Wednesday, June 18, 2008

The Semantics of Bush's Torture Policy

The Semantics of Bush's Torture Policy

By Jason Leopold

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The Bush administration built a legal framework – relying on semantics and secrecy – to subject detainees at Guantanamo Bay to brutal interrogation techniques and then to hide the reality from human rights observers, according to internal government documents.

The documents, made public by the Senate Armed Services Committee, undercut assertions by President George W. Bush, Vice President Dick Cheney, former Defense Secretary Donald Rumsfeld and other senior administration officials who have blamed cruel treatment of detainees on "a few bad apples" who acted on their own.

Instead, the documents show that the pattern of humiliation, abuse and even torture inflicted on detainees was a deliberate policy of the Bush administration – debated by mid-level lawyers at the CIA and the Pentagon, given legal cover at the Justice Department and approved at the highest levels of government.

According to one document, Jonathan Fredman, chief counsel to the CIA’s Counterterrorism Center, discussed with U.S. military officials how interrogators could use the “wet towel” technique, also known as waterboarding, against detainees to extract information.

“It can feel like you’re drowning. The lymphatic system will react as if you’re suffocating, but your body will not cease to function,” Fredman said on Oct. 2, 2002, during a meeting where specific techniques were reviewed and debated, according to the meeting minutes.

Fredman added that the “wet towel” technique would only be defined as torture “if the detainee dies.”

“It is basically subject to perception,” Fredman said. “If the detainee dies you’re doing it wrong.”

Fredman’s comments prompted Lt. Col. Diane Beaver, then the chief military lawyer at the U.S. military base at Guantanamo Bay, Cuba, to respond: “We will need documentation to protect us.”

Beaver also discussed hiding detainees from the International Committee of the Red Cross (ICRC), which visited Guantanamo to ensure interrogators were complying with the Geneva Conventions.

Beaver urged interrogators to "curb the harsher operations while ICRC is around," according to the meeting minutes.

"Officially it is not happening," Beaver is quoted as saying. "It is not being reported officially. The ICRC is a serious concern. They will be in and out, scrutinizing our operations, unless they are displeased and decide to protest and leave. This would draw a lot of negative attention."

‘How Did It Come About?’

In opening hearings by the Senate Armed Services Committee on the abusive techniques Tuesday, Chairman Carl Levin said the documents shed light on the administration’s decision-making that led to the abuse of U.S.-held detainees – what became an international scandal when photos surfaced in spring 2004 of naked and abused prisoners at Abu Ghraib prison in Iraq.

"How did it come about that American military personnel stripped detainees naked, put them in stress positions, used dogs to scare them, put leashes around their necks to humiliate them, hooded them, deprived them of sleep, and blasted music?" the Michigan Democrat asked.

"Were these actions the result of 'a few bad apples' acting on their own? It would be a lot easier to accept if it were,” Levin said. “But that's not the case.

“The truth is that senior officials in the United States government sought information on aggressive techniques, twisted the law to create the appearance of their legality, and authorized their use against detainees. In the process, they damaged our ability to collect intelligence that could save lives."

Apparently seeking to shift the blame away from President Bush and other higher-ups, Sen. Lindsey Graham, R-South Carolina, said the legal advice about brutal interrogation methods will "go down in history as some of the most irresponsible and shortsighted legal analysis ever provided to our nation's military and intelligence community."

The Armed Services Committee’s 18-month investigation, which generated 38,000 pages of documents, singled out Rumsfeld and William “Jim” Haynes II, the Pentagon’s former general counsel, as the officials who sought guidance on implementing more aggressive interrogation methods.

The committee is expected to release a full report later this year. So far, the probe has found that Rumsfeld and Haynes solicited input from military psychologists in July 2002, months earlier than they had previously acknowledged, about developing harsh methods interrogators could use against detainees held at Guantanamo Bay.

The report states that as early as July 2002, Rumsfeld, Haynes and other officials queried military psychologists about the use of waterboarding and other brutal methods to extract information that might not be gained through more conventional interrogations methods.

The questions from Rumsfeld and Haynes were raised one month before John Yoo, a deputy in the Justice Department's Office of Legal Counsel, issued two memos that authorized interrogators to use stress positions, military dogs and other still unknown methods against terror suspects at Guantanamo.

The interrogation methods, which were developed in July 2002, derived from the Army and Air Force’s Survival, Evasion, Rescue, and Escape (SERE) training program, meant to prepare U.S. soldiers for abuse they might suffer if captured by an outlaw regime, not as methods for U.S. interrogations.

The newly released documents don’t square with previous statements made by Haynes, who testified in 2006 that the impetus for the harsh tactics came from below, from lower-level military personnel who asked the Pentagon in October 2002 about using more aggressive techniques against detainees.

Richard Shiffrin, Haynes' former deputy on intelligence issues, told the Senate committee that in July 2002 Haynes became interested in using the SERE techniques, such as waterboarding and sleep deprivation, as a form of interrogation against detainees.

Not Recalling

Haynes was grilled by senators, but repeatedly said he could not recall receiving written and oral communications from military attorneys who warned that the methods being implemented at Guantanamo appeared to be illegal.

“We did not operate in a vacuum,” Haynes said in response to questions from Sen. Jack Reed, D-Rhode Island. “The secretary of defense [Rumsfeld] made the final decision” on interrogation methods.

Haynes hired a criminal attorney after he resigned from the Pentagon. He is now an executive at Chevron.

Following the October 2002 meeting with CIA lawyer Fredman, Lt. Col. Beaver, the chief military lawyer at Guantanamo, drafted a legal memo that authorized military personnel to use some of the harshest methods during interrogations at the facility.

Testifying before the Senate Armed Services Committee on Tuesday, Beaver said she was surprised that the Defense Department implemented the interrogation methods contained in her legal opinion.

“I did not expect that my opinion, as a lieutenant colonel in the Army Judge Advocate General's Corps, would become the final word on interrogation policies and practices within the Department of Defense,” Beaver said.

An earlier report by the Justice Department’s inspector general, Glenn Fine, concluded that Rumsfeld authorized the use of brutal interrogation techniques despite warnings from the FBI that the methods were inhumane, possibly illegal and ineffective in producing reliable intelligence.

In October 2002, FBI agents raised concerns with Marion Bowman, the Justice Department’s deputy general counsel in charge of national security, about the methods used during interrogations at Guantanamo Bay, according to Fine.

An FBI agent stationed at Guantanamo then sent the agency an analysis on Nov. 27, 2002, calling into question the legality of the interrogation techniques, stating that the methods used appeared to violate the U.S. anti-torture statute. Bowman then alerted Pentagon general counsel Haynes.

Fine concluded that Rumsfeld, with the support of top White House officials, ignored FBI concerns about the treatment of detainees and signed off on the interrogations in December 2002, insisting the tactics stopped short of torture.

Alberto Mora, general counsel of the Navy, criticized Rumsfeld’s approval of certain interrogation methods outlined in the December 2002 action memorandum.

“The interrogation techniques approved by the Secretary [of Defense] should not have been authorized because some (but not all) of them, whether applied singly or in combination, could produce effects reaching the level of torture, a degree of mistreatment not otherwise proscribed by the memo because it did not articulate any bright-line standard for prohibited detainee treatment, a necessary element in any such document,” Mora wrote in a 14-page letter to the Navy’s inspector general.

Mora testified Tuesday that the “policy decision to use so-called 'harsh' interrogation techniques during the war on terror was a mistake of massive proportions.”

Mora also took issue with the use of the words “harsh” and “enhanced” to describe interrogations that he believed amounted to torture and a “policy of cruelty.”

“The choice of the adjectives ‘harsh’ or ‘enhanced’ to describe these interrogation techniques is euphemistic and misleading,” Mora said. “The more precise legal term is ‘cruel.’ Many of the ‘counter-resistance techniques’ authorized for use at Guantanamo in December 2002 constitute ‘cruel, inhuman, or degrading’ treatment that could, depending on their application, easily cross the threshold of torture.”

Working Group

In January 2003, facing questions from the FBI and military lawyers about the brutal methods already in use, Rumsfeld asked Haynes to form a “working group” to draft a report on legally permissible interrogation techniques to use at Guantanamo.

The members of the group included former Undersecretary of Defense for Policy Douglas Feith, officials from the Defense Intelligence Agency, representatives of the Joint Chiefs of Staff, and judge advocate generals (JAGs) from all four branches of the military.

Early drafts of the report advocated intimidating prisoners with dogs, removing prisoners' clothing, shaving their beards, slapping prisoners in the face and waterboarding. Though some of the more extreme techniques were dropped as the list was winnowed down to 24 from 35, the final set of methods still included tactics for isolating and demeaning a detainee, known as "pride and ego down."

Stress positions were prohibited at Guantanamo under Pentagon policy beginning in January 2003. However, Justice Department inspector general Fine said FBI agents’ "observations confirm that prolonged short-shackling continued at Guantanamo for at least a year after the revised DOD policy took effect."

"Short-shackling in which a detainee’s hands were shackled close to his feet to prevent him from standing or sitting comfortably, was another of the most frequently reported techniques observed by FBI agents at Guantanamo. This technique was sometimes used in conjunction with holding detainees in rooms where the temperature was very cold or very hot in order to break the detainees’ resolve,” Fine said.

The more extreme interrogation methods that made it into the final list of administration-approved tactics rankled some of the JAGs, who feared the methods would put U.S. soldiers in danger if they were captured – and would tarnish the reputation and image of the U.S. abroad.

"Will the American people find we have missed the forest for the trees by condoning practices that, while technically legal, are inconsistent with our most fundamental values,” wrote Rear Adm. Michael Lohr, a member of the “working group," in a February 2003 letter to the working group's chairwoman, Mary Walker, the Air Force general counsel.

“How would such perceptions affect our ability to prosecute the Global War on Terrorism?" asked Lohr.

The admiral was so upset with the draft report and the advice provided by the Justice Department that he requested that Walker include a sentence in the final report making it clear that the legal findings were based exclusively on attorneys in the Justice Department's Office of Legal Counsel, where John Yoo worked.

