Wednesday, April 23, 2008

California foreclosure "surge": Up 327% from '07 levels

California foreclosure "surge": Up 327% from '07 levels

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The number of California homes lost to foreclosure in the first quarter surged 327% from year-ago levels -- reaching an average of more than 500 foreclosures per day -- DataQuick said in a report, warning that the widening foreclosure problem could "spread beyond the current categories of dicey mortgages, and into mainstream home loans."

From DataQuick's report on California foreclosures in the first three months of 2008: "Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 47,171 during the first quarter. ... Last quarter's total rose 48.9 percent from 31,676 in the previous quarter, and jumped 327.6 percent from 11,032 in first quarter 2007." That translates into 517 foreclosures every day in the first quarter of 2008.

DataQuick president Marshall Prentice: "The main factor behind this foreclosure surge remains the decline in home values. Additionally, a lot of the 'loans-gone-wild' activity happened in late 2005 and 2006 and that's working its way through the system. The big 'if' right now is whether or not the economy is in recession. If it is, the foreclosure problem could spread beyond the current categories of dicey mortgages, and into mainstream home loans."

From The L.A. Times' Peter Hong: "Sinking home values and the collapse of flimsy mortgages sent a record number of California homes into the foreclosure process in the first three months of this year, a real estate information service reported today."

Default notices -- which mark the beginning of the foreclosure process -- increased sharply, but not as rapidly as outright foreclosures. From Bloomberg News: "California mortgage defaults more than doubled in the first quarter to the highest in 15 years as a drop in sales and prices prevented some homeowners from selling their properties to pay debt, DataQuick Information Systems said.

More: "Homeowners received 113,676 default notices in the first quarter, up 143 percent from a year ago, La Jolla, California- based DataQuick said today in a statement. The level was the highest since at least 1992, when DataQuick's statistics begin."

Despite well publicized federal efforts to reach out to homeowners in default, the odds that they will ultimately lose their homes appear to be increasing. DataQuick reports that, of the homeowners in default, "an estimated 32 percent emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. A year ago it was about 52 percent.:

Chertoff Says Fingerprints Aren’t ‘Personal Data’

Chertoff Says Fingerprints Aren’t ‘Personal Data’

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Homeland Security Secretary Michael Chertoff has badly stumbled in discussing the Bush administration’s push to create stricter identity systems. Chertoff was recently in Canada discussing, among other topics, the so-called “Server in the Sky” program to share fingerprint databases among the U.S., Canada, the U.K., and Australia.

In a recent briefing with Canadian press (which has yet to be picked up in the U.S.), Chertoff made the startling statement that fingerprints are “not particularly private”:

QUESTION: Some are raising that the privacy aspects of this thing, you know, sharing of that kind of data, very personal data, among four countries is quite a scary thing.

SECRETARY CHERTOFF: Well, first of all, a fingerprint is hardly personal data because you leave it on glasses and silverware and articles all over the world, they’re like footprints. They’re not particularly private.

Many of us should rightfully be surprised that our fingerprints aren’t considered “personal data” by the head of DHS. Even more importantly, DHS itself disagrees. In its definition of “personally identifiable information” — the information that triggers a Privacy Impact Assessment when used by government — the Department specifically lists: “biometric identifiers (e.g., fingerprints).”

Chertoff’s comments have drawn sharp criticism from Jennifer Stoddart, the Canadian official in charge of privacy issues. “Fingerprints constitute extremely personal information for which there is clearly a high expectation of privacy,” Stoddart said.

There are compelling reasons to treat fingerprints as “extremely personal information.” The strongest reason is that fingerprints, if not used carefully, will become the biggest source of identity theft. Fingerprints shared in databases all over the world won’t stay secret for long, and identity thieves will take advantage.

A quick web search on “fake fingerprints” turns up cheap and easy methods for do-it-at-home fake fingerprints. As discussed by noted security expert Bruce Schneier, one technique is available for under $10. It was tried “against eleven commercially available fingerprint biometric systems, and was able to reliably fool all of them.” Secretary Chertof either doesn’t know about these clear results or chooses to ignore them. He said in Canada: “It’s very difficult to fake a fingerprint.”

Chertoff’s argument about leaving fingerprints lying around on “glasses and silverware” is also beside the point. Today, we leave our Social Security numbers lying around with every employer and numerous others. Yet the fact that SSNs (or fingerprints) are widely known exposes us to risk.

There have been numerous questions raised about how this Administration is treating our personal information. Secretary Chertoff’s comments show a new reason to worry — they don’t think it’s “personal” at all.

Food price rises are "mass murder"-UN envoy

Food price rises are "mass murder"-UN envoy

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Global food price rises are leading to "silent mass murder" and commodities markets have brought "horror" to the world, the United Nations' food envoy told an Austrian newspaper on Sunday.

Jean Ziegler, UN special rapporteur on the right to food, told Kurier am Sonntag that growth in biofuels, speculation on commodities markets and European Union export subsidies mean the West is responsible for mass starvation in poorer countries.

Ziegler said he was bound to highlight the "madness" of people who think that hunger is down to fate.

"Hunger has not been down to fate for a long time -- just as (Karl) Marx thought. It is rather that a murder is behind every victim. This is silent mass murder," he said in an interview.

Ziegler blamed globalisation for "monopolising the riches of the earth" and said multinationals were responsible for a type of "structural violence".

"And we have a herd of market traders, speculators and financial bandits who have turned wild and constructed a world of inequality and horror. We have to put a stop to this," he said.

Ziegler said he believed that one day starving people could rise up against their persecutors. "It's just as possible as the French Revolution was," he said.

Massive attack

Massive attack

US elections 2008: Hillary Clinton's pledge to 'obliterate' Iran if it attacks Israel is unnecessarily bellicose

By Richard Silverstein

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In an interview on ABC's Good Morning America today, Hillary Clinton pledged that if Iran launches a nuclear attack against Israel, the United States would retaliate against Iran. "I want the Iranians to know that if I'm the president, we will attack Iran," Clinton said. "In the next 10 years, during which they might foolishly consider launching an attack on Israel, we would be able to totally obliterate them."

Today promises to be a decisive moment in the Democratic primary campaign, as voters head to the polls in Pennsylvania. Clinton's comments this morning echo remarks she made last week in Philadelphia. There, during the presidential debate, Clinton came just short of promising a nuclear attack on Iran if it were to strike Israel or any of its other Arab neighbours.

According to the transcript this is how the exchange went:

George Stephanopoulos: "Senator Clinton, would you [extend our deterrent to Israel]?"

Hillary Clinton: "Well, in fact ... I think that we should be looking to create an umbrella of deterrence that goes much further than just Israel. Of course I would make it clear to the Iranians that an attack on Israel would incur massive retaliation from the United States, but I would do the same with other countries in the region."

On Warren Olney's To the Point radio show today, Barack Obama's Middle East adviser and former congressman Mel Levine noted that during the Eisenhower administration John Foster Dulles promised the same "massive retaliation" should the Soviet Union attack the US or its allies. This was widely understood as a threat of nuclear attack. Is this really the type of president Americans want? One who so demonises Iran that she's prepared to go to war at the first sign of conflict in the Middle East? Do we want to create a Middle East cold war like the one we had with the Soviets for four decades?

Equally troubling is the fact that Israel, in Clinton's conception, is merely an extension of the US - a member of the greater commonwealth, if you will. Of course, I find the notion of an Iranian attack on Israel disturbing as well. But the idea that we would react to an attack on Israel as if it were an attack on ourselves ties me up in knots.

We are not the same as Israel. We have our interests. Israel has its own. What if Israel attacks Iran first in an attempt to knock out its nuclear programme and Iran counterattacks? After all, Israeli government ministers have threatened a pre-emptive attack on Iran. In the event of such an assault, is Clinton then bound to retaliate massively against Iran though Israel was the aggressor? You can see where this is going, and it isn't any place good.

Clinton's threat was music to one Jewish group's ears: Aipac. She was practically channelling its talking points about Iran and the "existential threat" it poses to Israel. Her rhetoric was meant as red meat for Pennsylvania's Jews in the run up to the state's Democratic presidential primary. She believes they want to hear a battle cry against Iran. This, despite the fact that the latest American Jewish Committee annual opinion survey shows that Jews don't want to rattle sabres with Iran. They want negotiation instead. Of course, Clinton doesn't care so much what the average Jew thinks. She's playing to the Aipac donors and the Jewish PAC money which are more hawkish than the Pope - er, Ehud Olmert.

Compare Clinton's over-the-top response to Obama's modulated one during last week's debate:

Stephanopoulos: "Iran continues to pursue a nuclear option. Those weapons, if they got them, would probably pose the greatest threat to Israel. During the cold war, it was the United States' policy to extend deterrence to our Nato allies. An attack on Great Britain would be treated as if it were an attack on the United States. Should it be US policy now to treat an Iranian attack on Israel as if it were an attack on the United States?"

