Tuesday, April 22, 2008

Behind the US stock market rally

Behind the US stock market rally

By Barry Grey

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Last week, the US stock market registered major gains, despite dire first-quarter reports from major banks and investment houses and a raft of data indicating a rapid slide into recession.

The Dow Jones Industrial Average rose 524 points, or 4.25 percent, for the week; the Standard & Poor’s 500 Index gained 57 points, or 4.4 percent; and the Nasdaq Composite Index picked up 113 points, a rise of 4.9 percent. The major indexes closed at their highest points since February 1.

The upward spurt may well prove to be temporary, but the evident disconnect between the mood of big investors and the ongoing financial turmoil and economic distress is nevertheless a significant phenomenon that calls for an explanation.

The same trend was apparent on Monday, when the stock market essentially shrugged off more bad news from Bank of America and National City Bank, with the Dow giving up a marginal 24 points and the S&P 500 and Nasdaq closing slightly higher.

Bank of America said its first-quarter profit fell 77 percent, worse than anticipated by market analysts, and its credit-loss provisions rose by another $4.78 billion. National City announced it was seeking a cash infusion of over $6 billion, in exchange for discounted shares of its stock.

Last Wednesday, JPMorgan Chase announced $5.1 billion in write-downs and set-asides and a 50 percent drop in first-quarter profits. Nevertheless, its shares rose 5.1 percent. Overall, the Dow shot up 257 points.

On Thursday, Merrill Lynch, the investment bank and world’s largest brokerage firm, posted a first quarter loss of $1.96 billion, recording for the first time in its 94-year history its third consecutive quarterly loss. The firm announced an additional $6.6 billion in asset write-downs, bringing its total markdown of mortgage-backed and other speculative securities to $30 billion since last summer.

Merrill also announced an additional 2,900 job cuts, bringing the total number of job losses announced over the past several months to 4,000.

The firm’s quarterly loss, at $2.19 a share, was substantially higher than the $1.99 per share decline anticipated by market analysts. Yet Merrill’s shares soared 4.1 percent on Thursday. Stock indexes overall were mixed, with the Dow and the S&P 500 ending the day slightly up and the Nasdaq down by 8 points.

On Friday, Citigroup, the world’s largest bank by assets, reported a $5.1 billion loss for the first quarter, compared to a $5 billion profit for the same period a year ago. It had lost $10 billion the previous quarter. The bank took over $13.8 billion in write-offs and its revenue dropped 48 percent compared to the first quarter of 2007.

Citi announced it would lay off some 9,000 employees in the next twelve months, on top of 4,000 job cuts announced in January.

The company’s share price shot up 4.5 percent, and the overall stock indexes soared: the Dow closing up 229, the S&P 500 ahead by 25 and the Nasdaq up 61.

Shares of financial companies as a whole, which declined 14.7 percent in the first quarter, rose 5.2 percent last week, despite the dismal earnings reports from some of the biggest financial houses.

The spurt in banking shares coincided, moreover, with many indications of deepening slump and surging inflation.

* California reported a 0.5 percent jump in its jobless rate in March, to 6.2 percent.

* Housing starts plunged 11.9 percent in March to reach their lowest level in 17 years.

* The Federal Reserve’s “beige book” national survey reported consumer spending “softening” across the country. For the six weeks to April 7, three quarters of the Fed’s 12 districts experienced “slowing in the pace of economic activity.” The New York Times on Sunday reported that retail sales were down more sharply than at any time since the 1990-91 recession.

* Auto industry sources said car sales in the first quarter declined to an annualized rate of 15.2 million units, the lowest level in over a decade. Analysts cut their full-year 2008 forecasts to below 5 million units, more than 1 million lower than in 2007.

* The World Trade Organization reported Thursday that world trade growth declined sharply in 2007, increasing by 5.5 percent as compared to 8.5 percent in 2006. The WTO warned that growth in world trade could fall to 4.5 percent this year, the lowest level since 2002.

* Oil prices hit new record highs and US gasoline prices surged, approaching an inflation-adjusted record.

* Producer prices in the US rose in March by 1.1 percent, far higher than projected by economists and nearly four times the 0.3 percent reported in February.

* The US dollar hit new lows against the euro and other major currencies.

* The London interbank offering rate (Libor), a benchmark for loans between major banks, shot up, pointing to a continuation of the global credit crunch that is fueling the contraction in investment, sales and general economic activity.

What accounts for the seemingly irrational response of the stock market to this dismal news? In a basic sense, the answer is to be found more in politics than in economics.

The newfound bullish optimism among major Wall Street players—as transient as it may prove to be—can be traced in large part to the decision by the Fed to rescue Bear Stearns last month and open the Fed discount window for cheap loans to the big investment banks. This move, without precedent since the Great Depression, was taken to avert an imminent collapse of the US and global banking system, and it signaled that the US government would do whatever was necessary—ultimately at taxpayer expense—to bail out Wall Street.

It is this implicit guarantee from the government that has shifted the mood among big market players and institutions from fear and panic to a measure of confidence, bringing with it a new eruption of risk-taking and greed.

As Floyd Norris, the economic commentator for the New York Times, wrote on Friday, “... investors are starting to assume that the government stands behind Wall Street. The share prices of investment banks began to recover just after the Fed made it clear the investment banks could borrow from it.

“It appears that the real way we are going to get out of this crisis is to have the government guarantee lots of things. ‘The universal cry of the bust is, “Give me a government guarantee,” said Alex J. Pollack, a former president of the Federal Home Loan Bank of Chicago who is now a fellow at the American Enterprise Institute... As private balance sheets are cut back to reduce leverage, he forecast, the government’s balance sheet will grow rapidly.”

The political and social implications of this government rescue operation are far-reaching. In essence, it means that the consequences of the economic crisis precipitated by the reckless pursuit of super-profits on the basis of vastly inflated home values, leveraged buyouts and various forms of speculation and fraud will be borne entirely by the working class, while the big players, CEOs, accounting firms and ratings agencies will emerge relatively unscathed.

Meanwhile, the banks and finance houses will carry out a ruthless process of cost-cutting and job-slashing, which will be mirrored in every other sector of the economy. The US financial industry has already shed 38,000 jobs since last summer, not counting the most recent layoff announcements, and some analysts predict the final toll will reach 200,000.

Big investors are clamoring for just such measures, and are prepared to reward those companies that carry them out. Byron MacLeod, an analyst with Gradient Analytics, said of Citigroup’s quarterly report:

“Investors want to see aggressive action at this point. You want to make sure the company really cleans house. The provisions are a part of that. The layoffs are a part of that. They appear to be taking aggressive action, taking the company in line with an ideal structure going forward.”

There is no opposition from any section of the political establishment or either party to this blank check for Wall Street. The Fed’s massive intervention to shore up the banks has received the endorsement of the Democratic Congress. No congressional investigations of any substance have been launched to uncover the unprecedented scale of fraud and swindling that underlay the banking debacle. No one is being called to account.

In addtion, all three of the candidates vying to succeed George W. Bush in the White House—John McCain for the Republicans, Barack Obama and Hillary Clinton for the Democrats—declared their support for the Fed action, ensuring that the pro-Wall Street policy will continue in the next administration.

