Tuesday, May 13, 2008

JPMorgan Chase CEO: Recession Just Beginning

JPMorgan Chase CEO: Recession Just Beginning

Money News

NEW YORK -- JPMorgan Chase & Co.'s chief executive said Monday that while the crisis in the credit markets appears to be three-quarters over, he believes a U.S. recession is just beginning.

"Even if the capital markets crisis resolves, it does not mean that this country will not go into a bad recession," said CEO James Dimon, whose bank saw its first-quarter profit fall by half due to the recent collapse of the U.S. mortgage market. "The recession just started."

"We don't know if it's going to be mild or severe," he continued, speaking at a conference in New York hosted by Swiss bank UBS AG. "We're thinking there's a third of a chance that it's going to be pretty bad ... closer to the 1982 recession than the very mild recessions we had in 2001 and 1990."

Also incomplete is JPMorgan's acquisition of Bear Stearns Cos., the toppling investment bank that JPMorgan offered to buy in March.

"I want to make it perfectly clear: Mission not accomplished," Dimon said. He warned investors that while he still believes the deal was a good decision, "we are bearing an awful lot of risk" by taking on Bear Stearns' assets.

Bear Stearns is expected to post 2009 earnings of $800 million to $1.13 billion, Dimon said.

JPMorgan has so far found positions for 40 percent of the 14,000 Bear Stearns employees and job opportunities outside the company for an additional 1,500 people, Dimon said.

Bear Stearns shareholders are scheduled to vote on the proposed acquisition on May 29.

JPMorgan shares rose 22 cents to $46.79 in afternoon trading. Bear Stearns shares rose 5 cents to $10.28.

From The Credit Crunch To The Spectre Of Global Crisis

From The Credit Crunch To The Spectre Of Global Crisis

By Chris Harman

Go To Original

There is a hierarchy of precedents for financial crises. In August, as things began to unravel, the initial comparisons were with the 1998 collapse of Long Term Capital Management. That is, a freak event in which the sins of a few egg-heads temporarily hit confidence. Then, as it became clear that banks were in pain, the comparator became the 1980s and 1990s Savings and Loan crisis that saw bank losses worth 3 percent of US economic output. Now, after a very nasty week in markets, the whispers are that it might even be the big one: the worst crisis since the 1930s.
The Lex Column, Financial Times, 7 March 2008

13/05/08 "IS" -- - That was the Lex Column of the Financial Times as we went to press. It displays the bewilderment afflicting those who are supposed to be providing some direction to the system as they alternate between sheer panic, fake optimism, and simply hoping things will turn out all right.

Blaming the bankers

The easiest explanation for the crisis is to blame the bankers. The crisis "follows a well-trodden path laid down by centuries of financial folly", says Ken Rogoff, former chief economist at the International Monetary Fund.1 Raghuram Rajan, another former IMF chief economist, thinks the problem is the vast bonuses bankers receive when they lend and borrow.2 Billionaire financier George Soros blames "the financial authorities" for "injecting liquidity…to stimulate the economy". This "encouraged ever greater credit expansion".3 Even the French president, Nicolas Sarkozy, has joined the chorus, declaring that "something seems out of control" with the financial system.4 He should know, since his half-brother heads the European wing of the Carlisle Group, whose hedge fund has gone bust.

For supporters of capitalism to heap blame on the financial system is not as strange as it may seem. In so far as mainstream neoclassical economists have explanations for the slump of the 1930s, they are in terms of the operations of the money markets. The same is true of most mainstream Keynesian economists, who now believe their chance has arrived to come in out of the cold after three decades. So the Guardian's Larry Elliot argues:

This is a chance, perhaps a once in a lifetime chance, to break the dependency culture by forcing big finance to be more transparent, having a clearly defined separation between commercial and investment banking, and by banning some of the more toxic products.5

Deeper imbalances

Simply blaming the avarice and short-sightedness of bankers does not explain how they found it so easy to get the funds that they gambled so heavily. It also avoids asking what shape the world economy would have been in without such lending.

In their bewilderment, some strongly pro-capitalist commentators are raising such questions. For instance, Martin Wolf of the Financial Times writes of the crisis originating in "global macroeconomic disorder", rather than simply "financial fragility" or "mistakes by important central banks".6 Commentators such as Wolf have noted a surplus of "savings" over investment in some of the world's most important economies. The finger is usually pointed at East Asia. The head of the US Federal Reserve, Ben Bernanke, has cursed this "saving glut in the rest of world" for feeding the upsurge of lending to the US.7 But surpluses have also been generated nearer to home: "Investment rates have fallen across virtually all industrial country regions".8 According to one report:

The real driver of this saving glut has been the corporate sector. Between 2000 and 2004, the switch from corporate dis-saving to net saving across the G6 [France, Germany, the US, Japan, Britain and Italy] economies amounted to over $1 trillion… The rise in corporate saving has been truly global, spanning the three major regions—North America, Europe, and Japan.9

In other words, "Instead of spending their past profits, [US] businesses are now accumulating them as cash".10

Such an excess of saving has an effect noted by John Maynard Keynes in the 1930s—and by Karl Marx 60 years earlier. It creates recessionary pressures. The capitalist economy can only function normally if everything produced is sold. This will only happen if people spend all the income from producing goods—the wages of workers, the profits of the capitalists—on buying those goods. But if the capitalists do not spend all their profits (either on their own consumption or, more importantly, on investment) then a general crisis of overproduction can spread through the system. Firms that cannot sell their goods react by sacking workers and cancelling orders, and this in turn causes further contractions in the market. What begins as an excess of saving over investment ends up as a recession that can turn into a slump.

Keynes and his followers argued that there was a way to stop this happening. The government could intervene to encourage capitalists to spend their savings—by changing tax and interest rates to make it more profitable for firms to invest, by borrowing to undertake investment of its own, or by giving handouts to consumers to encourage them to spend. On occasion such methods have worked in the short term. Government investment or handouts have provided an immediate market for unsold goods, encouraging firms to increase their output and, as a by-product, increasing tax revenues sufficiently to pay for the extra government spending.

But there are inbuilt limits to the long term effectiveness of such methods when faced with a serious recession. Government borrowing must eventually be paid for. Otherwise the value of the currency will decline and inflation will result. If the spending is repaid by taxing profits it reduces the incentive to invest; if it is repaid by taxing consumers, it cuts into their buying power. The measures Keynes himself recommended to British governments in the 1930s would not have been nearly sufficient to end the mass unemployment of the time,11 while attempts to deal with the crisis of the mid-1970s in this way simply added rising inflation to rising unemployment.

In recent years government borrowing and spending have played a role in absorbing the surpluses created by the gap between saving and investment—particularly in the case of the US arms budget. "Official military expenditures for 2001-5 averaged…42 percent of gross non-residential private investment", even though "official figures…excluded much that should be included in military spending".12 But as important as government spending has been the upsurge of borrowing by US consumers to buy things that they cannot afford out of their wages and salaries. Subprime mortgages have been central to this.

In 2001 Alan Greenspan, then head of the US Federal Reserve, encouraged the financial market to let rip and provide for such borrowing when panic over the 9/11 attacks threatened to exacerbate an already deepening recession.13 The Italian Marxist Riccardo Bellofiore has aptly called this reaction "privatised Keynesianism".14 It was not just a question of a central banker doing favours for his friends who ran big private banks. As Martin Wolf recognises, "Surplus savings" created "a need to generate high levels of offsetting demand",15 and lending to poor people provided it. "US households must spend more than their incomes. If they fail to do so, the economy will plunge into recession unless something changes elsewhere".16 "The Fed could have avoided pursuing what seem like excessively expansionary monetary policies only if it had been willing to accept a prolonged recession, possibly a slump".17

In other words, only the financial bubble stopped recession occurring earlier. The implication is that there is an underlying crisis of the system as a whole, which will not be resolved simply by regulating financiers. Nor, in the medium term, can the sort of action being taken by the US Federal Reserve and the Bush administration solve the problems. They have cut interest rates and taxes to boost consumption. Martin Wolf, using a metaphor from Keynes, has described this as dropping money "from helicopters".18 But the most such measures could do would be to reflate the lending and borrowing bubble until it bursts again in a couple of years time. It may well not even achieve that.