Obama: I have said I will do whatever is required to prevent the Iranians from obtaining nuclear weapons. I believe that that includes direct talks with the Iranians where we are laying out very clearly for them, here are the issues that we find unacceptable, not only development of nuclear weapons but also funding terrorist organisations like Hamas and Hezbollah, as well as their anti-Israel rhetoric and threats towards Israel. I believe that we can offer them carrots and sticks, but we've got to directly engage and make absolutely clear to them what our posture is.

"Now, my belief is that they should also know that I will take no options off the table when it comes to preventing them from using nuclear weapons or obtaining nuclear weapons, and that would include any threats directed at Israel or any of our allies in the region."

Stephanopoulos: "So you would extend our deterrent to Israel?"

Obama: "As I've said before, I think it is very important that Iran understands that an attack on Israel is an attack on our strongest ally in the region, one that we - one whose security we consider paramount, and that would be an act of aggression that I would consider an attack that is unacceptable, and the United States would take appropriate action."

Who would you want answering that phone at 3am? Trigger Finger Clinton? Or Deliberate Obama? A president who promises "massive retaliation" or one who promises the US "would take appropriate action"? And let's not make the mistake of thinking this is merely parsing words. Lately, we've had an administration willing to go to war at the drop of a hat. Lest you think that Clinton might not initiate a regional war if Israel is attacked, think again.

And if you read her response further, you'll see she advocates a regional security umbrella of nations opposed to Iran. An attack on any of them would be the same as an attack on the US. So now you have the US becoming the gendarme of the Middle East willing to go to battle at the least flare-up between Iran and any number of neighbours with whom it might have a dispute. That scares me.

One final note: debate moderator George Stephanopoulos makes a huge assumption in claiming Iranian nuclear weapons "would probably pose the greatest threat to Israel". The distinguished Israeli military analyst Martin Van Creveld has written in the Forward that Iran wants nuclear weapons to defend itself from attack by one of its immediate neighbours (remember the Iran-Iraq war of the late 1980s?). Israel is far back on the list of nations Iran is thinking of when it thinks of the reasons it needs such weapons.

Why Does the Bush Regime Want to Rule Iraq?

Why Does the Bush Regime Want to Rule Iraq?

By Paul Craig Roberts

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he Bush regime has quagmired America into a sixth year of war in Afghanistan and Iraq with no end in sight. The cost of these wars of aggression is horrendous. Official U.S. combat casualties stand at 4,538 dead. Officially, 29,780 U.S. troops have been wounded in Iraq.

On April 17, 2008, AP News reported that a new study released by the RAND Corporation concludes that "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."

On April 21, 2008, reported that an internal e-mail from Gen. Michael J. Kussman, undersecretary for health at the Veterans Administration, to Ira Katz, head of mental health at the VA, confirms a McClatchy Newspaper report that 126 veterans per week commit suicide. To the extent that the suicides are attributable to the war, more than 500 deaths should be added to the reported combat fatalities each month.

Turning to Iraqi deaths, expert studies support as many as 1.2 million dead Iraqis, almost entirely civilians. Another 2 million Iraqis have fled their country, and there are 2 million displaced Iraqis within Iraq.

Afghan casualties are unknown.

Both Afghanistan and Iraq have suffered unconscionable civilian deaths and damage to housing, infrastructure, and environment. Iraq is afflicted with depleted uranium and open sewers.

Then there are the economic costs to the U.S. Nobel economist Joseph Stiglitz estimates the full cost of the invasion and attempted occupation of Iraq to be between $3 trillion and $5 trillion. The dollar price of oil and gasoline have tripled, and the dollar has lost value against other currencies, declining dramatically even against the lowly Thai baht. Before Bush launched his wars of aggression, one U.S. dollar was worth 45 baht. Today the dollar is only worth 30 baht.

The U.S. cannot afford these costs. Prior to his resignation last month, U.S. Comptroller General David Walker reported that the accumulated unfunded liabilities of the U.S. government total $53 trillion. The U.S. government cannot cover these liabilities. The Bush regime even has to borrow the money from foreigners to pay for its wars in Iraq and Afghanistan. There is no more certain way to bankrupt the country and dethrone the dollar as world reserve currency.

The moral costs are perhaps the highest. All of the deaths, injuries, and economic costs to the U.S. and its victims are due entirely to lies told by the president and vice president of the U.S., by the secretary of defense, the national security adviser, the secretary of state, and, of course, by the media, including the "liberal" New York Times. All of these lies were uttered in behalf of an undeclared agenda. "Our" government has still not told "we the people" the real reasons "our" government invaded Afghanistan and Iraq.

Instead, the American sheeple have accepted a succession of transparent lies: weapons of mass destruction, al-Qaeda connections and complicity in the 9/11 attack, overthrowing a dictator and "bringing democracy" to Iraqis.

The great, moral American people would rather believe government lies than to acknowledge the government's crimes and to hold the government accountable.

There are many effective ways in which a moral people could protest. Consider investors, for example. Clearly Halliburton and military suppliers are cleaning up. Investors flock to the stocks in order to participate in the rise in value from booming profits. But what would a moral people do? Wouldn't they boycott the stocks of the companies that are profiting from the Bush regime's war crimes?

If the U.S. invaded Iraq for any of the succession of reasons the Bush regime has given, why would the U.S. have spent $750 million on a fortress "embassy" with anti-missile systems and its own electricity and water systems spread over 104 acres? No one has ever seen or heard of such an embassy before. Clearly, this "embassy" is constructed as the headquarters of an occupying colonial ruler.

The fact is that Bush invaded Iraq with the intent of turning Iraq into an American colony. The so-called government of Maliki is not a government. Maliki is the well paid front man for U.S. colonial rule. Maliki's government does not exist outside the protected Green Zone, the headquarters of the American occupation.

If colonial rule were not the intent, the U.S. would not be going out of its way to force Sadr's 60,000-man militia into a fight. Sadr is a Shi'ite who is a real Iraqi leader, perhaps the only Iraqi who could end the sectarian conflict and restore some unity to Iraq. As such he is regarded by the Bush regime as a danger to the American puppet Maliki. Unless the U.S. is able to purchase or rig the upcoming Iraqi election, Sadr is likely to emerge as the dominant figure. This would be a highly unfavorable development for the Bush regime's hopes of establishing its colonial rule behind the facade of a Maliki fake democracy. Rather than work with Sadr in order to extract themselves from a quagmire, the Americans will be doing everything possible to assassinate Sadr.

Why does the Bush regime want to rule Iraq? Some speculate that it is a matter of "peak oil." Oil supplies are said to be declining even as demand for oil multiplies from developing countries such as China. According to this argument, the U.S. decided to seize Iraq to ensure its own oil supply.

This explanation is problematic. Most U.S. oil comes from Canada, Mexico, and Venezuela. The best way for the U.S. to ensure its oil supplies would be to protect the dollar's role as world reserve currency. Moreover, $3-5 trillion would have purchased a tremendous amount of oil. Prior to the U.S. invasions, the U.S. oil import bill was running less than $100 billion per year. Even in 2006 total U.S. imports from OPEC countries was $145 billion, and the U.S. trade deficit with OPEC totaled $106 billion. Three trillion dollars could have paid for U.S. oil imports for 30 years; $5 trillion could pay the U.S. oil bill for a half century had the Bush regime preserved a sound dollar.

The more likely explanation for the U.S. invasion of Iraq is the neoconservative Bush regime's commitment to the defense of Israeli territorial expansion. There is no such thing as a neoconservative who is not allied with Israel. Israel hopes to steal all of the West Bank and southern Lebanon for its territorial expansion. An American colonial regime in Iraq not only buttresses Israel from attack, but also can pressure Syria and Iran not to support the Palestinians and Lebanese. The Iraqi war is a war for Israeli territorial expansion. Americans are dying and bleeding to death financially for Israel. Bush's "war on terror" is a hoax that serves to cover U.S. intervention in the Middle East on behalf of "greater Israel."

Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions

UN cuts school children's meals

UN cuts school children's meals

Jeremy Lovell

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A "SILENT tsunami" unleashed by costlier food is threatening 100million people, the United Nations has warned, revealing that its World Food Program has begun cutting the provision of school meals to some of the world's poorest children as the global food-price crisis worsens.

Aid bodies said there was enough food to go round but the key was to help the poor afford it, and urged producing nations not to curb exports to stockpile food at home.

In London, the Prime Minister, Gordon Brown, said Britain would seek changes to EU biofuels targets if it was shown that planting crops for fuel was driving up food prices - a day after the bloc stood by its plans to boost biofuel use.