Lohr was not alone. Maj. Gen. Jack Rives, who at the time was judge advocate general of the Air Force, also wrote a letter to Walker warning that the interrogation techniques in the report would violate military law.

"Several of the exceptional techniques, on their face, amount to violations of domestic criminal law and the [Uniform Code of Military Justice]," Rives wrote. "Treating detainees inconsistently with the [Geneva] Convention arguably ‘lowers the bar’ for the treatment of U.S. POW's in future conflicts."

Maj. Gen. Thomas Romig, an Army JAG, and Brig. Gen. Kevin M. Sandkuhler, a Marine Corps JAG, also voiced concerns, specifically the determination that the President has the power to override the Uniform Code of Military Justice and other federal statutes and international treaties in the name of national security.

Despite the concerns of legal officials in the military community, Rumsfeld signed off on the final 81-page working group report on April 2, 2003.

Rumsfeld, who resigned in November 2006, immediately after Republicans lost control of Congress in the mid-term elections, has vehemently denied that he approved of brutal interrogation methods.

Restoring The Constitution

Restoring The Constitution

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In a landmark decision last week, the Supreme Court ruled that habeas corpus protections -- a time-honored principle entitling all who are imprisoned to challenge the basis for their confinement in a court of law -- apply to detainees held at Guantanamo Bay. "We hold these petitioners do have the habeas corpus privilege," wrote Justice Anthony Kennedy. The Guantanamo "review process is, on its face, an inadequate substitute for habeas corpus," he added. The decision in Boumediene v. Bush "is a stinging rebuke of the Bush administration's flawed detention policies," Sen. Patrick Leahy (D-VT) stated. President Bush, unsurprisingly, disagreed with the decision. "We'll abide by the court's decision. That doesn't mean I have to agree with it," he said. On Sunday, Weekly Standard editor Bill Kristol hinted that Sens. John McCain (R-AZ) and Lindsey Graham (R-SC) would introduce legislation undermining the decision by setting up a "national security court." Rejecting such calls to reopen debate on the issue, Sen. Dick Durbin (D-IL) remarked, "Follow the Supreme Court. The Supreme Court says these people have right to know why they're being held and what the charges are. That's so basic and fundamental."

STRIKING DOWN POOR LAWS: "The Court repudiated the efforts of Congress and the Bush administration to strip the federal courts of jurisdiction to hear habeas corpus petitions on behalf of detainees held at Guantanamo Bay and to substitute constitutionally-defective procedures in their place," noted Center for American Progress Senior Fellow Mark Agrast. The decision found that the Combatant Status Review Tribunals, mandated by Detainee Treatment Act of 2005, do not constitute an adequate substitute for habeas, resulting in a "considerable risk of error" in the tribunal's decisions. The Court declared unconstitutional Section 7 of the Military Commissions Act (MCA) of 2006, legislation that allowed Bush to imprison indefinitely any "unlawful combatant" and suspend the habeas writ for detainees. The MCA abolished habeas "despite the fact that the Constitution permits suspension of that writ only 'in Cases of Rebellion or Invasion,'" the Court noted. The decision does not address, however, whether the Bush administration had been "holding a single person illegally" at Guantanamo. "[O]ur opinion does not address the content of the law that governs petitioners' detention," Kennedy wrote. "That is a matter yet to be determined."

The decision is the fourth blow to the administration's detainee policies, each of which rein in Bush's sweeping claims of executive power. In June 2004, the Court issued two opinions on detainee issues. The Hamdi v. Rumsfeld case "ruled that a U.S. citizen seized on the Afghanistan battlefield and detained in a U.S. military brig can challenge his detention in U.S. courts."s In Rasul v. Bush, the Court "held that foreign-born detainees can challenge their detention in U.S. courts." In 2006, in Hamdan v. Rumsfeld, the Court held that the military commissions system established by a 2001 order from Bush violated the Uniform Code of Military Justice and the Geneva Conventions. "[T]he Executive is bound to comply with the Rule of Law that prevails in this jurisdiction," Justice John Paul Stevens wrote. Last week's decision also restrains Bush's power grab. Chief Justice John Roberts "unwittingly provides a fitting epitaph for the president's disastrous legal adventures," Ken Gude, Associate Director of the International Rights and Responsibility Program at CAP, noted. "One cannot help but think...that this decision is not really about the detainees at all, but about control of federal policy regarding enemy combatants," Roberts remarked.

CONSERVATIVE FEARMONGERING: Several conservatives have responded to the decision with inflammatory rhetoric. In his dissent, Justice Antonin Scalia devoted an entire section to "a description of the disastrous consequences of what the Court has done today." "The game of bait-and-switch that today's opinion plays upon the Nation's Commander in Chief will make the war harder on us. It will almost certainly cause more Americans to be killed," Scalia wrote. Former House Speaker Newt Gingrich remarked, "This court decision is a disaster, which could cost us a city." Graham called it "dangerous and irresponsible." In contrast, Graham wrote a letter to then-Secretary of Defense Donald Rumsfeld in 2003 stating, "A serious process must be established in the very near term either to formally treat and process the detainees as war criminals or to return them to their countries for appropriate judicial action." As Graham seemed to realize then, granting habeas rights to detainees is unlikely to result in threats to public safety. The Court's decision, in fact, will not result in the release of a single dangerous person.

Documents confirm U.S. hid detainees from Red Cross

Documents confirm U.S. hid detainees from Red Cross

Warren P. Strobel

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The U.S. military hid the locations of suspected terrorist detainees and concealed harsh treatment to avoid the scrutiny of the International Committee of the Red Cross, according to documents that a Senate committee released Tuesday.

"We may need to curb the harsher operations while ICRC is around. It is better not to expose them to any controversial techniques," Lt. Col. Diane Beaver, a military lawyer who's since retired, said during an October 2002 meeting at the Guantanamo Bay prison to discuss employing interrogation techniques that some have equated with torture. Her comments were recorded in minutes of the meeting that were made public Tuesday. At that same meeting, Beaver also appeared to confirm that U.S. officials at another detention facility — Bagram Air Base in Afghanistan — were using sleep deprivation to "break" detainees well before then-Defense Secretary Donald H. Rumsfeld approved that technique. "True, but officially it is not happening," she is quoted as having said.

A third person at the meeting, Jonathan Fredman, the chief counsel for the CIA's Counterterrorism Center, disclosed that detainees were moved routinely to avoid the scrutiny of the ICRC, which keeps tabs on prisoners in conflicts around the world.

"In the past when the ICRC has made a big deal about certain detainees, the DOD (Defense Department) has 'moved' them away from the attention of the ICRC," Fredman said, according to the minutes.

The document, along with two dozen others, shows that top administration officials pushed relentlessly for tougher interrogation methods in the belief that terrorism suspects were resisting interrogation.

It's unclear from the documents whether the Pentagon moved the detainees from one place to another or merely told the ICRC they were no longer present at a facility.

Fredman of the CIA also appeared to be advocating the use of techniques harsher than those authorized by military field guides "If the detainee dies, you're doing it wrong," the minutes report Fredman saying at one point.

Beaver testified that she didn't recall making the comment about avoiding "harsher operations" while ICRC representatives were around, but she said she probably was referring to the need to conduct extended periods of interrogations of detainees without disruption.

The minutes of the Guantanamo meeting were among 25 documents released Tuesday by Sen. Carl Levin, D-Mich., who chairs the Senate Armed Services Committee and is leading a probe of the origins of cruel treatment of detainees in President Bush's "war on terrorism."

The administration overrode or ignored objections from all four military services and from criminal investigators, who warned that the practices would imperil their ability to prosecute the suspects. In one prophetic e-mail on Oct. 28, 2002, Mark Fallon, then the deputy commander of the Pentagon's Criminal Investigation Task Force, wrote a colleague: "This looks like the kind of stuff Congressional hearings are made of. ... Someone needs to be considering how history will look back at this." The objections from the Army, Navy, Air Force and Marines prompted Navy Capt. Jane Dalton, legal adviser to the then-chairman of the Joint Chiefs of Staff, Gen. Richard Myers, to begin a review of the proposed techniques.

But Dalton, who's now retired, told the hearing Tuesday that the review was aborted quickly. Myers, she said, took her aside and told her that then-Defense Department general counsel William Haynes "does not want this ... to proceed." Haynes testified that he didn't recall the objections of the four uniformed services.

Officials in Rumsfeld's office and at Guantanamo developed the techniques they sought by reverse-engineering a long-standing military program designed to train U.S. soldiers and aviators to resist interrogation if they're captured.

The program, known as Survival, Evasion, Resistance and Escape, was never meant to guide U.S. interrogation of foreign detainees.

An official in Haynes' office sought information about SERE as early as July 2002, the documents show. Two months later, a delegation from Guantanamo attended SERE training at Fort Bragg, N.C. Levin said, "The truth is that senior officials in the United States government sought information on aggressive techniques, twisted the law to create the appearance of their legality and authorized their use against detainees." The documents confirm that a delegation of senior administration lawyers visited Guantanamo in September 2002 for briefings on intelligence-gathering there. The delegation included David Addington, a top aide to Vice President Dick Cheney; Haynes; acting CIA counsel John Rizzo; and Michael Chertoff, then the head of the Justice Department's Criminal Division and now the homeland security secretary. Few of the Republicans at Tuesday's hearing defended the Bush administration's detainee programs. Guidance provided by administration lawyers "will go down in history as some of the most irresponsible and shortsighted legal analysis ever provided to our nation's military intelligence communities," said Sen. Lindsey Graham, R-S.C..

Regarding the ICRC, the United States long has complained that other countries such as China or the old Soviet Union prevented independent access to prisoners or made their conditions look better when outsiders were inspecting. The Bush administration appears to have engaged in similar practices, however.

Bernard Barrett, the ICRC's Washington spokesman, said, "We knew that we did not always have full access to all detainees. It was a fairly serious issue." "It's been addressed," he said. "We are confident we now have access to all detainees at Guantanamo."