The source of the imbalances

Where does the "saving-investment" gap itself come from? Why have firms failed to invest their past profits on the scale they once did?

Studies of the advanced industrial economies show that there was a big drop in average rates of profit from the end of the 1960s through to the early 1980s.19 There were recurrent bursts of recovery in the mid to late 1980s and 1990s. But by 2000 profit rates had still not risen back to the levels that had sustained capitalism's longest boom during the quarter century after the Second World War, a time now often called "the golden age of capitalism". The highest point they reached in the US, around 1997, was only marginally above the level that had seen the onset of the first major post-war recession in 1973-4.

As I have argued in this journal in the past, the partial recovery that did occur was based on three things. The lower rate of profit caused a slowdown in investment, which did not rise as rapidly in relation to new profit as previously. Some firms went bust, particularly during and after the recession of the early 1990s, allowing the remainder to benefit at their expense. Most importantly, there was a general increase in the share of output going to capital as opposed to labour—in Marx's terms an increase in the rate of exploitation (figure 1).20

Figure 1: Wage share of national income (percent)
Source: OECD

Figure 1

The increased rate of exploitation is not confined to the advanced industrial counties. It is also a feature of the "newly industrialising" countries of East Asia. In China, for instance, real wages have not nearly kept up with rising output, while big sections of the peasantry have probably suffered falling living standards over the last decade.2122 although people still have to save an average of about 16 percent of their income if they are going to be able to pay bills for healthcare or to provide for their old age. As in the industrial countries, much of the saving in recent years has come from enterprises,

The worldwide increase in the rate of exploitation cuts the proportion of total output that workers can afford to buy as consumption goods. The economy is therefore dependent on investment if all the goods produced are to be sold, and the failure of capital to invest creates a potentially recessionary situation that may be hidden by financial and other bubbles.

Such bubbles arise because profits are not invested productively and instead flow, via the financial system, from one speculative venture to another. Each venture seems for a time to offer above average profits—the stock exchange and property booms of the late 1980s, the dotcom boom of the late 1990s, the subprime mortgage boom of 2002-6. Although none of these are directly productive, they can, for a period, provide a boost to spending (through outlay on office buildings, spending by those managing the speculation, the conspicuous consumption needed to attract speculative funds, and so on). That leads to a short term increase in real economic output.

As the economists Boyer and Aglietta have explained, the US boom of the second half of the 1990s rested on "a growth regime whereby overall demand and supply are driven by asset price expectations, which create the possibility of a self-fulfilling virtuous circle. In the global economy, high expectations of profits trigger an increase in asset prices which foster a boost in consumer demand, which in turn validates the profit expectations… One is left with the impression that the wealth-induced growth regime rests upon the expectation of an endless asset price appreciation".23

This is what is happening today. The most logical explanation seems to be the continuing low long term profitability. The Marxist economist Robert Brenner has used official US statistics to produce figures that show manufacturing profit rates in 2000-5 at levels lower than in either the early 1970s or the 1990s (although higher than in the late 1970s and 1980s). His calculations for all non-financial corporations show them as about a third lower in 2000-6 than in the 1950s and 1960s, and about 18 percent lower than in the early 1970s.24

Some commentators hold a different view on trends in long term profit rates. They believe that profit rates have been completely restored by increasing exploitation. This is held to be particularly true in the US, where increased productivity over the past seven years has been accompanied by stagnating wages and the loss of one in six manufacturing jobs. Martin Wolf asserts that "on average, US companies are in decent shape".25 The OECD World Outlook asserts that "the non-financial corporate sector is healthy".26 The French Marxist Michel Husson was already accepting eight years ago that there were "high levels of profitability".27 Today he writes of "a spectacular re-establishment of the average rate of profit since the mid-1980s".2829 Another leading Marxist economist Fred Moseley wrote recently, "The rate of profit appears to be more or less fully restored" without "a deep depression characterised by widespread bankruptcies that would result in a significant devaluation of capital", which is what Marx thought "would usually be required".

There are, however, reasons to believe that Brenner's account of profitability is the correct one. In recent years companies have tended to exaggerate their profits in order to boost their standing on stock exchanges, to deter takeover bids and to increase the value of "stock options" given to their top managers. So in the last boom in the US, that of the late 1990s, declared profits were up to 50 percent higher than actual profits.30 There are signs that the same thing has been happening over the past four or five years, with corporations concealing their level of indebtedness, while including in their declared profits proceeds from the financial bubble that have turned out to be fictional.

The mainstream economist Andrew Smithers has drawn attention to the way the profitability figures provided by companies give an exaggerated picture of what is really happening. He points out that the US's official figures shown in the "Flow of Funds" accounts involve adjustments that have the effect of "massively boosting US net worth by the addition of 'statistical discontinuities' and rising property values".3132 According to Samuel DiPiazza, chief executive of PwC, one of the US's four big accounting firms, many industrial concerns in the US have looked to finance to augment their profits in recent years and have "invested in the asset-backed and mortgage-backed securities".33 In fact, the Flow of Funds accounts showed increases in "real estate worth" alone accounting for $757 billion out of the $1,239 billion increase in "net worth" of the whole of the non-farm, non-financial corporate sector in 2005 (while "discontinuities" accounted for another $506 billion).

In other words, much of the apparent profitability of US corporations has depended upon the way the bubble increased the paper value of their financial and real estate assets well above their underlying real value.

Fred Moseley notes the way in which corporations have been hiding their level of debt by "the increasing transfer of debt from the books of non-financial corporate businesses to 'special purpose vehicles'".34 But hidden debt of this sort suggests that profitability on investments made in the past has not been as high as claimed, and that Brenner's account of relatively low profit rates would seem to be correct.

Finally, even if average profitability had risen as much as is sometimes claimed, it would not necessarily have been enough to raise the level of investment. Martin Wolf added a rider to his assertion that on average companies were in "good shape", to the effect that there is a "fat tail" of companies with low profitability and heavy debt.35 In other words, even if some companies have profits high enough to undertake large scale productive investment, there are many others that do not (among them are such giants as General Motors and Ford). This would leave investment in the economy at a low level, leading to a repeated tendency to recession.

What happens next?

The present financial crisis is a symptom of the same underlying problem that has plagued world capitalism since the mid-1970s. Increased exploitation has been able to stop a further downward plunge in the rate of profit, and even to restore it somewhat. But it has not been able to bring it back to a level that will persuade capital to invest sufficiently to avoid recurrent recessions. And the omens this time round look serious.

This is recognised even by many of those who see it as caused by runaway finance. They see that only the most drastic remedies can put a check on it, but that such remedies could precipitate a deep recession. Soros, for instance, argues that "credit expansion must now be followed by a period of contraction because some of the new credit instruments and practices are unsound and unsustainable", 36 but then worries that the outcome might be not just a US recession but a world slump.