Britain has also pledged $US900million ($947 million) to help the UN World Food Program alleviate its immediate problems and address longer-term solutions to "help put food on the table for nearly a billion people going hungry across the world".

In a meeting of experts which Mr Brown called on Tuesday to discuss the crisis, the head of the World Food Program, Josette Sheeran, said a "silent tsunami" threatened to plunge more than 100 million people on every continent into hunger.

"This is the new face of hunger; the millions of people who were not in the urgent hunger category six months ago but now are," she said.

Riots in poor Asian and African countries have followed steep rises in food prices caused by many factors: rising demand from consumers in developing countries such as China and India, the effect of climate change on food production, dearer fuel and the conversion of land to grow crops for biofuel.

Rice from Thailand has more than doubled in price this year.

Ms Sheeran said artificially created shortages, such as those caused by countries that have slowed or stopped exports, were worsening the problem.

The major food exporters Indonesia, Kazakhstan, Egypt and Cambodia have closed their stocks to safeguard supplies.

"The world has been consuming more than it has been producing for the past three years, so stocks have been drawn down," Ms Sheeran said.

"The world knows how to produce food and will do so. But we will have a couple of challenging years."

Rising prices meant the UN food program was running short of money to buy food.

A program providing meals for 450,000 Cambodian children has been suspended and Ms Sheeran said a similar program in Kenya, serving 1.2 million children, was facing cuts of nearly 50per cent.

She said the cutbacks reflected "heartbreaking decisions" and were the biggest challenges of the program in 45 years.

"The era of cheap food is over," said Rajat Nag, managing director general of the Asian Development Bank.

He urged Asian governments not to distort markets with export curbs but use fiscal measures to help the poor.

"We want to temper what we think is a bit of an over-reaction. There is still enough supply," he said.

Mr Brown raised further doubts about the wisdom of using crops to help produce fuel, an idea whose recent popularity in the United States and Europe has been dented by fears that it harms the environment and makes food dearer.

"We need to look closely at the impact on food prices and the environment of different production methods and to ensure we are more selective in our support [for biofuels]," Mr Brown said.

Existing home sales fell 2 percent in March

Existing home sales fell 2 percent in March

The pace of existing home sales in the United States fell two percent in March to a 4.93 million-unit annual rate, the National Association of Realtors said on Tuesday in a report that showed the U.S. housing market continues to struggle.

Economists polled by Reuters were expecting home resales to fall to a 4.92 million-unit pace, off from the February rate of 5.03 million that was left unchanged.

The inventory of homes for sale swelled by 40,000 to 4.06 million homes, or a 9.9 months' supply at the current sales pace from 9.6 months in February. Meanwhile, the median national home price declined 7.7 percent from a year ago to


The drop in home values nationwide has pushed many borrowers toward foreclosure and upset lending standards in many markets.

Of the homes for sale, 18 percent have negative equity and so are either in foreclosure proceedings or headed for a 'short sale' that will see the lender write off some of the original loan amount.

"This has been a frustration of our members," said NAR chief economist Lawrence Yun. "Lenders have been dragging their feet (in approving short sales)."

U.S. Treasuries eased after the housing data showed a smaller-than-expected slide.

Supply Scare Sends Oil Toward $120

Supply Scare Sends Oil Toward $120

Carl Gutierrez

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Oil was flirting with $120 on Tuesday, driven by a familiar theme: overseas supply concerns.

By late afternoon, light sweet crude for May delivery was up 13 cents to $119.50 on the New York Mercantile Exchange after a Royal Dutch Shell joint venture said it may have to cut deliveries in April and May after a pipeline attack in Nigeria. (See: "Oil Punches Above $117")

Oil's rise wasn't the result of oil alone, as the dollar weakened further and the National Association of Realtors reported a drop in both home sales and prices. (See: "U.S. Home Prices Tumble")

At the pump, the average price of a gallon of regular gas rose 0.8 cents Tuesday to a record $3.511, according to a survey of stations by AAA and the Oil Price Information Service. Although gas prices follow moves made by oil, gas is also being affected by falling supplies that comes with a seasonal switch made by refiners.

Oil's rise had a mixed, but largely positive effect on oil stocks, as the Energy Select Sector SPDR, an ETF that tracks energy shares, rose 4 cents to $84.85. Exxon Mobil rose 0.2% and ChevronMarathon Oil dropped 2.0% and Shell slipped 0.4%. The iShares Dow Jones Transportation Average, an ETF that tracks the performance of the transportation sector, fell 1.8%. lifted 1.4%, but

Oil's rise contributed to a tough day on the market, which, along with lukewarm earnings and the falling dollar, pushed the major indexes down. (See: "Wall Street Slides On Oil") Of course, investors tend to gravitate to alternatives such as oil when they feel stocks are more trouble than they're worth.

The high cost of oil has been drowning the highly oil-dependent airline industry. Airline stocks plunged Tuesday, after United Airlines parent UAL dropped the biggest earnings bombshell of the day, reporting a whopping first-quarter loss of $4.45 a share. United revealed plans to rein in costs in an effort to temper the impact of spiking jet fuel prices.

AirTran also announced that soaring fuel prices pushed it into the red during the first quarter, and kept it from enacting its expansion plans. (See: "Oil's A Drag For AirTran")

Out of the Way, Peasants

Out of the Way, Peasants

By Steven Greenhut

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Readers have been shocked to learn that California has about 1 million citizens who are literally above the law. Members of this group, as a Register front-page article April 6 detailed, can drive their cars as fast as they choose. They can drink a six-pack of beer at a bar and then get behind the wheel and weave their way home. They can zoom in and out of traffic, run traffic lights, roll through stop signs and ignore school crossing zones. They can ride on toll roads for free, park in illegal spots and drive on High Occupancy Vehicle lanes even if they have no passengers in the car with them. Chances are they will never have to pay a fine or get a traffic citation.

They are a special class of people, basically exempt from the laws the rest of us must follow. This isn't a small number, either. Drivers of one of every 22 California cars and light trucks on the road have this special immunity, which should cause our government leaders and law enforcement authorities – always eager to protect us from any perceived problem – to demand a fix to this real public safety threat. Think about what this means: a million drivers who can endanger our lives with near impunity. I can hear it now: "There ought to be a law!"

But instead of pushing for a fix, most legislators are trying to expand the program so that even more people can have the special "we're above the law" license plates. What gives? The answer is sickeningly obvious. The Special People are those who work for law enforcement or other government agencies or are their family members.

Now you get it. Government officials are zealous about dealing with problems caused by average citizens, but they are far less interested in dealing with the excesses of fellow members of the privileged, government elite. There are rules for "us" and rules for "them" – us being the subjects and them being the rulers. Feel free to pound the table in anger now!

How did we get to this sorry place?

In 1978, the state started a program to protect the confidentiality of peace officers so members of the public couldn't find their addresses on Department of Motor Vehicle databases. Over the years, the program has been expanded from one set of government workers to another. It now applies to corrections employees, social workers, nonsworn personnel who work in juvenile halls, parole officers, parking enforcement employees and on and on. Even county supervisors, city attorneys and city council members can be exempt from the state's traffic laws.

Even after the Register article exposed this outrageous situation, an Assembly committee voted to expand this special privilege to firefighters, animal control officers and veterinarians. Assemblyman Mike Duvall, R-Yorba Linda, explained his vote to the Register in this way: "I don't want to say no to the firefighters and veterinarians that are doing these things that need to be protected." That attitude explains why our society is moving in this direction. No one – not even a self-proclaimed believer in limited government – will stand up to groups of workers who have become as demanding, self-righteous and arrogant as those found in the French bureaucracy.

Americans used to be better schooled in the views of our nation's founders, who believed that government should be strictly limited and highly accountable. The Constitution, after all, is designed to protect the People from their rulers. These days, and especially after 9/11, Americans have become compliant and dangerously obedient to the authorities. Hence, they keep getting rolled. You know something's amiss when museum security guards, court workers, DMV employees and retired parking officers are part of the special-license caste.

The special-plate program works this way: The addresses are kept secret, so toll-road operators and parking enforcement cannot easily track down violators. The Transportation Corridor Agencies, which runs the toll roads, does not legally have access to the confidential addresses. The Orange County Transportation Authority has to go through additional hoops to get the addresses and admittedly doesn't pursue toll violations too zealously.

In one instance reported by the Register, one couple had racked up almost $35,000 in penalties from OCTA for driving on toll roads without paying. Regarding moving violations, when police see these special plates they either don't pull the drivers over or they don't ticket them if they do. The cops call this "professional courtesy." Officers know that those with the special plates are "their own," and officers are quite open about refusing to ticket other members of the Brotherhood. They scratch each other's back. "It's a courtesy, law enforcement to law enforcement," Sgt. Tom Lee of the San Francisco Police Department, told the Register. "We let it go."