The Biggest Election Story Not on Your TV

The Biggest Election Story Not on Your TV

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For over half the days during any period of years you choose to select, the biggest story in U.S. news outlets is the impending most important election in your lifetime. The story, of course, takes an infinite variety of forms, ranging from candidates' friends and associates to their diets, wardrobes, religions, childhoods, and hobbies. There are variations that take us through polls and fundraising and commercials and donors and staffers and analysis of commentary on reporting on sound bytes. We learn the ins and outs of the process, the demographics of likely supporters, and the statistical likelihood that a candidate of a given race, religion, gender, and shoe size will get an RBI in the next inning. Occasionally we even get a glancing glimpse at what a candidate might do if elected.

But what if there were a story about the entire process that flipped the whole thing upside down, radically altering many of the assumptions never mentioned but always assumed in all of the endless "reporting"? And what if, on top of that, this story involved strong evidence of the commission of major crimes and abuses by the highest officials in the land? And what if, on top of that, you could toss in the historic reversal of some of the major gains won by the most dramatic populist movement of civil resistance during the course of the last century? The question, of course, would be: Can we find a way to connect this information to some kinky form of illicit sex so that members of the media can feel responsible about using our airwaves to discuss it?

That, my friends, is your assignment. The raw material you have to work with is contained in the following two articles of impeachment introduced in the House of Representatives last Monday night by Congressman Dennis Kucinich. The model you should seek to emulate is, of course, the classic report named for its author: Kenneth Starr.

Article XXVIII

Tampering With Free and Fair Elections, Corruption of the Administration of Justice

In his conduct while President of the United States, George W. Bush, in violation of his constitutional oath to faithfully execute the office of President of the United States and, to the best of his ability, preserve, protect, and defend the Constitution of the United States, and in violation of his constitutional duty under Article II, Section 3 of the Constitution "to take care that the laws be faithfully executed", has both personally and acting through his agents and subordinates, conspired to undermine and tamper with the conduct of free and fair elections, and to corrupt the administration of justice by United States Attorneys and other employees of the Department of Justice, through abuse of the appointment power.

Toward this end, the President and Vice President, both personally and through their agents, did:

Engage in a program of manufacturing false allegations of voting fraud in targeted jurisdictions where the Democratic Party enjoyed an advantage in electoral performance or otherwise was problematic for the President's Republican Party, in order that public confidence in election results favorable to the Democratic Party be undermined;

Direct United States Attorneys to launch and announce investigations of certain leaders, candidates and elected officials affiliated with the Democratic Party at times calculated to cause the most political damage and confusion, most often in the weeks immediately preceding an election, in order that public confidence in the suitability for office of Democratic Party leaders, candidates and elected officials be undermined;

Direct United States Attorneys to terminate or scale back existing investigations of certain Republican Party leaders, candidates and elected officials allied with the George W. Bush administration, and to refuse to pursue new or proposed investigations of certain Republican Party leaders, candidates and elected officials allied with the George W. Bush administration, in order that public confidence in the suitability of such Republican Party leaders, candidates and elected officials be bolstered or restored;

Threaten to terminate the employment of the following United States Attorneys who refused to comply with such directives and purposes;

1.David C. Iglesias as U.S. Attorney for the District of New Mexico;

2.Kevin V. Ryan as U.S. Attorney for the Northern District of California;

3.John L. McKay as U.S. Attorney for the Western District of Washington;

4.Paul K. Charlton as U.S. Attorney for the District of Arizona;

5.Carol C. Lam as U.S. Attorney for the Southern District of California;

6.Daniel G. Bogden as U.S. Attorney for the District of Nevada;

7.Margaret M. Chiara as U.S. Attorney for the Western District of Michigan;

8.Todd Graves as U.S. Attorney for the Western District of Missouri;

9.Harry E. "Bud" Cummins, III as U.S. Attorney for the Eastern District of Arkansas;

10.Thomas M. DiBiagio as U.S. Attorney for the District of Maryland, and;

11.Kasey Warner as U.S. Attorney for the Southern District of West Virginia.

Further, George W. Bush has both personally and acting through his agents and subordinates, together with the Vice President conspired to obstruct the lawful Congressional investigation of these dismissals of United States Attorneys and the related scheme to undermine and tamper with the conduct of free and fair elections, and to corrupt the administration of justice.

Contrary to his oath faithfully to execute the office of President of the United States and, to the best of his ability, preserve, protect, and defend the Constitution of the United States, and in violation of his constitutional duty to take care that the laws be faithfully executed, George W. Bush has without lawful cause or excuse directed not to appear before the Committee on the Judiciary of the House of Representatives certain witnesses summoned by duly authorized subpoenas issued by that Committee on June 13, 2007.

In refusing to permit the testimony of these witnesses George W. Bush, substituting his judgment as to what testimony was necessary for the inquiry, interposed the powers of the Presidency against the lawful subpoenas of the House of Representatives, thereby assuming to himself functions and judgments necessary to the exercise of the checking and balancing power of oversight vested in the House of Representatives.

Further, the President has both personally and acting through his agents and subordinates, together with the Vice President directed the United States Attorney for the District of Columbia to decline to prosecute for contempt of Congress the aforementioned witnesses, Joshua B. Bolten and Harriet E. Miers, despite the obligation to do so as established by statute (2 USC § 194) and pursuant to the direction of the United States House of Representatives as embodied in its resolution (H. Res. 982) of February 14, 2008.

In all of these actions and decisions, President George W. Bush has acted in a manner contrary to his trust as President, and subversive of constitutional government, to the prejudice of the cause of law and justice and to the manifest injury of the people of the United States. Wherefore, President George W. Bush, by such conduct, is guilty of an impeachable offense warranting removal from office.

Article XXIX

Conspiracy to Violate the Voting Rights Act of 1965

In his conduct while President of the United States, George W. Bush, in violation of his constitutional oath to faithfully execute the office of President of the United States and, to the best of his ability, preserve, protect, and defend the Constitution of the United States, and in violation of his constitutional duty under Article II, Section 3 of the Constitution "to take care that the laws be faithfully executed", has both personally and acting through his agents and subordinates, willfully corrupted and manipulated the electoral process of the United States for his personal gain and the personal gain of his co-conspirators and allies; violated the United States Constitution and law by failing to protect the civil rights of African-American voters and others in the 2004 Election, and impeded the right of the people to vote and have their vote properly and accurately counted, in that:

A. On November 5, 2002, and prior thereto, James Tobin, while serving as the regional director of the National Republican Senatorial Campaign Committee and as the New England Chairman of Bush-Cheney '04 Inc., did, at the direction of the White House under the administration of George W. Bush, along with other agents both known and unknown, commit unlawful acts by aiding and abetting a scheme to use computerized hang-up calls to jam phone lines set up by the New Hampshire Democratic Party and the Manchester firefighters' union on Election Day;

B. An investigation by the Democratic staff of the House Judiciary Committee into the voting procedures in Ohio during the 2004 election found "widespread instances of intimidation and misinformation in violation of the Voting Rights Act, the Civil Rights Act of 1968, Equal Protection, Due Process and the Ohio right to vote;"

C. The 14th Amendment Equal Protection Clause guarantees that no minority group will suffer disparate treatment in a federal, state, or local election in stating that: "No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws." However, during and at various times of the year 2004, John Kenneth Blackwell, then serving as the Secretary of State for the State of Ohio and also serving simultaneously as Co-Chairman of the Committee to Re-Elect George W. Bush in the State of Ohio, did, at the direction of the White House under the administration of George W. Bush, along with other agents both known and unknown, commit unlawful acts in violation of the Equal Protection Clause of the 14th Amendment to the United States Constitution by failing to protect the voting rights of African-American citizens in Ohio and further, John Kenneth Blackwell did disenfranchise African-American voters under color of law, by

D. Willfully denying certain neighborhoods in the cities of Cleveland, Ohio and Columbus, Ohio, along with other urban areas in the State of Ohio, an adequate number of electronic voting machines and provisional paper ballots, thereby unlawfully impeding duly registered voters from the act of voting and thus violating the civil rights of an unknown number of United States citizens.

E. In Franklin County, George W. Bush and his agent, Ohio Secretary of State John Kenneth Blackwell, Co-Chair of the Bush-Cheney Re-election Campaign, failed to protect the rights of African-American voters by not properly investigating the withholding of 125 electronic voting machines assigned to the city of Columbus.

F. Forty-two African-American precincts in Columbus were each missing one voting machine that had been present in the 2004 primary.

G. African-American voters in the city of Columbus were forced to wait three to seven hours to vote in the 2004 presidential election.

H. Willfully issuing unclear and conflicting rules regarding the methods and manner of becoming a legally registered voter in the State of Ohio, and willfully issuing unclear and unnecessary edicts regarding the weight of paper registration forms legally acceptable to the State of Ohio, thereby creating confusion for both voters and voting officials and thus impeding the right of an unknown number of United States citizens to register and vote.

I. Ohio Secretary of State John Kenneth Blackwell directed through Advisory 2004-31 that voter registration forms, which were greatest in urban minority areas, should not be accepted and should be returned unless submitted on 80 bond paper weight. Blackwell's own office was found to be using 60 bond paper weight.

J. Willfully permitted and encouraged election officials in Cleveland, Cincinnati and Toledo to conduct a massive partisan purge of registered voter rolls, eventually expunging more than 300,000 voters, many of whom were duly registered voters, and who were thus deprived of their constitutional right to vote;

K. Between the 2000 and 2004 Ohio presidential elections, 24.93% of the voters in the city of Cleveland, a city with a majority of African American citizens, were purged from the voting rolls.

L. In that same period, the Ohio county of Miami, with census data indicating a 98% Caucasian population, refused to purge any voters from its rolls. Miami County "merged" voters from other surrounding counties into its voting rolls and even allowed voters from other states to vote.

M. In Toledo, Ohio, an urban city with a high African-American concentration, 28,000 voters were purged from the voting rolls in August of 2004, just prior to the presidential election. This purge was conducted under the control and direction of George W. Bush's agent, Ohio Secretary of State John Kenneth Blackwell outside of the regularly established cycle of purging voters in odd-numbered years.

