Thursday, July 3, 2008

Job losses mount as US economy heads into virtual freefall

Job losses mount as US economy heads into virtual freefall

By Jerry White

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Job losses in the US are mounting as inflation, the credit crunch, plunging home values and tighter family budgets are combining to produce a perfect storm of economic malaise, which is threatening the livelihoods of tens of millions of working people.

The private sector eliminated 79,000 jobs from May to June, according to a survey of nearly 400,000 US businesses released Wednesday by Automatic Data Processing, Inc. The ADP National Employment Report said the decline was “broad based across industrial sectors and suggests continued weakness in employment.”

The goods-producing sector slashed 76,000 jobs last month, ADP reported, with manufacturing employment falling by 44,000, marking their nineteenth and twenty-second consecutive monthly declines, respectively. Service jobs also declined by 3,000, the first fall-off since November 2002.

Construction and financial services related to home sales and lending are the two sectors of the economy hardest hit by the housing and mortgage crises. In June, ADP reported, construction employment dropped by an additional 34,000 jobs, marking the nineteenth straight monthly decline. A staggering 349,000 construction jobs have been lost since the peak of August 2006. Three thousand jobs in financial services were also lost in June.

“It’s clear that the housing downturn and credit crunch are still very much under way,” Andrew Tilton, an economist with Goldman Sachs told the New York Times. Clearly, there are more jobs to be lost in housing, finance and construction—hundreds of thousands of more jobs to be lost collectively.”

The US Bureau of Labor Statistics will release its monthly jobs report on Thursday, with economists predicting a loss of as many as 60,000 jobs in June. This would be the sixth consecutive month of employment declines.

Meanwhile, the Chicago-based job placement firm Challenger, Gray & Christmas Inc., which tracks job cutting announcements by employers, said planned layoffs rose to 81,755 last month, up 47 percent from June 2007.

“Downsizing in the financial sector has remained heavy, but now we’re seeing increased job cuts in other non-housing-related industries, mostly due to the added burden of skyrocketing oil prices,” chief executive officer John A. Challenger said in a statement released Wednesday. “The overall economy could continue to experience net losses for several months to come.’ ’

So far this year, Challenger said, companies have announced 475,948 cuts, up 21 percent from the first six months of 2007.

The financial sector led in announced reductions, with 19,227 job cuts. Last week, Bank of America, the second biggest US bank, announced plans to cut 7,500 jobs after its purchase of home lender Countrywide Financial. Year-to-date, Challenger reported, the financial industry has announced 85,258 positions will be eliminated.

The second highest sector was federal, state and local governments, which are being pressed by falling property values and tax revenues. Government entities have announced 10,797 job cuts, Challenger reported. This was followed by telecommunications, which announced 10,342 cuts.

Last month the official unemployment rate jumped half a point to 5.5 percent, the biggest single month rise in 22 years. Goldman Sachs recently forecast the jobless rate would rise to 6.4 percent by late 2009 before any improvement occurred.

Official government figures routinely underestimate the actual unemployment rate, since they do not count those who have given up looking for work and those reduced to part-time hours. If those workers were added, the “under-employment rate” in the US would rise to 9.7 percent, up from 8.3 percent in May 2007, according to the Labor Department.

“It’s a slow-motion recession,” Ethan Harris, chief US economist for the Wall Street firm Lehman Brothers told the New York Times. “In a normal recession, things kind of collapse and get so weak that you have nowhere to go but up. But we’re not getting the classic two or three negative quarters. Instead, we’re expected two years of sub-par growth. Growth that’s not enough to generate jobs. It’s kind of a chronic rather than acute pain.”

The massive loss of jobs in the US is part of an international trend fueled by the worldwide credit crisis, economic slowdown and spiking commodity prices. On Wednesday, the Paris-based Organization of Economic Co-operation and Development (OECD)—which includes 23 European states as well as the US, Australia, Turkey, New Zealand, Canada, Mexico, Japan and South Korea—warned that joblessness in industrialized countries would rise by 9 percent to 34.8 million, reversing the downward trend of recent years.

In the face of spreading unemployment, the OECD noted, “the growth in real compensation per employee should slow down in 2008 in the majority of the 30 OECD countries and be broadly in line or below productivity gains.”

From the standpoint of the world’s corporate and financial elite, this is the positive side of the growing economic insecurity felt by masses of working people. Citing the OECD figures on slowing job growth the Financial Times of London noted, “Rising unemployment, however, should dampen fears of inflationary pay rises as workers worry more about retaining their job than using their bargaining power to increase real pay.”

Meltdown of the US auto industry

Job cuts, higher prices and crushing levels of debt all threaten to slow US consumer spending, which accounts for 70 percent of the country’s economic activity. In a sign of the impact this is having on retailers, Starbucks, the world’s largest coffee chain, said Tuesday it would close 600 stores in the US—in addition to 100 already announced—laying off more than 12,000 employees.

American Airlines—which, like several other carriers, has cut back routes in the face of the high cost of fuel and fewer air travelers—announced Wednesday it would furlough 900 flight attendants.

UnitedHealth, the largest US health insurer, also announced it would lay off 4,000 workers, due to falling profits and rising health care costs.

The auto industry has been particularly devastated, with vehicle sales hitting a 10-year low, down 18 percent in June. Detroit automakers continued to see sharply declining sales, with Chrysler’s June sales down 36 percent compared to a year ago, Ford down 28 percent and General Motors falling 18 percent. Japanese automaker Toyota was also hit hard, with US sales down 21 percent.

Analysts predict automakers will sell well below 15 million new vehicles in the US this year, far fewer than the 16 million typical sold throughout the decade.

The decline—driven by high gas prices and falling demand, including from contractors and construction workers, for SUVs and pickups, upon whose high profit margins the US automakers depend —has now raised the prospect of the financial failure of one or more of Detroit’s famed “Big Three.”

GM, which is reportedly burning up $1 billion in cash reserves each month, could face bankruptcy, according to Merrill Lynch analyst John Murphy, who lowered his outlook for GM stock to $7 a share in a note to investors Wednesday. “The key change in our outlook is a much lower forecast for US auto sales that is driving higher cash burn necessitating a much larger raise than the market is currently anticipating,” Murphy wrote in reference to GM’s need to quickly borrow money.

Other analysts say GM must raise as much as a $10 billion as early as this quarter to keep operating. The company says it has liquidity and flexibility to meet its financial requirements. However, it could find raising additional cash difficult, if not impossible, because of the unfavorable rates in the tight credit market.

The threatened collapse of the once mighty icon of US industrial supremacy underscores the historic decline in the world position of American capitalism and the virtual takeover of the US economy by various forms of financial parasitism. Wall Street has carried out a deliberate policy of deindustrialization, in order to free up capital from unprofitable industries and invest it in more lucrative and speculative ventures, including the dot-com boom, the housing bubble and the new frenzy in oil, corn and other commodity future markets.

GM stock has fallen to a 50-year low, plummeting from $43 last November to close at $9.98 Wednesday. The total value of GM stock is the least of all companies traded on the Dow Jones Industrial Average. By contrast, the Internet company Google is selling at $527 per share and has a market capitalization 28 times the size of GM.

“What’s GM worth now—$7 billion?”, Bruce Birger, managing director of Birger Capital Management asked the Detroit News. “People can write checks for that amount.”

Ford, which has borrowed heavily against its assets, is not much better off, with shares of its stock selling at $4.36, roughly equivalent, the newspaper noted, to the price of gas in some major American cities.

Both companies are reportedly scrambling to sell off assets or use overseas divisions as collateral for new loans, which could mean selling them off to raise cash.

