Wednesday, July 30, 2008

A Revealing Day In The Systemic Problem Known As Our Financial System

A Revealing Day In The Systemic Problem Known As Our Financial System

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There has never been a more revealing day as today when it comes to the systemic problem which can be best described as the breakage of the financial system. The spin today also reached unprecedented levels calling the Merrill deals a sign that the credit problem is mostly behind us. Please look at my report on about the Merrill triple deals of obscuration, the revelation of the FASB news article and more. Recognize, please, that the method of computing future mortgage values spoken of today is extremely flawed, yet today the media spoke about seeing the low in the housing crisis.

My take is simple:

  1. You must protect yourself immediately from failure of your financial agents, brokers or trust bank.
  2. You must protect your investment shares and retirement accounts against the failure of the broker or trust bank.
  3. Gold is going to $1200 this year.
  4. Gold will trade at $1650 on or before January 14th, 2011
  5. The US dollar will break below .7200 then visit .6200 on the USDX.

Don't let the madness of the fools who have been fooled soil your thinking.

PLEASE do not use margin in anything gold!

If you must trade futures, for your sake, use the basic technical analysis that I have taught you.

Utilize the three tools that I have given you that no text book speaks about. These are secrets of the trading ages given to you gratuitously.

All this is JSMineset's and my gift to you. JSMineset is the product of a team hell bent to save as many people as we can. Help Monty, Trader Dan and I by protecting yourself immediately! I have protected myself, my family and my company. Monty has protected himself, his family and his clients. Trader Dan has taken all the practical measures a professional trader can. Now you must do likewise for your family and business. Do it immediately.

Consider that I take as many calls as one man can do. I reply on JSMineset or directly to as many emails as any one man can. I reply to all investors as that is my law. This is all for you, not for me.

Consider that there are many more problems that will drop, all and every financial entity that fails will be rescued by PUBLIC money on the road to some degree of the awful Weimar experience. There is no other possibility. This is not my opinion. I do not think this, I know it!

Consider the following from CIGA Ken as one of the other shoes to drop:

  1. Click here for Met life's toxic earnings report. How long before some of these Insurance companies go to the Fed Window?
  2. I recently "tried" to dissect PGR's earnings. Progressive is a large Prop/cas insurance company located where I live in North East Ohio. I worked in underwriting/fraud/opps management there for 7 years. My focus was not on their business models but on the financial investment holdings of the many multiple companies that are housed within the corporation. Well they keep walking the slow line down on mark to market. I have been emailing back and forth with them to no real satisfactory end. How can an investor logically make a decision on whether to invest in a company when you do not know from one quarter to the next how many losses will hit the balance sheet? I cannot make an informed investment decision here. I have urged them to be aggressive in their loss modeling and I hope they come clean and help lead the group out of the downtrend. These conduit loan vehicles that you recently mentioned on JSMineset are probably not even marked down yet by most companies. As I read from your site today - pushing out FASB is just going to make it worse by delaying the inevitable. Who is going to invest now, knowing that more is coming later? Utter insanity. The markets want to purge, but they are held back.
  3. My friend called his life insurance company to take a small loan against his life policy to clean off a credit card. The small company that holds his policy told him they are getting flooded with calls for this type of thing. Now my friend is not in trouble, he just wants to quickly erase all debts prior to this fall and winter. However he was shocked to hear that many people are in real trouble out there and calling in all available monies. His insurance agent was dead serious. I would also expect 401k hardship withdrawals and loans must be ratcheting up as well but have no data to back that up.

Why the Economy Went South

Why the Economy Went South

A reformed Wall Streeter explains where Congress went wrong on lending. Plus, a timeline of the mortgage crisis

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After months of housing-market debris, Congress is still grappling with temporary solutions. One question they should be asking this week: How could these problems have been avoided?

Below, five ways Wall Street and Washington set us up for the crash.

Newt Gingrich and Home Ownership

There were myriad calls in the early '90s to usher in banking controls on the precipice of the GOP "contract with America" revolution. In response, the House battled for the Home Ownership and Equity Protection Act of 1994 to cap the most outrageous predatory loans.

HOEPA's passage had dire consequences. First, it left a huge gap between the most egregious rates and fees a lender could charge and the next most egregious. If lenders didn't want to hit the new caps, they could still extend loans with rates and fees just beneath the HOEPA triggers. Since they would make less money off of each loan due to reduced rates and fees, they'd have to find more borrowers to make the same profits.

Voila, the quiet birth of subprime lending.

Florida and the "Rodash Fix"

At the same time the legislative battle to constrain interest rates and loan fees was being waged in Washington, another fight, over loan transparency, was being fought throughout the cities of America. It began in Miami, Florida.