N. Willfully allowing Ohio Secretary of State John Kenneth Blackwell, acting under color of law and as an agent of George W. Bush, to issue a directive that no votes would be counted unless cast in the right precinct, reversing Ohio's long-standing practice of counting votes for president if cast in the right county.

O. Willfully allowing his agent, Ohio Secretary of State John Kenneth Blackwell, the Co-Chair of the Bush-Cheney Re-election Campaign, to do nothing to assure the voting rights of 10,000 people in the city of Cleveland when a computer error by the private vendor Diebold Election Systems, Inc. incorrectly disenfranchised 10,000 voters

P. Willfully allowing his agent, Ohio Secretary of State John Kenneth Blackwell, the Co-Chair of the Bush-Cheney Re-election Campaign, to ensure that uncounted and provisional ballots in Ohio's 2004 presidential election would be disproportionately concentrated in urban African-American districts.

Q. In Ohio's Lucas County, which includes Toledo, 3,122 or 41.13% of the provisional ballots went uncounted under the direction of George W. Bush's agent, the Secretary of State of Ohio, John Kenneth Blackwell, Co-Chair of the Committee to Re-Elect Bush/Cheney in Ohio.

R. In Ohio's Cuyahoga County, which includes Cleveland, 8,559 or 32.82% of the provisional ballots went uncounted.

S. In Ohio's Hamilton County, which includes Cincinnati, 3,529 or 24.23% of the provisional ballots went uncounted.

T. Statewide, the provisional ballot rejection rate was 9% as compared to the greater figures in the urban areas.

U. The Department of Justice, charged with enforcing the Voting Rights Act of 1965, the 14th Amendment's Equal Protection Clause, and other voting rights laws in the United States of America, under the direction and Administration of George W. Bush did willfully and purposely obstruct and stonewall legitimate criminal investigations into myriad cases of reported electoral fraud and suppression in the state of Ohio. Such activities, carried out by the department on behalf of George W. Bush in counties such as Franklin and Knox by persons such as John K. Tanner and others, were meant to confound and whitewash legitimate legal criminal investigations into the suppression of massive numbers of legally registered voters and the removal of their right to cast a ballot fairly and freely in the state of Ohio, which was crucial to the certified electoral victory of George W. Bush in 2004.

V. On or about November 1, 2006, members of the United States Department of Justice, under the control and direction of the Administration of George W. Bush, brought indictments for voter registration fraud within days of an election, in order to directly effect the outcome of that election for partisan purposes, and in doing so, thereby violated the Justice Department's own rules against filing election-related indictments close to an election;

X. Emails have been obtained showing that the Republican National Committee and members of Bush-Cheney '04 Inc., did, at the direction of the White House under the administration of George W. Bush, engage in voter suppression in five states by a method know as "vote caging," an illegal voter suppression technique;

Y. Agents of George W. Bush, including Mark F. "Thor" Hearne, the national general counsel of Bush/Cheney '04, Inc., did, at the behest of George W. Bush, as members of a criminal front group, distribute known false information and propaganda in the hopes of forwarding legislation and other actions that would result in the disenfranchisement of Democratic voters for partisan purposes. The scheme, run under the auspices of an organization known as "The American Center for Voting Rights" (ACVR), was funded by agents of George W. Bush in violation of laws governing tax exempt 501(c)3 organizations and in violation of federal laws forbidding the distribution of such propaganda by the federal government and agents working on its behalf.

Z. Members of the United States Department of Justice, under the control and direction of the Administration of George W. Bush, did, for partisan reasons, illegally and with malice aforethought block career attorneys and other officials in the Department of Justice from filing three lawsuits charging local and county governments with violating the voting rights of African-Americans and other minorities, according to seven former senior United States Justice Department employees.

AA. Members of the United States Department of Justice, under the control and direction of the Administration of George W. Bush, did illegally and with malice aforethought derail at least two investigations into possible voter discrimination, according to a letter sent to the Senate Rules and Administration Committee and written by former employees of the United States Department of Justice, Voting Rights Section.

BB. Members of the United States Election Assistance Commission (EAC), under the control and direction of the Administration of George W. Bush, have purposefully and willfully misled the public, in violation of several laws, by;

CC. Withholding from the public and then altering a legally mandated report on the true measure and threat of Voter Fraud, as commissioned by the EAC and completed in June 2006, prior to the 2006 mid-term election, but withheld from release prior to that election when its information would have been useful in the administration of elections across the country, because the results of the statutorily required and tax-payer funded report did not conform with the illegal, partisan propaganda efforts and politicized agenda of the Bush Administration;

DD. Withholding from the public a legally mandated report on the disenfranchising effect of Photo Identification laws at the polling place, shown to disproportionately disenfranchise voters not of George W. Bush's political party. The report was commissioned by the EAC and completed in June 2006, prior to the 2006 mid-term election, but withheld from release prior to that election when its information would have been useful in the administration of elections across the country

EE. Withholding from the public a legally mandated report on the effectiveness of Provisional Voting as commissioned by the EAC and completed in June 2006, prior to the 2006 mid-term election, but withheld from release prior to that election when its information would have been useful in the administration of elections across the country, and keeping that report unreleased for more than a year until it was revealed by independent media outlets.

For directly harming the rights and manner of suffrage, for suffering to make them secret and unknowable, for overseeing and participating in the disenfranchisement of legal voters, for instituting debates and doubts about the true nature of elections, all against the will and consent of local voters affected, and forced through threats of litigation by agents and agencies overseen by George W. Bush, the actions of Mr. Bush to do the opposite of securing and guaranteeing the right of the people to alter or abolish their government via the electoral process, being a violation of an inalienable right, and an immediate threat to Liberty.

In all of these actions and decisions, President George W. Bush has acted in a manner contrary to his trust as President, and subversive of constitutional government, to the prejudice of the cause of law and justice and to the manifest injury of the people of the United States. Wherefore, President George W. Bush, by such conduct, is guilty of an impeachable offense warranting removal from office.

Further Reading on Election Tampering:

Dan Eggen, & Amy Goldstein, Voter-Fraud Complaints by GOP Drove Dismissals, The Washington Post, May 14, 2007.

Rebecca Carr, Former Justice Official: Fired U.S. Attorneys Among the Best, Cox Newspapers, May 8, 2007.

Marisa Taylor, Gonzales appoints political loyalists into vacant U.S. Attorneys slots, McClatchy Newspapers, January 26, 2007.

David Bowermaster, Charges may result from firings, say two former U.S. attorneys, Seattle Times, May 9, 2007.

Murray Waas, Secret Order By Gonzales Delegated Extraordinary Powers To Aides, National Journal, National Journal Group, Inc., April 30, 2007.

David Stout, Ex-Gonzales Aide Testifies, 'I Crossed the Line', New York Times, May 23, 2007.

Richard Roesler, No evidence of election crime, former U.S. attorney says, The Spokesman Review, May 20, 2007.

Jan Crawford Greenberg, E-Mails Show Rove's Role in U.S. Attorney Firings, ABC News, March 15, 2007.

Dan Eggen, Firings Had Genesis in White House Ex-Counsel Miers First Suggested Dismissing Prosecutors 2 Years Ago, Documents Show, Washington Post, March 13, 2007, p. Page A01.

Laura Jakes Jordan, Agency weighed prosecutors' politics, ABC News (AP), April 13, 2007

Kevin Johnson, Prosecutor fired so ex-Rove aide could get his job, USA Today, February 6, 2007.

David Johnston, White House Is Reported to Be Linked to a Dismissal, The New York Times, February 16, 2007.

CNN, Subpoenas target Justice; White House could be next, March 15, 2007.

Sheryl Gay Stolberg, Bush Clashes With Congress on Prosecutors, The New York Times, March 20, 2007.

President Bush Addresses Resignations of U.S. Attorneys - The Diplomatic Reception Room.

Michael Roston, Bush blocks Miers from appearing before House Judiciary Committee, contempt charges possible, July 11, 2007.

The New York Times, Questions About a Governor's Fall, Editorial, June 30, 2007.

Adam Cohen, A Woman Wrongly Convicted and a U.S. Attorney Who Kept His Job, The New York Times, April, 16, 2007.

Further Reading on Voting Rights:

James Tobin.

House Judiciary Committee Report, January 5, 2005.

Robert F. Kennedy Jr., Was the 2004 Election Stolen? Rolling Stone.

Jim Bebbington and Laura Bischoff, Ohio Secretary of State Blocks New Voter Registrations, Dayton Daily News, September 28, 2004.


Paul Kiel, Controversial USA Delivered "Voter Fraud" Indictments Right on Time, TPM Muckraker, May 1, 2007

Jason Leopold and Matt Renner, Emails Detail RNC Voter Suppression in Five States,

Thor Hearne, "American Center for Voting Rights" (ACVR) GOP "Voter Fraud" Scam.

Greg Gordon, Justice official accused of blocking suits into alleged violations, McClatchy Newspapers, June 18, 2007.

Arlen Parsa, U.S. Election Assistance Commission Altered Final Report On 'Voter Fraud' For Political Purposes BradBlog, April 11, 2007.

Brad Friedman, EAC Finally Releases Previously Withheld, 9 Month Old Report on 'Voter ID' Concerns After Congressional Prodding.

Rick Hasen, Another Report to the EAC Buried?, Election Law Blog, December 2, 2007.

Voting Rights Act of 1965,

Emerging Epic Recession?

Emerging Epic Recession?

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There's a specter hovering over the U.S. economy today. Like all specters, its background form may not be readily apparent. But the shadow it casts is nonetheless real. That specter and shadow are the still spreading financial crisis and the deepening credit contraction left in its wake.

Is there something fundamentally different about the current economic downturn that distinguishes it from the typical postwar recession? Could current events represent a qualitative change in the dynamic of postwar recessions? Perhaps something more appropriately called an epic recession?

Beginning of the End or End of the Beginning?