Another candidate for bankruptcy is privately-held Chrysler, which was bought by the private equity firm Cerberus. “They’re a limited liability company—when they run out of money, they’ve run out of money,” Steven Davidoff, a law professor at Wayne State University told the Detroit News. “Cerberus may push for the nuclear option and go into bankruptcy to restructure the organization,” he added, suggesting that the company could follow the lead of auto parts maker Delphi, which used the bankruptcy court to tear up its labor agreements and impose 50 percent wage cuts on its workers.

The News reported that there was “talk” of the automakers reopening union contracts, less than a year after the four-year agreement signed by the United Auto Workers bureaucracy, which handed over massive wage and benefit concessions in return for what have proven to be worthless “job guarantees.” All three of the companies have since carried out mass layoffs.

The burgeoning economic crisis is taking place in the middle of an election campaign that is remarkable for the lack of any serious proposals to meet what is increasingly becoming a catastrophe for tens of millions of working people in the US. The economic stimulus checks Washington sent out to the public have long since been eaten up by rising gas and food prices, and neither party nor their respective presidential candidates—Democrat Barack Obama and Republican John McCain—has any proposal to provide relief to workers facing the loss of their jobs and their homes.

Deepening Cycle of Job Loss Seen Lasting Into '09

Deepening Cycle of Job Loss Seen Lasting Into '09

As automakers dropped their latest batch of awful sales numbers on the market on Tuesday, reinforcing the gloom spreading across the economy, the troubles confronting American workers seemed to intensify.

Plummeting home prices have in recent months eliminated jobs for hundreds of thousands of people, from bankers and real estate agents to construction workers and furniture manufacturers. Tighter lending standards imposed by banks in the wake of huge mortgage losses have made it hard for many Americans to secure credit — the lifeblood of expansion in recent years — crimping the appetite of consumers, whose spending amounts to 70 percent of the economy.

Joblessness has accelerated, and employers have slashed working hours even for those on their payrolls, shrinking the size of paychecks just as workers need them the most.

Now, add to that unsavory mix the word from automakers that sales plunged in June — by 28 percent for Ford, 21 percent for Toyota and 18 percent for General Motors — a sharp sign that consumers are pulling back, making manufacturers more likely to cut production and impose more layoffs. Until recently, the weak labor market has been marked more by the reluctance of employers to create new jobs than by mass layoffs.

Among economists, the sense is broadening that the troubles dogging the economy will be stubborn, leaving in place an uncomfortable combination of tight credit and scant job opportunities perhaps well into next year.

"It's a slow-motion recession," said Ethan Harris, chief United States economist for Lehman Brothers. "In a normal recession, things kind of collapse and get so weak that you have nowhere to go but up. But we're not getting the classic two or three negative quarters. Instead, we're expecting two years of sub-par growth. Growth that's not enough to generate jobs. It's kind of a chronic rather than an acute pain."

Mr. Harris expects tepid economic growth and a shrinking labor market to persist through the fall of 2009.

The national unemployment rate climbed a full percentage point over the last year to 5.5 percent in May, according to the Labor Department. That does not include people who are jobless and have given up looking for work, or people who have been bumped to part-time jobs from full-time. Add in those people and the so-called underemployment rate rises to 9.7 percent, up from 8.3 percent in May 2007, according to the Labor Department.

Goldman Sachs forecasts that the unemployment rate will peak at 6.4 percent late in 2009 before the picture improves, meaning that the painful process of shedding jobs may be only half-way complete.

"The labor market is clearly deteriorating, and it's highly likely to keep deteriorating," said Andrew Tilton, an economist at Goldman Sachs. "It's clear that the housing downturn and credit crunch are still very much under way. Clearly, there are more jobs to be lost in housing, finance and construction — hundreds of thousands of more jobs to be lost collectively."

On Thursday, the Labor Department will release its snapshot of the job market for June. Economists generally expect the report to show 60,000 more jobs lost, marking the sixth consecutive month of decline.

But many anticipate the unemployment rate will nudge down a little bit, swinging back from an abrupt climb that could have been exaggerated by survey glitches in the previous month, when the rate jumped by half a percentage point — the sharpest one-month spike in 22 years.

If the unemployment rate were to hold steady or rise, that would likely spook markets, underscoring the impact of the economic slowdown.

"Slowing wage growth and falling employment is absolutely toxic if your business is selling anything to consumers," said Ian Shepherdson, chief United States economist for High Frequency Economics.

Recent indications lend credence to the view that the job market is in the grip of a sustained downturn. Three weeks in a row, new unemployment claims have exceeded 380,000, a level generally associated with recession. Construction spending fell in May. The University of Michigan Consumer Sentiment Survey, which tracks attitudes about business and personal finance, has dropped to a depth last seen in 1980.

On the factory floor, a weak dollar has been fanning export sales. The I.S.M. Manufacturing Index — a widely watched gauge of factory activity — nudged up in June to 50.2 from 49.6 in May, entering barely positive territory, which indicates a slight expansion.

But that mostly reflected a buildup of inventories and higher prices for raw materials, and not an improvement in orders for factory goods, said Stuart G. Hoffman, chief economist at PNC Financial Service Group in a note to clients. If business stays weak and orders do not materialize, factory layoffs could accelerate. Indeed, the employment component of the index declined to its lowest level in five years.

The slide in the labor market has become both symptom and cause of a weak economy, pulling many families into a downward spiral. Back when housing prices were still rising, Americans borrowed exuberantly against the value of their homes to finance renovations, vacations and shopping sprees. But that artery of finance has constricted considerably along with access to credit cards, forcing a reversion to the traditional limits of household finance. Millions of American families must now confine their spending to what they can bring home from work.

With job losses growing and working hours shrinking, many paychecks are eroding, prompting millions of families to cut their spending. Soaring prices for food and gasoline are overwhelming modest wage gains for most workers, leaving households with even less money to spend. All of which deprives struggling businesses of sales, prompting them to shed more workers, sending the cycle down another turn. Starbucks announced on Tuesday that it would close stores and eliminate up to 12,000 jobs, about 7 percent of its work force.

The fear of a downward spiral prompted the Bush administration to unleash $100 billion worth of tax rebates in the hopes that recipients would spend money and spur sales. The Treasury has already dispensed more than $78 billion, and the money appears to be finding its way into cash registers, with consumer spending climbing by 0.8 percent in May, according to the Commerce Department.

Economists expect the rebates will continue to help retail sales through the summer, fueling modest economic growth that spares some jobs and prevents an outright contraction.

But few expect these rebate-laced sales to expand the job market, because businesses understand that the one-time surge of money will wear off later this summer.

Many experts expect the economy to then be pulled back into the weeds by the same forces that have led the downturn — declining home prices, tighter credit and leaner paychecks.

"It's going to be very hard to overcome those headwinds," said Mr. Harris, the Lehman economist.

U.S. Loses 62,000 Jobs, Jobless Rate Holds at 5.5%

U.S. Loses 62,000 Jobs, Jobless Rate Holds at 5.5%

By Bob Willis

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U.S. employers cut jobs in June for a sixth consecutive month as soaring fuel prices and a slowing economy forced companies to reduce costs.

Payrolls fell by 62,000, close to economists' median forecast, after a 62,000 drop in May that was greater than initially reported, the Labor Department said today in Washington. The jobless rate remained at 5.5 percent after jumping in May by the most in two decades.

Job losses, along with record gasoline prices and tumbling home values, make it more likely consumer spending will falter once the lift from federal tax rebates fades. A weakening labor market may also prompt Federal Reserve policy makers to put off their first interest-rate increase since 2006.