Well, such "courtesies" are functions of police states, not free societies. In a free society, the government serves the people. No one is supposed to be above the law, not even animal control officers and their spouses. Assemblyman Todd Spitzer, R-Orange, calls the situation immoral, unfair and unethical. He has proposed legislation that would limit the practice. Spitzer deserves kudos for this effort, but I wouldn't expect the legislation to go far given the deference afforded public-sector union members and law enforcement in the state Capitol.

The whole thing is a scam. This confidentiality of plates is defended on grounds of safety – even though there's no example of anyone's safety having been jeopardized and even though so many of the workers who receive the protections are not in even remotely dangerous professions. Plus, the original rationale for the protection has evaporated. As the Register noted, "updated laws have made all DMV information confidential to the public."

Pound that table again!

Wouldn't it be nice if the government, for once, put the public's safety above the concerns of its own workers and its own bureaucratic prerogatives? These days, the focus always seems to be on the safety of the government workers (FYI, no government job is in the top 10 list of most-dangerous occupations), even though the government's entire raison d'être (hey, French is appropriate, given the subject matter) is to protect us. Public-choice theory is correct – government workers function mainly to promote their own self-interest, and not to promote what some naïvely believe to be the public good.

Sadly, as the government expands, America is becoming a society where the public "servants" are now the masters. Government workers earn higher salaries than their cohorts in the private sector and far higher benefits – with a massive public unfunded liability (debt) as a result. The taxpayer eventually will be forced to clean up the fiscal mess. These same government employees have special protections from accountability. There's the Peace Officers' Bill of Rights, civil service protections and government unions, the last of which instill fear and trepidation into the hearts of politicians.

And now we learn that members of this coddled and powerful group (and their family members) don't even need to follow the basic traffic laws that apply to the rest of us. If you're not angry, then you must be a member of the special caste.

Steven Greenhut (send him mail) is a senior editorial writer and columnist for the Orange County Register. He is the author of the book, Abuse of Power. Visit his blog.

Copyright © 2008 Orange County Register -

Message To Fed Chief Bernanke: "Enough With The Cuts, Already"

Message To Fed Chief Bernanke:

"Enough With The Cuts, Already"

By Mike Whitney

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Stop Last week's stock market blowout added more than 4 percent to the Dow Jones Industrials, but it had no affect on Libor rates. Libor rose steadily from Tuesday through Friday signaling more troubles in the banking system. Libor, which means London Interbank-Offered Rate, is the rate that banks charge each other for loans. It has a dramatic effect on nearly area of investment. When the rate soars, as it did last week, it means that the banks are either too weak financially to lend to each other or too worried about the ability of the other bank to repay them. Either way, it puts a crimp in lending. Banks serve as the transmission point for credit to the broader economy via business and consumer loans. When they're bogged down by their own bad investments or when risks increase; rates go up and the whole process slows to a crawl. When banks are unable to extend credit freely, business activity decreases and GDP shrinks.

The sudden surge in stocks is not a sign that things are back to normal; far from it. If anything, things are worse than ever. Credit remains unusually tight despite Bernanke's cuts to the Fed Funds rate or the creation of various “auction facilities” that remove mortgage-backed securities (MBS) from banks balance sheets. Businesses and consumers are still having a hard time getting funding, which means that the velocity of money in the financial system is decelerating rapidly increasing the likelihood of a system-wide freeze-up. Libor is just the flashing red light.

A rise in Libor adds billions in additional interest payments for homeowners, businesses and other borrowers. According to the Wall Street Journal:

“Libor is one of the world's most important financial indicators. It serves as a benchmark for $900 billion in subprime mortgage loans that adjust -- typically every six months -- according to its movements. Companies globally have nearly $9 trillion in debt with interest payments pegged to Libor, according to data provider Dealogic.”

Commercial real estate deals are mostly pegged to Libor as are adjustable rate mortgages (ARMs). In fact, most of the mortgages that were written up during the boom-years were tied to Libor. That's why Peter Fitzgerald, chief financial officer at Radco Cos., said, "If Libor were at 4% instead of under 3%, there would be a disaster that would take years to unwind.” (WSJ)

Rising Libor puts the Fed and the Bank of England in a tough spot. They're trying to keep rates artificially low so the banks can increase their lending and recoup their losses, but the market is not cooperating. The market is driving Libor upward, which means the Fed is losing control. The real cost of money is going up.

The Bank of England was forced to intervene on Monday. Mervyn King, the UK's central bank governor, launched a “Special Liquidity Scheme” to “improve the liquidity of the banking system and raise confidence in financial markets while ensuring that the risk of losses on the loans they have made remains with the banks.” The plan will provide $100 billion for "illiquid assets of sufficiently high quality” (Mortgage-backed securities) to “unfreeze” bank lending. The plan is similar to the Fed's auction facilities which have provided over $200 billion in exchange for dodgy MBS, collateralized debt obligations (CDOs) and commercial paper (ABCP) According to Bloomberg:

“The Central Banks move allows financial institutions to add government bonds to their inventory of liquid assets and make it easier for them to raise cash and lend, especially to consumers seeking home loans. In return the government will hold the riskier mortgage-backed securities.” The BOE said the swaps would be for a period of one year and could be renewed for up to three years, although the banks would be on the hook for losses on their loans. Its a sweet deal for the investment banks and a total loser for the British taxpayer who could get stuck with hundreds of billions of worthless MBS.

The $100 billion liquidity-injection is the biggest bailout in the BOE's history, and it was granted without public input or Parliamentary authorization, just like the Bear Sterns transaction. The bankers call the shots while the public picks up the tab. The BOE's action puts to rest the idea that “the worst is behind us”. It isn't; in fact, recent estimates suggest that the losses to the banking system could exceed $1 trillion. There's still a lot of carnage ahead.

The $100 billion will help to stabilize the money markets and put the banks on sounder footing, but it does nothing to help the housing market. The British real estate market is on life support because most of the mortgage financing was coming from investors who bought MBS. Mortgage securities are currently down 92 percent from the same period last year, which leaves potential buyers without a funding source. The BOE is considering creating a British-style Fannie Mae to kick-start the flagging housing industry by providing government-backed loans. The private sector will not be a big player in the housing market for the foreseeable future.

The same is true in the US. If the Fed can't bring Libor down with interest rate cuts, then it will have to develop a back-up plan. The next step would be “quantitative easing”; a monetary policy that was implemented by the Bank of Japan in 2001 “to revive that country's economy that was stagnant for a decade. Quantitative easing entails flooding the banking system with excess reserves, resulting in pushing the benchmark overnight bank lending to zero.” (Reuters) There are indications that Bernanke is preparing for this radical option already, but there's little chance that it will succeed. Whether the banks are able to lend or not is irrelevant. Public attitudes towards indebtedness have changed dramatically in the past few months. Overextended consumers are looking for ways to pay off their debts and live within their means. This will make it more difficult for Bernanke to reflate the equity bubble through credit expansion. When people are frightened or pessimistic about the future, they naturally curtail their spending. A recent poll conducted by the Washington Post/ABC illustrates how the publics attitude towards the economy has darkened in a matter of months. According to the survey:

“Nine out of ten Americans now give the economy a negative rating, with a majority saying it is in 'poor' shape, the most to say so in more than 15 years. And the sense that things are bad has spread swiftly. The percentage who hold a negative view of the economy is up 33 points over the last year, and the percentage who rate the economy 'poor' has increased 13 points in the last two months. That is the quickest 60-day decline since the Post and ABC started asking the question in 1985” (Washington Post)

The average American is showing a better grasp of the deteriorating economic conditions than the stock market. Housing sales continue to tumble, manufacturing is off, unemployment is steadily increasing, retail sales are flat, and inflation is soaring. Consumers are feeling the pinch of rising food and energy costs, loss of home equity and a general downturn in the credit markets. Money is tight and jobs are scarce.


When George W. Bush took office in 2000, oil was $28 per barrel, the euro was $.87 on the dollar, gold was $274 per ounce, and the national debt was $5.9 trillion. Today, oil is a record $114 per barrel, the euro is nudging $1.60 on the dollar, gold is $945 per ounce, and the National Debt is $9 trillion. The country is presently engaged in a $2 trillion war in Iraq with no end in sight. The federal government has expanded over 30% under Bush. Wages for working people have stagnated, unemployment has risen, 47 million Americans are without health care, and the economy is slipping into recession. By every objective standard, the country is worse off today than when Bush first took office.

