Friday, April 18, 2008

Authorities lose patience with collapsing dollar

Authorities lose patience with collapsing dollar

By Ambrose Evans-Pritchard

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Jean-Claude Juncker, the EU's 'Mr Euro', has given the clearest warning to date that the world authorities may take action to halt the collapse of the dollar and undercut commodity speculation by hedge funds.

Momentum traders have blithely ignored last week's accord by the G7 powers, which described "sharp fluctuations in major currencies" as a threat to economic and financial stability. The euro has surged to fresh records this week, touching $1.5982 against the dollar and £0.8098 against sterling yesterday.

"I don't have the impression that financial markets and other actors have correctly and entirely understood the message of the G7 meeting," he said.

Mr Juncker, who doubles as Luxembourg premier and chair of eurozone financiers, told the Luxembourg press that he had been invited to the White House last week just before the G7 at the urgent request of President George Bush. The two leaders discussed the dangers of rising "protectionism" in Europe. Mr Juncker warned that matters could get out of hand unless America took steps to halt the slide in the dollar.

World central banks last intervened eight years ago - with mixed success - buying euros in September 2000 to support the fledgling currency through its worst crisis.

David Woo, currency chief at Barclays Capital, said the Europeans and Americans are talking past each other. Whatever the G7 wording, Washington is happy to watch the dollar slide. "They are not going to worry unless there is a knock-on effect on US equity or bond prices. So far that hasn't happened. There are no signs that the dollar decline has turned disorderly," he said.

European industry has managed to live with the high euro so far, but the damage of major currency shifts can take years to surface. "The moment will come where the exchange rate level will start to cause serious harm to the European economy," said Mr Juncker.

Louis Gallois, head of the Airbus group EADS, said his company is already taking dramatic steps to shift plant to the dollar-zone. "The euro at its current level is asphyxiating a large part of European industry by shaving export margins," he said.

The European Central Bank revealed in its monthly report that foreign direct investment (FDI) into the euro zone has contracted by €269bn over the last two years. Foreigners are gradually winding down operations. This will have powerful long-term effects.

George Soros, the hedge fund baron who "broke" Europe's exchange system in the early 1990s, said yesterday that the euro could never anchor of the global system. "I don't think the euro can replace the dollar as the main world currency. The euro is not a truly attractive alternative," he said.

Pence per euro

Mr Soros said the dollar would reclaim its crown eventually, but for now the financial crisis is leading to a flight from all paper currencies, causing a dash for gold, silver, and oil futures.

Otmar Issing, the ECB's former 'High Priest', said the single currency had started well but could face a "disastrous outcome" if the eurozone failed to embrace a flexible market system. "The 'single-size' monetary policy would simply not fit at all. In such a scenario, the single currency would risk straining cohesion " he warned in a new book, 'The Euro'.

This is already occurring. North and South have diverged further. While Germany and Holland have prospered under the strong euro, most of southern Europe and Ireland is in trouble. Current account deficits have reached 9.2pc of GDP in Spain and may touch 15pc in Greece. The European Commission's economists fear that the loss of competitiveness against Germany over the last decade may have passed the point of no return. At best, these countries face years of belt-tightening as their property booms deflate.

Dollars per euro

Silvio Berlusconi, Italy's newly elected premier, has called for a change in the ECB's mandate, proposing a dual mission akin to the US Federal Reserve's mandate to promote growth as well as fighting inflation. He has the support of France's Nicolas Sarkozy.

A key reason for the 30pc rise in the euro agasint the dollar over the last two years has been the move by Asia central banks and Mid-East wealth funds to parking huge sums of newly acquired wealth in European bonds as an alternative to the dollar.

BNP Paribas said Asian surplus countries and commodity exporters have accumulated $1,160bn in reserves over the last year alone. US Treasury data shows that only 19pc of this was invested in dollar assets. This is a sharp break with past practice. A large chunk of the money was invested in euro-zone securities. The question is whether China, Saudi Arabia, and others, have now reached euro saturation.

Meltdown of U.S. Dollar Underway as China Dumps the Currency

Meltdown of U.S. Dollar Underway as China Dumps the Currency

By David Gutierrez

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(NaturalNews) Comments by China that it intends to move away from its reliance on the dollar triggered a sharp drop in the Dow Jones Industrial Average and heightened worldwide fears about the U.S. currency's stability. Chinese Central Bank Vice Director Xiu Jian said that his country is planning to shift much of its $1.4 trillion national currency reserve from dollars to more stable currencies, such as the euro or Canadian dollar. After these comments, the dollar fell to record lows relative to other currencies -- the lowest ever against the euro, the lowest in a generation against the British pound, and the lowest in 57 years against the Canadian dollar.