The spread of recession increases the problems of the financial sector and spreads them to part of the productive sector. It makes it impossible for all sorts of very big borrowers to recover enough of what they have lent to repay what they owe. Nouriel Roubini of New York University's Stern School of Business sees "a rising probability of a 'catastrophic' financial and economic outcome" with "a vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe".37

Such fears explain the behaviour of the US Federal Reserve and the Bush government. They are afraid of the crisis deepening, and so are pouring money into the system with a series of interest rate reductions and with the first tax cuts that have benefited anyone apart from the very rich. It is an approach that has led the Wall Street Journal to accuse Bernanke of being a "Keynesian".38

Such a policy really amounts to trying to overcome the collapse of one bubble by inflating another one. But that is likely to add to inflationary pressures at a time when food prices worldwide are soaring and oil prices are at a record level. It also risks provoking a loss of faith in the value of the dollar when it is already falling in value against currencies such as the euro. The fact that the US authorities are prepared to take such a risk, with the potential damage to US global hegemony it entails, is a sign of how seriously they take the situation.

Yet the approach shows signs of failing. It faces all the problems that have beset mainstream Keynesian attempts to deal with crises in the past. The tax cuts are not on anything like the same scale as the private loans that people are now under enormous pressure to repay, while the cuts in interest rates are not feeding through. As Wolfgang Müncher argues:

The US Federal Reserve has cut short term rates by a cumulative 225 base point, yet borrowing costs for US consumers and companies have gone up. While the European Central Bank has stoically kept short term interest rates at 4 percent, rates charged to consumers and companies have increased.39

To have more than a short term effect, the US government would have to be putting enough money into people's pockets not only to absorb the worldwide surplus of saving over investment, but also to reassure them that they do not need to save it in order to protect themselves against the impact of a slump. Giving banks or people the incentive to use their money is not the same as making sure they do so. That is why mainstream economists are quoting Keynes's adage that you "can't push on a string".

It is also why some mainstream commentators are convinced that the US government will be forced to go much further. So George Magnus, chief economic adviser to the UBS financial services company, argues that the cost of nationalising Northern Rock is "pretty small beer compared with the kind of activities which I think are going to take place in the United States…a bailout for homeowners in the United States is as close to a surefire thing as I can imagine. The losses on mortgages are so high and the stories and estimates which…people make about repossessions and delinquencies in the housing market are so high that, especially in a presidential election year, I think it's just inevitable that there will be very strong action".40

But then Magnus holds that this crisis is much more serious than the collapse of the Long Term Capital Management hedge fund in 1998, the Stock Exchange Crash of 1987 or the Mexican crisis of 1995. "This is different: (a) because it's big; (b) because it's widespread; and© because it is about solvencies, not just about liquidity. And solvency requires a totally different policy approach than just a liquidity problem." Crises of liquidity occur when firms are profitable but lack the cash to pay their immediate bills; crises of solvency occur when they are operating at a loss.

Müncher sees this as a "hugely contagious solvency crisis" and suspects that "we will ultimately end up with some combination of regulatory relief, fiscal bailouts, nationalisations and many, many bankruptcies of financial institutions that are not too big to fail".41

Two nightmares haunt defenders of the system. One is the great slump of 1929-33. This is not completely off key. There are similarities between what happened in the 1920s and what has happened in recent years. In both cases profit rates were stopped from falling from previously fairly low levels by increased exploitation, creating underlying imbalances between production and consumption that were bridged, for a period, by speculation, unproductive use of resources, and lending to finance consumption.42 Then, as now, it only required the bubble to deflate for the underlying imbalance to make itself felt.

There is, however, one important difference. The level of government spending, especially military spending, in the US is much higher today. As noted earlier, this has played a role alongside private borrowing in maintaining demand in recent years. Short of the US state going bankrupt this government spending provides a floor below which the American economy will not sink. Weaker capitalisms may not, however, be so fortunate.

The second, slightly less frightening, scenario is what happened to Japan in the early 1990s. The collapse of a boom based on a real estate bubble resulted in a long period of near stagnation that has not yet come to an end 16 years later. The losses incurred by the Japanese banks were around the same level as those incurred so far in the US (losses that could well double in the months ahead). Nevertheless, most mainstream commentators are keen to stress that the US today is different—in particular that the Federal Reserve is not making the supposed "mistakes" made by Japan's central bankers. But that rests on the assumption that the root of both crises lay purely in finance, and not in tendencies in the productive sector of the economy as well. In fact problems of profitability in the productive sector played a big role in Japan43 and, as we have seen, they are central to what is happening now.

Japanese capitalism has, of course, survived, despite growing so slowly. But a similar prolonged period of stagnation like that would have a traumatic effect on the US, deepening the so far unfocused bitterness to be found within its working class and shaking US global hegemony still further. It is not really so surprising that, faced with such a possibility, those who run the US state are ignoring the neoliberal credo they preach to the rest of the world.

The political impact

Economic crises in the modern world always have a political impact. This is because the biggest capitalist concerns still operate from national bases, despite all the hype about globalisation. Each relies on its own national state to defend its interests around the world against those of rival multinationals based in other national states. This is especially true at times of crisis.

Because crisis affects the various sections of global capitalism in different ways, governments and central banks react with policies that move in different directions. So over the past eight months the US Federal Reserve has been pouring money into the economy and making big cuts in interest rates; the British government, the Bank of England and the European Central Bank have been trying to restrain public expenditure and keep interest rates high; the Chinese state has been trying to slow down its economy for fear of inflation (and popular unrest) getting out of hand.

If the crisis gets more severe, the disagreements could get quite nasty, with each state trying to exert pressure on others to get its way. In the past the US state could usually use its influence on the European and Japanese governments to get them to accept some of the pain involved in solving its problems. The most famous case was the "Plaza Agreement" 23 years ago, in which the Europeans and Japanese agreed to take action together to reduce the international value of the US currency. One reason the US could get its way was that the other states were dependent on US financial and military power.

The US will try to exert similar pressures now, but it will do so from a weaker position. The most rapidly growing national economy is no longer that of Japan, but that of China—and China is nothing like as dependent on the US economically, financially or militarily as Japan was (and still is).44 The US government can be expected to try to counter its current economic weaknesses through the use of the other tools at its disposal. This means the US showing it has the military power to determine what happens in wide areas of the world and upping the ideological barrage against those other major powers that might stand in its way. Expect more crocodile tears about the horrors in Darfur from those who have created horrors on an even greater scale in Iraq, Afghanistan, Congo-Zaire and Somalia. And expect them to create more such horrors.

It is not only internationally that financial crisis is finding political expression. Different capitals within particular countries are differentially affected by the crisis—it has hit Lloyds and Barclays to a different degree to Northern Rock—and they are attracted to different ways of trying to resolve it. Those who look to serve the interests of capital pull in different directions, develop different perspectives and denounce each other when things go wrong. In the process capitalist hegemony itself can be damaged, particularly in the weaker capitalist states worst hit by the crisis.

We can expect further political ructions in Britain, precisely because the economy has become more dependent on finance as a source of profits (and a centre of employment) over the past two decades than any other advanced industrial state.45 Wolfgang Müncher even holds that "the UK economy is about to undergo a downturn at least as large as that of the US—maybe even worse, because of an even more inflated housing market and because the financial sector constitutes a larger share of gross domestic product".46

Mervyn King, the governor of the Bank of England, has reacted to these problems by calling for "a genuine reduction in our standard of living compared to where it would otherwise have been".47 New Labour, of course, is intent on trying to achieve that through continuing its cuts in real public sector wages for at least another two years, even as food and energy prices soar and those who took advantage of cut rate mortgage deals in recent years face a massive escalation of housing costs.