The Federal Reserve has played a major role in America's economic decline. Greenspan's “weak dollar” policy pushed trillions of dollars of credit into the hands of people who had no realistic prospect of paying it back. Now the banks are buried beneath a mountain of bad investments and foreclosures are at record highs. (In California 65,000 homes are now in some stage of foreclosure while the total number of homes sold in February—new and used---was a mere 20,513) Michael S. Rozeff explains the current downturn in his article “The Subprime Crisis and Government Failure”:

“How are we to explain and understand the details of the subprime crisis? Is it a sudden outcropping of market madness? Is this an instance of a free market gone haywire? Is it a case of mass lender stupidity? Is it a case of greed and corruption? Is it a case of inefficient regulation by the states?

The subprime crisis is none of these. Its origin lies in a housing price bubble brought about by excessive central bank money creation and the subsequent puncturing of this bubble...

Fiat money inflations often bring on real estate booms followed by busts. These inflations are the common element in real estate cycles that span many countries and many centuries, and they put the lie to the hypothesis that bad lending practices are the culprit. Fraudulent money creation is the culprit, not faulty evaluation of the credit risks of borrowers.” (Michael S. Rozeff , “The Subprime Crisis and Government Failure”,

The knock-on effects of the housing bust are just now rippling through the broader economy. Consumer spending is sluggish, growth is weak, and the stock market is more volatile than anytime since the 1930s. The Fed has usurped congressional powers to deal with insolvency problems at the banks. Public money is now being provided for the purchase of dubious assets held by unregulated investment banks owned by private speculators. The Fed is simply making up the rules as it goes along. Bernanke's actions have not yet been challenged by any congressman or senator.

The Fed's monetary policies have triggered a run-up in commodities prices which is driving up the cost of everything from corn to copper. Food riots have broken out in capitals around the world and leaders are worried about growing political instability. The media is blaming drought, high energy prices, and biofuels for the sudden rise in prices, but these are only secondary factors. Currency devaluation has played a bigger role than shortages or blight. The world is awash in dollars which are steadily losing value. Pension funds and foreign central banks are diverting dollars into commodities rather than keeping them in corporate bonds or the sagging stock market. Here's an excerpt from the Wall Street Journal that sums it up:

“Inflation is rising throughout the world due to dollar weakness, and the prices of such commodities as oil and corn have soared. ..As former Fed Chairman Paul Volcker noted last week, we are already in a “dollar crisis”. Even the IMF---typically the temple of devaluationists—is alarmed by the dollar's fall. Dollar weakness has already contributed to soaring commodity prices that have walloped US consumers just when their spending is most needed to offset the housing slump. ...The commodity boom is result in large part of the Fed's weak dollar policy, and it may have tipped the US into recession that could have been avoided.” (Wall Street Journal)

Economics editor for the UK Telegraph, Ambrose Evans-Pritchard, draws the same conclusion in his recent article, "Oil, Surges as Investors hunt for Anti-dollar":

“Société Générale said the near $30 spike in prices since early February is largely due to money pouring into commodity index funds, now worth some $200bn. Crude has taken on a "safe-haven" role for investors fleeing the dollar, or those betting that central banks will let rip with excess liquidity.

"This is now entirely investor driven," said Dr Frederic Lasserre, Société Générale's head of commodities research. He added that most of the money is coming from pension funds, insurers and other long-term investors. They view the US recession as a mere hiccup in a powerful upward cycle, convinced that Chinese and Mid-East demand will hold up long enough for America to recover. "They are all convinced by the fundamental tightness of the market," he said.” (UK Telegraph)

Commodities prices are now being driven by an ever-weakening dollar. As Pritchard notes, oil futures have become a sort of “anti-dollar”; a more reliable store of value than the anemic greenback.

The Fed's loose money policies have put the dollar at risk of losing its role as the world's reserve currency. If the dollar falls from its perch, the empire will soon follow. The macroeconomic impact of Greenspan's low interest rates will be seismic. Foreign banks and investors currently hold $6 trillion in dollar-based assets and currency. When the dollar falls; speculation will increase and prices will rise. Currently, the US is exporting its inflation and fueling political unrest in the process. If Bernanke continues to slash interest rates, the problems will only get worse. The Fed could raise rates by 50 basis points tomorrow and the commodities bubble would explode overnight, but that doesn't look likely.

The idea that soaring commodity prices are the result of speculation is controversial. (I could be wrong!) Economist Paul Krugman does not think that “low interest rates and irrational exuberance” are responsible for the high prices. Rather, he thinks they are the result of “rapidly growing demand and constrained supply”. This is certainly possible. Perhaps, there is no bubble at all.

Currency Intervention to Save the Dollar

The G-7 finance ministers met in Washington last week and announced their “resolve” to minimize the volatility in the currency markets. Many people took this to mean that foreign central banks would take a more active role in shoring up the dollar. So far, there's been no indication of support. The dollar has stayed within the $1.58-1.59 per euro range for more than a week. Help could be on the way but, then, maybe not. The only one who can really save the dollar now, is Bernanke. All he needs to do is indicate that the rate cuts are over and the bleeding will stop. But that might be too much to hope for. Bernanke has already cut the Fed Funds rate from 5.25 percent to 2.25 percent since September. (way below the 4.1 percent rate of inflation) Its clear that he sees a deflationary tidal wave about to hit sometime in the next few quarters. Why else would he slash rates so aggressively while stretching the Fed's mandate (“make sure the markets function properly”) to the limit?

Last week, former Fed chairman Paul Volcker took the unusual step of publicly chastising Bernanke in a speech he gave to the Economic Club of New York. Volcker's comments indicate the level of frustration with the Fed's dollar-savaging rate cuts which have caused problems around the world. Volcker said “The recession is not the Fed's problem. It's the government's. The Fed's job is to defend the currency and fight inflation—exactly the opposite of what this Fed is doing.” The former Fed chief thinks Bernanke should raise rates now, because if he doesn't, he'll have to raise them even more later, “with even more awful consequences.”

Martin Feldstein, chairman of the Council of Economic Advisers under Ronald Reagan, joined Volcker in blasting the Fed and calling for an end to the rate cuts. In a Wall Street Journal editorial on April 15 Feldstein said:

“It's time for the Federal Reserve to stop reducing the federal funds rate, because the likely benefit is small compared to the potential damage....Lower interest rates could raise the already high prices of energy and food, which are already triggering riots in developing countries. In order to offset the inflationary impact of higher imported commodity prices, central banks in those countries may raise interest rates. Such contractionary policies would reduce real incomes and exacerbate political instability....lowering interest rates stimulates economic activity to a point at which labor and product markets cause wages and prices to rise. That is unlikely to happen in the U.S. in the coming year. The general weakness of the economy will keep most wages and prices from rising more rapidly.....But high unemployment and low capacity utilization would not prevent lower interest rates from driving up commodity prices.

Lower interest rates induce investors to add commodities to their portfolios. When rates are low, portfolio investors will bid up the prices of oil and other commodities to levels at which the expected future returns are in line with the lower rates.”

Feldstein is right. Additional cuts will probably have negligible effect on housing and consumer spending, but they could be a death-blow to the dollar. It's not worth it. Lower rates will be devastating for people living in poorer countries. In the US, middle class families spend only 15 percent of net earnings on food. In poorer countries people spend upwards of 75 percent of their income just trying to feed themselves. That's why riots are breaking out everywhere; the Fed's monetary policy is a catalyst for political instability.

Besides, lower interest rates don't necessarily increase demand or make credit more easily available. The only way to spark demand is to make sure that wages keep pace with production so that workers can buy the things they produce. That's the only way to create a prosperous economy, too; build a strong and well-educated work-force.

“Economic recovery will require resolving the difficult problems of the credit markets, dealing with the millions of homeowners who may now be tempted to default on mortgages that exceed the value of their homes, and reducing the risk that the ongoing decline in house prices will push millions of additional homeowners into a vulnerable, negative equity condition,” says Feldstein. “A lower fed funds rate will not solve any of those problems.”

Right again. The problems we face can't be resolved with rate cuts and auction facilities. They require new thinking, fiscal solutions and public engagement. There's no quick fix and no perfect solution; not everyone will get a fair deal. But its pointless to wreck the currency when nothing is gained by it.

The Double Trouble of Taxation By Ron Paul

The Double Trouble of Taxation

By Ron Paul

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Taxes were on the forefront of many Americans’ minds this week as they scrambled to meet the April 15th deadline to file their returns. Tax policy in this country hurts taxpayers twice – once when they pay taxes, and then when the government spends the money. Americans are sick and tired of the financial burden and the endless forms to fill out. To add insult to injury, after collecting this money the government does some very detrimental things to the economy.