"The big issue on any currency is if its rate of depreciation is so fast that it scares away all capital, and the announcement that we heard from China sort of feeds those fears," said Larry Smith, chief investment officer at Third Wave Global Investors.

China is the world's largest investor in U.S. Treasury bonds and securities, holding more U.S. debt than any country but Japan. Because China's currency is linked to the dollar, the country also maintains a massive reserve of the currency.

But this policy had already begun to shift at the time of Xiu's comments. China has divested approximately 5 percent of its $400 billion holdings in the U.S. Treasury and established a $200 billion fund to help diversify its investments in equities and stocks around the world.

"We will favor stronger currencies over weaker ones, and will readjust accordingly," said Cheng Siwei, vice chairman of China's National People's Congress.

It is not just U.S. investors who are concerned. Because the dollar's fluctuations have driven up the euro, exports in Europe have fallen and sparked fears for the stability of that continent's economy. In a recent speech, French president Nicolas Sarkozy added his voice to those calling for the Bush administration to act to stabilize the currency.

"The dollar cannot remain 'someone else's problem,' " Sarkozy said. "If we are not careful, monetary disarray could morph into economic war. We would all be its victims."

Citigroup lops off $14 billion in investments during 1Q

Citigroup lops off $14 billion in investments during 1Q

By MADLEN READ

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Citigroup Inc. said Friday it will eliminate about 9,000 more jobs, after poor bets on defaulting loans and the tumultuous credit markets lopped $14 billion in value from its investments during the first quarter.

That write-down, plus more than $3 billion in costs related to consumers' credit problems, led Citigroup to a quarterly loss of $5.1 billion.

Citigroup has announced 13,200 job cuts since the credit crisis began slamming the banking industry last summer. The bank announced 4,200 cuts in January, and more work-force reductions are likely.

"We're very, very focused on efficiency," said chief executive Vikram Pandit during a conference call.

The most recent quarterly shortfall at the nation's biggest bank by assets was not as massive as the nearly $10 billion loss it suffered in the fourth quarter of last year, though.

Citigroup shares jumped more than 7 percent, or $1.79, to $25.82 in midday trading Friday, as many investors had been bracing for even more dismal results. Citigroup's stock is down 12 percent since the beginning of the year.

But Citigroup essentially lost in the first three months of the year, $1.02 per share, what it made in the same period in 2007 — $5 billion, or $1.01 per share. Analysts, on average, had expected the New York bank to lose 95 cents per share, according to a Thomson Financial survey.

"We're not happy with our financial results this quarter — although they're not completely unexpected, given the assets we hold," Pandit said.

With its significant exposure to problematic mortgages and leveraged loans, Citigroup remains at risk for further write-downs. As a result, Fitch Ratings downgraded the bank's credit rating, while Moody's Investors Services and Standard & Poor's Ratings Services took actions that indicated Citigroup might be downgraded in the future, if the assets on its books deteriorate.

"There's always the prospect that you'll have additional marks," chief financial officer Gary Crittenden said.

Still, the $14.1 billion in write-downs were smaller than the $18.1 billion it marked down after the fourth quarter.

And in another positive sign for investors, total revenue came to $13.2 billion — about half what the bank pulled in during the first quarter of 2007, but more than the average analyst forecast for $12.8 billion. The bank's revenues were padded by its global consumer segment and its global wealth management business.

The bank ousted CEO Chuck Prince late last year and promoted Pandit, a former Morgan Stanley investment banker, as it scrambles for cash.

In December and January, Citi raised over $30 billion through sales of assets and stock to outside investors, some of which have been funds run by Asian and the Middle Eastern governments. It also has slashed costs and reorganized the bank's mortgage business and wealth management unit.

Citigroup, like other banks, still faces a deteriorating environment for consumer lending: charge-off rates are climbing for mortgages, credit cards, auto loans and other types of loans.

"The consumer is being pinched — it's not just homes," said Byron MacLeod, earnings quality analyst with Gradient Analytics.

"Everybody is swimming in the same pool here. Everybody has issues," MacLeod said. But compared to other banks, he noted, the rate at which Citigroup is having to write off loans is particularly high in relation to the amount of loans on its books that are in default or close to default. "That's going to be a serious concern for the company going forward."

To prepare for more consumer loan losses, the company added about $2 billion to its reserves.

Citigroup's $14.1 in write-downs include $7 billion related to subprime and alt-A mortgages; $3.1 billion related to leveraged loans; $1.5 billion related to bond insurers; $1.5 billion on auction-rate securities; and another $1 billion related to commercial real estate, a hedge fund and funds known as structured investment vehicles.

___

On the Net:

Citigroup Inc.: http://www.citigroup.com

Retailers Get Stingy With Data

Retailers Get Stingy With Data

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J.C. Penney says the tumultuous economy is making it impossible to predict earnings over the next year. Macy’s asserts that providing monthly sales information is too distracting and confusing. And Starbucks argues that annual profit estimates are unnecessary.