The supposed relief measures for desperate families facing foreclosure are derisory. The Senate bill passed this month, dubbed the “Foreclosure Prevention Act of 2008,” will do nothing for the hundreds of thousands of families that have already had their homes foreclosed or the millions more who face the prospect. It allocates a mere $100 million for “foreclosure counseling,” while providing over $25 billion in tax windfalls over the next several years for home builders, auto companies, airlines and other industries.

The measures taken by the Fed will, in the end, only compound the crisis that is gripping the American and world economy. They can only deepen the crisis of the US dollar, further exacerbate global economic imbalances, and create new speculative bubbles—such as in commodities—in place of the imploded housing bubble. The crisis is rooted in the capitalist system itself, and the attempts to offload its implications onto the backs of the working class must inevitably lead to social and political convulsions.

The Wage That Meant Middle Class

The Wage That Meant Middle Class

By Louis Uchitelle

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Whatever Senator Barack Obama meant by his less than artful remarks about small-town Pennsylvanians "bitter" over lost jobs, he certainly turned a lot of attention last week to the decline of the American worker, bitter or not.

The talk most often has been of shuttered factories, layoffs, outsourcing and other effects of globalization, especially in a state like Pennsylvania, which has lost tens of thousands of industrial jobs. But there is another way to look at blue-collar workers or their counterparts in the service sector.

Leaving aside for a moment those who have lost their jobs, what of those who still have them? Once upon a time, a large number earned at least $20 an hour, or its inflation-adjusted equivalent, and now so many of them don't.

The $20 hourly wage, introduced on a huge scale in the middle of the last century, allowed masses of Americans with no more than a high school education to rise to the middle class. It was a marker, of sorts. And it is on its way to extinction.

Americans greeted the loss with anger and protest when it first began to happen in big numbers in the late 1970s, particularly in the steel industry in Western Pennsylvania. But as layoffs persisted, in Pennsylvania and across the country, through the '80s and '90s and right up to today, the protests subsided and acquiescence set in.

Hourly workers had come a long way from the days when employers and unions negotiated a way for them to earn the prizes of the middle class - houses, cars, college educations for their children, comfortable retirements. Even now a residual of that golden age remains, notably in the auto industry. But here, too, wages are falling below the $20-an-hour threshold - $41,600 annually - that many experts consider the minimum income necessary to put a family of four into the middle class.

The nation's political leaders - Democrats and Republicans alike - have argued that education and training are a route back to middle-class wages for those who have fallen out. But the demand isn't sufficient to absorb all the workers that the leaders would educate. Even now, roughly 15 percent of college-educated workers find themselves in jobs for which they are overqualified, the Economic Policy Institute reports, and many of these jobs pay less than $20 an hour.

"People are mainly worried about having a job and only secondly what it pays and whether they are gaining ground," said Frank Levy, a labor economist at the Massachusetts Institute of Technology, trying to explain the absence of an outcry and a political debate in which the candidates do not quantify the decline. "If you aren't gaining ground," Mr. Levy added, "then you look for other ways to pay for consumption, going into debt or, until recently, refinancing your home."

Still, the erosion haunts the presidential campaign. Mr. Obama, competing against Hillary Rodham Clinton in the Pennsylvania primary to be held on Tuesday, touched this nerve in his description of small-town voters who "cling" to their guns and their religion in their resentment over lost jobs. It was a description that prompted John McCain, the Republican candidate, to label Mr. Obama an "elitist," and Mrs. Clinton to portray him as out of touch with small-town sentiment. But like Mr. Obama, neither spoke of dollars missing from paychecks, or of the disappearing $20-an-hour wage.

That basic wage blossomed first in the auto industry in 1948 and served, in effect, as a banner in the ideological struggle with the Soviet Union. As the news media frequently noted, salt-of-the-earth American workers were earning enough to pay for comforts that their counterparts behind the Iron Curtain could not afford.

As the years passed, unions succeeded in negotiating this basic wage not as an ultimate goal but as an early rung in their wage ladders. That was the union standard, particularly in heavy industries, and in the early postwar decades nonunion employers fell into line, spreading middle-class incomes broadly through the service sector.

"The most important model that rolled off the Detroit assembly lines in the 20th century," said Harley Shaiken, a labor economist at the University of California at Berkeley, "was the middle class for blue-collar workers."

The high point came in the 1970s, just as the United States was beginning to lose its controlling grip on the economies of the non-Communist world. Since then the percentage of people earning at least $20 an hour has eroded in every sector of the economy, falling last year to 18 percent of all hourly workers from 23 percent in 1979 - a gradual unwinding of the post-World War II gains.

The decline is greatest in manufacturing, where only 1.9 million hourly workers still earn that much. That's down nearly 60 percent since 1979, the Bureau of Labor Statistics reports.

The shrinkage is sometimes quite open. The Big Three automakers are currently buying out more than 25,000 employees who earn above $20 an hour, replacing many with new hires tied to a "second tier" wage scale that never quite reaches $20. A similar buyout last year removed 80,000 auto workers. Many were not replaced, but many were, with the new hires paid today at the non-middle-class scale, and with fewer benefits.

The United Auto Workers agreed to this arrangement, accepting management's argument that it must have labor cost relief to rebound and prosper. Whatever the justification, the new accord in effect abandoned the 1948 contract. That agreement is still hailed as historic. In contrast, the 2007 contract that reversed it is hardly recognized as a significant event in labor history. "It is significant," Mr. Shaiken insisted, referring to last year's contract. "The Big Three and the U.A.W. were the model for industrial America at its zenith."

This time the auto workers weren't first. They ratified a practice that had spread to tire makers, heavy-equipment manufacturers, parts plants, groceries, retailers and longshoremen, diluting older workers' resistance by preserving their status, while lowering earning power for new hires.

Two tiers is one tactic. Another is filling middle-income jobs with temporary workers earning less. Add outsourcing to the list, and the off-shoring of such middle-income work as computer programming and radiology. Then there are the manufacturers who close a union plant and shift production to a nonunion one, often in the South but also in the Midwest.

When Whirlpool, for example, acquired Maytag last year it closed a Maytag washing machine factory in Newton, Iowa, that had employed hundreds of workers at more than $20 an hour and shifted production to its plant in Clyde, Ohio, adding hundreds of workers at $17 an hour.

Put givebacks on the list as well. Tens of thousands of workers have accepted wage cuts pressed on them by embattled employers, cuts that in many cases pushed their wages below middle-class levels. Flight attendants are a notable example. And as each new group acquiesces, the standard for what constitutes an acceptable wage comes down in America.

"You can't have an economy heavily invested in tradable goods and services that is completely oblivious to global wages," said Ron Bloom, special assistant to the president of the United Steelworkers.

The decline is most significant in the data that the Bureau of Labor Statistics collects for the nation's hourly work force, which totals 76 million, or 52 percent of all workers, and ranges from managers and professionals to factory and construction workers to technicians, educators and sales people. The wages of many salaried workers show a similar trend, although the bureau does not convert their pay into hourly amounts.