The inevitable bitterness can have a big ideological fallout. Any recession exposes the claims that are always made during booms, however short lived, about the wonders of capitalism. Martin Wolf, a staunch defender of the system, fears that "the combination of the fragility of the financial system with the huge rewards it generates for insiders will destroy something even more important—the political legitimacy of the market economy itself—across the globe".48

Such worries over "legitimacy" explain the New Labour government's attempts to avoid nationalising Northern Rock, even after it became clear that this was the only way to stop a collapse that would further damage the rest of the financial system. Nationalisation as such is not necessarily inimical to capitalism. It was a characteristic feature even of some of the most right wing regimes in the period from the early 1930s to the mid-1970s. Nor is it some peculiar aberration in the present period. Governments, including those often called "neoliberal", have repeatedly taken over the running of parts of endangered national banking systems to capitalist applause in the past two decades (Chile in the early 1980s, the US in the late 1980s, Japan in the 1990s).

However, such actions stand in clear contradiction to the way neoliberal ideology is used to try to legitimise the current phase of capitalism. That ideology portrays the market as a mechanism of superb efficacy that must not under any circumstances be interfered with. Every time nationalisation is carried through, even the most thorough capitalist form of nationalisation, it challenges that view. It shows that conscious human action can override the supposedly natural laws of the market—and raises the questing of why that action cannot be in the interests of the mass of people rather than in the interests of capital.

Many more such questions are going to be raised as the effects of the monetary crisis work their way through the system. And they will do so as the different national governments try to pass the burden on to those who labour for capital. No wonder it is not only the bankers who are worried as well as bewildered.


Notes

1: Quoted in the Independent, 19 January 2008.

2: Quoted By Martin Wolf, Financial Times, 15 January 2008.

3: Financial Times, 22 January 2008.

4: Quoted on the Financial Times website, 29 January 2007.

5: Guardian, 24 January 2008.

6: Financial Times, 22 January 2008.

7: Quoted in Godley, Papadimitriou, Hannsgen and Zezza, 2007.

8: Terrones and Cardarelli, 2005, p92.

9: "Corporates are Driving the Global Saving Glut", JP Morgan Securities, 24 June 2005.

10: Papadimitriou, Shaikh, Dos Santos and Zezza, 2005.

11: Harman, 1996.

12: Magdoff, 2006, p5. Net physical investment by non-farm, non-financial corporate business in the US in 2006 amounted to $299 billion, the US military budget $440 billion.

13: For a longer account of the emergence of the subprime crisis, see Lapavitsas, 2008.

14: Speech at the Historical Materialism conference, London, November 2007.

15: Financial Times, 22 January 2008.

16: Martin Wolf, Financial Times, 21 August 2007.

17: Martin Wolf , Financial Times, 22 January 2008.

18: Martin Wolf, Financial Times, 12 December 2008.

19: For detailed analysis, see Harman, 2007a.

20: The usual measures of the shares of capital and labour, as in the graph shown here, give only a rough indication of the trend in the rate of exploitation, since, for Marx, surplus value extracted from productive labour also pays for a mass of "unproductive" activities that serve to bolster capitalism (such as the forces of "law and order", the military and the financial system). For simplicity I use the conventional measures here.

21: For more on this, see Charlie Hore's article in this issue.

22: Terrones and Cardarelli, 2005, Box 2.1, p96.

23: Aglietta, 2000, p156. The discussion between Aglietta and Boyer was indicative of a situation where their Regulation School's effort to explain the long term trajectory of capitalism was coming adrift. For a comment on this, see Grahl and Teague, 2000, pp169-170. For an early critique of the Regulation School, see Harman, 1984, pp141-147.

24: Handout provided to participants in the Historical Materialism conference, London, November 2007.

25: Financial Times. 19 February 2008.

26: Quoted by Andrew Smithers, response to "America's Economy Risks Mother Of All Meltdowns", economists' forum, Financial Times website, 20 February 2008.

27: Husson, 1999.

28: Husson, 2008.

29: "Is the US Economy Headed for a Hard Landing?", www.mtholyoke.edu/~fmoseley/hardlanding.doc

30: The Economist, 23 June 2001, quoted in Harman, 2001. For the same phenomenon in the late 1980s, see Harman, 1993.

31: Andrew Smithers, response to "America's Economy Risks Mother Of All Meltdowns", economists' forum, Financial Times website, 20 February 2008.

32: "Flow of Funds Accounts of the United States, Flows and Oustandings, second quarter 2007", Federal Reserve statistical release, p106, table R102, www.federalreserve.gov/RELEASES/z1/20070917/ The "disconunities" figure jumped by $323 billion between 2005 and 2006-equivalent to nearly a fifth of the increase in net worth for the whole sector.

33: Quoted in Financial Times, 6 February 2008.

34: "Is the US Economy Headed for a Hard Landing?", www.mtholyoke.edu/courses/fmoseley/HARDLANDING.doc

35: Financial Times, 19 February 2008.

36: Financial Times, 22 January 2008.

37: Quoted by Martin Wolf, Financial Times, 19 February 2008.

Gulf Seen Between Democracy in Theory and Practice: Survey

Gulf Seen Between Democracy in Theory and Practice: Survey

By Jim Lobe

Go To Original

The basic democratic principle that "the will of the people should be the basis for the authority of government" is supported by overwhelming majorities throughout the world, according to a major new survey of more than 17,000 adults in 19 countries released here Monday.

Large majorities in most of those countries also believe that their own governments are not living up to that principle, according to the poll which was conducted and published by WorldPublicOpinion.org (WPO).

Indeed, an average of 74 percent of respondents in the 19 countries, which represent 59 percent of the world's total population, believe that "the will of the people" should have more influence in how their country is concerned than it currently does.

And an average of 63 percent of respondents say their country is being run by a "few big interests looking out for themselves," rather than "for the benefit of all the people."

The belief that governments were being run by "a few big interests" was particularly pervasive in Ukraine (84 percent), Mexico (83 percent), the United States (80 percent), Nigeria and South Korea (78 percent), and Argentina (71 percent).

"The perception that governments are not responsive to the popular will appears to be contributing to the low levels of confidence in government found around the world," noted Steven Kull, who directs both the WPO and its parent organisation, the University of Maryland's Programme on International Policy Attitudes (PIPA).

"Most see their governments as primarily serving big interests rather than the people as a whole," he added.

The new survey, part of a series conducted by WPO earlier this year to probe global attitudes towards human rights and other key issues, was carried out between January and mid-March this year. The previous surveys have shown, among other things, majority support in most countries for a free press unfettered by government control, even stronger support for gender equality, and growing unease with the impact of economic globalisation, especially in western countries.

The 19 countries in the latest survey included Argentina, Mexico, and the U.S. in the Americas; France, Britain, Poland, Russia, and Ukraine in Europe; Azerbaijan, Egypt, Iran, Jordan, the Palestinian Territories (PT), and Turkey in the greater Middle East; Nigeria in sub-Saharan Africa; and China, India, Indonesia and South Korea in Asia.

On average, 85 percent agreed the principle enshrined in the Universal Declaration of Human Rights, whose 60th anniversary is being celebrated this year, that "the will of the people should be the basis for the authority of the government." Fifty-two percent agreed "strongly", while 33 percent said they agreed "somewhat".

Those who said they agreed "strongly" were most prevalent in relatively new democracies, notably Ukraine (77 percent), Nigeria (75 percent), Indonesia (72 percent), Azerbaijan (63 percent), Mexico and the PT (59 percent each), although 70 percent of Turks, whose longer-standing democracy has been interrupted by several military interventions over recent decades, also agreed strongly.

By contrast, respondents in the more long-standing democratic states were less enthusiastic. While 55 percent of British respondents said they agreed strongly, that was true of only 44 percent of U.S. respondents, and 34 percent of French respondents.

The least enthusiastic respondents were found in India, the world's most populous democratic state, where only 53 percent said they either strongly (32 percent) or "somewhat" (21 percent) agreed with the basic principle -- far below the overall average of 85 percent and even the next most-sceptical group of respondents in Iran.