In American retailing, less is suddenly more — at least when it comes to giving investors the sort of financial information they have long expected from companies.

Faced with an economic slump, a growing number of national retailers are abandoning the longstanding tradition of reporting monthly store sales and forecasting annual profits.

The stores say that they are eliminating outdated practices that encourage short-term decision-making and can confuse investors.

But many Wall Street analysts and investors, who rely on these numbers to gauge a company’s health and the mood of the American consumer, are crying foul, The New York Times reports. The motive for providing less financial insight, they suspect, is to avoid issuing embarrassing numbers in the middle of a recession, numbers that can drive down a company’s stock price.

So far this year, Starbucks, Macy’s, CVS Caremark and Jos. A. Bank have ditched one or both of the financial reporting practices that were once standard in retailing.

And on Wednesday, J.C. Penney joined the list, saying it would stop offering annual profit estimates, known in the industry as guidance, at least for now. (It will still provide monthly sales and quarterly profit estimates.)

Myron E. Ullman, the chief executive of J.C. Penney, said that with the housing market in turmoil and gas prices surging, “there is not enough visibility to give something meaningful.”

The analysts who track J.C. Penney and the rest of the retail business can barely contain their frustration with all the lip zipping. “Withholding information is not what investors want,” Bill Dreher, a longtime retail analyst at Deutsche Bank Securities, told The Times. “They want clarity.”

A tough economy, Mr. Dreher added, “is a time to be more communicative, not a time to deprive us of guidance or clamp down on information.”

Though they have no legal obligation to do so, most publicly traded retail companies divulge their monthly sales performance and offer an estimate of their annual profits, with the figures becoming guideposts for Wall Street, economists and investors.

The profit forecasts allow stores to set reasonable expectations for investors, and minimize the chances for surprises, which Wall Street tends to dislike.

The monthly sales figures from retailers are especially valuable to economists, because they provide a regular snapshot of consumer finances and confidence. The first Thursday of every month, dozens of chains disclose how much sales rose or fell at stores open at least one year, a figure known as same-store sales. “It’s a barometer of the economy and a benchmark for the industry,” said Michael P. Niemira, chief economist at the International Council of Shopping Centers, a trade group.

But monthly sales have become controversial within retailing. Stores say they encourage employees to make decisions that bolster sales within a given month, even if they may hurt the company over time.

And some retailers argue that frequent quirks in the calendar can skew the numbers from one month to the next, creating a false impression of strong or weak performance.

That is what happened at chains like Macy’s during the 2007 holiday season. Because Thanksgiving occurred a week earlier than normal last year, one week of holiday shopping shifted from December to November. As a result, reported sales surged in November and plunged in December. Macy’s sales, for example, rose 13.4 percent in November 2007, but fell 7.9 percent in December. When the latter figure came out, Macy’s stock fell more than 6 percent in two days.

Despite warnings about the calendar shift, many investors were surprised by the December numbers. Executives at Macy’s found this agonizing — and said it contributed to their decision to stop reporting monthly store sales after January 2008.

“The numbers are increasingly confusing because of the calendar shifts,” Jim Sluzewski, a spokesman for Macy’s, told The Times. He added that the monthly numbers encourage “a short-term orientation, which is not the way to run a business.”

But analysts suspect another motivation for Macy’s: weak performance. The department store chain, which has experienced ups and downs since its merger with May Department Stores in 2005, reported sales declined in seven out of the last nine months that it provided such figures.

It was not until Starbucks ran into business problems, in January, that it stopped offering annual profit forecasts and same-store sales for its coffee shops.

With the chain experimenting with a variety of changes, like closing stores and dropping warm breakfast sandwiches, the chief executive, Howard Schultz, said monthly sales “will not be an effective indicator of our performance.”

Mr. Schultz said he would consider offering a quarterly same-store sales figure, but no decision has been made so far.

“The less said the better,” Mr. Niemira, of the shopping council, told The Times, summing up the new prevailing wisdom.

But clamming up can backfire for companies. In mid-2006, as the housing market began to slip, Home Depot said it would no longer disclose same-store sales, which it issued every quarter alongside its earnings.

The company said the figure was becoming less relevant, since Home Depot was branching out into new businesses, like a supply division focused on lumber and cement.

But investors balked. Soon, Home Depot reversed itself and began offering same-store sales figures.

So far, there is no sign that Macy’s, Starbucks or J.C. Penney will face similar revolts. But analysts are making their displeasure known.

“Small investors will be hurt because they will not have as much information,” Walter Loeb, president of Loeb Associates, a retail consulting firm, told The Times.