The trend in the hourly work force is striking. Take only the peak years in each business cycle, starting in 1979. The proportion earning at least $20 an hour declined from 23 percent that year, to 20 percent in 1980, to 18 percent in 1989, and to 16 percent in 2000. Manufacturing was hit the hardest.

The current business cycle brought some relief. It reached its peak last year, before plunging into what now appears to be the opening months of a stiff recession. In 2007, before the plunge, the percentage of middle-income hourly workers earning at least $20 an hour had risen, to 18 percent. The improvement came mainly from a rising proportion of women in higher-end hourly work.

Wages also held up in the public sector. Strip out that sector, and only 16 percent of privately employed hourly workers took home at least $20 an hour, just fractionally above the 2000 level.

The Homeownership Ideologues

The Homeownership Ideologues

By Dean Baker

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The economy is sinking into a recession and faces the worst financial crisis since the depression. The unemployment rate is rising, the foreclosure rate is soaring and home prices are plummeting. It's time to settle some scores with the people who brought us to this sorry state of affairs.

The identity of some of the villains is already widely known. At the top of the list is Alan Greenspan for his malfeasance in allowing the housing bubble to expand to ever more dangerous levels and ignoring the explosion of predatory mortgages. Then, we have the mortgage brokers who made the predatory loans and the Wall Street wunderkind who repackaged them in complex financial instruments and sold them all around the world. We can also include the builders and the realtors who profited from and promoted the irrational exuberance that fed the housing bubble.

But there is one group that still needs to be singled out for their role in bringing about this disaster: The ideologues of homeownership. These are the folks who push the ideology of homeownership as an end itself. They insist on lavish government subsidies, even in situations where homeownership is not a good solution for the people affected.

To be clear, homeownership is often desirable. It can be a mechanism for providing good secure housing and, also, for accumulating wealth. It is, therefore, reasonable to have policies like a limited mortgage interest deduction or credit that make it easier for low- and middle-income people to become homeowners.

However, homeownership should not be viewed as an end in itself. One of the reasons millions of families face foreclosure and/or the loss of their life's savings is the ideologues of homeownership continued to promote homeownership even when it was clear buying a home would be financially detrimental.

Recognizing the risks of homeownership in a bubble wasn't a matter of rocket science - it was simple arithmetic. The ratio of house sale prices to annual rent soared past 20 to 1 in the bubble markets, approaching 30 to 1 in the most inflated markets.

If a homeowner takes out a 7 percent mortgage (very low for a subprime buyer), pays 1 percent of the value in property tax each year, and another 1 percent for insurance and maintenance, then ownership costs are equal to 9 percent of the sale price. If the house sells for 20 times annual rent, then this family is paying 80 percent more in housing costs as homeowners each year than they would pay as renters. If the house was selling for 25 times the annual rent, then the family would be paying 125 percent more as homeowners than they would as renters.

For low- and moderate-income families who are struggling to make ends meet and pay for necessities like health care and child care, how are we helping them by having them pay 80 percent to 125 percent more than necessary for their housing costs? Oh, yeah, but they will accumulate equity in their home.

Right, the housing bubble will keep inflating indefinitely. Maybe the ideologues of homeownership thought housing prices would just keep rising forever, but this was an unbelievably stupid thing to believe.

The homeownership ideologues really screwed over an awful lot of low- and moderate-income families because they didn't know what they were talking about. If progressives ever advocated policies that were as wrong-headed as pushing homeownership in the middle of a housing bubble, we would be hearing about it for the next 40 years. Real or invented excesses of the 1960s are still a backdrop right wingers use in current political debates.

Incredibly, instead of acknowledging their mistake, the homeownership ideologues want the government to throw even more money at homeownership. (The money is more likely to end up with bankers than homeowners, as I have argued elsewhere.)

In the interest of promoting better housing policy in the future, it is important to have a public acknowledgment of the follies of homeownership ideology. We don't have a bottomless pit of money to satisfy their perverse ideology. If homeownership does not make economic sense, then we should not tell people to sacrifice health care and other essential needs to make the ideologues happy. It's time to force some honesty into the discussion of housing policy.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer (www.conservativenannystate.org). He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues. You can find it at the American Prospect's web site.

Bank of America Net Income Falls 77% on Writedowns

Bank of America Net Income Falls 77% on Writedowns

By David Mildenberg

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Bank of America Corp., the second- largest U.S. bank, said profit dropped for a third straight quarter as the company set aside $6.01 billion for bad loans.

First-quarter net income declined 77 percent to $1.21 billion from $5.26 billion a year earlier, the Charlotte, North Carolina-based bank said today in a statement. The results fell short of analysts' estimates and sent the bank's stock down 2.5 percent in New York trading.

Chief Executive Officer Kenneth Lewis scaled back a January forecast of 20 percent earnings growth this year after reporting the two worst quarters since he took over in 2001. Lewis said he now expects ``sequential profit improvement'' for the rest of 2008. The bank's consumer unit, which contributed more than 60 percent of operating income in 2007, faces a nationwide jump in unpaid debt and the highest unemployment rate since 2005.

``The first quarter was much worse than our expectations three months ago,'' Lewis said on a conference call. ``It's too early to strike up the band and say that happy days are here again.''

Revenue fell 6 percent to $17.3 billion, while earnings per share shrank to 23 cents from $1.16. Profit decreased 59 percent in the consumer and small business unit, and dropped 92 percent at the corporate and investment bank. Results included $1.31 billion in trading losses and $2.72 billion in costs for uncollectible loans.

Home equity, homebuilder and small-business loans were ``particularly'' affected by the slowing economy, the bank said.

Weaker Economy

``It's quite a bit below expectations,'' Walter ``Bucky'' Hellwig, senior vice president of Morgan Asset Management in Birmingham, Alabama, told Bloomberg Television. ``They are paddling upstream with regards to credit losses and credit quality.''

Lewis affirmed the bank's focus on U.S. consumers, calling Bank of America's franchise ``the best in the world.'' Asked in an interview if the company needs a greater overseas presence to cushion the weakness of the U.S. economy, Lewis said, ``The three most global franchises I can think of are UBS, Merrill Lynch and Citigroup.''

Merrill Lynch & Co. and Citigroup Inc., both based in New York, and Zurich-based UBS AG have taken writedowns of about $105 billion since the start of 2007, mostly because of the collapse of the U.S. subprime mortgage market, according to Bloomberg data.

Shares Slide

Citigroup, the biggest U.S. bank by assets, reported a first-quarter loss last week of $5.1 billion, smaller than analysts' most pessimistic estimates. New York-based JPMorgan Chase & Co., ranked third, said earnings declined 50 percent. Wachovia Corp., ranked fourth and based in Charlotte, posted an unexpected loss of $393 million.

Bank of America fell 95 cents to $37.61 a share in 4:15 p.m. New York Stock Exchange composite trading. The stock slid 8.1 percent in the first quarter, compared with JPMorgan's 1.6 percent drop and Citigroup's 27 percent decline. The 24-member KBW Bank Index dropped 11 percent. Bank of America supplanted Citigroup last year as the largest U.S. bank by market value.

Bank of America's Tier 1 capital ratio -- a benchmark regulators use to monitor a lender's ability to withstand loan losses -- rose to 7.51 percent at the end of the quarter from 6.87 percent at the end of 2007. The minimum for a ``well- capitalized'' rating from U.S. regulators is 6 percent.