Thus far in 2008 both the financial crisis and credit contraction have continued to gain momentum. In mid-March financial instability reached a tipping point, as banks and other financial institutions began to turn on each other. Like crocodiles eating their own, investment banks (I-banks) such as Bear Stearns began calling in margins on loans to their hedge fund partners and other large investors. In response, hedge funds began playing hard ball by taking their money out of Bear Stearns and other I-banks. A feared run on the banks was imminent. Not a retail customer bank run, as during the Great Depression in 1932 and 1933, but a wholesale bank run on the I-bank sector with Bear Stearns at the center and with Lehman Brothers and other I-banks not far behind.

As George Soros, the billionaire investor, had warned just weeks earlier, the U.S. was facing the prospect of a wholesale bank run "of the type we have not seen before," a bank run that might very well "cripple the entire short term funding market."

While Congress dallied and the Bush administration opposed offering any assistance to two million homeowners facing foreclosure, over the weekend of March 15-16 the U.S. Federal Reserve, the U.S. government central bank, quickly acted to bail out Bear Stearns by effectively providing it a $29 billion guaranteed loan—in exchange for which Bear Stearns had to agree to feed itself to its bigger bank brother, J.P. Morgan-Chase.

Less well known perhaps, but more significant, has been the Federal Reserve's making available nearly $400 billion in low cost loans to banks and financial institutions from December through April this year. More so than the Bear Stearns bailout, the $400 billion has served to temporarily prevent the wholesale bank run that Soros predicted was imminent. It probably also was central for preventing, for the moment at least, a spillover of the banking crisis to the $2 trillion hedge fund and $60 trillion credit derivatives markets, about $25 trillion of which is currently held by U.S. banks and financial institutions. (Another $22 trillion is held by UK banks.)

But the March action by the Fed and U.S. Treasury has not resolved the current financial crisis; or the associated credit contraction the financial crisis has provoked; or, more importantly, had any notable impact on the consequent downturn in the real economy.

A contrarian view increasingly promoted in the business press since the Bear Stearns bailout is that the financial crisis has now stabilized. However, that view is largely the product of bank CEOs like Lloyd Blankfein, head of Goldman Sachs, John Mack of Morgan Stanley, Vikram Pandit of Citigroup, and Richard Fuld of Lehman Brothers. All, in orchestrated fashion, trotted out in successive press conferences in early April to declare the "beginning of the end" of the financial crisis—when, in fact, events since Bear Stearns represent not the beginning of the end but rather the end of the beginning.

Financial Crises Phase Two

In April the International Monetary Fund estimated that projected losses from the financial crisis would be approximately $1.2 trillion. However, major money center banks collectively have thus far acknowledged only $200 billion in losses. Estimates of bank losses still to come are, at minimum, another $300-$400 billion. Hedge funds, insurance companies, pensions and other funds have yet to acknowledge any of their share of the still unaccounted for $1 trillion—which the IMF estimates at $280 billion, $100 billion and $110 billion respectively.

Beyond the $1 trillion are further losses to come associated with the accelerating decline in consumer credit markets now underway—in particular, markets for auto and student loans, credit cards, personal loans, and the like. A further round of consumer credit market losses will begin to impact financial institutions later in 2008 and 2009 in a feedback effect.

As a rough idea of the potential scope of this second phase, consumer indebtedness ballooned from 2001 to 2007 from $5 trillion to $10 trillion in the U.S., about half of which, more than $2 trillion, was non-housing related. The size of the consumer-related losses and credit contraction to come may thus be at least as large as the subprime mortgage bust of 2007-08. That would mean at least another $500 billion in losses to come. In addition, experts on corporate defaults and bankruptcies estimate a minimum of another $220 billion in losses due to corporate defaults in 2008, with at least another $200 billion in 2009. Together with consumer credit losses, that's nearly another $1 trillion to be added to the IMF's projected losses.

Worth noting as well, is that the U.S. Federal Reserve currently has total available bailout funds of around $800 billion. If it has already committed $400 billion to mainstream banks (smaller regional and local banks are out of luck), that leaves the Federal Reserve short of funds for bailout purposes by approximately $1-$1.5 trillion. If faced with further runs on financial institutions as occurred in March, the underfunded Fed will have to seek an emergency loan from Congress as the Federal Reserve has already shot off its big cannons and has little in the way of effective ammunition left. Knowing this full well, it will now most likely retreat and turn over primary responsibility for the crisis to Congress and the U.S. Treasury.

Recession or Depression?

Since 1945 the U.S. economy has experienced a number of recessions, but not yet anything that could be called a full-fledged depression. Recessions are officially defined as two consecutive quarters of declining total output of goods and services in the economy. Thus recessions are relatively short. While they may extend beyond two consecutive quarters, they seldom last more than three. And the magnitude of economic decline is typically in the range of a few percentage point drops in total economic output, while unemployment levels rise at most to the 8-10 percent range and quickly retreat to lower levels in a matter of months. Recessions are never associated with sustained or deep declines in prices. Nor with system-wide crises in the banking and financial system. Moreover, monetary policy designed to lower interest rates and fiscal policy by government in the form of cutting taxes or increasing spending typically have a positive impact within months, thus checking and reversing the economic decline.

Describing a recession as only two consecutive quarters of contraction in the real economy is rather arbitrary. But definitions of a depression are even more imprecise. Economists concur that a depression is worse than a recession, in the relative sense of being deeper, longer, and having a more negative impact.

The last generally acknowledged depression in the U.S. occurred between 1929-1934. It was followed by a brief period of recovery, 1935-37, but quickly followed by a downturn in 1938-39 nearly as severe as the earlier period of the decade. Less well known, but no less devastating for their time, were depressions in the U.S. that occurred in the 1890s, 1870s, and 1830s. During the Great Depression of the 1930s the economy declined 30 percent, compared to the typical 2 percent for a postwar recession. Unemployment levels reached more than 20 percent. The decline in the economy and jobs lasted over a course of nearly five years, compared typically to less than one year.

Some Characteristics of Depressions

All the identifiable depressions in the U.S. since the 1830s were preceded, and to a great extent provoked, by periods of intensive financial speculation, accelerating price increases for investment assets, and excessive accumulation of investor debt, followed by an eventual blow up of the banking and finance systems as the excess speculation and debt peaked and then busted. From 1945 to the 1980s recessions were essentially de-linked from financial crises and there were no financial crises of any note, apart from an occasional bank or other major company going bankrupt. Since the 1980s, however, recessions have been increasingly linked with financial crises that, while not yet system-wide, have been growing nonetheless in intensity and scope. The current 2007-08 crisis represents the closest and most intense integration of financial instability and recession since 1939. Compared to prior postwar recessions, today's financial instability also appears to be system-wide in scope.

In depressions, the accumulation of excessive debt and intensifying speculation go hand in hand, the one feeding upon the other in turn, until the speculative bubble bursts. The bust then quickly leads to a rapid fall in asset prices (i.e. investments) and then spreads eventually to general product prices, and thereafter to wages. The combination of excessive debt and falling asset prices results, in the initial phase, in a crisis in the finance and banking sector. Bank losses quickly pile up. Banks in turn reduce or stop loaning to businesses, and even to each other, or else raise interest rates to levels to discourage loans to all but those businesses most desperate to borrow. The system of credit freezes up. A general contraction of credit then follows. Non-financial businesses are subsequently impacted and can't get loans at reasonable rates to keep their businesses going. The shakiest and least financially able companies are forced to borrow at the higher rates. Meanwhile, prices for their products also begin to fall, creating a double problem as revenues decline while costs rise. During the depression of the 1930s general prices fell by more than a third. Increasingly short on cash, businesses then cut costs. Layoffs occurred first in smaller numbers then massively. As revenues continued to drop and debt and costs rose, the most exposed businesses began to default on their previously borrowed loans to banks, causing a further round of bank losses. Banks in turn tightened credit further.

Thus a spiral of declining prices (called deflation) and rising debt and costs leads increasingly to more and more defaults on loans and to bankruptcies—both consumer and business. Defaults and bankruptcies lead to more losses for banks and a second phase of financial crisis. The downward cycle of debt, deflation, layoffs, credit contraction, defaults and bankruptcies continues, followed by a series of banking crises and an ever-deepening crisis of confidence in the financial system.

Depressions are further characterized by having a global dimension. Depressions are always global events and the economic declines in countries are transmitted by one or more financial mechanisms between countries. In contrast, recessions are typically restricted to a given country's economy. In addition, depressions are typically associated with currency crises. During the 1930s, the U.S. dollar plummeted in value, as did other currencies. In contrast, currency crises and a precipitous fall in the value of a country's currency are not normally associated with recessions. Finally, the depression of the 1930s was notable for the failure of the Federal Reserve bank to stop the downward spiral, despite having lowered interest rates to virtually zero. Monetary policy thus proves largely ineffective in stemming economic decline in a depression.

In a depression, government spending has to assume the task of restoring growth and jobs. However, government spending in the 1930s was not hampered by a $10 trillion dollar government debt level, such as is the case today. Just as banks and businesses took on trillions in additional debt since 2000, and consumers added $5 trillion in debt, the U.S. government since 2000 has also borrowed $5 trillion in order to finance war and tax cuts for the wealthy and corporations.

Thus between $13-$15 trillion in debt at all levels of the U.S. economy—business, consumer, and government—has been added since 2000, a development similar to what occurred in the 1920s in the runup to the Great Depression. In fact, the unwinding of massive excess debt levels is one of the major hallmarks of depressions compared to recessions.

Some Characteristics of Epic Recessions

An epic recession shares some—though not all—characteristics associated with a depression. An epic recession would typically last beyond three quarters, but probably fall well short of the 12-20 successive quarters of economic decline often associated with a depression. However, the 4-12 quarters of decline in an epic recession could take the form of a long stagnation—i.e., somewhat similar to what occurred in Japan in the 1990s. Unemployment might range between 10-15 percent properly estimated (not underestimated as it is currently in the U.S.). Price deflation might occur in at least a few select major markets or sectors, although not as a general rule throughout all sectors. Or, consumer and wholesale product price levels might stagnate or decline mildly for an extended period of time. Workers' real wages and weekly earnings would decline. Corporate defaults and bank failure rates would exceed historical averages. There would have to be evidence of a cross country transmission of economic decline, with some identifiable mechanism for the transmission. Exceptional volatility in the country's currency (either excessive decline or rise) would be another characteristic of epic recessions, as well as increasing ineffectiveness of lower interest rates in stimulating recovery.