Miami resident Martha Rodash had just received some good news in March 1994; the 11th District Federal Court of Appeals in Florida had awarded her the right to rescind on her mortgage, a major upset for the two big lenders she was facing. Little did she know that her victory would help pave the way for the subprime loan bubble.

Rodash wasn't some deadbeat trying to get out of her payments. She wasn't even a victim of predatory lending. But when stricken with multiple sclerosis, she refinanced her home in order to seek a cure. The treatments failed, and she was soon forced to quit her job. Ultimately, she defaulted on her loan.

Charles Baird of Legal Aid came to her defense. He built his case on a fee misstatement in Rodash's Truth in Lending disclosure sheet. "We didn't wipe out her debt," Baird told me about the victory, "but we did void her mortgage interest and take the lien off her house."

Her consumer victory inspired more than 40 class action suits across the country, and had the national lending industry up in arms.

In 1995, Congress passed a major amendment to the 1968 Truth in Lending Act. That 1995 amendment became known as the "Rodash fix" and had the effect of making certain fees, previously grounds for successful litigation, mute.

Phil Gramm and the "Enron Loophole"

As the late 1990's stock market boom headed into the new millennium, there were some renewed legislative attempts to rein in the banking industry. Notably, in April 2000, Rep. John LaFalce (D-N.Y.) and Sen. Paul Sarbanes (D-Md.) introduced the Predatory Lending Consumer Protection Act of 2000.

The act would have brought down HOEPA triggers and ensured that everyone in the chain had an interest in homeowners' ability to repay loans. Sarbanes and Senate staffer Jonathan Miller worked feverishly to line up cosponsors.

The industry attacked the bill and its backers and won. What passed instead was Texas Sen. Phil Gramm's Commodity Futures Modernization Act of 2000. The act ushered in tremendous growth of unregulated commodity trades through its "Enron Loophole," which allowed companies to trade energy and other commodity futures on unregulated exchanges.

Sarbanes' Sorrow

Meanwhile, Sarbanes and LaFalce soldiered on for the cause of averting lending disaster through instilling appropriate regulation. Three months later, the duo reintroduced the Predatory Lending Consumer Protection Act of 2001. It died, like its predecessor.

Down but not out, Sarbanes and LaFalce tried to pass the 2002 Act the following May. It failed again.

Two years later, the Office of Federal Housing Enterprise Oversight's chief economist, Patrick Lawler, said, "There is no evidence here of prices topping out. On the contrary, house price inflation continues to accelerate, as some areas that have experienced relatively slow appreciation are picking up steam."

Indeed, subprime loan volumes rose from 5 percent of the overall mortgage market in 2001 to 15 percent in 2006. Home equity loans ballooned simultaneously. Then, those adjustable rates kicked in, and yes, prices did top out. Borrower mortgage payments soared by 25 to 30 percent, just as housing values were faltering. Foreclosures ramped up. And consumer protections were simultaneously chucked. On April 15, 2005, Charles Grassley (R-Iowa) passed the 2005 Bankruptcy Abuse and Consumer Protection Act, which worsened the quietly growing housing crisis for consumers. The act took away the ability of borrowers facing bankruptcy to negotiate down the principal of their primary home mortgages with their creditors—meaning they had no way to avoid foreclosure, even if they wanted to.

After the Bust

The finance community's theory is Darwinian: Little people who take bad risks deserve the consequences. Companies that take bad risks are a welcome addition to the fallen competitor list.

Current congressional packages tend to offer temporary financial solutions to long-term regulatory dilemmas. Yet even if we Band-Aid housing, the gear-up in commodities beats on. Wall Street will continue to battle for fewer restrictions under the political guise of American global competition, while Americans bear the brunt of the consequences.

Research support for this article was provided by the Nation Institute Investigative Fund. For more dates and events related to the lending crisis, click here.

IMF predicts no end in sight to credit crisis

IMF predicts no end in sight to credit crisis

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The International Monetary Fund says there's no end in sight to the credit crisis gripping world financial markets.

As Australia's NAB and ANZ have already discovered, the IMF believes banks are in for more pain as mortgage defaults soar and economies slow. The IMF has a particularly gloomy assessment of the US economy, and it came on the same day as the Bush administration revealed America's budget deficit will climb to a record high of more than half-a-TRILLION dollars.