The survey found substantial dissatisfaction among respondents regarding their perceptions of how well their governments reflected the popular will. When asked to rate on a scale of 0-10 how much influence the "will of the people" has on their own government, the mean response was 4.5 -- well below what they said was the preferred level of 8.0.

An average of 74 percent of all respondents said they wished their government would be more responsive to the popular will than they perceived it to be. The biggest gaps were found in Egypt (97 percent), Nigeria (89 percent), Ukraine (86 percent), Mexico (85 percent), the U.S. and South Korea (83 percent). The smallest gaps were found in Jordan (44 percent) and India (46 percent).

The survey also found low levels of trust in their governments to "do what is right", with majorities respondents in 11 of the countries saying their governments did so "only some of the time" (48 percent) or "never" (six percent). Cynicism was particularly high in South Korea, Mexico, Argentina, and Ukraine.

On the other hand 83 percent of Chinese respondents said they could trust their national government to do what is right "just about always" (23 percent) or "most of the time" (60 percent). The percentages for Egypt were also high, at 13 percent and 71 percent, respectively. Smaller majorities in Russia, Jordan and the PT also said they trusted their government at least "most of the time", while 48 percent of Iranians agreed.

An average of 84 percent of all respondents said they believed their government leaders should be selected through elections in which all citizens can vote, as opposed to the 12 percent who said they should be selected some other way. Support was highest in Indonesia (97 percent), the U.S. (96 percent), Poland, Ukraine, and South Korea (91 percent). Support was lowest in India (33 percent), Egypt and Jordan (24 percent).

At the same time, three out of four respondents said elections alone should "not (be) the only time when the views of the people should have influence," but that leaders should also "pay attention to the views of the people as they make decisions". Four out of five respondents said policymakers should pay attention in particular to public opinion polls.

Views on this point were strongest in South Korea (94 percent), Nigeria (93 percent), Mexico (92 percent), Poland (91 percent), and Ukraine (90 percent) and weakest in Egypt (64 percent) and India (56 percent).

Respondents were also asked whether they thought their governments should take account of world public opinion in making decisions. Support for that proposition was strongest in Indonesia, Mexico, Nigeria, China, Azerbaijan, and Britain in descending order. Support was weakest by far in India, followed by the PT, the U.S., Russia, and Argentina. Among all 19 countries, respondents in the U.S. thought their government took into account world public opinion the least.

Taking a Stand Against War

Taking a Stand Against War

By Scott Ritter

Go To Original

As someone who has been urging focused citizen activism for some time now, I find it heartening that there are those in the United States who put action to words and seek to lead by example. This is the case with Chicago Alderman Joe Moore, who, together with seven of his 49 colleagues (Toni Preckwinkle, Sandi Jackson, Eugene Schulter, Robert Fioretti, Freddrenna Lyle, Ricardo Munoz and Mary Ann Smith), has prepared a resolution for the Chicago City Council opposing war on Iran. By itself, this resolution most probably will not serve to alter the policies currently being pursued by the Bush administration. But when a great American city such as Chicago takes the lead in expressing its rejection of irresponsible national policy, other cities should, and will, take notice.

I have been asked to be a witness, together with other experts on Iran and U.S. Middle East policy, before the City Council as it considers this resolution. I think it is of great importance that the representatives of the people of Chicago vote to adopt it in its entirety. I would also encourage other municipalities to consider similar resolutions opposing war on Iran, and to express their concern through the adoption of resolutions which, collectively, might serve as a notice to the United States Congress, as well as the administration of President Bush, that a war with Iran would not be supported by the citizens of this land.

In preparing for my role as witness, I carefully considered the Chicago resolution in its entirety, and offer my analysis of its content as a primer for interested parties. I sincerely hope that the leadership and courage exhibited by the Chicago council members can be replicated across America in a timely fashion, and that the resultant will of the people is recognized by the Congress in time for effective legislation to be drafted and passed which reduces the threat of U.S.-Iranian conflict.

“WHEREAS, The Bush Administration and its Congressional allies are engaging in a systematic campaign to convince the American people that the Islamic Republic of Iran poses an imminent threat to the American nation, American troops in the Middle East and U.S. allies.”

The propaganda war being waged by the Bush administration in this regard has been as intense and relentless as any in recent memory. Either directly or through proxy, the administration has painted a one-sided portrait of Iran which is inaccurate and misleading in the extreme. To have a nation of nearly 80 million people, possessing a history and culture several thousands of years old, suddenly personified in the image of a single individual, Iranian President Mahmoud Ahmadinejad, is a gross misrepresentation. Imagine if one tried to characterize the entire American people in the form of George W. Bush. Iran is a diverse nation, with numerous political and social constituencies which compete across a broad spectrum of forums, governmental and nongovernmental alike. To take the words and deeds of one man, out of context in some cases and inaccurately in others, and use them to paint a picture of national policy is as wrong as it is deceitful.

Iran today poses no threat to the American nation, its allies (including Israel) or American troops in the region. To the extent that U.S. service members are threatened in Iraq, one must consider the reality of a genuine popular resistance by Iraqis to a brutal and illegitimate occupation. It should also be noted that Iran is primarily interested in securing a stable Iraq in the post-Saddam period, a policy requiring Iran to back the current Iraqi government, a Shiite-dominated government which the United States helped empower and which the United States currently supports.

The fact that the current Iraqi government is drawn primarily from two political entities (the Da’wa Party and the Supreme Council for the Islamic Revolution in Iraq) that are closely allied with the Iranians not only belies the U.S. claim that Iran seeks to undermine security in Iraq (since to accept this proposition one would have to embrace the premise that Iran is fighting itself), but also illustrates the inherent inconsistency of the U.S. position in Iraq, which is to oppose the one regional power which supports the stated U.S. objective of empowering the Shiite-dominated government in Baghdad. The reality is that it is bad U.S. policy, not any concerted action on the part of Iran, which serves as the greatest threat to U.S. forces in the Middle East.

“WHEREAS, This campaign bears a strong resemblance to that waged during the lead-up to the Iraq War and occupation, with the use of unreliable sources, exaggerated threat assessments, the selective use of information, unsubstantiated accusations about Iran’s nuclear program and its supply of weapons to Iraqi forces as centerpieces of their case to the American people for aggressive action against Iran.”

If the current war in Iraq has taught the American people anything, it is that we can never again have our nation led to war based upon unsubstantiated data, rumor and speculation. Effective congressional oversight could have retarded the Bush propaganda on Iraq, especially concerning the WMD issue and the allegations of ties between Saddam’s regime and al-Qaida. The fact that Congress accepted, without question, every negative story produced by the Bush administration, and that the product of this abrogation of constitutional mandate was parroted as fact by a too-compliant media, should serve as a wake-up call that past patterns of behavior are repeating themselves today, this time in the case of Iran.

If one replaces Ahmed Chalabi and the Iraqi National Congress with Alireza Jafazadeh and the Mujahedeen Khalq, and “Curveball” (the disgraced INC-planted intelligence source cited by then-Secretary of State Colin Powell in his infamous February 2003 presentation before the U.N. Security Council) with the “magic laptop computer” (provided by the MEK to U.S. intelligence, and cited by the U.S. as the sole source for many of its claims concerning an ongoing Iranian nuclear weapons program), it is clear that there is much to be suspicious of regarding the Bush administration case against Iran.

When the United States cites the capture of alleged Iranian “Quds Force” officials as proof of Iranian perfidy inside Iraq, and then releases these same individuals months later, citing a lack of intelligence value and the fact that these prisoners pose no security threat, it becomes clear that the U.S. case against Iran is built primarily upon ideologically motivated smoke and mirrors. The Congress must never again allow itself to be used as a rubber stamp for unnecessary war, but it will act only when pushed to do so by an alarmed and awakened constituency.