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US mortgage clock ticking, Dodd warns

US mortgage clock ticking, Dodd warns

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There are only a few weeks left for Congress and the BushChris Dodd, one of the most senior lawmakers overseeing US economic policy. administration to agree on large-scale government intervention in the mortgage market, according to

In an interview with the Financial Times, Mr Dodd said that a compromise deal needed to be reached before home prices collapsed further and election-year politics took over. "I am optimistic at this point, but this has to happen fairly quickly if it is going to be meaningful."

Mr Dodd, the Connecticut Democrat who chairs the Senate banking committee, last month made an aggressive proposal to use public funds to guarantee the refinancing of up to $400bn (€250bn, £200bn) in mortgages at lower values through the Federal Housing Administration, the government-owned mortgage insurer.

The plan is designed to tackle the problem of negative equity - or homeowners holding mortgages worth more than the value of their homes - which has been a key feature of the US housing crisis.

While Mr Dodd said "there is obviously some risk" to taxpayers associated with the plan, he claimed it would help "determine a floor in residential mortgages" and said that doing nothing would allow contagion to spread across US financial markets and the economy.

Mortgage servicers, who manage loan payments on behalf of lenders, would voluntarily agree to forgive parts of loans to struggling borrowers in exchange for some participation in the benefits of future appreciation, according to the proposal, which would be confined to borrowers funding their primary residences.

A similar plan has been moving through the House under the sponsorship of Barney Frank, the chairman of the financial services committee.

While the proposals have been supported in general by US banking regulators, they have not been endorsed by either the Bush administration or many Republicans on Capitol Hill. Mr Dodd failed in his attempt to include his plan in a narrower package of measures to prevent foreclosures that passed the Senate last week.

"I have got a clock in my own head and that clock runs out in the next several weeks," said Mr Dodd. He added that he had "some work to do to find out what the tolerance levels are", and complained that he was "getting mixed messages" from the administration.

Mr Dodd was still hammering out the final details of his proposal, and was open to considering additional incentives that have been proposed for servicers to write down the value of mortgages. These include "negative equity certificates", which would allow lenders to share in any recovery in house prices, and measures to shield servicers from litigation.

A deal with the administration could involve a wider compromise including legislation to reform Fannie Mae (NYSE:FNM) and Freddie Mac, the government-sponsored mortgage companies, which Hank Paulson, Treasury secretary, has been urging.

The White House and many Republicans have opposed large-scale intervention in the mortgage market amid fears that they would bail out speculators and reward bad behaviour, as well as potentially lose taxpayer money.

"In the current housing crisis I think we have to draw a line. Some homeowners used poor judgment. A lot of lending companies want a bail-out," said Brian Montgomery, federal housing commissioner, at a Senate hearing to examine Mr Dodd's proposal yesterday.

The administration's efforts to tackle the mortgage crisis have so far focused on the HopeNow alliance, a private-sector initiative to help borrowers avoid foreclosures by reworking their mortgages.

U.S. Begins Erecting Wall in Sadr City

U.S. Begins Erecting Wall in Sadr City

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rying to stem the infiltration of militia fighters, American forces have begun to build a massive concrete wall that will partition Sadr City, the densely populated Shiite neighborhood in the Iraqi capital.

The construction, which began Tuesday night, is intended to turn the southern quarter of Sadr City near the international Green Zone into a protected enclave, secured by Iraqi and American forces, where the Iraqi government can undertake reconstruction efforts.

“You can’t really repair anything that is broken until you establish security,” said Lt. Col. Dan Barnett, commander of the First Squadron, Second Stryker Cavalry Regiment. “A wall that isolates those who would continue to attack the Iraqi Army and coalition forces can create security conditions that they can go in and rebuild.”

On Wednesday night, huge cranes slowly lifted heavy concrete blocks into place under a moonless sky. The barriers were implanted on Al Quds Street, a major thoroughfare that separates the Tharwa and Jamilla districts to the south from the heart of Sadr City to the north.

The avenue was quiet except for the whirring sound of the cranes and thud of the barriers as they touched the ground. Contractors operated the cranes, but American soldiers transported the barriers on trucks and directed their placement.

The team building the barrier was protected by M-1 tanks, Stryker vehicles and Apache attack helicopters. As the workers labored in silence, there was a burst of fire as an M-1 tank blasted its main gun at a small group of fighters to the west. An Apache helicopter fired a Hellfire missile at a militia team equipped with rocket-propelled grenades, again interrupting the night with a thunderous boom. A cloud of dark smoke was visible in the distance through the Stryker’s night-vision system.

Concrete barriers have been employed in other areas of Baghdad. As the barriers were being erected in other neighborhoods, some residents said they feared being isolated. But walls have often proved to be an effective tool in blunting insurgent attacks.