‘‘The job market remains weak and will probably stay weak for a while,'' said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina. ‘‘The Fed is still on inflation watch, but the price pressures from commodities have not moved into the wage-setting process,'' helping to limit price pressures, he said.

Stock futures rallied and Treasuries fell after the report. Futures contracts on the Standard & Poor's 500 Stock Index advanced 0.8 percent to 1,273 at 9:05 a.m. in New York and 10- year note yields rose to 4.00 percent from 3.95 percent.

Total Losses

The June figures brought total job losses for the first half of 2008 to 438,000. In 2007, the economy generated 91,000 jobs a month on average. Revisions subtracted 52,000 from payroll figures previously reported for April and May.

‘‘It's really a weak labor market,'' Kathleen Stephansen, chief global economist at Credit Suisse Holdings USA Inc. in New York, said in an interview with Bloomberg Radio. ‘‘When you look at the details it seems as though there is no redeeming factor here. You have weakness in most industries.''

Economists had projected payrolls would drop by 60,000 after a previously reported 49,000 decline the prior month, according to the median of in a Bloomberg News survey.

Trends in jobs, sales, production and incomes, in addition to changes in gross domestic product, are the criteria used by the National Bureau of Economic Research to determine when contractions begin and end. The Cambridge, Massachusetts, group is the arbiter of U.S. recessions.

Fed's Outlook

‘‘Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters,'' Fed policy makers said last week, when they kept their benchmark rate at 2 percent. Central bankers had also signaled that inflation was an increased risk.

Another report from the Labor Department today showed initial claims for jobless benefits rose by 16,000 to 404,000 last week. The total, higher than economists forecast, brought the four-week average to the highest since October 2005, just after Hurricane Katrina. The total number of people collecting benefits dropped to 3.116 million from 3.135 million.

Oil prices that topped $145 a barrel today are hammering manufacturers and service companies alike. Factory payrolls dropped by 33,000 workers after declining by 22,000 in May. Economists had forecast a drop of 30,000.

Auto manufacturing and parts industries gained 5,600 jobs, reflecting the end of a walkout at an auto parts manufacturer, the report said. About 20 General Motors Corp. plants that were shut or partially idled returned to work after a 12-week strike at American Axle & Manufacturing Inc. was resolved in late May.

Construction, Finance

The worst housing slump in a quarter century and the resulting collapse in subprime lending were reflected in today's report. Payrolls at builders declined by 43,000 after dropping 37,000 the prior month, bringing the total loss of construction jobs since September 2006 to 528,000. Financial firms trimmed payrolls by 10,000, after a 3,000 decline the prior month.

Service industries, which include banks, insurance companies, restaurants and retailers, added 7,000 workers after a decline of 8,000 in May. Retail payrolls decreased by 7,500 after a 22,600 decline.

Bank of America Corp., the second-largest U.S. bank, will cut about 7,500 jobs after buying Countrywide Financial Corp. amid mounting subprime-mortgage losses, Charlotte, North Carolina-based Bank of America said June 28.

Other service companies, a source of relative strength in recent months, are also cutting staff. Starbucks Corp., the world's largest chain of coffee shops, will close 600 U.S. locations and eliminate as many as 12,000 jobs, the most in its history, the Seattle-based company said this week.

Government payrolls increased by 29,000 for a second month in a row.

Hours Worked

The average work week remained at 33.7 hours. Average weekly hours worked by production staff slipped to 40.8 from 40.9, while overtime was unchanged at 3.9 hours. That brought the average weekly earnings up $2.02 to $606.94 last month.

Workers' average hourly wages rose to $18.01, up 6 cents or 0.3 percent. Hourly earnings were 3.4 percent higher than in June 2007, the smallest 12-month increase since January 2006. Both increases were in line with forecasts.

Declines in employment signal consumer spending, which picked up in May as the government sent out tax rebates, may weaken as the stimulus checks are spent.

‘‘The rapid up-tick in fuel prices pretty much absorbs the stimulus we're seeing in the economy,'' Fritz Henderson, GM's chief operating officer, said in an interview in Wilmington, Delaware, on June 3.

Mortgage ruling could shock U.S. banking industry

Mortgage ruling could shock U.S. banking industry

By Gina Keating

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A lawsuit filed by a Wisconsin couple against their mortgage lender could have major implications for banks should a U.S. appeals court agree that borrowers can cancel their loans en masse when their lenders violate a federal lending disclosure law.

The case began like hundreds of others filed since the U.S. housing boom spawned a rise in sales of adjustable rate loans. Susan and Bryan Andrews of Cedarburg, Wisconsin, claimed that lender Chevy Chase Bank FSB (CCX_pc.N: Quote, Profile, Research) had hidden the true terms of what they believed was a good deal on a low-interest loan.

In their 2005 lawsuit, the couple said the loan's interest rate had more than doubled by their second monthly payment from the 1.95 percent rate they thought was locked in for five years. The interest rate rose well above the 5.75 percent fixed-rate loan they had refinanced to pay their children's college tuition.

The Andrews filed the case seeking class action status; and in early 2007, U.S. District Judge Lynn Adelman ruled that the bank had violated the Truth in Lending Act, or TILA, and that thousands of other Chevy Chase borrowers could join them as plaintiffs.

The judge transformed the case from a run-of-the-mill class action to a potential nightmare for the U.S. banking industry by also finding that the borrowers could force the bank to cancel, or rescind, their loans. That decision was stayed pending an appeal to the 7th U.S. Circuit Court of Appeals, which is expected to rule any day.

The idea of canceling tainted loans to stem a tide of foreclosures has caught hold in other quarters; a lawsuit filed last week by the Illinois attorney general asks a court to rescind or reform Countrywide Financial Corp (CFC.N: Quote, Profile, Research) mortgages originated under "unfair or deceptive practices."

'MASSIVE CLASS SUITS'

The mortgage banking industry already faces pressure from state and federal regulators, who have accused banks of lowering underwriting standards and forcing some borrowers, through fraud, into costly adjustable loans that the banks later bundled and sold as high-interest investment vehicles.

The loans have caused serious instability in the financial sector, as mortgage interest rates adjusted upward and borrowers began defaulting at a significant rate starting in 2007, drawing lawsuits from investors and homeowners.

Federal appeals courts disagree over whether class-wide rescission under the Truth in Lending Act is available, said attorney Christine Scheuneman, whose firm represented Chevy Chase at the district court.

"If class treatment is found to be available for rescission ..., given the current crisis not predicted in 2005, the result all over the country could be massive class suits," said Scheuneman, a partner at Pillsbury Winthrop Shaw Pittman LLP.

The Truth in Lending Act, a 1968 federal law designed to protect consumers against lending fraud by requiring clear disclosure of loan terms and costs, lets consumers seek rescission, or termination, of a loan and the return of all interest and fees when a lender is found in violation.

Should the 7th U.S. Circuit Court of Appeals agree with Judge Adelman, banking industry associations predict "confusion and market disruption" as banks curtail lending further.

"Class certification of rescission claims would saddle the mortgage lending industry and secondary market with billions of dollars of class action exposure for supposed violations of TILA that do not give rise to any actual damages," the financial services associations wrote in an amicus brief.

But the Andrews' attorney, Kevin Demet, said lenders want to scare the judiciary into banning class action rescissions because they were unable to convince Congress to do so in the 1990s.

"If (banks) get relief (from the appeals court), it's activist judges trying to give them what they could not get legislatively," said Demet, of Demet & Demet of Milwaukee, Wisconsin.

Consumer advocates said the banks would have "no more or no less" liability for the tainted mortgages if the court found in favor of the Andrews plaintiffs.