Wider Margin

The net interest margin, the difference between interest paid on deposits and received from loans, widened to 2.73 percent from 2.61 percent on Dec. 31.

Earnings growth should enable the bank to maintain its quarterly dividend of 64 cents, a policy that will be revised if the U.S. economy enters a prolonged recession, Lewis said.

``The real guts of the bank appear to be working well and as they manage their way through the credit crisis, they're going to come out of this in very good shape,'' Georges Yard, chief investment strategist at Yared Investment Research in Wayzata, Minnesota, said in an interview.

Bank of America will move deeper into the mortgage business when it acquires Calabasas, California-based Countrywide Financial Corp., the biggest U.S. home lender. The transaction is on schedule to be completed early in the third quarter, Lewis said.

The stock-swap transaction, originally valued at about $4 billion, gives Bank of America a role in one out of every four home loans in the nation. Countrywide, with losses of $1.6 billion over the past two quarters, is scheduled to report quarterly results on April 29.

Visa IPO

Earnings included a $776 million pretax gain linked to the sale of shares in Visa Inc., the world's biggest credit-card network, and $170 million of restructuring costs. San Francisco- based Visa set a record for U.S. initial public offerings last month by raising more than $19 billion, and the stock has since gained more than 60 percent. Bank of America ranked as Visa's second-largest bank owner after JPMorgan.

The world's biggest banks and brokerages have disclosed $290 billion of writedowns and credit losses since June because of collapsing prices in U.S. mortgage markets. They've raised more than $160 billion to replenish capital, with Bank of America tapping public investors for at least $13 billion after writedowns and credit losses that totaled at least $8.2 billion before today, according to data compiled by Bloomberg.

Bank of America said it can't collect payments on 4.9 percent of its $75.9 billion credit card portfolio as of March 31, up from 4.5 percent at the end of the previous quarter. The bank is the nation's biggest issuer of credit cards.


As much as 2.5 percent of the bank's $118 billion home- equity portfolio may be uncollectible this year, mainly because of lower home prices in California and Florida, Chief Financial Officer Joe Price said. Assuming 2 percent of the bank's home- equity loans are charged off this year, the cost may be $2.3 billion, Fitch Ratings analyst John Mackerey said in a March 14 report. If the bad loans reach 5 percent, the damage could total $5.9 billion, he said.

About 44 percent of Bank of America's home-equity loans are in California, Nevada, Arizona and Florida, four states where housing prices are sliding faster than the national average.

Countrywide, with $34 billion in home-equity loans as of Dec. 31, also concentrated on those regions. All four ranked among the top 10 states with the most foreclosure filings last month, according to Irvine, California-based RealtyTrac Inc., a seller of default data. U.S. median home prices as of February were 15 percent below the peak of $230,200 in July 2006, according to the Chicago-based National Association of Realtors.

Biggest Stakeholders

Bank of America's largest stockholders at the end of 2007 are Barclays Global Investors, with 4.2 percent, State Street Corp., with 3.5 percent, and Vanguard Group Inc., with 3 percent, according to Bloomberg data. The market capitalization of $167 billion is about 8 percent greater than JPMorgan and about 27 percent more than Citigroup.

Investors have speculated since at least 2006 that Bank of America might make a large acquisition overseas. Lewis said in September 2006 in Singapore that his company was more focused on ``organic growth'' that would sustain revenue. About 90 percent of revenue last year came from the U.S. and Canada, according to Bloomberg data.

Dark clouds gather over Australian economy

Dark clouds gather over Australian economy

By Mike Head

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Until last week, the prevailing view in the Australian business and political establishment, at least in public, was that the national economy had become “de-coupled” from the US, and was therefore sheltered from the worst impacts of the recession taking hold in the world’s largest economy. Booming exports to China and the rest of Asia would, the argument went, insulate Australian capitalism from a global slump.

Last week, speaking after attending meetings of the International Monetary Fund (IMF) in Washington, Treasurer Wayne Swan said he was now certain that Australia would not escape the deepening international financial crisis. In an interview with Fairfax newspapers, he said no one at the IMF meetings believed that Asia was de-coupled from the turmoil that began last year with the sub-prime mortgage collapse in the US.

The IMF’s “World Economic Outlook” report, presented to the Washington meetings, described the financial crisis as the biggest since the Great Depression, forecast a US recession this year and warned of a 25 percent chance of a worldwide downturn “equivalent to a global recession”.

Swan stated: “Australia has never been immune from these sorts of financial crises. The fallout will have substantial knock-on effects to developing and emerging economies, and from our point of view that means flow on effects to Australia.” He also warned of an end to the 15 years in which cheap imports from countries such as China had a deflationary impact. A new period had commenced of high inflation and interest rates, combined with slowing growth.

Australia has had 17 consecutive years of economic growth, with an annualised average of 3.5 percent, largely as a result of two factors. One was rising minerals exports and high commodity prices, substantially fuelled by the rapid expansion of Chinese capitalism. The other was unprecedented rises in the levels of corporate and household debt, which generated soaring share prices and real estate values. Now, it is precisely Australian capitalism’s reliance on debt and mining exports that has made it extremely exposed, both to the global credit squeeze and to signs of slower growth and inflationary problems in China.

Last week, an economics expert drew attention to this vulnerability. Associate professor Peter Kriesler from the University of New South Wales told ABC radio: “The huge foreign debt and the huge private sector debt means that we’re much more susceptible to recession, interest rates etc., coming from abroad.

“If you look at the Australian economy, the manufacturing sector, the industrial base, has been shrinking quite rapidly; we’re becoming more and more reliant on a number of key resource exports.... Right now we’re so reliant on what’s happening abroad, particularly China and India ... there’s a possibility that the growth rate there [in China] will slow down, which means that the resource boom that’s been carrying us forward will collapse.”

In Australia, the international credit crunch triggered by the US sub-prime crisis since last August has already produced a trail of high-profile collapses by heavily-leveraged companies, including ABC Learning Centres, Centro Properties, finance companies RAMS, Allco and MFS, and stockbrokers Opes and Lift. Share prices have fallen by 30 percent since last November’s peak, wiping hundreds of millions of dollars off corporate values, particularly among the banks and finance houses.

At the same time, high levels of stress and hardship have been caused by soaring mortgage and credit card interest rates and rising prices for food, fuel and other essential items. Official interest rates have been raised eight times in three years, to 7.25 percent, and this year the private banks have hiked their rates higher than that. Inflation has climbed to 4 percent, well above the 3 percent limit maintained since the mid-1990s. Recent surveys warned that 300,000 households are at risk of losing their homes, and that many young people and workers earning less than $A30,000 ($US28,260; €17,760) a year are already missing credit card payments. Ordinary working people also face the loss of their retirement incomes—superannuation funds are likely to report losses of anywhere between 5 percent and 20 percent this financial year because of the US crisis and share market losses.

These developments have begun to seriously affect consumer and business confidence. New car sales dropped 2.3 percent in February, while housing finance for owner-occupied dwellings plunged 6 percent and retail sales declined by 0.1 percent, led by a 2.3 percent fall in spending at household goods stores. The ANZ bank job ads index—regarded as a forward indicator—showed newspaper advertisements fell to the lowest level in more than 14 years.