American and Iraqi forces here say they have been battling Iranian-backed groups and militia fighters who support Moktada al-Sadr, the anti-American cleric. Much of Sadr City has become a sanctuary for such militias. Prime Minister Nuri Kamal al-Maliki’s recent offensive in Basra led to an increase in rocket attacks on the Green Zone.

Many of the Shiite militias that the American and Iraqi forces have been battling in the Tharwa area of Sadr City in the past several weeks have been infiltrating from the north. Al Quds Street has become a porous demarcation line between the American- and Iraqi-protected area to the south and the militia-controlled area to the north.

The avenue has been filled with numerous roadside bombs that American teams in special heavily armored vehicles have sought to clear. The militias have stacked tires on the road and turned them into burning pyres to hamper the American infrared surveillance and targeting systems or to soften the concrete to make it easier to bury bombs.

With a sandstorm hampering reconnaissance drones and grounding helicopters, work on the barrier was suspended Thursday, but the military intends to resume work as the weather improves.

The swirling dust storm, which turned the sky into a gritty beige, proved to be a boon to the militias. Calculating that they would ground the Americans helicopters and interfere with the reconnaissance drones, militias assaulted the northernmost Iraqi Army positions.

Iraqi troops, who are manning strongholds hundreds of yards ahead of the American positions, reported that they had run desperately low on ammunition, according to tactical radio reports.

American commanders were eager to avoid a repeat of the setback Tuesday evening when one Iraqi company abandoned its position to the front of American forces. That area was reclaimed the next day by a different Iraqi unit, but the episode gave militias temporary control of a critical stretch of road and a fresh opportunity to plant roadside bombs.

The militias’ main effort on Thursday was focused on dislodging Iraqi forces from a police station. American advisers took up positions with the Iraqi unit.

As the fighting intensified and there were reports that militia fighters had closed to within 100 yards, Colonel Barnett moved tanks into position so they could rush to the Iraqis’ aid. Stryker vehicles also moved forward.

But two Iraqi T-72s and four other Iraqi armored vehicles arrived on the scene before the American tanks were needed. The Iraqi Army has rushed ammunition to Sadr City, including machine-gun rounds and rocket-propelled grenades to give its units more firepower and address complaints of shortages.

Three Iraqi soldiers were reported killed Thursday when a militia fighter sneaked up close enough to a position they were guarding to lob a grenade, American officers said. There was such a heavy volume of Iraqi Army fire, however, that American commanders were not able to determine the scale of the attacks and whether they were as severe as the Iraqi forces had reported.

While the American military hopes to turn the southern portion of Sadr City into a protected enclave so that reconstruction can proceed, there has been no indication that the Iraqi government has mounted such efforts in recent days.

During a joint patrol conducted by Iraqi Army soldiers and American troops from the First Battalion, 14th Infantry Regiment, 25th Infantry Division on Tuesday, residents complained vociferously about stagnant pools of water, downed power lines and piles of garbage.

The Americans sought to persuade the Iraqis that they were just as eager for the Iraqi government to fix the infrastructure and restore water and electricity.

“We are not stopping governmental services from coming in here,” Lt. Matthew Schardt, the commander of First Platoon, Company B, sought to assure one distressed woman. “We want them to come in here.” The American military plans to hire 200 Sadr City residents to clean up trash for a 75-day period. So far, it has hired about 90, Colonel Barnett said. But the program is seen as a stopgap effort.

The U.S. Nears the Limits of Its Water Supplies

The U.S. Nears the Limits of Its Water Supplies

By Shiney Varghese

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I am amazed: since last summer, almost every day we see at least one news story on another water crisis in the U.S. The water crisis is no longer something that we know about as affecting developing countries or their poor in particular. It is right here in our own backyard. Today, in many parts of the U.S. we are nearing the limits of our water supplies. And that is getting our attention. The writing has been on the wall for some time. The private sector has been showing much interest in water as a source of profit, and water privatization has been an issue in many parts of the country.

The failure in public water systems has indeed been a contributing factor for this interest. In many cities, consumers have been organizing and opposing the privatization of water utilities, because they have been concerned about affordability or deterioration in the quality of service. Environmental organizations and consumer activists have also been concerned about the socio-economic, health and environmental implications of ever increasing bottled water use. But for most of us living in the U.S., water is something we take for granted, available when you turn your tap on -- to brush your teeth, to take a shower, to wash your car, to water your lawn, and if you have your own swimming pool then, to fill that as well.

So it was with alarm that many of us read the story of Orme, a small town tucked away in the mountains of southern Tennessee that has become a recent symbol of the drought in the southeast. Orme has had to literally ration its water use, by collecting water for a few hours every day -- an everyday experience in most developing countries, but unusual for the U.S. This is an extreme experience from the southeast region that has been under a year long dry spell. In fact, the region's dry spell resulted in the city of Atlanta setting severe water use restrictions and three states, Georgia, Florida and Alabama, going to court over a water allocation dispute (settled in favor of Florida and Alabama early last month).