“WHEREAS, Iran has not threatened to attack the United States, and no compelling evidence has been presented that Iran poses a real and imminent threat to the security and safety of the United States that would justify an unprovoked unilateral pre-emptive military attack.”

In fact, there is overwhelming evidence that Iran, rather than conspiring against the U.S. in the Middle East, has actively reached out to Washington in an effort to normalize relations. Iran was the first Islamic nation to condemn the Sept. 11, 2001, terror attack on the United States, and Iran coordinated with the U.S. military on certain aspects of the American military response in Afghanistan. Likewise, Iran was supportive of the U.S. drive to remove Saddam Hussein from power.

In May of 2003, Iran made a bold diplomatic approach to the United States which sought to resolve outstanding issues such as the Iranian nuclear program, Iranian support for Hamas and Hezbollah, and Iran’s relationship with Israel. It was the United States which rejected this outreach, not Iran. The fact is that it is the unilateral policy objectives of the Bush administration, which revolve around regime change in Iran, which serve as the principal threat to regional peace and security in the Middle East today. Iran poses a threat to no nation, least of all the United States.

“WHEREAS, We support the people of Iran who are struggling for freedom and democracy, and nothing herein should be construed as supportive of their government, the Islamic Republic of Iran, but a unilateral, pre-emptive U.S. military attack on Iran could well prove counterproductive to the cause of promoting freedom and democracy in that country.”

We should never forget that while Iran functions as a theocracy in terms of ultimate constitutional authority, both its legislative and executive branches are a product of democratic processes. The best course of action American policy could take would be to create the conditions inside Iran where the genuine will of the people can be expressed through the existing democratic structures. This is best accomplished by creating increased opportunities for interaction between Iran and the rest of the world. Such interaction would go far to moderate the theocratic structures inside Iran. The current policies of economic sanctions and political isolation of Iran are counterproductive in this regard, and serve to strengthen the political power of those conservative institutions that Americans hope would be undermined by an Iranian population moderated by international interaction.

“WHEREAS, A 2007 National Intelligence Estimate (NIE), representing the consensus view [of] all 16 U.S. intelligence agencies, concluded that Iran froze its nuclear weapons program in 2003, and an earlier NIE concluded that Iran’s involvement in Iraq “is not likely to be a major driver of violence there.”

While the United States has been plagued by the increasing politicization of intelligence—prime examples being the October 2002 National Intelligence Estimate on Iraq and the creation within the Pentagon of a special intelligence entity (the Office of Special Programs, under the guidance of Douglas Feith) whose sole purpose was to introduce into the policymaking body data and information which had been rejected by the intelligence community as unfounded—the entire work of the intelligence community cannot be dismissed out of hand, especially when it publishes a major finding which clashes with the position held by an activist administration. The fact that the U.S. intelligence community and the Bush administration do not agree on the specifics of how Iran constitutes a threat to America in and of itself begs intervention in the form of congressional oversight. It is not unpatriotic for Congress to hold hearings for the purpose of discerning the facts surrounding a given policy. When such policies involve war or the threat of war, the need is even more imperative, and the failure of Congress to act accordingly represents a dereliction of duty which must not be ignored by the American people, whom Congress purports to represent.

“WHEREAS, an attack on Iran is likely to cause untold thousands of American and Iranian casualties, lead to major economic dislocations, and threaten a much wider and more disastrous war in the Middle East.”

While it is currently in vogue for ideologues and proponents of neoconservative ideology to promote a “limited airstrike” against Iran, anyone with any military experience will point out that no plan survives initial contact with the enemy. The Iranian government will have a say in how it will choose to respond in case of an unprovoked American military strike, however limited it might be. Any Iranian retaliation might prompt an American counter-retaliation, and one might find a limited strike quickly spiraling out of control and threatening full-scale conflagration. The American economy has been bankrupted by the war in Iraq, and the American military, especially the Army and Marines, is stretched to its breaking point. While an argument can be made that any limited strike would rely primarily on the resources of the Air Force and Navy, if the conflict escalates, this will no longer be the case. Given the fact that any attack on Iran would represent an elective war rather than a war of national security, there is no compelling reasoning which cites the so-called national interest for the United States to consider any military action against Iran, either now or in the future.

“WHEREAS, a pre-emptive U.S. military attack on Iran would violate international law and our commitments under the U.N. Charter and further isolate the U.S. from the rest of the world.”

Most Americans remain ignorant of the laws which govern our nation, and the document which serves as the foundation of these laws. The United States Constitution, in Article 6, declares that international treaties and agreements ratified by a two-thirds vote in the Senate become the supreme law of the land. The United States is a signatory to the charter of the United Nations, and the charter has been ratified by the U.S. Senate. As such, the United States is bound by international law and its own Constitution to not only reject pre-emptive warfare (a notion cited by the Nuremburg tribunals as the greatest of all war crimes, since it is from pre-emptive war of aggression that all other war crimes are born), but note that the United States can justify going to war only as a result of legitimate self-defense (i.e., in response to an attack), per Article 51 of the U.N. charter, or as a result of a Chapter VII resolution of the United Nations Security Council authorizing the use of military force.

The Bush administration violated every legal principle the United States claims to represent, internationally and domestically, when it pre-emptively invaded Iraq in 2003, without provocation and void of any Chapter VII authorization. Two wrongs do not make a right, and it is imperative that the Congress take action to make sure that the administration is not permitted to embark on a similarly illegal and illegitimate course of action regarding Iran.

“WHEREAS, An attack on Iran is likely to inflame hatred for the U.S. in the Middle East and elsewhere, inspire terrorism, and lessen the security of Americans in Chicago and worldwide.”

The reputation of the United States has been severely harmed by the irresponsible actions of the Bush administration in Iraq. Without condoning the actions of groups such as al-Qaida, it is important to understand that irresponsible American action abroad does manifest itself in a backlash, and that often this backlash comes in the form of terrorism. Any U.S. attack on Iran would only reinforce the opinions of those in the world already disposed against the United States, and draw many more into their ranks. The only way to truly win the war on terror is to identify the point at which an individual decides to embrace terror as a means of achieving an objective, along with the means for which such a decision was made, and then to take actions to prevent that point from ever being reached. To operate as if American policy and actions in Iraq, and the potential of similar actions and activities in Iran, do not influence this equation is simply to ignore reality and embrace ignorance.

“WHEREAS, The Iraq war and occupation has already cost the lives of over 4,000 American soldiers, the maiming and wounding of over 38,000 American soldiers, the death and maiming of over one million Iraqi civilians.”

The war in Iraq has already killed far too many people, American and Iraqi alike. This war is widely recognized as being unsustainable. The key question that must be answered by those who champion a “stay the course” approach is, “How big do you want the Iraqi War Memorial to be?” It is already 4,070-plus names too big. Expanding the conflict to include Iran would not only extend this unwinnable (and unjustified) war, but it would also expand the size of whatever memorial is eventually built to commemorate this national folly. And while America will probably never construct a memorial to the Iraqi people we are responsible for killing and wounding, it should be understood that these people will never be forgotten by their fellow Iraqis, and indeed the rest of the world. To extend this human suffering and tragedy into Iran would be to create a level of suffering for which America can never, and should never, be forgiven.

“WHEREAS, According to the nonpartisan National Priorities Project, the Iraq War and occupation has cost American taxpayers more than $500 billion, the citizens of Chicago nearly $5.2 billion, and the citizens of each of Chicago’s 50 wards an average of $104 million, and

“WHEREAS, Any conflict with Iran is likely to incur far greater costs and divert more precious national resources away from critical human needs in Chicago and its 50 wards.”

