measure through.” Ehlers is convinced that the representative from DaimlerChrysler passed information from the ministry to his bosses at the auto company.

Since then the German government has admitted that four company representatives were directly involved in drafting laws. Two other representatives were even employed as section chiefs, with senior executive powers.

…Susanne Vollrath has been sent to work in the German Ministry of Transport by her employer—the German Building Industry Federation. For four days a week her job consists in securing public orders for the building industry. She assigns these orders to private contractors on the remaining day of the week. At the ministry she is employed for the working group—Public-Private Partnership (PPP).

Her building industry boss is Heiko Stiepelmann. He openly admits: “Formerly we were involved in the hearings into the preparation of decisions. That was often too late. Today we are involved much earlier in the development of measures in connection with PPP. For us this is a much more efficient way of working. We have a contract with the ministry, our employee is working in the interests of the Federal Republic of Germany.”

The logic of such an argument is that the interests of the Federal Republic of Germany are identical to the interests of big business. Stiepelmann has not the slightest doubt about the connection and thereby makes clear what modern German business leaders and company executives really think of the constitutional “independence of the people’s representatives.”

This all sounds very familiar to those of us in the United States. And, as in United States politics, the cozy arrangement between corporations and government allows the politicians to completely ignore the wishes of their constituents. In Germany, that means that in spite of the clear preference of the public for the continuance of the German welfare state, both major parties conspired together with the oligarchy to dismantle the welfare system. When the Social Democrats decided to form a unity government with the Christian Democrats against a clear preference by a majority of the voters for left-wing government, the die was cast. You get gated-community, neoliberal capitalism, with casinos and drugs (legal and illegal) to keep the money flowing upwards and the lower orders occupied.

We mentioned the English casino plan. The blogger Stef Zucconi, whose three part series (here, here and here) on money is well worth reading, writes:

I've never been much into gambling.

I get enough in the way of thrills and excitement simply from walking home at night.

Being a fan of tacky Americana I have, however, visited a fair few US casinos in my time.

All things considered they're a bit grim. Very grim actually.In spite of the bright lights and up tempo decor there's a whiff of desperation about the people who frequent them.

I remember passing one old woman feeding a slot machine in a riverboat casino on the Mississippi a few years back. She had a large cup of quarters held between her legs and was robotically pumping them into the machine. She was covered in cigarette ash and food crumbs and looked like she hadn't slept for days. She also smelled vaguely of piss. On the wall in front of her was a flashing illuminated sign. It read 'Fun! Fun! Fun!'.

I wasn't convinced.

Nor am I convinced by the claim that casino complexes are a powerful tool for urban regeneration. Based on what I've seen in the States, what you get when you build a large casino in the middle of a deprived urban s***hole is......

a deprived urban s***hole with a large casino in the middle of it.

Let's be honest, if huge casino complexes were so f****** great they'd be built in well-off districts and nobody would bother with tossing around pretending how beneficial they are.

I mention all this because, of course, we've just found out which of the many competing British s***holes (and there is a lot of competition) gets to be home to the UK's first super casino.

And it wasn't London.

Not yet anyway.

But there's no doubt we'll get a few sooner or later. After all, even though it was faced with overwhelming public apathy and antipathy, our government was hot to trot with forty of the damned things.

Forty of them...

Zucconi has a clear summary, in part one of the aforementioned three-part Money series, of the “Bankers Control the World Theory,” basic and advanced versions:

The basic version Bankers Control the WORLD!!! conspiracy theory goes something like this...

· Using fractional reserve banking techniques, Central Bankers flood a target economy with insane amounts of money that they whisk out of thin air. The result is a BOOM of massive inflation, excessive consumption, trade deficits and indebtedness...

Then, when the time is right…

· The Bankers move their own money into commodities or alternate currencies that retain inherent value.

Then…

· The Bankers BUST the bubble they created by sharply restricting the money supply, causing a major recession/ depression...

Then...

· The Bankers start foreclosing on everyone like a bastard, whilst bringing their own money back into the economy and picking up the resulting bargains on offer.
Those people who took out loans when prices were high and money was cheap and freely available who manage to avoid foreclosure will still be bollocksed by the effort of servicing those loans with money that is now neither cheap nor freely available.It’s a Grapes of Wrath thing...



· Repeat for centuries


The deluxe version of the Bankers CONTROL the World!!! model includes such optional extras as…

· Buying-off or in some other way controlling all major political parties and stifling political expression

· The establishment of restrictive security measures and databasing in advance of the bubble bursting and the social unrest that will go with it

· Invading oil-rich countries to stop rag heads popping the bubble early by selling their oil in a currency of their choosing

· Preparing the groundwork for excuses to distract people from what really is f****** their lives up. Stuff like, ooh I don’t know, an ill-defined, unwinnable global war, or targeting and demonising a particular social class or racial group, or maybe invoking the spectre of impending ecological catastrophe, something like that

How crap would living in a world like that be, eh?