The consumer sentiment index, compiled by Westpac bank and the Melbourne Institute, fell to its lowest level since June 1993, at the end of the last recession. “The three months to March showed the sharpest three-month decline in the index (21.2 percent) since its introduction in January 1975,” Westpac chief economist Bill Evans said. “This further fall emphasises just how concerned households must be with the current economic environment.” CommSec chief equity economist Craig James warned of a “dramatic plunge in consumer spirits”.

Business confidence, sales, profits, employment and forward orders are also falling, according to the February National Australia Bank (NAB) survey. Business confidence was the lowest since the September 2001 attacks in the US, and the business conditions index suffered one of the biggest falls in the survey’s history. NAB chief economist Alan Oster admitted that the size and breadth of the slowing in domestic demand and business conditions “has caught both business and us by surprise”.

There are signs that the fallout from the financial meltdown is far from over. In its current “World Economic Outlook”, released this month, the IMF named Australia as having one of the four most overvalued housing markets in the Western world, and one of four highest levels of housing debt. Borrowings by households had grown from 75 percent of disposable incomes a decade ago to 175 percent, and this included credit card debt of $42 billion, or $2,000 for every man, woman and child. The IMF estimated that Australian housing prices last year were 25 percent higher than could be explained by “economic fundamentals”, producing the risk of a sharp “correction”.

This warning came after another indication that the banking problems in the US and Europe could spread to Australia. One of the four major banks, the ANZ, shocked financial markets by announcing much higher bad debt provisions for the first half of fiscal 2008-09, sending its share price down nearly 7 percent. The ANZ said its provisions would be about $975 million, a 72 percent increase from a year ago.

The problems are not confined to ANZ. JP Morgan estimates that Australia’s top five lenders have about $7.7 billion in secured and unsecured loans made to companies with high gearing. Goldman Sachs forecasts bad debt charges at Australia’s other top five banks, excluding ANZ, to rise by 43 percent in the current fiscal year to $2.7 billion. Dun & Bradstreet estimates that one in 12 Australian-based companies is now considered higher risk, which it says implies distressed debt of $3.5 billion.

These developments underscore the fragility produced by the extraordinary growth of financial parasitism in the Australian economy, as in the US. Over the past 30 years, as corporations have constantly shifted production in search of cheaper labour, lower costs and reduced taxes, manufacturing’s share of output has fallen from around 16 percent to 10 percent, while financial services have become increasingly dominant. Boosted by the previous Labor government’s introduction of compulsory superannuation in the 1990s, the value of funds under management has grown from 50 percent of gross domestic product in 1990 to 160 percent, or $1.7 trillion.

Reliance on China and the US

Deep problems lie ahead also because of the reliance on Chinese and other Asian export markets, which are in turn heavily dependent on the US, Japan and Europe for their sales. Under the impact of the US recession and slowing growth in Japan and Europe, China’s annual growth rate has begun to slow, from 11.9 percent last year to 10.6 percent in the first three months of 2008. China, like every other country, is now also being affected by rising inflation. Food prices rose at an annual rate of 21 percent in the first quarter of 2008, and the official inflation rate was 8 percent.

Until recently, the Chinese authorities and companies were content to accept higher prices for Australian raw materials in order to secure supplies. However, there are signs that the Chinese regime, haunted by the threat of soaring prices and social unrest, is now demanding greater access to ownership and control over Australian resources. In February, state-owned Chinalco made a $15 billion share raid on Anglo-Australian mining giant Rio Tinto. Last month, Sinosteel launched a hostile takeover bid for West Australian iron ore company Midwest. China is reportedly considering a $22 billion share raid on Australian-South African BHP Billiton, the world’s biggest mining company.

On his recent trip to Beijing, Rudd called for the opening of China’s financial markets to Australian and other foreign banks and finance houses. Beijing may insist on the quid pro quo that state-owned Chinese conglomerates be permitted to buy up Australian resources, undercutting the ability of Australian-based companies to continuously ratchet up prices, the main source of a 15-year mining export bonanza.

Australian capitalism’s vulnerability was underscored when the trade deficit for February widened to a record $3.29 billion, seasonally adjusted, from $2.54 billion in January. Metal and mineral exports fell 18 percent, while coal exports dropped 16 percent. According to the Australian Bureau of Statistics, the principal cause was severe weather conditions at key ports. Nevertheless, deeper processes are at work. The trade balance has been in the red for more than five years, despite the more than doubling of base metals and other resources prices since 2003.

Because of this chronic deficit and dependence on foreign investment, the level of foreign debt has increased from 15 percent of GDP to more than 50 percent over the past two decades, reaching $610 billion by the end of 2007. This level could become unsustainable in the event of a global recession. In addition, there are indications of a significant withdrawal of equity (shares) investment since the US crisis began last August, with two quarterly outflows of up to nearly 8 percent of GDP.

With high levels of foreign and domestic debt, the Australian economy is seriously exposed to the US crisis. The US has been the largest source of foreign investment since World War II, accounting for $45.3 billion last year, or 29 percent of the total, and more than a quarter of the overall stock of investment. It is also the most important destination of Australian foreign direct investment, about 40 percent of which flows to the US, revealing the dependence of large Australian-based corporations on expansion into North American markets.

How badly the economy will fare in the immediate period ahead is not yet clear. According to the official minutes, at their April 1 meeting, Reserve Bank of Australia board members concluded that domestic growth would slow somewhat from last year’s 3.9 percent. They noted that the terms of trade—the ratio of export to import prices—would rise another 15 percent this year because of higher prices that China has previously agreed to pay for iron ore and coal. Nevertheless, they expressed nervousness about the economic prospects. “Members recognised that a considerable degree of uncertainty continued to surround the outlook for both demand and inflation.”

One thing is certain. The Rudd Labor government is committed to making ordinary working people pay for the failures of the financial markets. Ever since Labor took office, Treasurer Swan and Prime Minister Kevin Rudd have been seeking to soften up public opinion for harsh cuts of $10 billion or more to government spending in next month’s budget, citing the need to combat inflation. As his remarks following the IMF meeting indicate, Swan is now using the worsening economic outlook as an added justification for slashing social spending.

Bush Secrecy Policies have Transformed U.S. Government from "Open" to "Closed"

Bush Secrecy Policies have Transformed U.S. Government from "Open" to "Closed"

Global Research

Since his inauguration, Bush has overseen changes that suggest "a dramatic growth of government secrecy, far beyond the secrecy occurring during the Clinton Administration," writes Susan Dente Ross, an Associate Professor in the Edward R. Murrow School of Communication at Washington State University at Pullman.