The burden of complying with the income tax is tremendous. Since its inception in 1913, the tax code has gone from 400 pages to over 67,000. The Tax Foundation estimates that around $265 billion dollars and 6 billion hours are spent just on compliance. That expense amounts to about 22 cents of every dollar the IRS collects. Imagine the boon to the economy if we spent that time and money expanding our businesses and creating jobs!

Aside from the direct loss of money and productivity, the funds from the income tax enable the government to do some very destructive things, such as vastly over-regulating economic activity, making it difficult to earn money in the first place. The federal government funds over 50 agencies, departments and commissions that formulate rules and regulations. These bureaucracies operate with little to no oversight from the people or Congress and generate around 4,000 new rules every year and operate at a cost of about 40 billion dollars. There are some 75,000 pages of regulations in the Federal Register that Americans are expected to know and abide by. Complying with these governmental regulations costs American businesses more than one trillion dollars per year, according to a study by Mark Crain for the Small Business Administration. This complicated system drives production to other countries and shrinks our job market here at home.

Big government is destructive when it takes your money and when it spends it. There is no economic benefit to supporting a government sector as massive as ours. In fact, this country thrived for well over 100 years without an income tax. Today, if you took away the income tax, the government would still have revenue from other sources equal to total government spending in 1990, when government was still too big. $1.2 trillion should be more than enough to fund a government operating within its constitutional confines, and that is exactly what we need to get back to.

I have introduced legislation many times to abolish the IRS and the income tax. It is fundamentally un-American to require taxpayers to testify against themselves and be considered guilty until proven innocent. Abolishing the IRS altogether would trigger an avalanche of real growth in the economy.

With these financial hard times only just beginning, this would be the most efficient and logical way to get our economy growing again, and Americans would need not dread the 15th of April every year

Dr. Ron Paul is a Republican member of Congress from Texas.

The Great Silence: Our Gilded Age and Theirs

The Great Silence: Our Gilded Age and Theirs

By Steve Fraser

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Google "second Gilded Age" and you will get ferried to 7,000 possible sites where you can learn more about what you already instinctively know. That we are living through a gilded age has become a journalistic commonplace. The unmistakable drift of all the talk about it is a Yogi Berra-ism: it's a matter of déjà vu all over again. But is it? Is turn-of-the-century America a replica of the world Mark Twain first christened "gilded" in his debut bestseller back in the 1870s?

Certainly, Twain would feel right at home today. Crony capitalism, the main object of his satirical wit in The Gilded Age, is thriving. Incestuous plots as outsized as the one in which the Union Pacific Railroad's chief investors conspired with a wagon-load of government officials, including Ulysses S. Grant's vice president, to loot the federal treasury once again lubricate the machinery of public policy-making. A cronyism that would have been familiar to Twain has made the wheels go round in these terminal years of the Bush administration. Even the invasion and decimation of Iraq was conceived and carried out as an exercise in grand-strategic cronyism; call it cronyism with a vengeance. All of this has been going on since Ronald Reagan brought back morning to America.

Reagan's America was gilded by design. In 1981, when the New Rich and the New Right paraded in their sumptuous threads in Washington to celebrate at the new president's inaugural ball, it was called a "bacchanalia of the haves." Diana Vreeland, style guru (as well as Nancy Reagan confidante), was stylishly blunt: "Everything is power and money and how to use them both ... We mustn't be afraid of snobbism and luxury."

That's when the division of wealth and income began polarizing so that, by every measure, the country has now exceeded the extremes of inequality achieved during the first Gilded Age; nor are our elites any more embarrassed by their Mammon-worship than were members of the "leisure class" excoriated a century ago by that take-no-prisoners social critic of American capitalism Thorstein Veblen.

Back then, it was about masquerading as European nobility at lavish balls in elegant hotels like New York's Waldorf-Astoria, locked down to forestall any unpleasantness from the street (where ordinary folk were in a surly mood trying to survive the savage depression of the 1890s). Today's "leisure class" is holed up in gated communities or houseoleums as gargantuan as the imported castles of their Gilded Age forerunners, ready to fly off - should the natives grow restless - to private islands aboard their private jets.

The Free Market as Melodrama

At the height of the first Gilded Age, William Graham Sumner, a Yale sociologist and the most famous exponent of Herbert Spencer's theory of dog-eat-dog Social Darwinism, asked a good question: What do the social classes owe each other? Virtually nothing was the professor's answer.

As in those days, there is today no end to ideological justifications for an inequality so pervasive that no one can really ignore it entirely. In 1890, reformer Jacob Riis published his book How the Other Half Lives. Some were moved by his vivid descriptions of destitution. In the late nineteenth century, however, the preferred way of dismissing that discomfiting reality was to put the blame on a culture of dependency supposedly prevalent among "the lower orders," particularly, of course, among those of certain complexions and ethnic origins; and the logical way to cure that dependency, so the claim went, was to eliminate publicly funded "outdoor relief."

How reminiscent of the "welfare to work" policies cooked up by the Clinton administration, an exchange of one form of dependency - welfare - for another - low-wage labor. Poverty, once turned into the cultural and moral problem of the impoverished, exculpated Gilded Age economics in both the nineteenth and twenty-first centuries (and proved profitable besides).

Even now, there remains a trace of the old Social Darwinian rationale - that the ascendancy of "the fittest" benefits the whole species - and the accompanying innuendo that those consigned to the bottom of the heap are fated by nature to end up there. To that must be added a reinvigorated belief in the free market as the fairest (not to mention the most efficient) way to allocate wealth. Then, season it all with a bravura elevation of risk-taking to the status of spiritual, as well as economic, tonic. What you end up with is an intellectual elixir as self-congratulatory as the conscience-cleansing purgative that made Professor Sumner so sure in his cold-bloodedness.

Then, as now, hypocrisy and self-delusion were the final ingredients in this ideological brew. When it came to practical matters, neither the business elites of the first Gilded Age, nor our own "liquidators," "terminators," and merger and acquisition Machiavellians ever really believed in the free market or the enterprising individual. Then, as now, when push came to shove (and often way earlier), they relied on the government: for political favors, for contracts, for tax advantages, for franchises, for tariffs and subsidies, for public grants of land and natural resources, for financial bail-outs when times were tough (see Bear Stearns), and for muscular protection, including the use of armed force, against all those who might interfere with the rights of private property.

So too, while industrial and financial tycoons liked to imagine themselves as stand-alone heroes, daring cowboys on the urban-industrial-financial frontier, as a matter of fact the first Gilded Age gave birth to the modern, bureaucratic corporation - and did so at the expense of the lone entrepreneur. To this day, that big business behemoth remains the defining institution of commercial life. The reigning melodrama may still be about the free market and the audacious individual, but backstage, directing the players, stands the state and the corporation.

Crony capitalism, inequality, extravagance, Social Darwinian self-justification, blame-the-victim callousness, free-market hypocrisy: thus it was, thus it is again!

At the end of the Reagan years, public intellectuals Kevin Phillips and Gary Wills prophesied that this state of affairs was insupportable and would soon end. Phillips, in particular, anticipated a populist rising. It did not happen. Instead, nearly 20 years later, the second Gilded Age is alive, if not so well. Why such longevity? The answer tells us something about how these two epochs, for all their striking similarities, are also profoundly unalike.

Missing Utopias and Dystopias

As a title, Apocalypse Now could easily have been applied to a movie made about late nineteenth century America. Whichever side you happened to be on, there was an overwhelming dread that the nation was dividing in two and verging on a second civil war, that a final confrontation between the haves and have-nots was unavoidable.

Irate farmers mobilized in cooperative alliances and in the Populist Party. Farmer-labor parties in states and cities from coast to coast challenged the dominion of the two-party system. Rolling waves of strikes, captained by warriors from the Knights of Labor, enveloped whole communities as new allegiances extended across previously unbridgeable barriers of craft, ethnicity, even race and gender.

Legions of small businessmen, trade unionists, urban consumers, and local politicians raged against monopoly and "the trusts." Armed workers' militias paraded in the streets of many American cities. Business and political elites built massive urban fortresses, public armories equipped with Gatling guns (the machine guns of their day), preparing to crush the insurrections they saw headed their way.

Even today the names of Haymarket (the square in Chicago where, in 1886, a bombing at a rally of rebellious workers led to the legal lynching of anarchist leaders at the most infamous trial of the nineteenth century), Homestead (where, in 1892, the Monongahela River ran red with the blood of Pinkerton thugs sent by Andrew Carnegie and Henry Clay Frick to crush the strike of their steelmaking employees), and Pullman (the company town in Illinois where, in 1894, President Grover Cleveland ordered Federal troops to put down the strike of the American Railway Union against the Pullman Palace Car Company) evoke memories of a whole society living on the edge.