But an adverse ruling for borrowers would cut off an important remedy. Borrowers would "lose the opportunity to use rescission to save their homes from foreclosure or to rescind their mortgages and refinance into affordable ones," the Center for Responsible Lending, the National Consumer Law Center, Public Citizen and AARP Foundation Litigation wrote in an amicus brief filed in the case.

Both sides said the case will likely be decided by the U.S. Supreme Court.

Citigroup says long-term gold price could double or even triple

Citigroup says long-term gold price could double or even triple

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Citigroup forecasts that "gold is likely to regain $1,000/oz by end-08 and to work higher through 2009-2010."

In their recent Gold Commodity Update, Citigroup metals analysts John H. Hill and Graham Wark also predicted that "longer term, we believe that gold is capable of doubling or tripling from current levels."

The Citi global metals forecasts have an upward bias, at $906/$950/1000 average in 2008/09/10.

The analysts said "secular and seasonal factors favor gold" during the second half of this year. "We remain positive on gold, based on macro and supply/demand factors. The forces that have propelled gold for 5 years are firmly in place."

During the second quarter of this year, gold has averaged $896/oz, up 34% from the same quarter of 2007 and down 3% from the first quarter of this year. "Following a series of downside fundamental tests gold appears to have found a floor, and quietly climbed back to $917/oz."

"Despite extensive hand-wringing, the ‘floor in the dollar' has inflicted minimal damage," the analysts noted. "We believe the drivers of the gold bull market remain intact, heading into a favorable period."

"We see gold as well-positioned heading into Autumn, when fabrication tends to heighten the market," they added.

Nevertheless, Hill and Wark warned, "It will be important for seasonal/volatility dampened fabrication demand to recover, before gold can move higher." However, they added," Longer term, we would not be surprised to see gold double from current levels as the global policy prescriptions for the credit crunch remain powerfully and uniformly re-flationary."

Meanwhile, Citicorp suggested that slow de-hedging is unlikely to result in a gold market surplus, although they said it remains a key question. "We believe that the combination of wealth creation in China, petrodollars in Russia/Mid-East, and ETF inflows is likely to absorb possible additional ‘supply' of 200-300 TPY," the analysts advised.

In the meantime, "real interest rates are still strongly negative, inherently favoring hard assets and gold," Citigroup noted.

In their analysis Citigroup found that the principal Exchange Traded Funds hold 954 tonnes of gold bullion valued at US$24 billion, down 4% from peaks during the first quarter of this year. Total volume is equivalent to about 130 days of mine supply. The analysts noted that average daily gold ETF trading value was about $900 million, "more than that of Newmont and Barrick combined."

ETF holdings are up 5% or 39 tonnes from trough levels at the end of May amid profit-taking after $1,000, according to Citigroup.

"Gold correlations are evolving," the analysts noted. "Adherent owners of gold as portfolio insurance should be delighted in recent weeks as increasingly negative is being established between gold and the S&P 500. A strong positive correlation with oil has prevailed year-to-date. The negative correlation with dollar remains a fixture."

Citigroup's analysis also revealed that "gold shares have stalled as investors have flocked to physical bullion or FRF-rich bulk/base miners."

"Disappointingly, gold equities remain near levels seen when the gold was in the low $700s," the analysts determined. "On the other hand, cash flow should be strong with gold above $900/oz.

"The move in gold has been perhaps too sharp for the equities," the analysts said. "During a financial crisis, safe haven demand favors the simplicity of bullion."

Citigroup's" buy-rated" gold picks include Barrick, Peter Hambro, Lihir, and Newmont. However, the analysts cautioned, the second quarter is "likely muted due to flat gold amid energy/input escalation."

World Bank Chief: World Entering Danger Zone

World Bank chief urges G8 to act now as "world entering danger zone"

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World Bank President Robert B. Zoellick has called on leaders of the G8 as well as the major oil producers to act now to deal with surging food and energy prices, warning that the world is now "entering a danger zone."

Zoellick's call is contained in a July 1 letter to the head of the upcoming G8 summit in Japan, in which the Bank, World Food Program (WFP) and International Monetary Fund estimate that about 10 billion dollars is needed to meet short term needs of people hit hardest by the crisis.

"What we are witnessing is not a natural disaster -- a silent tsunami or a perfect storm: It is a man-made catastrophe, and as such must be fixed by people," Zoellick said in the letter made available to Xinhua on Wednesday.

"I urge the Group of Eight countries, in concert with major oil producers, to act now to address this crisis. This is a test of the global system to help the most vulnerable, and it cannot afford to fail," said the World Bank chief.

He said the G8 made a commitment at the Gleneagles Summit in 2005 to boost overall development aid, to Africa in particular, by2010, noting such aid was needed now, more than ever, as Africa accounted for two thirds of the countries most under stress by the food and fuel crisis.

"For 41 countries, the combined impact of high food, fuel and other commodity prices since January 2007 represents a negative shock to GDP of between 3 and 10 percent," he said. "These numbers translate into broken lives, and stunted potential. For the most vulnerable, especially poor children, they mean malnutrition, reduced resistance to disease, and too often death."

"Record oil prices and high and rising food costs threaten a growing number of countries with rising poverty and social instability. Already we have seen food riots in over 30 countries, and unrest over high fuel prices is spreading. The urban poor are especially affected by the double hit of food and fuel," he warned.

In his letter, Zoellick urged the G8 to consider two new measures to "improve the world's ability to cope with an on-going food crisis."

The first was a UN assessment on guaranteeing a portion of funding for the World Food Program. The second was to study the merits of an internationally coordinated "virtual" humanitarian strategic reserve system for food emergencies.

"The international community is facing an unprecedented test in this new era of globalization: the question is whether we can act swiftly to help those most in need, "he said.

"For globalization to work successfully and achieve its promise, it must be inclusive and sustainable. This means acting now in the interests of the poor who are most affected by this double jeopardy of food and fuel crisis, and who are least able to help themselves," he added.

Ron Paul: "Something Big is Going On"

Something Big is Going On

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The following statement is written by Congressman Paul about the pending financial disaster. He will introduce this statement as a special order and insert it into the Congressional Record next week. Fortunately, we have the opportunity to debut it first on the Campaign for Liberty blog. It reads as follows:

I have, for the past 35 years, expressed my grave concern for the future of America. The course we have taken over the past century has threatened our liberties, security and prosperity. In spite of these long-held concerns, I have days—growing more frequent all the time—when I’m convinced the time is now upon us that some Big Events are about to occur. These fast-approaching events will not go unnoticed. They will affect all of us. They will not be limited to just some areas of our country. The world economy and political system will share in the chaos about to be unleashed.

Though the world has long suffered from the senselessness of wars that should have been avoided, my greatest fear is that the course on which we find ourselves will bring even greater conflict and economic suffering to the innocent people of the world—unless we quickly change our ways.

America, with her traditions of free markets and property rights, led the way toward great wealth and progress throughout the world as well as at home. Since we have lost our confidence in the principles of liberty, self reliance, hard work and frugality, and instead took on empire building, financed through inflation and debt, all this has changed. This is indeed frightening and an historic event.

The problem we face is not new in history. Authoritarianism has been around a long time. For centuries, inflation and debt have been used by tyrants to hold power, promote aggression, and provide “bread and circuses” for the people. The notion that a country can afford “guns and butter” with no significant penalty existed even before the 1960s when it became a popular slogan. It was then, though, we were told the Vietnam War and a massive expansion of the welfare state were not problems. The seventies proved that assumption wrong.