"Through executive agency opinions, executive orders, statutory changes, and aggressive litigation, the Bush Administration has effectively limited the power of FOIA(Freedom of Information Act) and reversed the presumption that government records should be available to the public absent demonstrable proof showing that secrecy is needed," Ross writes in The Long Term View, a journal of opinion published by the Massachusetts School of Law at Andover.
"The administration's sweeping expansion of the power of federal government to classify records, and so hide them from public view, increases the range of information that may be classified and extends the lifetime of such secrecy," Ross says. She noted that:
Mr. Bush has increased the number of federal agencies authorized to designate information as secret and exempt them from public disclosure.
The Department of Homeland Security removed the agency's entire classification of information process from public scrutiny. The secretaries' of Health and Human Services and Agriculture and the administrator of the Environmental Protection Agency, have been granted the right to classify information "for purposes of national security and national defense."
The Defense Department has adopted a new policy that imposes strict limits on discussion of all its "critical research" from the "idea phase" onward.
Mr. Bush has placed his own papers, and those of his father, the former president, "outside the public eye and empowered himself to keep Congress in the dark about intelligence matters."
Mr. Bush has increased the authority of the Central Intelligence Agency to empower its director to block declassification of CIA information unless disclosure is authorized by the president.
Mr. Bush has extended time that information can be kept classified from 10 to 25 years and this period may be extended even longer.
"Blanket closures of INS(Immigration and Naturalization Service) proceedings and absolute gags on disclosure of related information eviscerate the time-honored constitutional protection of open public trials," Ross writes. She noted the federal government "arrested and refused to identify hundreds of aliens who either may be connected to terrorism as material witnesses or who may have visa or other INS infractions."
An INS directive issued promptly after September 11, 2001, mandated absolute closure of all deportation hearings in cases the agency determined to be of "special interest" to the war on terrorism, Ross said. The INS judges could gag aliens from disclosing anything learned in closed proceedings and an INS regulation requires states and localities housing federal detainees to withhold all information about them.
Ross noted, though, a U.S. Court of Appeals judge struck down the INS closures and a U.S. District Court Judge in Washington ordered the Justice Department to disclose the names of more than 1,100 non-U.S. citizens detained at some point in connection with terrorism.
Ross asserts, "Legislation championed as essential to protect the nation against terrorist threats allows the federal government to spy on its citizens, to detain them in secret without charges, to prosecute them based on secret evidence, and to prohibit parties to the trial from discussing related information."
Ross writes the merest perusal of some Bush initiatives shows it has reversed the presumption of open government: "Although the now prevailing presumption of closed government is masked in subtle nuances of language and interpretive guidelines, we may liken the shift to the sea change that would occur in our criminal justice system if we moved from a presumption of innocent until proven guilty to an assumption of guilty until proven innocent."
Granting the Bush administration has imposed its sweeping secrecy policies in the name of national security, Ross contends this exchange is "unacceptable." "The trade-off, secrecy for security, is a sham," she writes. "The citizenry gives up its vital check on abuse of government power and gains little in return."
"A shadow government that operates in secrecy," Ross continues, "does not advance the security of its citizens. Ignorance is not security. Safety is not increased when citizens are blinded by government deception and distortion. Government does not better serve its electorate when it operates with impunity."
The Massachusetts School of Law, publishers of the Long Term View, is purposefully dedicated to the education of minorities, immigrants, and students from low- and middle-income backgrounds that would otherwise be unable to attend law school and enter the legal profession. Views expressed in the publication are not necessarily those of the law school.

Further Information: Jeff Demers at MSL demerse@mslaw.edu or Sherwood Ross, media consultant to MSL, at sherwoodr1@yahoo.com

VA Debated PR Plan on Vets' Suicides

VA Debated PR Plan on Vets' Suicides

By Jason Leopold

Go To Original

enior officials at the Veterans Administration debated internally how to downplay evidence of a stunning number of suicides and suicide attempts among veterans who were treated or had sought help at VA hospitals around the country, according to newly disclosed internal VA e-mails.

On Feb. 13, 2008, Ira Katz, the VA’s mental health director, and Ev Chasen, the agency’s chief communications director, exchanged e-mails discussing P.R. strategy for handling this troubling news, according to evidence made public Monday in a federal court case in Northern California.

The exchange came in the context of how to handle inquiries from CBS News, which was reporting on the surge of suicides among U.S. veterans – reaching an average of 18 per day – with part of that rise attributed to soldiers returning from the wars in Iraq and Afghanistan.

In an e-mail headlined “Not for the CBS News Interview Request,” Katz notified Chasen that the VA had identified some 1,000 suicide attempts per month among war veterans treated by the VA.

“Shh!” Katz wrote to Chasen. “Our suicide prevention coordinators are identifying about 1,000 suicide attempts per month among the veterans we see in our medical facilities. Is this something we should (carefully) address ourselves in some sort of release before someone stumbles on it?”

Chasen responded to Katz with suggestions about how to avoid too much negative attention to the data.

“Is the fact that we’re stopping [suicides] good news, or is the sheer number bad news? And is this more than we’ve ever seen before?” Chasen wrote to Katz, adding:

“It might be something we drop into a general release about our suicide prevention efforts, which (as you know far better than I) prominently include training employees to recognize the warning signs of suicide.”

In testimony to the House Veterans’ Affairs Committee on Dec. 12, 2007 – just two months before the e-mail exchange – Katz had stressed the VA’s successes in treating mental health problems and preventing suicides.

He also disputed that veterans from Iraq and Afghanistan face any special risk of suicide.

VA's latest data do not demonstrate an increased risk of suicide among [Afghan and Iraqi theatre] veterans compared to the age and gender matched American population as a whole,” Katz said.

Three days after the testimony, on Dec. 15, Katz painted a grimmer picture in an e-mail to Brig. Gen. Michael J. Kussman, the Veteran Health Administration’s undersecretary for health.

Katz’s e-mail said that from the total population of U.S. veterans from all wars, an average of 18 vets commit suicide each day. Katz said the data, which the VA obtained from the Center for Disease Control, showed that 20 percent of suicides in the United States are identified as war veterans.

“VA’s own data demonstrate 4-5 suicides per day among those who receive care from us,” Katz wrote.

On March 20, 2008, CBS News reported that it had obtained an internal VA study showing that 1,784 vets who received VA services still committed suicide in 2005, an increase from 1,403 such suicides in 2001.

CBS News also quoted Rep. Bob Filner, D-California, chairman of the House Veterans’ Affairs Committee, complaining that the VA had withheld this important data from Congress.

“Given the fact that we keep asking for data and they say, ‘we don’t have any,’ yes, it surprises me,” Filner told CBS News. “If we can’t get the correct information, we can’t do our job. We can’t prevent every suicide but you can prevent a whole lot of them and it’s our duty as a nation to do that.”

Suicide Epidemic

The internal VA e-mail exchange discussing P.R. strategy was disclosed at a federal trial in Northern California where two veterans’ advocacy groups – Veterans for Common Sense and Veterans United for Truth – have filed a class-action lawsuit against the VA.

The lawsuit alleges that a systematic breakdown at the VA has led to an epidemic of suicides among war veterans. The suit claims the VA has turned away veterans who have sought help for post-traumatic stress disorder and were suicidal.

Some of these veterans, the lawsuit claims, later took their own lives.

The lawsuit wants a federal judge to issue a preliminary injunction to force the VA to immediately treat veterans who show signs of PTSD and are at risk of suicide and to overhaul internal system that handles benefits claims.