Early this year we also heard that drought in the region could force nuclear reactor shut-downs. Nuclear reactors need billions of gallons of cooling water daily to operate, and in many of the lakes and rivers water levels are getting close to the limit set by the Nuclear Regulatory Commission. It is possible in the coming months that we may see water levels decrease below the intake pipes, or that shallow water could become warmer and unusable as a coolant. While this may not cause blackouts, this can result in increased costs for energy as utilities have to buy from other sources.

Water concerns are not restricted to the southeast region -- similar issues have also been popping up in other parts of the United States. In the Midwest, concerns abound as to whether the newly emerging biofuel industry is putting undue pressure on the region's groundwater resources. The issue came into focus for the first time in the late summer of 2006 in Granite Falls, MN where an ethanol plant in its first year of operation depleted the groundwater so much that it had to begin pumping water from the Minnesota River.

In early February, it was reported that there is a 50 percent chance Lake Mead (on the Arizona/Nevada border), will be dry by 2021 if climate change continues as expected and future water use is not limited. Along with Lake Powell in Utah, Lake Mead helps provide water for more than 25 million people, and is a key source of water in the southwestern U.S. On the west coast, where water is a precious resource, water disputes abound: between farmers who want water for agriculture, environmentalists who want to conserve water for ecosystems, and cities who want to meet ever-growing urban water needs. Last summer, in a landmark decision, a federal judge ordered state and federal water project managers to reduce the amount of water pumped from the Sacramento-San Joaquin River Delta to protect the threatened delta smelt from extinction. Along with excessive rains in other regions and increased incidence of hurricanes in the Gulf Coast, these changes are a constant reminder of an increasingly evident reality: climate change.

In fact, in early February, Nature reported that, "In the western US, where water is perhaps the most precious natural resource, anthropogenic global warming is responsible for more than half of the well-documented changes to the hydrological cycle from 1950 to 1999. Over the last half of the twentieth century, the region's mountains received less winter snow and more rain, with snow melting earlier, causing rivers to flow more strongly in the spring and more weakly in the summer."

Unlike Katrina's images that are as haunting as that of a severe sub Saharan drought, the images of the current North American drought are no more than a mild distraction for most Americans (though not for those who live in Orne). Yet there is no reason to be complacent. We are close to the limits of our water supplies. It is time for us to start thinking of this nation's susceptibility to these changes and disruptions and how to minimize our vulnerability to them. Barely three years ago in the wake of hurricane Katrina IATP's Mark Muller wrote: "The storm exposed some real vulnerability in the current agriculture system. As we recover from the tragedy of Katrina, we have an opportunity to rebuild and rethink how to strengthen agriculture, regional economies and the transportation and production infrastructure. He identified 10 areas of vulnerability exposed by Katrina, including energy, fertilizer, transportation markets for crops less dependent on inputs, CAFO regulation, on-farm water storage, valuing the commons and climate change."

I find these areas of vulnerability particularly relevant when it comes to the current water crisis. Like Katrina, this crisis gives us yet another opportunity to rethink and challenge issues that we need to raise: land use planning that allows unfettered development, energy production that is water intensive, and agricultural water use that is inefficient from a hydrological perspective. So far we have assumed that we can undertake any development we want, wherever we want, or we could grow whatever we want, however we want, and that water will always be available to support that growth. In the process we are draining our aquifers, polluting our rivers, tampering with ecosystems and destroying the diversity of life -- as if nature is ours to be manipulated to suit our wants. It is time to change some of our practices.

For more than a century, the federal government has spent billions of dollars, building our dams, reservoirs, aqueducts and pipelines. Ironically, in the same way that extracting/ transporting and processing water consumes large amounts of energy, the operation of power plants consume large amounts of water.

Thermal energy is one of the largest water users in the United States. However, irrigated agriculture accounts for 80 percent of water consumed in the U.S. This high percentage is partially because of low water use-efficiency (the portion of water actually used by irrigated agriculture relative to the volume of water withdrawn). For the western United States, agricultural farms are the single largest water user, half of which is used by the largest 10 percent of the farms. High levels of irrigation subsidies, combined with archaic water laws make water use in the western U.S. highly wasteful and inefficient. But there is room for improvement in agricultural water use in almost all parts of the U.S. Water use should be such that for a given locale, appropriate incentives are put in place to ensure that water withdrawals do not exceed the recharge rate; that water conservation techniques (such as rain water harvesting) are central to land use planning; that improved irrigation efficiency and better nutrient management (to reduce non-point water pollution from farm run-offs) are rewarded; and that growing water-intensive crops in water scarce regions discouraged.