Today things are different from even ancient times or the 1970s. There is something to the argument that we are now a global economy. The world has more people and is more integrated due to modern technology, communications, and travel. If modern technology had been used to promote the ideas of liberty, free markets, sound money and trade, it would have ushered in a new golden age—a globalism we could accept.

Instead, the wealth and freedom we now enjoy are shrinking and rest upon a fragile philosophic infrastructure. It is not unlike the levies and bridges in our own country that our system of war and welfare has caused us to ignore.

I’m fearful that my concerns have been legitimate and may even be worse than I first thought. They are now at our doorstep. Time is short for making a course correction before this grand experiment in liberty goes into deep hibernation.

There are reasons to believe this coming crisis is different and bigger than the world has ever experienced. Instead of using globalism in a positive fashion, it’s been used to globalize all of the mistakes of the politicians, bureaucrats and central bankers.

Being an unchallenged sole superpower was never accepted by us with a sense of humility and respect. Our arrogance and aggressiveness have been used to promote a world empire backed by the most powerful army of history. This type of globalist intervention creates problems for all citizens of the world and fails to contribute to the well-being of the world’s populations. Just think how our personal liberties have been trashed here at home in the last decade.

The financial crisis, still in its early stages, is apparent to everyone: gasoline prices over $4 a gallon; skyrocketing education and medical-care costs; the collapse of the housing bubble; the bursting of the NASDAQ bubble; stockmarkets plunging; unemployment rising;, massive underemployment; excessive government debt; and unmanageable personal debt. Little doubt exists as to whether we’ll get stagflation. The question that will soon be asked is: When will the stagflation become an inflationary depression?

There are various reasons that the world economy has been globalized and the problems we face are worldwide. We cannot understand what we’re facing without understanding fiat money and the long-developing dollar bubble.

There were several stages. From the inception of the Federal Reserve System in 1913 to 1933, the Central Bank established itself as the official dollar manager. By 1933, Americans could no longer own gold, thus removing restraint on the Federal Reserve to inflate for war and welfare.

By 1945, further restraints were removed by creating the Bretton-Woods Monetary System making the dollar the reserve currency of the world. This system lasted up until 1971. During the period between 1945 and 1971, some restraints on the Fed remained in place. Foreigners, but not Americans, could convert dollars to gold at $35 an ounce. Due to the excessive dollars being created, that system came to an end in 1971.

It’s the post Bretton-Woods system that was responsible for globalizing inflation and markets and for generating a gigantic worldwide dollar bubble. That bubble is now bursting, and we’re seeing what it’s like to suffer the consequences of the many previous economic errors.

Ironically in these past 35 years, we have benefited from this very flawed system. Because the world accepted dollars as if they were gold, we only had to counterfeit more dollars, spend them overseas (indirectly encouraging our jobs to go overseas as well) and enjoy unearned prosperity. Those who took our dollars and gave us goods and services were only too anxious to loan those dollars back to us. This allowed us to export our inflation and delay the consequences we now are starting to see.

But it was never destined to last, and now we have to pay the piper. Our huge foreign debt must be paid or liquidated. Our entitlements are coming due just as the world has become more reluctant to hold dollars. The consequence of that decision is price inflation in this country—and that’s what we are witnessing today. Already price inflation overseas is even higher than here at home as a consequence of foreign central bank’s willingness to monetize our debt.

Printing dollars over long periods of time may not immediately push prices up–yet in time it always does. Now we’re seeing catch-up for past inflating of the monetary supply. As bad as it is today with $4 a gallon gasoline, this is just the beginning. It’s a gross distraction to hound away at “drill, drill, drill” as a solution to the dollar crisis and high gasoline prices. Its okay to let the market increase supplies and drill, but that issue is a gross distraction from the sins of deficits and Federal Reserve monetary shenanigans.

This bubble is different and bigger for another reason. The central banks of the world secretly collude to centrally plan the world economy. I’m convinced that agreements among central banks to “monetize” U.S. debt these past 15 years have existed, although secretly and out of the reach of any oversight of anyone—especially the U.S. Congress that doesn’t care, or just flat doesn’t understand. As this “gift” to us comes to an end, our problems worsen. The central banks and the various governments are very powerful, but eventually the markets overwhelm when the people who get stuck holding the bag (of bad dollars) catch on and spend the dollars into the economy with emotional zeal, thus igniting inflationary fever.

This time—since there are so many dollars and so many countries involved—the Fed has been able to “paper” over every approaching crisis for the past 15 years, especially with Alan Greenspan as Chairman of the Federal Reserve Board, which has allowed the bubble to become history’s greatest.

The mistakes made with excessive credit at artificially low rates are huge, and the market is demanding a correction. This involves excessive debt, misdirected investments, over-investments, and all the other problems caused by the government when spending the money they should never have had. Foreign militarism, welfare handouts and $80 trillion entitlement promises are all coming to an end. We don’t have the money or the wealth-creating capacity to catch up and care for all the needs that now exist because we rejected the market economy, sound money, self reliance and the principles of liberty.

Since the correction of all this misallocation of resources is necessary and must come, one can look for some good that may come as this “Big Even” unfolds.

There are two choices that people can make. The one choice that is unavailable to us is to limp along with the status quo and prop up the system with more debt, inflation and lies. That won’t happen.

One of the two choices, and the one chosen so often by government in the past is that of rejecting the principles of liberty and resorting to even bigger and more authoritarian government. Some argue that giving dictatorial powers to the President, just as we have allowed him to run the American empire, is what we should do. That’s the great danger, and in this post-911 atmosphere, too many Americans are seeking safety over freedom. We have already lost too many of our personal liberties already. Real fear of economic collapse could prompt central planners to act to such a degree that the New Deal of the 30’s might look like Jefferson’s Declaration of Independence.

The more the government is allowed to do in taking over and running the economy, the deeper the depression gets and the longer it lasts. That was the story of the 30ss and the early 40s, and the same mistakes are likely to be made again if we do not wake up.

But the good news is that it need not be so bad if we do the right thing. I saw “Something Big” happening in the past 18 months on the campaign trail. I was encouraged that we are capable of waking up and doing the right thing. I have literally met thousands of high school and college kids who are quite willing to accept the challenge and responsibility of a free society and reject the cradle-to-grave welfare that is promised them by so many do-good politicians.

If more hear the message of liberty, more will join in this effort. The failure of our foreign policy, welfare system, and monetary policies and virtually all government solutions are so readily apparent, it doesn’t take that much convincing. But the positive message of how freedom works and why it’s possible is what is urgently needed.

One of the best parts of accepting self reliance in a free society is that true personal satisfaction with one’s own life can be achieved. This doesn’t happen when the government assumes the role of guardian, parent or provider, because it eliminates a sense of pride. But the real problem is the government can’t provide the safety and economic security that it claims. The so-called good that government claims it can deliver is always achieved at the expense of someone else’s freedom. It’s a failed system and the young people know it.

Restoring a free society doesn’t eliminate the need to get our house in order and to pay for the extravagant spending. But the pain would not be long-lasting if we did the right things, and best of all the empire would have to end for financial reasons. Our wars would stop, the attack on civil liberties would cease, and prosperity would return. The choices are clear: it shouldn’t be difficult, but the big event now unfolding gives us a great opportunity to reverse the tide and resume the truly great American Revolution started in 1776. Opportunity knocks in spite of the urgency and the dangers we face.

Let’s make “Something Big is Happening” be the discovery that freedom works and is popular and the big economic and political event we’re witnessing is a blessing in disguise.