The first Gilded Age was a moment of Great Fears, but also of Great Expectations - a period infatuated with a literature of utopias as well as dystopias. The two most successful novels of the nineteenth century, after Uncle Tom's Cabin, were Edward Bellamy's utopian Looking Backward and the horrific dystopia Caesar's Column by Populist tribune Ignatius Donnelly. The latter reached its denouement when Donnelly's fictional proletarian underground movement, the "Brotherhood of Destruction," marked its "triumph" with the erection of a giant pyramid composed of a quarter-million corpses of its enemy, "the Oligarchy" and its minions, cemented together and laced with explosives so that no one would dare risk removing them and destroying this permanent memorial to the barbarism of American industrial capitalism.

This end-of-days foreboding and the thirst for utopian release were not, moreover, confined to the ranks of agrarian or industrial trouble-makers. Before "Pullman" became a word for industrial serfdom and the Federal government's bloody-mindedness, it was built by its owner, George Pullman, as a model industrial city, a kind of capitalist utopia of paternal benevolence and confected social harmony.

Everyone was seeking a way out, something wholly new to replace the rancor and incipient violence of Gilded Age capitalism. The Knights of Labor, the Populist Party, the anti-trust movement, the cooperative movements of town and country, the nation-wide Eight-Hour Day uprisings of 1886 which culminated in the infamy of the Haymarket hangings, all expressed a deep yearning to abolish the prevailing industrial order.

Such groups weren't just angry; they weren't merely resentful - although they were that, too. They were disturbed enough, naÃ̅ve enough, desperate enough, inventive enough, desiring enough, deluded enough - some still drawing cultural nourishment from the fading homesteads and workshops of pre-industrial America - to believe that out of all this could come a new way of life, a cooperative commonwealth. No one really knew what exactly that might be. Still, the great expectation of a future no longer subservient to the calculus of the marketplace and the capitalist workshop lent the first Gilded Age its special fission, its high (tragic) drama.

Fast-forward to our second Gilded Age and the stage seems bare indeed. No great fears, no great expectations, no looming social apocalypses, no utopias or dystopias - just a kind of flat-line sense of the end of history. Where are all the roiling insurgencies, the break-away political parties, the waves of strikes and boycotts, the infectious communal upheavals, the chronic sense of enough is enough? Where are the earnest efforts to invoke a new order which, no matter how sketchy and full of unanswered questions, now seem as minutely detailed as the blueprints for a Boeing 747 compared to "yes we can"?

What's left of mainstream populism exists on life-support in some attic of the Democratic Party. Even the language of our second Gilded Age is hollowed out. In a society saturated in Christian sanctimony, would anyone today describe "mankind crucified on a cross of gold" as William Jennings Bryan once did, or let loose against "Mammon worship," condemn aristocratic "parasites," or excommunicate "vampire speculators" and the "devilfish" of Wall Street? If nineteenth century evangelical preachers once pronounced anathema on capitalist greed, twenty-first century televangelists deify it. Tempers have cooled, leaving God, like many Americans, with only part-time employment.

The Great Silence

I exaggerate, of course. Movements do exist today to confront the inequities and iniquities of our own Gilded Age. Wall Street bandits are, once in a while, arrested by a sheriff. Some ministers, even born-again ones, do still preach the Social Gospel. But all this seems a pale shadow of what was. Something fundamental about the metabolism of capitalism has changed.

Perhaps the answer is simple and basic: The first Gilded Age rested on industrialization; the second on de-industrialization. In our time, a new system of dis-accumulation looted American industry, liquidating its assets to reward speculation in "fictitious capital." After all, the rate of investment in new plant, technology, and research and development all declined during the 1980s. For a quarter-century, the fastest growing part of the economy has been the finance, insurance, and real estate (FIRE) sector.

De-industrialization has set off an avalanche whose impact is still being felt in the economy, in the country's political culture, and in everyday life. It laid the industrial working class and the labor movement low, killing it twice over. This, more than anything else, may account for the great silence of the second Gilded Age, when measured, at least, against the raucous noise of the first. Labor was mortally wounded by direct assault, beginning with President Reagan's decision in 1981 to fire all the striking air traffic controllers. His draconian act licensed American business to launch its own all-out attack on the right to organize, which continues to this day.

In itself, however, resorting to coercion to deal with the opposition hardly distinguishes our own gilded elite from the first one. If anything, we live in less savage times, at least here at home. More fatal by far was the arrival of a new mode of capital accumulation, starkly different from the one that had prevailed a century ago. It eviscerated towns, cities, regions, and whole ways of life. It demoralized people, hollowed out popular institutions that had once offered resistance, and stoked the fires of resentment, racism, and national revanchism. Here was the raw material for mean-spirited division, not solidarity.

Dis-accumulation transformed the working class into a disaggregated pool of contingent labor, contract labor, temporary labor, and part-time labor, all in the interests of a new "flexible capitalism." Ideologues gussied-up this floating workforce by anointing it "free agent" labor, a euphemism designed to flatter the free market homunculus in each of us - and, for a time, it worked. But the resulting reality has proved a bitter pill to swallow. To be a "free agent" today is to be free of health care, pensions, secure jobs, security in every sense. In our gilded era, downward mobility, lasting a quarter-century and still counting, has marked the social trajectory of millions of people living in the American heartland.

Dis-accumulating capitalism also undermined the political gravitas of poverty. In the first Gilded Age, poverty was a function of exploitation; in the second, of exclusion or marginalization. When we think about poverty, what comes to mind is welfare and race. The first gilded age visualized instead coal miners, child labor, tenement workshops, and the shantytowns that clustered around the steel mills of Aliquippa and Homestead.

Poverty arising out of exploitation ignited widespread moral revulsion and a robust political assault on the power of the exploiters. The perpetrators of the poverty of exclusion of our own time have been trickier to identify. In his 1962 book The Other America, Michael Harrington noted the invisibility of poverty. That was half a century ago and misery still lives in the shadows. Helped along by an ingrained racism, poverty in the second Gilded Age was politically neuteredÂ… or worse.

Decline, dispossession, and marginalization: a grim scenario. Yet the new political economy of finance-based dis-accumulation also announced itself as the second coming of democratic capitalism. And in the realm of the collective imaginary, if not in reality, it convinced millions.

The Myth of Democratic Capitalism

Aristocrats don't exist anymore, but it is remarkable how long they lasted as major actors in the country's political dramaturgy. Franklin Delano Roosevelt was still denouncing "economic royalists" and "tories of industry" at the height of the New Deal. The struggle against the counter-revolutionary aristocrat, seen to be subverting the institutions of democratic life, piling up unearned riches, supplied the energy powering American reform for generations. In real life, the robber baron industrialists and financiers of Wall Street were no more aristocrats than my grandma from the shtetl. They were parvenus.

For their own good reasons, however, they actively conspired in this popular misperception by playing the aristocratic role for all it was worth. In hindsight, what looks like one of the silliest utopias of the first Gilded Age was enacted by these nouveaux riche, performing in tableaux vivant at gala balls dressed in aristocratic drag, or cavorting in the castles and villas they had transported stone by stone from France and Italy, or showing off at the weddings of their daughters to the offspring of bankrupt European nobility, or parading to New York's Metropolitan Opera in coaches driven by liveried servants and embossed with their family's "coat of arms," complete with hijacked insignia and faked genealogies that concealed their owners' homelier origins.

We may laugh at all this now. Back then, for millions, these aristocratic pretensions confirmed an ancient Jeffersonian suspicion: Capitalists were nothing more or less than camouflaged aristocrats. And mobilizing to rescue the republic and democracy from such a danger was practically an indigenous instinct. However, pushing beyond this horizon of political democracy in the direction of social democracy is a different matter entirely, arousing anxiety about threatening the understructure of private property which is, after all, also part of the American dream. Having an aristocracy to kick around, even an ersatz one, can be politically empowering.

Minus the oddball exception or two, the new tycoonery of the second Gilded Age does not fancy itself an aristocracy. It does not dress up like one or marry off its daughters to fortune-hunting European dukes and earls. On the contrary, its major figures regularly dress down in blue jeans and cowboy hats, affecting a down-home populism or nerdy dishevelment. However addicted to the paraphernalia of flamboyant excess they may be, the new capitalist elite does not pretend these are the insignia of ruling class entitlement.

Once upon a gilded time, the lower orders aped the fashions and manners of their putative betters; today it's the other way around. Indeed, it is no longer even apt to talk of a "leisure class," since our moguls of the moment are workaholics, Olympians of the merger-and-acquisition all-nighter.

Although the economic and political throw-weight of our gilded elite is at least as great as that of its predecessors in the days of J.P. Morgan and John D. Rockefeller, an American fear of a moneyed aristocracy has subsided accordingly. Instead, from the Reagan era on, Americans have been captivated by businessmen who took on the rebel role against a sclerotic corporate order and an ossified government bureaucracy that, together, were said to be blocking access to a democracy of the bold.