Based on the above short list of characteristics it is clear the emerging recession in the U.S. shares significant common ground with an epic recession.

First, the current recession is characterized by a massive debt overhang of more than $13 trillion that has already begun to unwind in the form of significant deflation in the residential and commercial property investments markets. For example, as a direct consequence of excessive debt levels, U.S. residential housing prices have fallen dramatically. Moreover, they are projected to continue to decline at an even faster rate over the next year. Only 200,000 of the anticipated 2 million foreclosures have occurred to date. That means as foreclosures accelerate in coming months, further significant price declines are inevitable. It appears, in addition, that commercial property price declines are close behind. In 2002, the U.S. economy came perilously close to deflation in product markets and it may well return to that threshold in the near future, given current conditions—although the price declines may also be cloaked by rising prices for oil, food, and commodities for a number of months to come. In terms of workers' pay, real wages today are clearly stagnating at best while, in auto and other select industries, wage deflation is occurring. In terms of deflation, conditions of epic recession are evident in the current downturn.

In terms of general economic output, of course, the current recession is just beginning and it is difficult to determine how long it will last. On the employment side, the economy is migrating toward very large job losses and unemployment over the next 18 months. Every month the U.S. economy must create 150,000 jobs just to absorb new entrants to the job market. Instead, it has been losing on average nearly 100,000 a month. That means a quarter million without jobs every month, or about 2 million more unemployed during the first half of 2008—all that before announcements of mass layoffs begin to occur in the second half of 2008. It appears the current recession might attain 10 percent-plus levels of unemployment.

With regard to corporate defaults and bankruptcies, recent estimates by Standard and Poor's, and other rating agencies, are that corporate defaults will rise tenfold in 2008-09.

Meanwhile, credit card companies and banks are preparing for billions of dollars in losses from additional consumer defaults as well. The student loan market has virtually dried up, requiring a Congressional bailout. Auto loans are projected to default at record rates in 2009. Consumers are turning to food stamps in record numbers and drawing down their 401k plans to cover daily consumption needs as their wages stagnate and fall, mortgage refinancing dries up, and credit card terms and usage are tightened. Both consumer and business confidence are now in freefall by all official estimates. Consumer spending has hit a wall and is rapidly decompressing. The wall is about to collapse on them as oil prices will continue to rise to more than $150 a barrel, and perhaps as high as $200, which will result in gas prices at the pump approaching $5 gallon by year end.

In the 1930s the depression was propagated and spread by the financial system, in particular the gold standard at the time. Today, once again, it appears the financial system is spreading the crisis, but with a different transmission mechanism. This time it's the global integration of financial markets, technology, and the securitization revolution of the past decade replacing the gold standard as a pro- pagating mechanism spreading the downturn. It is not by accident that the two economies suffering the worst of the financial instability—the U.S. and the UK—are the two now experiencing the fastest real economic slowdowns. Moreover, their respective currencies are plummeting while the euro rises to record levels, which will soon tip the economies of continental Europe into recession as well.

In yet another characteristic of epic recessions, the declining effectiveness of monetary policy in the U.S. is also becoming increasingly apparent. The Federal Reserve began rapidly lowering short term interest rates in September 2007. Despite that effort, the real economy continued its momentum toward recession. Short term rates today are about as low as the Fed dares to go, at around 2 percent, and the Fed has all but admitted they won't fall much lower. The Fed's dilemma is that, while it has lowered short term rates, long term interest and bond rates have either not moved or have risen. And it is long term rates that businesses and corporations borrow at in order to finance their continuing day-to-day operations. For example, 30-year mortgages have moved a miniscule 0.10 percent despite a full 5 percent drop in short term rates. The Federal Reserve interest rate policy has thus served only to fatten bank profits and balance sheets, allowing banks to borrow at super low rates while continuing to charge unchanged high long term rates to businesses and other customers. But the effort hasn't helped the general economy recover at all.

What the preceding brief and general overview reveals is that the current economic downturn is quite unlike typical postwar recessions. The fundamental forces driving the current recession include:

  • forces associated with excess debt
  • deflation in housing and construction
  • strong job losses
  • rates of corporate and consumer default well above historical averages
  • extraordinary pressures on consumer incomes and spending
  • a major decline in the value of the U.S. dollar
  • spreading slowdown to other economies
  • increasing ineffectiveness of monetary policies

These all provide strong evidence that the current recession is transitioning to an epic recession. The underlying factors that will continue to drive these forces will be the protracted financial instability, driven by a projected $1.5 trillion in losses yet to impact the U.S. economy.

Market Madness

Market Madness

How Speculators are Manipulating & Profiting from the Global Food Crisis

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Unless you live in a bubble, like George Bush, who expressed total surprise in February when a reporter told him gas was nearing $4 a gallon, you've been socked hard in the pocketbook by rising prices. It's most evident at the supermarket—according to the Bureau of Labor Statistics, the cost of a gallon of milk has jumped 17 percent and a dozen eggs have leaped 40 percent in the last year and a loaf of bread is up nearly 30 percent in the last two years. At the gas pump the national average for regular gasoline notched a record $3.63 a gallon in early May, double from 2005, and it looks set to break the $4 barrier this summer.

As dramatic as the consumer price increases are, the frenzy on commodity exchanges, where traders negotiate "futures" prices (and related financial products known as "options") is even more pronounced. The Commodity Futures Trading Commission (CFTC), in an unprecedented public webcast, held hearings on April 22 examining why agricultural commodity prices are skyrocketing. It noted, "In the last three months, the agricultural staples of wheat, corn, soybeans, rice and oats have hit all-time highs."

Over the last year, wheat prices are up 95 percent, soybeans are up 88 percent, corn is up 66 percent, and Thai B grade rice, the world's trading benchmark, ended 2007 at about $360 a metric ton. It hit $760 at the end of March and continued its dizzying climb to $1,080 less than a month later. On top of that, crude oil futures have more than doubled since January 2007, coming within a hair of $120 a barrel this April.

One striking aspect of the rising commodity prices is that when charted, they look similar to the Internet stock mania a decade ago or the charts of soaring (and plunging) home prices of late. This is no mere coincidence. One of the main factors in accelerating commodity and food costs is financial speculation. The same Wall Street banks and hedge funds that gave us the stock bubble and the housing bubble are reportedly throwing billions of dollars at the commodity markets, betting they can make a fast buck. One analyst interviewed by the Wall Street Journal estimates that "investors have poured roughly $175 billion to $200 billion into commodity-linked index funds since 2001." The Journal explained, "As with energy markets a few years ago, pension funds and hedge funds have flocked to grain investments as the supply of farm acreage and crop output shrinks relative to the growing global population and new demands for crops for biofuels and food. Many such investors make predominantly bullish bets," that is, expecting the price to rise.

The daily fluctuations on commodity exchanges are at times greater than used to occur in an entire year. On February 25 alone, at the Minneapolis Grain Exchange, one type of wheat jumped 29 percent. On a single day in March, "the price of cotton jumped 15 percent despite reports showing cotton supplies were at near record highs," according to the Toronto Globe and Mail. During the CFTC hearings, commodity producers laid the blame for soaring prices at the speculators' door. A representative of the National Grain and Feed Association testified, "Sixty percent of the current [wheat] market is owned by an index fund. Clearly that's having an impact on the market," while a cotton producer stated, "The market is broken, it's out of whack."

If there is a main culprit, it is the market. There is a lot of talk about growing consumption and falling supplies for both food and energy, but most of the data contradicts these claims. For example, despite a drought in Australia, ice and snow storms throughout China, and a cold, wet winter in the American breadbasket, the UN Food and Agricultural Organization projects global cereal production for 2007-2008 to increase by 92 million tons to 2.102 billion tons. But almost all this increase is from a record U.S. corn harvest, which is feeding the market for biofuels.

In essence, large speculators ranging from Wall Street banks and hedge funds to oil companies and agribusiness giants are making a killing from trading commodities. Analysts say some players may be manipulating the markets, but this is extremely difficult to prove because regulatory oversight of these markets has been deliberately rolled back. Still, many sectors appear to be engaging in blatant profiteering. This includes speculators, but also extends to food retailers, food producers, and fertilizer manufacturers. One of the ironies of the current situation is that even as the revenue of farmers is increasing furiously, especially in the United States, they are losing out on profits because of the wild gyrations in the commodities markets.

Grain shortages abound because speculators' profits are literally coming at the expense of the world's poor. Food riots have occurred in Egypt, Cameroon, Burkina Faso, Mauritania, Ivory Coast, Senegal, and Ethiopia—countries where many people spend half their income or more on food (compared to less than 10 percent for Americans). The starkest indication of the deprivation is seen in countries like Haiti where, as rice prices have skyrocketed, the poor have been turning to mud cakes made with oil and sugar for sustenance.

Raj Patel, author of Stuffed and Starved, says, "It's obviously a crime against humanity that this kind of financial speculation is allowed to continue. It's one thing to have speculation on the price of widgets or car parts, but it's another thing to have speculation in the fount of human life.... This should be a wake-up call to help us realize that food isn't a commodity, it's a human right." In a speech on April 2, World Bank President Robert Zoellick noted that food prices "have jumped 80 percent" since 2005, and "33 countries around the world face potential social unrest because of the acute hike in food and energy prices." A few weeks later, the World Food Program called high food prices "a silent tsunami" that has already pushed an estimated 100 million people deeper into poverty and which threatened "to plunge more than 100 million people on every continent into hunger."