Happy Birthday America: Americans need to stop listening to the myths they’ve been fed

Americans need to stop listening to the myths they’ve been fed

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The American executive and legislative branches of government are in dire need of an aggressive purge in the form of a no-confidence referendum. Unfortunately, the American people have no such device to rid themselves of desiccated people and the interests that tell them what American national policies should be. More’s the pity, presidential candidates Barak Obama (D) and John McCain (R) have merely repackaged the status quo and are selling it as new-face-equals-new policy. None of it adds up to change and, no matter who is elected as president or which party controls congress, odds are America will be on the same course towards more war, more economic pain, more infrastructure problems, and more security intrusions into the daily routine.

There are fundamental flaws not in the constitutional construct of the United States but in the people who are occupying positions in at least two of the three branches of the US government. The executive and legislative branches, according to polls, are sincerely reviled and that means both Republicans and Democrats get equal measure of disgust. But the two parties and their interested backers simply don’t care because they know the American people have no choice but to vote for one or the other. And so the game is all about the two parties entertaining each other and those top few percent of Americans and American corporations that control over 90 percent of America’s wealth.

At fault in it all are the American people who like the main character Wesley Gibson in the thrilling movie Wanted, is willingly tied to a chair and takes punch after punch in the face until he finally "gets it." But America today is no movie where the main character recovers. The American people need to suck it up and stop taking sucker punches before they have no blood left to bleed.

Americans need to stop listening to the myths they’ve been fed. America is not the shining light on the hill but it is an equal member of the world community.

Yes, there are foreign competitors out there and they are as good as the Americans in manufacturing, computing and aerospace. So Americans should compete with them or become part of their business systems. In this Olympic year, it’s worth noting that Americans hold just six world records in track & field competitions. They hold none in weightlifting. Americans are fat and lazy.

Americans are crying about gas prices. A pity they can’t buy as many hot dogs or beers at the baseball stadium. They need to adjust and adapt. Americans have always been told that they are the best at everything, so why aren’t they? Americans are not entitled to anything more than the rest of the world. Do they want education systems, roads, bridges and levees that function properly? Well then they need to stop whining about taxes and pay up or make those who pay nothing pull their weight.

Do Americans really want to continue the war in Iraq and go to war with Iran and Syria—and destabilize Turkey and Pakistan---for natural resources and Israel? Well, then do it! Activate selective service, militarize one million Americans (women too) and invade ‘em all. If Americans were as tough as they think they are, they’d get it done and damn the suffering of the military families and the maimed in action. Onward with torture! Medals for Bush, Cheney, Rumsfeld!

Do the American people even want the government of Jefferson, Madison, Adams, et al? With the privatization of the civilian and military functions and with their states selling off bridges and roadways for money, it seems they find government of any kind is too much of a burden. Americans really don’t want to pay for anything and they are not accountable to or for themselves (witness Katrina). Forget the Darfur crisis. As sorry as that is, take a look at what the Americans have done in Iraq: millions displaced internally and externally and disease widespread. Americans raped Iraq and remain non-penitent for their crime.

Happy Birthday America! The founders would be appalled.

John Stanton is a Virginia based writer specializing in national security and political matters. His most recent book is Talking Politics with God & the Devil in Washington, DC. Reach him at cioran123@yahoo.com

"Keeping America Safe"--from the Constitution

Total Information Awareness Finds its "Second Life" at IARPA

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Like countless resurrections of Freddy Krueger, it appears that John Poindexter's Total Information Awareness (TIA) program has found a new, more accommodating home for its "mission" of "keeping America safe"--from the Constitution--at the Intelligence Advanced Research Projects Agency (IARPA).

According to McClatchy investigative journalist Warren Strobel,

IARPA ... is the U.S. intelligence community's counterpart to DARPA, the Defense Advanced Research Projects Agency, which has been in business for more than 35 years and is meant to be a small, flexible R&D agency that funds high-risk, but potentially high-payoff technologies. ("What's IARPA?", McClatchy Washington Bureau, June 30, 2008)

IARPA has been organized under the auspices of Office of Director of National Intelligence (ODNI) Mike McConnell, a former executive vice-president with spooky mega-contractor Booz Allen Hamilton. As Tim Shorrock reported in March,

As Booz Allen's chief intelligence liaison to the Pentagon, McConnell was at the center of action, both before and after the September 11 attacks. During the first six years of the Bush administration, Booz Allen's contracts with the U.S. government rose dramatically, from $626,000 in 2000 to $1.6 billion in 2006. McConnell and his staff at Booz Allen were deeply involved in some of the Bush administration's most controversial counterterrorism programs. They included the Pentagon's infamous Total Information Awareness data-mining scheme run by former Navy Admiral John Poindexter, which was an attempt to collect information on potential terrorists in America from phone records, credit card receipts and other databases. (Congress cancelled the program over civil liberties concerns, but much of the work was transferred to the NSA, where Booz Allen continued to receive the contracts.) ("Carlyle Group May Buy Major CIA Contractor: Booz Allen Hamilton, CorpWatch, March 8, 2008)

According to the agency's website, IARPA's brief is centered on three program areas:

Smart Collection, "The goal of the programs in this office is to dramatically improve the value of collected data from all sources."

Incisive Analysis, "The goal of the programs in this office is to maximize insight from the information we collect, in a timely fashion."

Safe & Secure Operations, "The goal of the programs in this office is to be able to counter new capabilities implemented by our adversaries that would threaten our ability to operate freely and effectively in a networked world."

There's no argument that preventing sociopaths--state-sponsored or otherwise--using malware to cause the meltdown of a nuclear power plant's uranium core or the sudden release of methyl isocyanate into the atmosphere should be a priority of any sane government. Certainly such laudatory goals would be optimized by writing better programs rather than through intrusive data-mining ops carried out by the state's outsourced and well-paid private "partners."

Unfortunately, we aren't dealing with a sane government here in the United States. According to Virtual Worlds News, one IARPA program seeks to "mine" information from virtual worlds and online gaming sites for its potential to "model" terrorist activity.

Reynard, a data-mining project from Intelligence Advanced Research Projects Activity (IARPA), is an exploratory effort to monitor activity in virtual worlds and online games and then model what terrorist activity in those worlds would look like. The Director of National Intelligence recently released a Congressionally mandated report on various data-mining projects of which Reynard is just one. While it's just an early effort right now, "If it shows early promise, this small seedling effort may increase its scope to a full project."

Data-mining is defined as "a program involving pattern-based queries, searches or other analyses of 1 or more electronic databases" in order to "discover or locate a predictive pattern of anomaly indicative of terrorist or criminal activity...." and will now be ongoing "in a public virtual world environment. The research will use publicly available data and begin with observational studies to establish baseline behaviors."

No word on what world that will be in, but we already know that the CIA has a presence in Second Life and that IARPA has investigated Linden Lab's world as well. ("U.S. Project Reynard Mines Data Looking for Virtual Spies," Virtual Worlds News, February 25, 2008)

One can only wonder what IARPA will do once "baseline behaviors" are mapped! But apparently there's no need to fret since "the government understands that 'applications of results from these research projects may ultimately have implications for privacy and civil liberties,' so 'IARPA is also investing in projects that develop privacy protecting technologies,'" Secrecy News reports.

We bet they are! But as Strobel points out, "IARPA's ancestry is a wee bit interesting":

In the beginning, there was Total Information Awareness, a DARPA information-gathering program run by noneother than former Iran-Contra figure and Reagan national security adviser John Poindexter. Critics saw the program as a major, post-9/11 intrusion on American's privacy and civil liberties, and Congress killed funding for it in 2003. But there were persistent reports--confirmed by yours truly in conversations with former U.S. intelligence officials--that portions of the Total Information Awareness research had simply been shunted off to other agencies.