As the American economy continues to suffer under the strains of the second most expensive war in U.S. history (after World War II), and as the Pentagon continues to consume national treasure which is sorely needed for domestic programs involving the health, education and general welfare of the people, it must be recognized that, in going to war against Iraq, President Bush actually declared war on the American people. Any military action against Iran would only magnify the economic consequences of this criminal folly.

“BE IT RESOLVED, That the City Council of the City of Chicago does hereby urge the Illinois Congressional delegation to clearly express the will of the people of Chicago in opposing any U.S. attack on Iran, and urging the Bush Administration to pursue diplomatic engagement with that nation, and

“BE IT FURTHER RESOLVED, That suitable copies of the resolution be forwarded to President George W. Bush and all members of the Chicago Congressional delegation.”

America claims to be the greatest functioning democracy in the world today. While our system is in reality a democratic republic, the will of the people is in fact expressed through those whom they elect to represent them in higher office. The resolution of the Chicago City Council opposing war on Iran is as strong a statement as can be made by a free people outside of an election. For this resolution to have any real meaning, it must be made clear to those in the Illinois congressional delegation, especially those representing the people of Chicago, that this resolution is not simply a collection of words, but rather a collection of political will, and that any representative who fails to act in a manner reflective of the serious intent of this resolution will be held to account. Such accountability is what completes the cycle of representative democracy, and if those whom the citizens of Chicago elect to represent them in Congress fail to respond to the collective resolve of their constituencies, then they must do so at their own political peril if this resolution is to have any meaning.

I am proud of the City Council members for standing up in defense of the ideals and values of not only the citizens of the great city of Chicago but also for setting an example that all cities, towns and villages across America should follow in the coming weeks so that the collective will of the people can resonate within the halls of Congress, and a senseless and illegal war with Iran can be averted. I have always believed that the true strength of America is best measured by the principled action of its people. Chicago is leading the way by taking a principled stand. It is now up to the rest of America to follow suit.

Anglo-American Ascendancy Lost in Unnecessary Wars

Anglo-American Ascendancy Lost in Unnecessary Wars

By Paul Craig Roberts

Go To Original

In a new book that will infuriate the fake conservatives who inhabit the Republican Party, Patrick J. Buchanan documents how British self-righteousness, delusion, and hubris destroyed both the British Empire and Western ascendancy in two unnecessary wars launched by a small cabal of morons that ruled Britain


Churchill, Hitler, and the Unnecessary War shows that the two world wars that destroyed European civilization began when England declared war on Germany, thus dragging in the Empire, Commonwealth, and United States. This was a strategic blunder unparalleled in history. Mighty Britain emerged from World War II as an American dependency.

Buchanan cites such British notables as F.J.P. Veale, B.H. Liddell Hart, and C.P. Snow to document that it was Winston Churchill who committed, in Veale’s words, “the first deliberate breach of the fundamental rule of civilized warfare that hostilities must only be waged against the enemy combatant forces.” It was Churchill, not Hitler, who first targeted civilian populations in World War II and caused the structure of civilized warfare to collapse in ruins.

The Americans quickly adopted Churchill’s criminal policy of attacking civilians, culminating in the outrageous use of nuclear weapons against two Japanese cities, the slaughter of Vietnamese civilians, and the ongoing slaughter of Afghan and Iraqi civilians.

A popular American myth is that “the greatest generation” saved the world from Nazi tyranny. As Buchanan points out, the fact of the matter is that the Normandy invasion in June 1944 played little, if any, role in Germany’s defeat. By the end of 1942 Hitler had lost World War II at Stalingrad, long before any American troops appeared on the scene. What the Normandy invasion achieved 18 months later was to keep the Red Army from over-running all of Europe.

Although Buchanan’s book is about how the British destroyed themselves, Buchanan is clearly thinking about America. In the closing pages Buchanan shows how the Bush Regime has broken from the sound policy of President Reagan and is replicating the British folly of self-destruction. “There is hardly a blunder of the British Empire we have not replicated,” laments Buchanan.

The distinct American hubris that we are “the indispensable nation” and the braggadocio that we are an “omnipower” has us overcommitted in alliances that we cannot fulfill. Despite 25 percent of the Iraqi population killed, injured or displaced, the “world’s only superpower” cannot even control Baghdad. To deal with the pointless war we started in Afghanistan, we have had to sucker our NATO allies into a conflict that is no concern of theirs. Militarily overextended and with a faltering economy and collapsing currency, the cabal of morons that rules America still hopes to attack Iran, Syria, and to drive Hezbollah from Lebanon. American idiots in think tanks are busy at work drawing up plans about how the US is going to check China and prevent her emergence as a power beyond US control. The Republican presidential candidate has boasted that he will challenge Russia and bring Putin to heel.

Amazing. The world’s greatest debtor is going to take on the two powerful countries with the largest trade surpluses. According to the World Factbook, an annual publication of the CIA, Russia’s 2007 current account surplus is $465 billion and China’s is $363 billion. In contrast, the US current account deficit is $987 billion--an amount larger that the total deficits of all other countries in the world combined. The out-of-pocket and already incurred future cost of Bush’s wars of aggression is between $3 and $5 trillion, every dollar of which must be borrowed. That comes on top of the unfunded liabilities of the US government totaling $53 trillion. By any account the US is the world’s worst credit risk. The “mighty” US relies on foreigners to finance its consumption, its wars, and the daily operations of its government.

When Buchanan looks at the collection of idiots that comprise America’s ruling class, he despairs.

In truth, American power is already broken, and the country is already lost.

The country is lost, because the brownshirt Bush Regime has destroyed the US Constitution with the complicity of the opposition party and the federal courts. There is no organized power that can restore the Constitution or even much concern that it has been overthrown.

The country is broken, because American capitalists have moved offshore so many US manufacturing, engineering, and research jobs that US imports now exceed US industrial production. American dependency on imported manufactured goods, advanced technology goods, and energy is astounding.

Moreover, the dependency is escalating dramatically. In March 2002, prior to Bush’s decision to impose Israel’s will on the Middle East, oil was $25 a barrel. Today oil is $125 a barrel, a five-fold increase that has seen our oil import bill rise from $145 billion in 2006 to $456 billion presently, a $300 billion addition to a trade deficit that was already running $700-$800 billion annually.

There is no possibility of the US closing its trade deficit. The US is able to survive such enormous deficits only because the US dollar is the world reserve currency. This role for the dollar is nearing an end as the world looks for more stable stores of value. Although oil is still nominally priced in dollars, in reality it is being priced in euros as oil producers raise the dollar price with a view to keeping their oil revenues at a constant purchasing power in euros.

When the dollar loses its reserve currency role, foreign financing for US trade and budget deficits will evaporate. US living standards will collapse, and the indispensable omnipower will be just another washed up country.

For a world weary of “American exceptionalism,” this can’t happen too soon.

Saying No to Everything

Saying No to Everything

Go to Original

Even before the House passed a new plan last week to prevent foreclosures, President Bush threatened to veto the bill, calling it "overly burdensome." The bill is not burdensome enough.

To help an estimated 500,000 borrowers switch to federally insured loans, it relies on the voluntary participation of lenders, an approach that has doomed other foreclosure-prevention efforts.

Earlier this year, Mr. Bush derided a modest plan to provide $4 billion to states and localities to buy foreclosed properties, saying that buying up empty homes helps only "the lenders or the speculators." Actually, it protects entire neighborhoods and local economies from the effects of foreclosures by preventing a greater buildup of unsold homes and a further drop in prices.

Most egregious, Mr. Bush has resisted efforts to allow bankrupt homeowners to have their mortgages modified under court protection, parroting the mortgage industry's overwrought objections to what is arguably the best way to avoid preventable foreclosures. Letting homeowners have the loans modified in court would keep them in their homes, helping to stabilize the housing market while inflicting the considerable pain of bankruptcy on both lender and borrower.