In the United States, the situation is troubling, if not as dire as the developing world. The U.S. Department of Agriculture estimates 12.1 percent of Americans, or more than 35 million people, experienced "food insecurity" in 2006. For many, this meant running out of food towards the end of the month, skipping meals, or not eating for a whole day. (Until the Bush administration changed definitions, this used to be known as "hunger.") Reports from media outlets, food banks, and soup kitchens indicate that food insecurity is increasing, caused by the leap in food and energy prices, along with the weakening economy, falling home prices, and fast-rising unemployment. Many low-income Americans, especially retirees on fixed incomes, are being forced to choose between eating, staying warm, or purchasing prescription drugs.

One of the more disturbing signs of economic desperation is that many Americans are selling off their belongings to "meet higher gas, food and prescription drug bills," according to the Associated Press. The hard evidence comes from websites like Craigslist where the number of for-sale listings from March 2008 have "more than doubled to almost 15 million from the year-ago period" and are often accompanied by pleas like, "Please buy anything you can to help out."

The Inflation Equation

Understanding the nature and causes of inflation—when prices rise quickly and purchasing power diminishes —is difficult to grasp because there is a gap between people's daily experience and the official story. For years government officials have been declaring soothingly that inflation is "under control." The government reports that consumer inflation has been around 2-3 percent for the last 10 years and has jumped to almost 4 percent in the last 6 months. Some economists, including ones that run the website Shadow Government Statistics, claim the real inflation rate has been above 8 percent for the last decade and is closer to 12 percent at the moment. (They assert one reason the government manipulates the rate of inflation is to reduce cost-of-living adjustments that must be made to Social Security payments.)

Any number of reasons has been put forth for rising commodity and food prices: diminishing inventories of grains, greater consumption of animal products in Asia, a growing global population, global warming, biofuels, natural limits, financial speculation, the falling dollar, escalating crude oil prices, World Bank and IMF policies, hoarding, export restrictions, and more. In one way or another, all of these factor into inflation. But it's not a jumble of reasons; there are a few critical causal chains and feedback loops behind the chaos. In broad terms, the nature of the globalized economy—the role of financial speculation, the dumping of subsidized foodstuffs from Western farmers in poor countries forced to "liberalize" their agricultural sectors, the declining dollar, and the overheated oil market—is why prices are shooting up. What ties all these factors together is politics. It's a political decision to allow rampant speculation in commodities; it's a political decision to decrease regulation of commodities trading; it's a political decision to devalue the dollar by increasing deficits and cutting interest rates; it's a political decision to force poor countries to dismantle supports for their farming sector; it's a political decision to force the poor to buy food in the marketplace, instead of making access to food a basic human right.

The Return of Malthus

Much of the debate boils down to politics versus natural limits. This debate stretches back more than 200 years to Thomas Malthus's 1798 "Essay on the Principle of Population," in which he argued, as John Bellamy Foster put it, "There is a constant pressure of population against food supply which has always applied and will always apply." Without retracing the debate over hundreds of years (Foster's 1998 essay in Monthly Review, "Malthus' Essay on Population at Age 200: A Marxian View," is an excellent introduction), it's critical to note that it's still of great relevance today. Many people who speak of natural limits—such as the "peak oil" or "peak food" crowd—are neo- Malthusians. They often exhibit hostility toward the poor like Malthus, who wrote, "We cannot, in the nature of things, assist the poor, in any way, without enabling them to rear up to manhood a greater number of their children."

Some involved in the debate today, such as Lester Brown and the World Watch Institute, tread close to the Malthusian line in warning of the "population problem" and arguing that it is a major reason why commodity prices are rising. Despite talk of increased food aid—which involves buying more subsidized Western foodstuffs and dumping them in impoverished countries, thereby further undermining their food security by bankrupting small farmers who can't compete against free foods— there is a willingness to let the poor die en masse in adherence to the neoliberal agenda.

There are, of course, limits to everything—food, population, energy. But as Marx argued in the Grundrisse, overpopulation is "a historically determined relation, in no way determined by abstract numbers or by the absolute limit of the productivity of the necessaries of life, but by limits posited by specific conditions of production." It is these limits imposed—such as biofuel production and speculation—that are behind the global food crisis.

On the other side, there is a strategy to blame the developing world for both the food and fuel crisis. China and India, with their booming economies, are held as culprits for the rising demand and thus shrinking supplies of food and energy supplies. India and China's population and caloric intake is increasing, particularly that of meat and dairy products. But this is a decades-long trend. There is no way that steady growth over 20 or 30 years could cause commodity prices to double in a year or 2. For example, from 1990 to 2003, India's caloric intake grew by 155 calories a person, barely 12 calories a year, while China's grew by 231 calories, or 18 calories a year. (During this same period, the intake of the average American increased by 310 calories.) At the same time, despite adverse climatic events such as large crop failures in Australia, the world's cereal output has increased. Part of the problem, notes Raj Patel, is that by one estimate, "740 million tons of grains were fed to animals last year and that would cover the food deficit at the moment 14 times over."

The biofuels industry has been eager to blame China. An April 2008 "study" published by the Biofuels Digest was headlined "China's Meat Consumption Causing Global Grain Shortage." But the study contradicted itself because it found that China's per capita meat consumption increased by less than seven pounds total from 2000 to 2007, a miniscule rise. The same strategy of blaming China and India is being used to hang the energy crisis as well as global warming around their necks. China and India use about 10 million barrels a day of petroleum products. But that's half the U.S. consumption of 20.6 MBD and they have nearly 8 times the population between them.

The "Dot-Corn" Bubble

It is in industrial agriculture where the link between energy and food inflation becomes apparent. The food we eat is literally hydrocarbons like oil. Oil is used for pesticides and herbicides to plant, harvest, and mill grains, to manufacture food products, to transport them and drive them home from the supermarket. Oil is even more central to meat production as the animals are reared on grain-heavy diets. On top of this, fertilizer, the boon of industrial agriculture, is mostly produced from natural gas, which has also been rising in price. With diesel above $4 a gallon already, businesses are passing the costs through the commodity chain to consumers (and truckers). The rise in egg prices has been extreme and therein lies an interesting story. The average egg-laying hen will in a year produce 276 eggs and eat 83 pounds of feed, three-quarters of which is corn.

With the rise in oil prices, there has been a boom in biofuels like corn-based ethanol. Last December, President Bush signed a law mandating the use of at least 36 billion gallons of biofuels by 2020. In the summer of 2006, when corn was $2 a bushel and oil $70 a barrel, ethanol producers averaged $1.06 in profits per gallon sold. But then, corn prices doubled to $4 a bushel last year and just breached $6 a bushel this April. Midwestern farmers giddily joke about a "dot-corn" bubble as many of them (and their suppliers) rake in the money, but for everyone else, including ethanol producers, it's been a disaster. Various analyses show that ethanol distilled from corn uses more energy to produce than it provides. It's also a worse greenhouse gas emitter than crude oil and it's driving up feed costs for cattle ranchers, hog farmers, and egg producers, which is a big reason why eggs are much more expensive.

The effects go further still. Corn or corn syrup is used in three-quarters of all processed foods, from bread, chips, and soda to peanut butter, oatmeal, and salad dressing. It's even found in diapers and dry cell batteries, meaning thousands of products are experiencing upward price pressure. Corn is also distorting agricultural production as U.S. farmers have shifted more cropland to corn and have planted less soy and wheat. In 2007, 24 percent of the corn crop, some 3.2 billion bushels, was made into ethanol.

The price of wheat has skyrocketed, boosted by the weak dollar, falling supplies, and speculation. The price of soybean oil is also increasing, partly because of its use for biodiesel. In August 2007, "376.2 million pounds of soybean oil were used for bio-diesel production, accounting for 20.6 percent of the monthly use of U.S. soybean oil," according to the University of Illinois. Having planted so much corn last year, some U.S. farmers are switching to other crops, partly because oil-thirsty corn, even at $6 a bushel, is seeing its margins squeezed by soaring costs for fertilizer and diesel.

The Oil Factor

Rising energy prices are a major factor in the escalating costs of agricultural products. But there is still the issue of why oil prices have almost quintupled since 2002. There are three main explanations: supply and demand, speculation, and the U.S. government's monetary policy. The White House and many pundits point to supply and demand because it's presented as a natural economic law beyond anyone's control. In this view China, India, and the rest of the developing world are the culprits. Yes, China's and India's consumption is rising rapidly, as is that of Middle East countries awash in oil. But from 2002 to 2006, even as oil prices tripled, global oil production kept up with demand by increasing 7.6 million barrels a day to 84.6 MBD. Demand growth has also slowed to a 1.1 million barrel per day annual increase from 2005 to 2008. This is compared to a 3 MBD increase in 2004 alone.

Even more telling, OPEC has announced numerous production cuts over the last year because it wants to keep oil prices high. So if we are supposedly experiencing natural limits to the production of oil, why is production being reduced? OPEC country ministers publicly proclaim they want to keep oil prices high because of falling value of the dollar. The falling dollar is being caused by two main factors: the U.S. trade and the federal budget deficits.

There is also an issue of "excess capacity." The cushion between production and consumption has fallen dramatically in the last six years, which has created supply hiccups and higher prices. The cause is not geological limits, however, but another factor: U.S. foreign policy. The Bush administration has destabilized three major oil producers that have suffered declining production in recent years—Iran, Iraq, and Venezuela.

The commodities building blocks of the modern economy include everything from coal, oil, wood, gold, and copper to cotton, milk, corn, cattle, and sugar. Manufacturers need commodities to produce finished goods while consumers usually encounter commodities at the grocery store. Commodities trading, such as livestock, dates back to ancient times, but the modern "futures" market was established in Chicago in the 1840s. There, at the board of trade, commodities are standardized according to "quantity, quality, delivery month, and terms," while traders negotiate prices and contract amounts. Ideally, this system, through the buying and selling of futures contracts, allows farmers to determine what to plant based on futures prices for corn and wheat while an industrial-scale baker can lock in prices for flour, butter, and sugar months in advance.