As readers undoubtedly recall, Total Information Awareness (TIA) was "terminated" by Congress when it learned that Poindexter was setting up a program that would sift through "public databases storing credit card purchases, rental agreements, medical histories, e-mails, airline reservations, and phone calls for electronic 'footprints' that might indicate a terrorist plot in the making," according to Shorrock's excellent read, Spies for Hire.

And to whom did DARPA turn to manage TIA? Why none other than Booz Allen Hamilton, of course! Joining SAIC (Science Applications International Corporation), Booz Allen "won" some $63 million in contracts to run Poindexter's pet project. While the program--and contracts--were allegedly cancelled, portions of TIA had simply been spun-off to other agencies including the FBI and NSA.

Where else did TIA migrate? It turns out, many of its data-mining projects, including the Scalable Social Network Analysis (SSNA) operation, which seeks to model networks of connections like social interactions, financial transactions, telephone calls, and organizational memberships into a coherent analytical tool, were "assimilated" by the Advanced Research and Development Activity (ARDA), managed by NSA.

Strobel reports that "ARDA was later renamed, given the ominous-sounding moniker, Disruptive Technology Office." And now ARDA and DTO along with a "new and improved" TIA, have apparently been folded into IAPRA.

Which just goes to show, you can't kill off that which the state decrees is necessary for "your protection." As Wired's Ryan Singel advises online gaming enthusiasts, you'd better "be careful who you frag"!

The Human Cost Of War

The Human Cost Of War

ACLU Releases Navy Files On Civilian Casualties In Iraq War ACLU

Public Has A Right To Unfiltered Information About The Human Cost Of War, ACLU Says

FOR IMMEDIATE RELEASE CONTACT: (212) 549-2666; media@aclu.org

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The American Civil Liberties Union today released thousands of pages of documents related to Navy investigations of civilians killed by Coalition Forces in Iraq, including the cousin of the Iraqi ambassador to the United States. Released today in response to a Freedom of Information Act (FOIA) request by the ACLU filed in June 2006, these records provide a vivid snapshot of the circumstances surrounding civilian deaths in Iraq.

"At every step of the way, the Bush administration and Defense Department have gone to unprecedented lengths to control and suppress information about the human cost of the wars in Iraq and Afghanistan," said Nasrina Bargzie, an attorney with the ACLU National Security Project. "Our democracy depends on an informed public and that is why it is so important that the American people see these documents. These documents will help to fill the information void around the issue of civilian casualties in Iraq and will lead to a more complete understanding of the prosecution of the war."

The ACLU obtained documents from eight Naval Criminal Investigative Service (NCIS) investigations. One of the files documents the investigation of the death of Mohammed al-Sumaidaie, a cousin of the Iraqi ambassador to the U.S, Samir al-Sumaidaie. In 2006, the ambassador accused Marines of "intentionally" killing his cousin and today's records shed light on al-Sumaidaie's NCIS investigation for the first time. Among the findings uncovered in this file are conflicting accounts of events, questions of credibility, possible command influence issues and cover-ups.

"As these files remind us, many charges of war crimes in Iraq have not seen the light of day," said Michael Pheneger, a retired Army intelligence colonel who is also a board member of the ACLU. "There are many discoveries here that should bring pause to any American who cares about this country and hopes to restore the United States' respected role in the world. It is time to bring the facts about this war into the sunlight and end practices that go against our laws and national values."

Through its FOIA project, the ACLU has made public information on Defense Department policies designed to control information about the human costs of war. These practices include:

• Banning photographers on U.S. military bases from covering the arrival of caskets containing the remains of U.S. soldiers killed overseas;

• Paying Iraqi journalists to write positive accounts of the U.S. war effort;

• Inviting U.S. journalists to "embed" with military units but requiring them to submit their stories for pre-publication review;

• Erasing journalists' footage of civilian deaths in Afghanistan; and

• Refusing to disclose statistics on civilian casualties.

Today's documents are available online at: www.aclu.org/natsec/foia/NCIS_log.html

Attorneys involved in this project are Bargzie, Ben Wizner and Jameel Jaffer of the ACLU National Security Project. In a separate lawsuit, the ACLU sued for records concerning the abuse of prisoners held by U.S. forces in Iraq, Afghanistan, and Guantánamo Bay. To date, that request has resulted in the release of more than 100,000 pages, all of which are available online at: www.aclu.org/torturefoia

New Documents Detail Civilian Deaths Caused by US Forces

New Documents Detail Civilian Deaths Caused by US Forces

War victims advocates dismayed at failure to pay for damages

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WASHINGTON - July 2 - The American Civil Liberties Union (ACLU) today released documents from the US Naval Criminal Investigative Services (NCIS) detailing the alleged killing of Iraqi civilians by US Marines. After studying the eight cases, Campaign for Innocent Victims in Conflict (CIVIC) was dismayed that only one resulted in payment to civilians for damages and called for swift compensation to the victims and their families.

When US forces anywhere cause the death of civilians through wrongful or negligent acts, a law called the Foreign Claims Act authorizes compensation to the victim's family members. If a Foreign Claims Act award is not appropriate in a particular case, the US military still maintains the ability to offer a "condolence" - usually in the form of a smaller, symbolic payment to the victim's family that recognizes unintentional harm caused by US combat operations. Though four of the eight victims described in the NCIS files were determined to be civilians, only one family received a claims payment and none were paid condolences. CIVIC called this a mistake.

"These documents tell us that victims and their families are being overlooked by US forces," said Sarah Holewinski, executive director of CIVIC. As an example, Holewinski cited the case of a man pulled from his home by Marines and shot by the side of the road. The Marines then planted an AK-47 and a shovel on the man to make it appear as though he was an insurgent caught burying an Improvised Explosive Device (IED). The true story was eventually revealed after initial cover-ups and several convictions followed, but compensation to the family (in this case appropriate through the Foreign Claims Act) did not follow.

"Justice doesn't end in a courtroom," said Holewinski. "US laws exist to compensate civilians suffering losses. To not use them diminishes their value and further harms the grieving victims, who are left without recognition or assistance long after a case is closed." CIVIC also noted that the ACLU documents represent only an extremely small number of the many documents the US military refuses to release.

CIVIC is a Washington-based organization that believes civilians harmed in conflict should be recognized and helped by the warring parties involved. In 2005, CIVIC's founder Marla Ruzicka was killed in Iraq by suicide bomb. CIVIC honors her legacy and strives to sustain her vision.

Monsanto has to Accept Full Responsibility for Genetic Contamination

Monsanto has to Accept Full Responsibility for Genetic Contamination

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On 19 March 2008 Monsanto accepted their responsibility for the genetic contamination of Schmeiser’s canola fields in an out of court settlement between Percy Schmeiser and Monsanto.

In an earlier trial the Canadian Supreme Court had recognized the legality of the patent protection to Monsanto’s Transgene, but at the same time this court had transferred the question about the legality of a patent about life and forms of life to the Canadian Parliament for re-evaluation. In accordance with earlier legal norms the owner of a patent on a certain gene is also the owner of the respective harvest. This question is still pending and has to be re-assessed by the Canadian Parliament.

Since Schmeiser could prove that he had never used Monsanto’s genetically modified seeds nor the total-herbicide Roundup Ready going with the Monsanto GM seeds, and that he had indeed no advantage from the pollution and contamination of his harvest, he was acquitted of Monsanto’s compensation demands.