Legal judgments, such the recent case involving the Sacramento-San Joaquin River Delta, are an attempt to reverse earlier actions by state and federal water managers that have damaged the water system. But much more is needed. As Peter Gleick of the California based Pacific Institute points out in a recent article: "While predictions of economic disaster arising from the Delta decision may come true, they don't have to. But it will take a re-evaluation of our ideas about water-use and politi- cal courage by the governor, Legislature and water users to have open and honest discussions about how to redesign our water system so that it is smart, efficient and sustainable."

This is true for the nation as a whole: here in this land of plenty, we need to rethink our policies regarding urban development, energy production, and most importantly our agriculture and food systems, in order to avert an environmental crisis that many countries are already in the grip of.

Sickened pork workers have new nerve disorder

Sickened pork workers have new nerve disorder

By Julie Steenhuysen

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Eighteen pork plant workers in Minnesota, at least five in Indiana and one in Nebraska have come down with a mysterious neurological condition they appear to have contracted while removing brains from slaughtered pigs, U.S. researchers and health officials said on Wednesday.

They said the illness is a new disorder that causes a range of symptoms, from inflammation of the spinal cord to mild weakness, fatigue, numbness and tingling in the arms and legs.

"As far as we are aware it is a brand new disorder," said Dr. Daniel Lachance of the Mayo Clinic in Rochester, Minnesota, who presented his findings at the American Academy of Neurology meeting in Chicago.

Lachance has been following the 18 Minnesota patients, all of whom have evidence of nerve involvement, typically affecting the legs.

He said tests showed patients had damage to the nerves at the root level near the spinal cord, and at the far reaches of their motor nerves, where the nerves connect with muscle.

The first cases of the condition were reported in November of last year at Quality Pork Processors Inc in Austin, Minnesota, where workers had been using compressed air to blow pork brains out of the skull cavity.

Lachance said this process appears to be triggering some sort of inflammatory response. So far, no infectious agent has been found that could explain the illness.

'STRONG ASSOCIATION'

Lachance said it is possible that bits of pig brain stimulated an immune response in the bodies of the workers, causing their immune systems to improperly attack their own nerve tissue.

"It is a very strong association -- the fact that we are talking about harvesting (pig brains) and potentially exposing workers to nervous system tissue and then they are coming down with a neurological syndrome," he said in a telephone interview.

Dr. James Sejvar of the U.S. Centers for Disease Control and Prevention in Atlanta said it is unlikely the condition could be passed from person to person.

"It doesn't appear this is in any way a foodborne illness," Sejvar told a media briefing. He said the processing technique used appears to be very uncommon.

"We canvassed 25 of the largest pork processors in the United States," Sejvar said. "We have identified only these three plants that use this process."

All three plants have suspended the processing practice as a precaution.

While symptoms range in severity, most of the cases are mild. "Most of these patients have relatively mild weakness on their examinations or in fact no weakness, but have a predominance of sensory symptoms. They could be walking around and not have the appearance of being ill," Lachance said.

He said those who were mildly affected received drugs that address numbness and pain, and those who were more severely affected were treated with drugs that suppress or modulate the immune system.

"No one has completely recovered," Lachance said, adding, "Most have improved to a very modest degree, mainly in terms of their fatigue and sensory symptoms."

Workers Walk Off Job at Lansing GM Assembly Plant

Workers Walk Off Job at Lansing GM Assembly Plant

By Sharon Terlep

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Lansing - United Auto Workers walked off the job at General Motors Corp.'s Delta Township plant when a 10 a.m. deadline passed with no deal on a local contract.

The walkout started at about 10:15 a.m. with dozens of vehicles streaming out of plant gates. Some workers picketed the plant with signs as passing motorists signaled support.

UAW officials have not specified the local contract issues in dispute. In addition to the overarching UAW contract reached last fall with Detroit's Big Three automakers, most UAW locals are still negotiating plant-level deals.

Doug Rademacher, president of UAW Local 602, which represents workers at the Lansing plant, said talks have broken off and that he didn't know when they will resume.

He dismissed speculation that the strike is part of a UAW strategy to draw GM into the lengthy labor dispute with partsmaker American Axle & Manufacturing Inc. The UAW walked off the job at American Axle plans Feb. 26.

Rademacher said workers at the Delta plant have been working under a contract put in place in 1999 when GM built the factory. The contract, he said, was intended to give GM flexibility to get the factory running, but was never supposed to be a long-term labor agreement. The UAW planned to get a plant-level contract in place for Delta after last fall's national negotiations, he said.

This workforce deserves respect," he said. "We changed our culture to work with the company. We need a local agreement."

The Delta plant is critical for GM because it builds the automaker's popular crossovers, the GMC Acadia, Saturn Outlook and Buick Enclave.

"We are disappointed that UAW Local 602 has taken strike action," GM spokesman Dan Flores said. "We remain focused on reaching an agreement as soon as possible."