After the Internet bubble burst in 2000, the Fed lowered interest rates to historic lows, which increased the amount of money being borrowed and thus the amount of money in circulation. This is known as monetary inflation. What happens is the money supply increases at a faster rate than the production of goods and services. When many more dollars are competing for these goods and services, the result is an inevitable rise in prices. An example of how this works is the link between rising oil prices and the Fed's interest rate cuts. Since the Fed started slashing rates last September, the dollar has plunged against the euro, oil has risen by more than $40 a barrel and gold, at one point, by some $300 an ounce. The Fed is increasing the money supply, which means there are now more dollars in circulation than before against the euro, so the dollar falls in value. As the dollar drops against the euro, oil-producing countries demand more dollars per barrel.

Another inflationary factor is the federal budget deficit, which has doubled under Bush's watch, and the trade deficit. To stabilize the "current account balance," the United States needs an inflow of nearly $1 trillion a year to make up the difference. Dollars flow out because of our overconsumption and excessive government spending, while investments flow in to buy corporate, consumer, and government debt. The torrential outflow of dollars, however, weakens the value of the dollar. The trade deficit is running at about $58 billion a month. More than two-thirds of that goes to pay for the 12.5 million barrels of imported oil we use every day. Rising oil prices have become a vicious feedback loop. As oil prices spiral upwards and dollars flow out, the dollar drops in value, spurring the next round of oil price increases, a greater outflow of dollars, and a further drop in value.

There is one other factor that's rarely talked about, except in the financial press—speculation, which "amplifies" price moves. After the Internet bubble popped, many investment banks and hedge funds began speculating in commodities. Speculators, when they buy a futures contract, create demand. But they are not interested in getting the actual pork bellies or coal. They just want to make a fast buck. When inflation rises significantly, commodities become an attractive investment because they increase in price rapidly. But the speculation completes the feedback loop by making the price rise inevitable and drawing in more speculators.

This is a major factor in the oil markets. In 2004 the New York Times recounted one speculative episode: "When low inventories and news of violent attacks on oil executives and facilities in Saudi Arabia drove oil futures up, speculators piled on, according to market analysts. Their buying forced crude prices up even higher, attracting yet more investors betting on a continued rise, and so on in a classic spiral." Even the head of Exxon, in a March 5 press conference, admitted speculation was a big factor. According to the financial news website Marketwatch, CEO Rex Tillerson called the price increases "pretty crazy" and said, "A weak dollar accounts for about a third of the recent record run in oil prices, another third on geopolitical uncertainty and the rest on market speculation."

The Enron Loophole

What made the oil market speculation possible was legislation passed in the waning days of the Clinton administration. At the behest of energy-trading companies like Enron, a shadow electronic trading system was created that allowed speculators to trade oil futures contracts beyond the regulatory oversight of the Commodities Future Trading Commission. The CFTC is empowered to establish trading limits ‘‘as the Commission finds are necessary to diminish, eliminate, or prevent" the "burden" arising from speculation. Because the CFTC can't track much of the oil trading now, it can't stop the speculation. A U.S. Senate subcommittee report from June 2006 squarely blamed speculators for much of the rise in oil prices, estimating more than $60 billion had poured into the markets at that point.

The report noted that even as oil prices were rising, so were oil inventories because suppliers were gambling they could get more money down the road. The same exact thing occurred earlier this year. Crude oil prices zoomed nearly $20 a barrel in January and February. But in eight of nine weeks, U.S. oil inventories increased to multi-year highs. Tyson Slocum, director of Public Citizen's Energy Program, explains how it works: "You've got hundreds of parties entering into an electronic format to exchange massive volumes of crude oil and gasoline and natural gas and electric power and coal and ethanol and whatever else they want to do. And it's all unregulated." The players, says Slocum, include, "Goldman Sachs, Morgan Stanley, Merrill Lynch, Citigroup and a huge host of hedge funds. Deutsche Bank, Credit Suisse, UBS—all the big investment banks. The big oil companies that are traders are BP, Shell, and Marathon. Exxon Mobil really is not a big trader."

There are some "legitimate supply-demand issues that are driving prices up," he says. But "supply and demand does not justify the level of prices that we are seeing right now. I think that has to do with the increased level of trading volume, volatility and speculation that is represented by a lot of these new players." Slocum adds that because we "lack any effective transparency...that marketplace has an invitation to engage in anti-competitive behavior—colluding, rigging bets, price fixing."

It's hard to say if agricultural commodities markets are being manipulated, but there appears to be naked profiteering. For one, at the Chicago Board of Trade, there has been a big leap in electronic trading. The volume of wheat and oat contracts in the electronic arena (as opposed to the classic "open pit" where traders physically meet) has increased by more than 130 percent in 2008 so far, while rice contracts have ballooned by 219 percent. Patel says he thinks that "hedge funds and grain-trading divisions of the large agribusinesses are making a ton of cash, like Cargill and Archer Daniels Midland."

In 2007 Cargill posted a 36 percent increase in profit over the previous year, ADM 67 percent, and ConAgra 30 percent. In the first quarter of 2008 Cargill announced an 86 percent increase in profit to $1.03 billion, which it attributed in part to the fact that "investment monies have streamed into commodity markets," meaning "prices are setting new highs and markets are extraordinarily volatile."

Another sector profiting handsomely is fertilizer companies. In the last few years, fertilizer prices have risen dramatically. Some, such as urea and diammonium phosphate, have almost doubled or tripled in the last year. In fact, the price charts of some fertilizers closely match crude oil prices. That would make sense, except most fertilizer is manufactured by using natural gas and natural gas prices have been swinging up and down since 2000, not climbing a steep mountainside like oil.

This year, fertilizer companies have been experiencing the "sweet smell of success," as Forbes puts it. On April 4, Mosaic, the world's second-largest fertilizer maker and a Cargill unit, announced a 12-fold increase in profits to $520.8 million. Another manufacturer, Bunge, said its profits increased to $289 million from $14 million a year ago, and a third, Potash, announced its "first-quarter net earnings nearly tripled to $566.0 million." What makes these huge profits so suspicious is if their costs were increasing dramatically, their profits should be pinched. Instead, Forbes noted, there was only a "slight rise in raw material costs."

That's not to say they are manipulating the price increases that take place in the futures markets, but they do seem to be taking full advantage of it. Patel says food retailers are also profiteering. He says "corporations are using food price inflation as an excuse to ratchet up prices.... In fact, in the UK and Spain and South Africa, retailers such as Tesco and Asda [the British division of Wal-Mart] are under criminal investigation for their price-fixing of milk and chicken and bread." A report posted on the website, "Making a Killing from Hunger," detailed the profit increases among food manufacturers and retailers. Nestlé's worldwide sales grew 7 percent in 2007, Tesco reported a record profit of 12.3 percent last year, Unilever said its profit margins were increasing, and "France's Carrefour and the U.S.'s Wal-Mart, say that foo d sales are the main factor sustaining their profit increases." That's not to say every corporation is raking it in; some food manufacturers, such as Kraft Foods, have announced declining profits due to higher input costs.

The Great Rice Panic

There is no one explanation for why all commodities are rising in price. As the world's workshop, China creates demand-driven inflation for various industrial commodities. It needs mountains of coal, huge swaths of forests, and great veins of copper ore to feed its industry.

In contrast, since the end of 2007, the price of Thai B grade rice doubled to $760 a ton by the end of March and then hit $1,080 weeks later. The reason for the initial rise is attributed to various supply and demand causes—a pest outbreak in Vietnam, low global stocks, the biofuel boom, rising demand from rising affluence. But speculation is driving these huge price leaps here, too. Essentially, all parties involved in the rice trade are engaging in fear-induced speculation. Major rice-exporting countries like India, Thailand, and Vietnam are limiting exports to ensure the domestic market is satisfied, thereby constraining supplies for rice importers. Farmers, including many in Thailand, are reportedly hoarding rice because, as one observer told the Guardian (UK), "Who's going to sell rice at $750 a ton when they think it's going to hit $1,000?" According to anecdotal reports, many consumers in Asia are buying large supplies of rice now because of fears they will pay more down the road.

All this panic and speculation feeds on itself. Absent a global famine, normal demand or supply issues cannot explain why rice prices have tripled in Asia in just a few months.

Another explanation comes by way of the interplay between environment and economics. Australia used to be one of the largest producers and exporters of rice in the world, but 6 years of drought have reduced the crop to virtually nothing, just 2 percent of its former self. In describing the situation, the New York Times notes, while it's difficult to say any short-term weather pattern is caused by global warming, the "severe drought is consistent with what climatologists predict will be a problem of increasing frequency."

The rice industry has collapsed because farmers are turning to other commodities. For instance, "Some farmers are abandoning rice, which requires large amounts of water, to plant less water-intensive crops like wheat." Others are turning to wine grapes, which also use less water and bring pre-tax profits of $2,000 an acre versus $240 an acre for rice. Others are finding it more valuable to sell their water rights or even land to grape growers. One result, then, is because of market-based decisions, wine production is increasing for affluent populations while the poorest rice-dependent populations are left to scramble in the marketplace for food to survive.

Putting the inflation genie back into the bottle is no simple task. One immediate solution is to better regulate commodities markets and tax futures contracts. A similar idea has been proposed on currency speculation, known as the Tobin Tax. A small tax would not hinder the actual buyers and sellers, but it would take a bite out of speculative interest.

For the United States, the answers are much more difficult. The Fed is using inflationary policies to devalue U.S.-denominated debt, which helps the government and corporations, but harms consumers. Cutting the federal deficit is a no-brainer, but unlikely, and involve repealing the tax cuts for the wealthy and ending the Iraq War. The trade deficit must be cut, but even in the best-case scenario, it would take decades to build a new energy infrastructure independent of imported oil.

Some suggest inducing a severe recession, as the Fed did in the early 1980s by jacking interest rates, but the pain would be severe for many Americans. A better solution is a real green energy and infrastructure program combined with single-payer national health care and expanded unemployment and welfare benefits. This could cushion the impact of the recession, while shifting the United States to a healthier economic base. But in this neoliberal world, that's about as likely to happen as George Bush ever admitting he's wrong.