Often men from the middling classes, lacking in social pedigree, the overnight elevation of people like Michael Milken, Carl Ichan, or "greed is healthy" Ivan Boesky, flattered and confirmed a popular faith in the American dream. These irreverent new "revolutionaries," intent on overthrowing capitalism in the interests of capitalism, made fun of the men in pin-striped suits.

When the captains of industry and finance lorded it over the country in the late nineteenth century, no one dreamed of calling them rebels against an overweening government bureaucracy or an entrenched set of "interests." There was then no government bureaucracy and tycoons like Russell Sage and Jay Gould were "the interests." They worried about being overthrown, not overthrowing someone else.

Our corporate elite are much more adept than their Gilded Age predecessors were at playing the democracy game. The old "leisure class" was distinctly averse to politics. If they needed a tariff or tax break, they called up their kept Senator. When mortally challenged by the Populists and William Jennings Bryan in 1896, they did get involved; but, by and large, they didn't muck about in mass party politics which they saw as too full of uncontrollable ethnic machines, angry farmers, and the like. They relied instead on the Federal judiciary, business-friendly Presidents, constitutional lawyers, and public and private militias to protect their interests.

Beginning in the 1970s, our age's business elite became acutely politically-minded and impressively well-organized, penetrating deeply all the pores of party and electoral democracy. They've gone so far as to craft strategic alliances with elements of what their nineteenth century predecessors - who might have blanched at the prospect - would have termed the hoi polloi. Calls to dismantle the federal bureaucracy now carry a certain populist panache, while huffing and puffing about family values has - so far - proven a cheap date for a gilded elite that otherwise generally couldn't care less.

Moreover, the ascendancy of our faux revolutionaries has been accompanied by media hosannas to the stock market as an everyman's Oz. America's long infatuation with its own democratic-egalitarian ethos lent traction to this illusion.

Horace Greely's inspirational admonition to "go West young man" echoed through all the channels of popular culture in the 1990s - from cable TV shows and mass circulation magazines to baseball stadium scoreboards and Internet chat rooms. Only now Greeley's frontier of limitless opportunity had migrated back East to the stock exchange and into the ether of virtual or reality. The culture of money released from all ancient inhibitions enveloped the commons.

"Shareholder democracy" and the "ownership society" are admittedly more public relations slogans than anything tangible. Nonetheless, you can't ignore the fact that, during the second Gilded Age, half of all American families became investors in the stock market. Dentists and engineers, mid-level bureaucrats and college professors, storekeepers and medical technicians - people, that is, from the broad spectrum of middle class life who once would have viewed the New York Stock Exchange with a mixture of awe, trepidation, and genuine distaste, and warily kept their distance - now jumped head first into the marketplace carrying with them all their febrile hopes for social elevation.

As Wall Street suddenly seemed more welcoming, fears about strangulating monopolies died. Dwindling middle-class resistance to big business accounts for the withering away of the old anti-trust movement, a telling development in the evolution of our age's particular form of "big-box" capitalism. Once, that movement had not only expressed the frustrated ambitions of smaller businessmen, but of all those who felt victimized by monopoly power. It embodied not just the idea of breaking up the trusts, but of competing with, or replacing them with, public enterprises.

Long before the Reagan counter-revolution defanged the whole regulatory apparatus, however, the "anti-trust" movement was over and done with. Its absence from the political landscape during the second Gilded Age marks the demise of an older middle-class world of local producers, merchants, and their customers who were once bound together by the ties of commerce and the folk truths of small town Protestantism.

Big-box capitalism, the capitalism of Wal-Mart, still incites local uproars that carry a hint of that anti-trust past, but oppositional forces are divided. The capitalism of which Wal-Mart is emblematic generates a dissonant universe of political and cultural desires. It appeals, first of all, to instincts of individual and family material wellbeing which may run up against calls for a wider social solidarity. Moreover, in its own everyday way consumer culture - more far-reaching than anything imaginable a century ago - channels desire into forms of expressive self-liberation. Grand narratives that tell a story of collective destiny - Redemption, Enlightenment, and Progress, the Cooperative Commonwealth, Proletarian Revolution - don't play well in this refashioned political theater.

The End of the Age of Acquiescence?

However, the wheel turns. The capitalism of the Second Gilded Age now faces a systemic crisis and, under the pressure of impending disaster, may be headed back to the future. Old-fashioned poverty is making a comeback. Arguably, the global economy, including its American branch, is increasingly a sweatshop economy. There is no denying that brute fact in Thailand, China, Vietnam, Central America, Bangladesh, and dozens of other countries and regions that serve as platforms for primitive accumulation. Hundreds of millions of peasants have become proletarians virtually overnight.

Here at home, something analogous has been happening, but with an ironic difference and bearing within it a new historic opportunity. One might call it the unhorsing of the middle class.

During the first Gilded Age, the sweatshop seemed a noxious aberration. It lawlessly offered irregular employment at sub-standard wages for interminable hours. It was ordinarily housed helter-skelter in a make-shift workshop that would be here today, gone tomorrow. It was an underground enterprise that regularly absconded with its workers' paychecks and made chiseling them out of their due into an art form.

Today, what once seemed abnormal no longer does. The planet's peak corporations depend on this system. They have thrived on it. True enough, it has also encouraged the proliferation of petty enterprises - sub-contractors, consulting firms, domestic service companies - fertilizing the soil in which our age of democratic capitalism is rooted. But the ubiquity of the sweated economy promises to alter the nation's political chemistry.

Many of the newly flexible proletarians working for Wal-Mart, for auto parts or construction company sub-contractors, on the phones at direct mail call centers, behind the counters at mass market retailers, earn a dwindling percentage of what they used to. Even new hires at the Big Three automobile manufacturers will now make a smaller hourly wage than their grandfathers did in 1948. So too, the relative job security such employees once enjoyed is gone, leaving them vulnerable to the "lean and mean" dictates of the new capitalism: double or triple work loads; or, even worse, part-time work, work always shadowed by indignity and fear; or, worse yet, no work at all.

Meanwhile, the white collar Tomorrowland of "free agent" techies, software engineers, and the like - not to mention a whole endangered species of middle management - lives a precarious existence, under intense stress, chronically anticipating the next round of lay-offs. Yet many of them were once upon a time members in good standing of the "middle class." Now, they find themselves on the down escalator, descending into a despised state no one could mistake for middle class life.

"Flexible accumulation" joins this dispossession of the middle class to the super-exploitation of millions who never laid claim to that status. Many of these sweated workers are women, laboring away as home health care aides, in the food services industry, in meat processing plants, at hotels and restaurants and hospitals, because the arithmetic of "flexible accumulation" demands two workers to add up to the livable family wage not so long ago brought home by a single wage earner.

Millions more are immigrants, legal as well as undocumented, from all over the world. They live, virtually defenseless, in a twilight underworld of illegality and prejudice. Thanks to all this, the category of the "working poor" has reentered our public vocabulary. Once again, as during the first Gilded Age, poverty seems a function of exploitation at work, not only the lot of those excluded from work.

Might these developments augur the end of our second Gilded Age; or rather the end of the age of acquiescence? No one can know. Yet anger and resentment over insecurity, downward mobility, exploitation, second-class citizenship, and the ill-gotten gains of our Gilded Age mercenaries and their political enablers already rippled the political waters during the mid-term elections of 2006. This primary season has witnessed a discernable leftward shift of the center of gravity within even the cowed leadership ranks of the Democratic Party, a shift driven in large measure by the sub-prime mortgage collapse and the ominous rumblings of severe recession.

Anger and resentment, however, do not by themselves comprise a visionary alternative. Nor is the Democratic Party, however restive, a likely vehicle of social democratic aspirations. Much more will have to happen outside the precincts of electoral politics by way of mass movement building to translate these smoke signals of resistance into something more muscular and enduring. Moreover, nasty competition over diminishing economic opportunities can just as easily inflame simmering racial and ethnic antagonisms.

Nonetheless, the current break-down of the financial system is portentous. It threatens a general economic implosion more serious than anyone has witnessed for many decades. Depression, if that is what it turns out to be, together with the agonies of a misbegotten and lost war no one believes in any longer, could undermine whatever is left of the threadbare credibility of our Gilded Age elite.

Legitimacy is a precious possession; once lost it's not easily retrieved. Today, the myth of the "ownership society" confronts the reality of the "foreclosure society." The great silence of the second Gilded Age may give way to the great noise of the first.

Steve Fraser is working on a book about the two gilded ages. A Tomdispatch regular, he is the author of, among other works, the just published Wall Street: America's Dream Palace. He is Editor-at-Large of New Labor Forum magazine.