In addition to GM strike, production could be halted by a UAW strike at a small supplier that produces carpeting for the crossover SUVs built at the plant.

About 90 workers at Lansing-based Alliance Interiors went on strike Tuesday because they have no labor contract and have been trying to secure one for almost a year.

A parts shortage from that stoppage forced GM on Wednesday to cut shifts short at the plant.

Another GM local in Warren has threatened to strike GM by 10 a.m. Friday if there's no plant level contract by then.

The Lansing strike is taking place in a town where the UAW and community have a long history of working with well with GM. The automaker opted to build the Delta plant, its first new factory in years, after a massive local campaign by local community leaders. As part of the deal, the union agreed to adopt flexible, money-saving work rules GM is pushing at all its plants.

Several workers interviewed as they walked off the job at GM said they were told by local union leaders that a strike was called because dozens of local contract issues are unresolved after months of negotiations.

Many said that while they support the union's decision to strike, they question the timing. If the plant were idled by the Alliance strike, workers would receive layoff pay.

Now, they'll get much less in strike compensation.

"I don't want to be on strike," said worker Duane McClung. "And it's really not quite clear why we're striking."

Worker Dean Betcher said he believes the union did it's best to resolve issues with GM. But, he said, he would have preferred the UAW waited to see if workers were laid off instead.

"I'd prefer that to a strike," he said.

Even amid the tension and questions, workers began to rally a show of support for the UAW. Some drivers honked at leaving workers and shouted encouragement. Other began to hand out "UAW on Strike" picket signs.

300,000 Vets Have Mental Problems, 320,000 Had Brain Injuries

300,000 Vets Have Mental Problems, 320,000 Had Brain Injuries

By Pauline Jelinek

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Washington - Some 300,000 U.S. troops are suffering from major depression or post traumatic stress from serving in the wars in Iraq and Afghanistan, and 320,000 received brain injuries, a new study estimates.

Only about half have sought treatment, said the study released Thursday by the RAND Corporation.

"There is a major health crisis facing those men and women who have served our nation in Iraq and Afghanistan," said Terri Tanielian, the project's co-leader and a researcher at the nonprofit RAND.

"Unless they receive appropriate and effective care for these mental health conditions, there will be long-term consequences for them and for the nation," she said in an interview with The Associated Press.

The 500-page study is the first large-scale, private assessment of its kind - including a survey of 1,965 service members across the country, from all branches of the armed forces and including those still in the military as well veterans who have left the services.

Its results appear consistent with a number of mental health reports from within the government, though the Defense Department has not released the number of people it has diagnosed or who are being treated for mental problems. The Department of Veterans Affairs said this month that its records show about 120,000 who served in the two wars and are no longer in the military have been diagnosed with mental health problems. Of the 120,000, approximately 60,000 are suffering from PTSD, the VA said.

Veterans Affairs is responsible for care of service members after they have left the service, while the Defense Department covers active duty and reservist needs. The lack of information from the Pentagon was one motivation for the RAND study, Tanielian said.

The most prominent and detailed military study on mental health that is released is the Army's survey of soldiers at the warfront. Officials said last month that it's most recent one, done last fall, found 18.2 percent of soldiers suffered a mental health problem such as depression, anxiety or acute stress in 2007 compared with 20.5 percent the previous year.

The Rand study, completed in January, put the percentage of PTSD and depression at 18.5 percent, calculating that approximately 300,000 current and former service members were suffering from those problems at the time of its survey, which was completed in January.

The figure is based on Pentagon data showing over 1.6 million military personnel have deployed to the conflicts since the war in Afghanistan began in late 2001.

RAND researchers also found:

  • About 19 percent - or some 320,000 services members - reported that they experienced a possible traumatic brain injury while deployed. In wars where blasts from roadside bombs are prevalent, the injuries can range from mild concussions to severe head wounds.

  • About 7 percent reported both a probable brain injury and current PTSD or major depression.

  • Only 43 percent reported ever being evaluated by a physician for their head injuries.

  • Only 53 percent of service members with PTSD or depression sought help over the past year.

  • They gave various reasons for not getting help, including that they worried about the side effects of medication; believe family and friends could help them with the problem, or that they feared seeking care might damage their careers.

  • Rates of PTSD and major depression were highest among women and reservists.

The report is titled "Invisible Wounds of War: Psychological and Cognitive Injuries, Their Consequences, and Services to Assist Recovery." It was sponsored by a grant from the California Community Foundation and done by 25 researchers from RAND Health and the RAND National Security Research Division, which also has done does work under contracts with the Pentagon and other defense agencies as well as allied foreign governments and foundations.


On the Web:

RAND Corporation: http://www.rand.org

Army studies: http://www.armymedicine.army.mil