In 2005 Schmeiser again found Monsanto GM Rap plants on his fields. He informed Monsanto and demanded that the company remove the plants. Monsanto confirmed to Schmeiser that the plants were Roundup-Ready raps and therefore property of Monsanto. Referring to the existing judgement that the owner of a plant is also liable for plant contamination damages, Schmeiser had the plants removed professionally and forwarded the removal cost invoice to Monsanto.

In earlier attempts to achieve an out of court settlement, Monsanto had not consented to paying the removal cost amounting to $660, so Schmeiser subsequently had sued the company. Monsanto would have paid for the contamination damage, but only under the condition that Schmeiser signed a “gag agreement”, i.e. he would agree not to talk about the damage case, which would have deprived him and/or his wife of the right for the remainder of their lives to ever speak about the case publicly or to ever again sue Monsanto for contaminating their harvest in future before any court. Schmeiser rejected. The demands raised by Monsanto were totally immoral. When the judge asked why Monsanto had not simply paid the very small sum of $ 660, Monsanto’s lawyer Richard W. Danyliuk responded that there was a lot more involved than just $ 660.

One hour before the court hearing was scheduled on March 19, 2008 Monsanto accepted all demands of Percy Schmeiser as well as their responsibility for the contamination of Schmeiser’s fields. Monsanto does not only pay for the damage but also accepts that Schmeiser reports and informs the public about the background and that he can express his opinion and position about this case in public. The acceptance of responsibility by Monsanto as the owner of the patented Transgene for the contamination of neighbouring fields opens the path for all farmers in the world to demand compensation by Monsanto.

Further information www.percy.schmeiser-on-tour.org, www.percyschmeiser.com
Interviews: Percy Schmeiser, Canada: +1 306 369 25 20

Global food price rises exacerbate famine in Ethiopia and Somalia

Global food price rises exacerbate famine in Ethiopia and Somalia

By Barry Mason

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It is not unusual for Ethiopia and Somalia to be hit by drought and food shortages, but this year the rise in food costs makes an already disastrous situation worse.

In Ethiopia, the area affected is in the triangle of land in the east and southeast bordering Kenya and Somalia, comprising the Somalia, Oromiya and Amhara regions. According to Reuters, a NASA earth observatory picture taken from space shows the “eastern half of the country withered in drought.”

Around 4.5 million Ethiopians are in need of food aid, with as many as 75,000 children facing acute malnutrition and illness.

Ken Caldwell, international operations director for the charity Save the Children, explained, “Hunger hits children first and hits them hardest. Ethiopian children, who are going hungry because their parents can’t afford to feed them, will be among the first victims of the global food price rises.”

As in previous years the impact of a poor belg rainfall (the belg rains fall March to May) has left the area to be classified by FEWSNET (famine early warning network) as either “highly” or “extremely” food-insecure.

A Reuters report of June 13 quoted Elisabeth Byrs, of the United Nations Office for the Coordination of Humanitarian Affairs.

“Seasonal rains have been poor or have failed in many parts of Ethiopia with dramatic effects on harvests in crop-producing areas,” she explained, and the effects of the drought had doubled the numbers needing food aid.

All the NGOs working in Ethiopia repeat the danger to children. The American-based CHF International explains how the drought’s effect on livestock means that milk production has almost ceased, and that this is having a marked impact on children’s nutrition.

The medical charity Medecins Sans Frontieres (MSF), in a press release of June 5, said, “Since MSF started its intervention in this region on 13 May, over 700 children with complicated severe malnutrition...have been admitted to its three stabilisation centres. In addition more than 1,500 other malnourished children are being treated as outpatients in eight clinics around the region. In Ethiopia around 7 million people routinely rely on food aid—malnutrition is nothing new. However, this year, the situation is much worse.... An MSF emergency nutritional project will generally be started if a rate of 3 percent severe acute malnutrition is found in a certain area. In some places in Ethiopia, recent assessments revealed a rate of 11 percent.”

The UN has launched an appeal for US$325 million to provide 400,000 tonnes of food aid in Ethiopia. The fact that just two months ago the UN estimated around US$70 million was needed shows the rapidly increasing severity of the situation.

One indication of the impact of rising food prices and the weakening of the Ethiopian currency is a statement by the UN that staple food costs nearly four times more than a year ago.

The NGOs, as well as pointing to the longer term factors—the impact of climate change making droughts more frequent and the reduced agricultural output resulting from IMF-World Bank economic programmes—also highlight massive food price rises.

Care International on its website comments: “The situation in Ethiopia is not only due to the current drought but a combination of additional factors including dwindling natural resources and agricultural productivity due to the effects of climate change.... For millions of people, there just isn’t food available, but in many cases even food is for sale on local markets, the price is so exorbitant that poor people simply can’t afford to pay”.

Francois Calas, MSF head of mission, explained that whilst the failure of the early belg rains had initiated the famine, “other factors such as high rates of inflation and an increase in food prices have also played a part. For most people life here is a daily struggle and for many of them this year that struggle became too much to bear.”

In Ethiopia, as in most African countries, agriculture has been seriously set back over the last three decades by IMF-World Bank free-market policies as well as by the influx of subsidised US and European Union food production after local markets have been forced open by the World Trade Organisation’s Agreement on Agriculture.

A recent article entitled “Destroying African Agriculture” by Walden Bello in Foreign Policy in Focus is an indictment of the impact of Western policies. He writes, “African agriculture is a case study of how doctrinaire economics serving corporate interests can destroy a whole continent’s productive base. At the time of decolonisation in the 1960s, Africa was not just self-sufficient in food but was actually a net food exporter... Today the continent imports 25 percent of its food, with almost every country being a net food importer.... [S]tructural adjustment saddled Africa with low investment, increased unemployment, reduced social spending, reduced consumption, and low output, all combining to create a vicious cycle of stagnation and decline.”

He continues, “According to Oxfam, the number of Africans living on less than a dollar a day more than doubled to 313 million people between1981 and 2001.... [S]tructural adjustment [has had the effect of] severely weakening the continent’s agricultural base and consolidating import dependency.”

Neighbouring Somalia has also been hit by drought, but here the situation is made seriously worse by the invasion of US-backed Ethiopian troops coming to the rescue of the Transitional Federal Government (TFG). For the last year and a half, they have attempted to drive out the Islamic Courts Union (ICU) that ruled the capital Mogadishu and large parts of Somalia during 2006. The ICU drove out the warlords that preyed on the civilian population, many of whom are allied to the TFG. Washington, which claimed that the ICU contained Al Qaeda members, has justified the invasion and subsequent atrocities on the grounds of pursuing the “war on terror.”

The UN has warned that the number of people needing emergency food relief in Somalia is likely to increase by nearly a third to 3.5 million in the next three months.

Few NGOs now risk working in Somalia. Medecins Sans Frontieres had four of its aid workers killed this year but continues to operate in 12 locations through local people. Its latest report on the situation in Hawa Afdi, on the road between Mogadishu and Afgooye where many have fled the fighting in the capital, reports a 400 percent increase in the number of children under five suffering malnutrition.

“Between 13 and 19 June, over 500 children under five years’ old were admitted to this nutritional programme [in Hawa Afdi], suffering from acute malnutrition,” MSF reports. In the Mogadishu-to-Afgooye corridor, more than 250,000 people are now living in extremely crowded conditions, with their number steadily increasing as they flee the fighting in the capital.

MSF states that in all its 12 locations, “we have seen a drastic deterioration in the health situation over the last year, and increases in malnutrition over the last three months.” It also points to the issue of the increasing prices of staple foods, explaining that “Some items have risen by up to 200 percent since the beginning of this year.” Food price rises have been compounded by the devaluation of the currency by 80 percent between April 2007 and 2008.