Underscoring just how under-prepared the VA was for the number of PTSD cases that would emerge from the Iraq and Afghanistan wars, documents released to support the veterans’ lawsuit show that prior to the U.S. invasion of Iraq the VA believed it would likely see a maximum of 8,000 cases where veterans showed signs of PTSD.

Last week, the RAND Corporation released a study that said about 300,000 U.S. troops sent to combat in Iraq and Afghanistan are suffering from major depression or PTSD, and 320,000 received traumatic brain injuries.

Since October 2001, about 1.6 million U.S. troops have deployed to the wars in Iraq and Afghanistan. Many soldiers have completed more than two tours of duty meaning they are exposed to prolonged periods of combat-related stress or traumatic events.

“There is a major health crisis facing those men and women who have served our nation in Iraq and Afghanistan," said Terri Tanielian, a researcher at RAND who worked on the study.

“Unless they receive appropriate and effective care for these mental health conditions, there will be long-term consequences for them and for the nation. Unfortunately, we found there are many barriers preventing them from getting the high-quality treatment they need.”

Paul Sullivan, executive director of Veterans for Common Sense, has been warning lawmakers about this problem for several years.

“The scope of PTSD in the long term is enormous and must be taken seriously,” Sullivan told a congressional committee in July 2007. “When all of our 1.6 million service members eventually return home from Iraq and Afghanistan, based on the current rate of 20 percent, VA may face up to 320,000 total new veterans diagnosed with PTSD.”

“If America fails to act now and overhaul the broken DoD and VA disability systems, there may a social catastrophe among many of our returning Iraq and Afghanistan war veterans. That is why VCS reluctantly filed suit against VA in Federal Court. ... Time is running out.”

Sullivan urged Congress to enact legislation to immediately overhaul the VA.

“Congress should legislate a presumption of service connection for veterans diagnosed [with] PTSD who deployed to a war zone after 9/11,” Sullivan said. “A presumption makes it easier for dedicated and hard-working VA employees to process veterans’ claims. This results in faster medical treatment and benefits for our veterans.”

Yet despite Sullivan’s dire predictions and calls for legislative action, the issue has not been given priority treatment by lawmakers. Instead, Congress continued to fund the war in Iraq to the tune of about $200 billion and will likely approve another $108 billion next month.

VA’s Backlog

Meanwhile, a backlog of veterans’ benefits claims continue to pile up at the VA.

The VA said it has hired more than 3,000 mental healthcare professionals over the past two years to deal with the increasing number of PTSD cases, but the problems persist.

In opening statements in the federal court case, Richard Lepley, a Justice Department attorney, defended the VA, calling its network of hospitals a "world-class healthcare system."

But Gordon Erspamer, the lead attorney representing the two veterans groups, said the VA has arbitrarily denied coverage to thousands of vets, that it takes nearly a year to decide whether it will provide coverage to veterans suffering from PTSD, and takes as long as four years to address veterans appeals cases.

“Seeking help from the Department of Veterans’ Affairs ... involves a two-track system,” according to the plaintiff’s trial brief. “A veteran will go to the Veterans’ Health Administration for diagnosis and medical care; and a veteran goes to the Veterans’ Benefits Administration to apply for service-connection and disability compensation.

“VA is failing these veterans as they move along both of these parallel tracks. They are not receiving the healthcare to which they are entitled (and where they do receive it, it is unreasonably delayed) and they are not able to get timely compensation for their disabilities, which means that they have no safety net.

“These two problems combine to create a perfect storm for PTSD veterans: they receive no treatment, so their symptoms get worse; and they receive no compensation, so they cannot go elsewhere for treatment. The failings of these two separate but interrelated systems are what this action seeks to address.”

The lawsuit alleges that numerous VA practices stemming from a 1998 law violate the constitutional and statutory rights of veterans suffering from PTSD by denying veterans mandated medical care.

Justice Department attorneys argued in court papers filed in March that Iraq and Afghanistan veterans were not "entitled" to the five years of free healthcare upon their return from combat as mandated by Congress in the "Dignity for Wounded Warriors Act."

Rather, the VA argued, medical treatment for the war veterans was discretionary based on the level of funding available in the VA's budget.

But during a court hearing before U.S. District Court Judge Samuel Conti, Dr. Gerald Cross, principal deputy under-secretary for health at the Veterans Health Administration, said veterans of Iraq and Afghanistan were not only entitled to free healthcare, but he said, "there is no co-pay."

Warnings Ignored

Chris Scheuerman, a retired Special Forces masters sergeant, testified before a congressional committee in March that there is an urgent need for mental health reform in the military.

Scheuerman said his son, Pfc. Jason Scheuerman, went to see an Army psychologist because he had become suicidal.

The Army psychologist wrote up a report saying Jason Scheuerman “was capable of (faking) mental illness in order to manipulate his command,” according to documents the soldier’s father turned over to Congress.

“Jason desperately needed a second opinion after his encounter with the Army psychologist,” Chris Scheuerman testified before the Armed Services Committee’s Military Personnel Subcommittee.

“The Army did offer him that option, but at his own expense. How is a PFC (private first class) in the middle of Iraq supposed to get to a civilian mental healthcare provider at his own expense?” Scheuerman said.

“I believe a soldier should be afforded the opportunity to a second opinion via teleconference with a civilian mental healthcare provider of their own choice.”

Jason Scheuerman shot himself with a rifle on July 30, 2005. The 20-year-old’s suicide note said, “Maybe now I can get some peace.”

"Hero" John McCain as Phony and Collaborator

"Hero" John McCain as Phony and Collaborator

What Really Happened When He Was a POW?

By Alexander Cockburn

Go To Original

John McCain’s been getting kid-glove treatment from the press for years, ever since he wriggled free of the Keating scandal and his profitable association – another collaboration, you might say -- with the nation’s top bank swindler in the 1980s. But nothing equals the astounding tact with which his claque on the press bus avoids the topic of McCain’s collaborating with his Vietnamese captors after he’d been shot down.

How McCain behaved when he was a prisoner is key. McCain is probably the most unstable man ever to have got this close to the White House. He’s one election away from it. Republican senator Thad Cochrane has openly said he trembles at the thought of an unstable McCain in the Oval Office with his finger on the nuclear trigger.

What if a private memory of years of collaboration in his prison camp gnaws at McCain, and bursts out in his paroxysms of uncontrollable fury, his rantings about “gooks” and his terrifying commitment to a hundred years of war in Iraq. What if “the hero” knows he’s a phony?
Doug Valentine has written the definitive history of the Phoenix ProgramThe Hotel Tacloban. in Vietnam. He knows about the POW experience. His dad, an Army man, was captured by the Japanese and sent to a POW camp in the Philippines for forced labor. Many of his mates died. Doug wrote a marvelous book about it,

Now Valentine has picked up the unexploded bomb lying on McCain’s campaign trail this year. As he points out, he’s not the first. Rumors and charges have long swirled around McCain’s conduct as a prisoner. Fellow prisoners have given the lie to McCain’s claims. But Valentine has assembled the dossier. It’s devastating. We’re running it in our current CounterPunch newsletter and we strongly urge you to subscribe.

Some excerpts from Valentine’s indictment.