When Mr. Bush hasn't been busy saying no to worthy efforts, he has been endorsing Orwellian-named programs that have failed to address the problem effectively. Hope Now, the mortgage industry alliance that pledged a big effort five months ago to modify subprime loans, has barely made a dent. Project Lifeline, announced last February, has yet to release any results. The Times reported last month that another program much touted by Mr. Bush, FHA Secure, has helped fewer than 2,000 homeowners at risk of foreclosure.

Meanwhile, defaults, the first link in the foreclosure chain, are running at an annual pace of 2.2 million so far this year.

But the Bush administration's free-market biases have apparently convinced officials that bold action would impede a necessary economic correction. That is misguided. The housing bust is at the root of the economy's problems, and foreclosures are its most serious manifestation. House prices have collapsed to a point where they are creating a negative spiral: price drops provoke foreclosures, which in turn provoke even lower prices, and so on. The danger now is not too much government intervention but too little.

The House is to be commended for defying Mr. Bush's veto threat, especially the 39 Republicans who joined all the House Democrats. When the Senate considers a similar measure, Republicans there are likely to face pressure, too. At least the Senate bill will probably not be considered until after Memorial Day. While home for the holiday, senators are sure to hear from constituents about the need for mortgage relief. That might inspire lawmakers to do what Mr. Bush is unwilling to do.

Conyers Mounts Opposition to Iran Attack

Go To Original

From: The office of House Judiciary Chairman John Conyers, Jr.

May 8, 2008

Join Me in Calling on President Bush to Respect Congress' Exclusive Power to Declare War

Dear Democratic Colleague:

As we mark five years of war in Iraq, I have become increasingly concerned that the President may possibly take unilateral, preemptive military action against Iran. During the last seven years, the Bush Administration has exercised unprecedented assertions of Executive Branch power and shown an unparalleled aversion to the checks and balances put in place by the Constitution's framers. The letter that follows asks President Bush to seek congressional authorization before launching any possible military strike against Iran and affirms Senator Biden's statement last year that impeachment proceedings should be considered if the President fails to do so.

I hope that you will join me in calling on the President to respect Congress' exclusive power to declare war. To sign the letter below, please contact the Judiciary Committee staff at 225-3951.

Sincerely,
John Conyers, Jr.
Chairman


May 8, 2008

The Honorable George W. Bush
President of the United States
1600 Pennsylvania Avenue, N.W.
Washington, D.C. 20500

Dear Mr. President:

We are writing to register our strong opposition to possible unilateral, preemptive military action against other nations by the Executive Branch without Congressional authorization. As you know, Article I, Section 8 of the U.S. Constitution grants Congress the power "to declare war," to lay and collect taxes to "provide for the common defense" and general welfare of the United States, to "raise and support armies," to "provide and maintain a navy," to "make rules for the regulation for the land and naval forces," to "provide for calling forth the militia to execute the laws of the Union, suppress insurrections and repel invasions," to "provide for organizing, arming, and disciplining, the militia," and to "make all laws necessary and proper for carrying into execution ... all ... powers vested by this Constitution in the Government of the United States." Congress is also given exclusive power over the purse. The Constitution says, "No money shall be drawn from the Treasury but in consequence of appropriations made by law."

By contrast, the sole war powers granted to the Executive Branch through the President can be found in Article II, Section 2, which states, "The President shall be the Commander-in-Chief of the Army and Navy of the United States, and of the Militia of the several States, when called into actual Service of the United States." Nothing in the history of the "Commander-in-Chief" clause suggests that the authors of the provision intended it to grant the Executive Branch the authority to engage U.S. forces in military action whenever and wherever it sees fit without any prior authorization from Congress. In our view, the founders of our country intended this power to allow the President to repel sudden attacks and immediate threats, not to unilaterally launch, without congressional approval, preemptive military actions against foreign countries. As former Republican Representative Mickey Edwards recently wrote, "[t]he decision to go to war ... is the single most difficult choice any public official can be called upon to make. That is precisely why the nation's Founders, aware of the deadly wars of Europe, deliberately withheld from the executive branch the power to engage in war unless such action was expressly approved by the people themselves, through their representatives in Congress." [1]

Members of Congress, including the signatories of this letter, have previously expressed concern about this issue. On April 25, 2006, sixty-two Members of Congress joined in a bipartisan letter that called on you to seek congressional approval before making any preemptive military strikes against Iran. [2] Fifty-seven Members of Congress have co-sponsored H. Con. Res. 33, which expresses the sense of Congress that the President should not initiate military action against Iran without first obtaining authorization from Congress. [3]

Our concerns in this area have been heightened by more recent events. The resignation in mid-March of Admiral William J. "Fox" Fallon from the head of U.S. Central Command, which was reportedly linked to a magazine article that portrayed him as the only person who might stop your Administration from waging preemptive war against Iran, [4] has renewed widespread concerns that your Administration is unilaterally planning for military action against that country. This is despite the fact that the December 2007 National Intelligence Estimate concluded that Iran had halted its nuclear weapons program in the fall of 2003, a stark reversal of previous Administration assessments. [5]

As we and others have continued to review troubling legal memoranda and other materials from your Administration asserting the power of the President to take unilateral action, moreover, our concerns have increased still further. For example, although federal law is clear that proceeding under the Foreign Intelligence Surveillance Act (FISA) "shall be the exclusive means by which electronic surveillance" can be conducted within the U.S. for foreign intelligence purposes, 18 U.S.C. 2511(2)(f), the Justice Department has asserted that the National Security Agency's warrantless wiretapping in violation of FISA is "supported by the President's well-recognized inherent constitutional authority as Commander in Chief and sole organ for the Nation in foreign affairs". [6] As one legal expert has explained, your Administration's "preventive paradigm" has asserted "unchecked unilateral power" by the Executive Branch and violated "universal prohibitions on torture, disappearance, and the like." [7]

Late last year, Senator Joseph Biden stated unequivocally that "the president has no authority to unilaterally attack Iran, and if he does, as Foreign Relations Committee chairman, I will move to impeach" the president. [8]

We agree with Senator Biden, and it is our view that if you do not obtain the constitutionally required congressional authorization before launching preemptive military strikes against Iran or any other nation, impeachment proceedings should be pursued. Because of these concerns, we request the opportunity to meet with you as soon as possible to discuss these matters. As we have recently marked the fifth year since the invasion of Iraq, and the grim milestone of 4,000 U.S. deaths in Iraq, your Administration should not unilaterally involve this country in yet another military conflict that promises high costs to American blood and treasure.

Sincerely,
John Conyers, Jr.
Chairman


[1] Mickey Edwards, Dick Cheney’s Error, Wash. Post, March 22, 2008, at A13. [2] Letter from Rep. Peter DeFazio, Rep. John Conyers, Jr., and 60 other Members of Congress, to President George W. Bush (Apr. 25, 2006) (on file with the Committee on the Judiciary). [3] H. Con. Res. 33, 110th Cong. (2008) [4] Thomas E. Ricks, Top U.S. Officer in Mideast Resigns, Wash. Post, March 12, 2008, at A1. [5] Dafna Linzer and Joby Warrick, U.S. Finds That Iran Halted Nuclear Arms Bid in 2003, Wash. Post, Dec. 4, 2007, at A1. [6] Department of Justice, Legal Authorities Supporting the Activities of the National Secuirty Agency Described by the President, Jan. 19, 2006 at 1. [7] David Cole, Less Safe, Less Free: Why America is Losing the War on Terror, 2007 at 2. [8] Adam Leach, Biden: Impeachment if Bush Bombs Iran, PORTSMOUTH HERALD, Nov. 29, 2007.