“War is one thing, collaborating with the enemy is another; it is a legitimate campaign issue that strikes at the heart of McCain’s character. . .or lack thereof. In occupied countries like Iraq, or France in World War II, collaboration to that extent spells an automatic death sentence.. . .The question is: What kind of collaborator was John McCain, the admitted war criminal who will hate the Vietnamese for the rest of his life?

“Put it another way: how psychologically twisted is McCain? And what actually happened to him in his POW camp that twisted him? Was it abuse, as he claims, or was it the fact that he collaborated and has to cover up? Covering-up can take a lot of energy. The truth is lurking there in his subconscious, waiting to explode. ”

“McCain had a unique POW experience. Initially, he was taken to the infamous Hanoi Hilton prison camp, where he was interrogated. By McCain’s own account, after three or four days he cracked. He promised his Vietnamese captors, “I’ll give you military information if you will take me to the hospital ...

“His Vietnamese captors soon realized their POW, John Sidney McCain III, came from a well-bred line in the American military elite. . .The Vietnamese realized, this poor stooge has propaganda value. The admiral’s boy was used to special treatment, and his captors knew that. They were working him.”

“. . .two weeks into his stay at the Vietnamese hospital, the Hanoi press began quoting him. It was not ‘name rank and serial number, or kill me’. as specified by the military code of conduct. McCain divulged specific military information: he gave the name of the aircraft carrier on which he was based, the number of U.S. pilots that had been lost, the number of aircraft in his flight formation, as well as information about the location of rescue ships.”

“…McCain was held for five and half years. The first two weeks’ behavior might have been pragmatism, but McCain soon became North Vietnam’s go-to collaborator…..McCain cooperated with the North Vietnamese for a period of three years. His situation isn’t as innocuous as that of the French barber who cuts the hair of the German occupier. McCain was repaying his captors for their kindness and mercy.

“This is the lesson of McCain’s experience as a POW: a true politician, a hollow man, his only allegiance is to power. The Vietnamese, like McCain’s campaign contributors today, protected and promoted him, and, in return, he danced to their tune. . .”

Subscribe now.

Making Polite “Conversation”

Suddenly everyone is having a “conversation”. The word has come of age. I see it bowing and scraping on the opinion pages and tv talk shows three or four times a day. Its formulaic sidekick is the equally irksome “if you will”, beloved of Wolf Blitzer, John King and the other tv anchors and correspondents. “If you will” is something between a sheep-like cough and a verbal tailwag, a signifier of decorum, itself a prime ingredient of the “national conversation”.

National conversations” are clubby affairs. Their prime purpose is to exclude the unconversational, meaning intellectual or verbal excess; above all, unseemly questioning of the essential functionality of the existing system. Indeed, I began to keep an eye out for the term a few years ago when I read a column in which some rabble-rouser was haughtily black-balled as most definitely not being part of the national conversation.

It’s possible that the “national conversation” got its start as an effort to dignify the interactions of the “chattering classes”, a phrase which had its origin as a right-wing snarl, in the Thatcher years. Real men and real women didn’t chatter. They moved briskly forward with the business of “governance”, yet another irksome locution.

Ayers and the Weather Undergound

Dave Lindorff said some nice things about Bill Ayers and the Weather Underground last week. CounterPuncher Dan Cassidy, author of How the Irish Invented Slang (CounterPunch Books, winner of an American Book Award last year) fired off this letter to Dave, with a cc to us.

Dear Mr. Lindorff,

I think your remarks on the Weather Underground's positive effect on the old new left, and SDS in particular, back in the late 1960s and early 1970s are misguided and off the mark. I am sure Ayers has become a progressive force in Chicago and applaud him for his transformation.

But my personal experience of the WU and Ms. Dohrn at Colombia and Cornell found them to be a mostly upper- and upper-middle class, immature, narcissistic group of misguided ultra-leftists who had no understanding of the working class or the need to build a mass base. They were, in fact, an impediment to efforts to build a broader based anti-war movement. They engaged in divisive sectarian tactics in scores of meetings I attended, and further divided an already divided student left. Unlike the Panthers, or the IRA, for instance, they had absolutely no base within the working classes. For a guerrilla army, even a small one, to have an effect on the struggle against imperialism it must be rooted in working-class and poor communities. The Panthers came out of the streets of Oakland. They were born there The IRA were all products of the historic nationalist communities in the north of Ireland, both rural and urban. The IRA had only 500 ASU [operational volunteers] in the field at any given time, yet fought the Brit imperialists to a standstill. The ANC's armed wing was also rooted in the same types of working-class and rural communities. The Weather Underground was rooted in the middle and upper-middle classes of the US and had no base whatsoever in working-class and poor communities. They were a farce.

I was there. I knew many of them. They were legends in their own mind. That said, I have no doubt Ayers has transformed himself into a decent man who works for a progressive agenda. We all grow up. The WU was an immature, narcissistic bunch of mostly rich kids, who played at revolution and whose only base was in the townhouses of their rich parents.

Dan Cassidy

Michael Moore’s Oscar Speech

A while back Jeff Gibbs sent us this note about John Ross’s piece on the dark side of the Oscars. It fell between the cracks but here it is. Jeff, you’re on at last:

“A very enlightening and well written article. I must take issue with one thing though, your assertion that Michael Moore went on a “self-promoting tirade after winning an Oscar for "Fahrenheit 9/11." The Oscar was for "Bowling for Columbine.’ I was there. I don't think saying ‘shame on you Mr. Bush’ is self-promoting. It was a very, very painful thing to do then, and remains so. Our entire production team decided to give up having our names mentioned or being thanked before millions in order that Michael might take a stance against the war. His reward for speaking out is that he has endured unrelenting and brutal personal attacks including several threats to his physical safety put forth on both FOX and Clear Channel since then.

“Alas, everything he has said in our next film ‘Fahrenheit 9/11’ has proven to be all too true. I for one am tired of potshots at one of the few well-off Americans who risked his own personal and artistic well-being to so effectively speak out against the war. If more of his peers in Hollywood and the media had the same courage ‘Taxi to the Dark Side’ might never had to have been made, and Michael would not have to endure relentless attacks from both the right who hates him for speaking against the war and even more so for reaching hundreds of millions of people, and the left, who seem determined to bring down anyone who actually rises above incompetence to threaten the other side.

Jeff Gibbs
Co-producer, ‘Fahrenheit 9/11’
Field Producer, ‘Bowling for Columbine’

I’ll Really Miss George Bush

Miss him? Alexander, how can you say such a thing? But I do. He’s done the Empire all the harm he can. Who needs Barack Obama to polish up Uncle Sam’s image with some fancy talk? Besides, Bush was in top form during the Pope’s White House visit. What other president would have shambled up to his Holiness, made as if to give him a hug, and said to the Vicar of Christ, “Awesome speech.”

I should add that I’d been saddened by the First Lady’s appearance in recent months, albeit the decline is predictable, given the hell that must be the poor lamb’s personal circumstance, shackled to that dunderhead. But in the Pope’s visit Laura was spectacular in her beauty and aplomb. Her and Pope Benedict’s white ensembles were the talk of the vestry. I imagine the couple will soon drift apart after quitting the White House. There’s been gossip of angry exchanges, and Crawford would be very constricting.