Speaker: Michael Rowland
Speakers: Jaime Caruana, head of the IMF's capital markets division; Doug Peta, a market strategist with J and W Seligman; Jim Nussle, White House budget director

Fed Extends Emergency Loan Programs Through January

Fed Extends Emergency Loan Programs Through January

By Scott Lanman

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The Federal Reserve extended its emergency lending programs to Wall Street firms through January after policy makers judged that markets are still too weak to go without a backstop from the central bank.

The Fed also plans to give securities dealers options for tapping one of the loan programs to ensure financing through the ends of quarters, when funding needs can jump. Commercial lenders will be able to borrow from the central bank for a longer period, and the Fed boosted its swap line with the European Central Bank.

Today's announcement reflects continued turmoil in financial markets, after three U.S. banks failed in as many weeks. It's the latest step in officials' efforts to combat the yearlong credit crisis, after the Fed's rescue of Bear Stearns Cos. in March and the Treasury's backstop plan for Fannie Mae and Freddie Mac this month.

‘‘The U.S. is pulling out all the stops here to make sure we don't have a terrible downturn or a collapse in the financial system,'' said Allen Sinai, chief global economist at Decision Economics in Boston. ‘‘There isn't anything else the Federal Reserve can do but to keep pumping liquidity into the system.''

The Primary Dealer Credit Facility for direct loans to securities firms and the Term Securities Lending Facility for loans of Treasuries, both begun in March, will now extend through Jan. 30. They would then be canceled if the Fed judges that markets ‘‘are no longer unusual and exigent,'' the Fed said in a statement today in Washington.

Outlook for Rates

‘‘These facilities do indicate strains that are part of the risks in the economic outlook,'' said Brian Sack, a former Fed research manager who is now senior economist at Macroeconomic Advisers LLC in Washington. Sack added that today's decision bolstered his expectation for the Fed to hold off on raising interest rates until next year.

The Fed made today's announcement ‘‘in light of continued fragile circumstances in financial markets,'' the central bank said today.

Policy makers are forecast to keep their benchmark rate at 2 percent when they next meet on Aug. 5. Traders still see a 71 percent chance of at least a quarter-point increase by year-end, futures prices show.

Chairman Ben S. Bernanke and New York Fed President Timothy Geithner spearheaded the introduction of three lending programs since December as the credit crisis engulfed Wall Street.

Bernanke Message

Bernanke flagged the likelihood of the extension in a July 8 speech, saying the Fed is ‘‘strongly committed'' to financial stability. The programs represent a provision of Fed credit to nonbanks unprecedented since the Great Depression.

The Fed will start auctions of options of as much as $50 billion in the TSLF on top of the $200 billion program, which loans Treasuries to securities firms in exchange for asset-backed securities and other collateral.

New York Fed officials plan to consult with the primary dealers of U.S. government bonds on the TSLF options program, the district bank said in a separate statement. The options plan is aimed at providing liquidity for two weeks or less surrounding key financing periods to be identified. Further details are planned on or before Aug. 8, the New York Fed said.

The central bank also will start selling 84-day loans to commercial banks under the Term Auction Facility beginning next month, in addition to the sales of 28-day loans that have occurred since the program began in December. The biweekly sales will alternate between auctions of $75 billion in 28-day loans, and $25 billion in 84-day loans.

$150 Billion

The Fed plans to keep the TAF program at $150 billion and released a schedule indicating it will remain at that size through November.

In related moves, the European Central Bank and Swiss National Bank are also extending their operations to include auctions of 84-day funds, the Fed said in a press release. The Federal Open Market Committee authorized an increase in the ECB's swap line with the Fed to $55 billion from $50 billion; the SNB's swap line is unchanged at $12 billion. The swaps are authorized through Jan. 30.

The Fed started the lending programs for investment banks under its authority to lend to nonbanks in ‘‘unusual and exigent circumstances.'' Officials said at the time the Primary Dealer Credit Facility, which provides direct loans, would last for ‘‘at least'' six months. The central bank had not previously given an end date for the TSLF.

The PDCF has shown a zero balance for four straight weeks. The loans, once as high as $37 billion, fell to zero after the Fed took on a portfolio of assets in June as part of a March agreement to ease Bear Stearns's acquisition by JPMorgan Chase & Co.

Crunch ‘Spreading'

‘‘I would be surprised if Jan. 30 marks the end of the measures,'' said Mark Vitner, senior economist at Wachovia Corp. in Charlotte, North Carolina. ‘‘The credit crunch is very much with us and, if anything, spreading a bit to consumer borrowing.''

Regulators took over IndyMac Bancorp Inc., a California lender, on July 11 after a run on deposits. First National Bank of Nevada and California-based First Heritage Bank were shuttered July 25.

Today, President George W. Bush signed into law a housing bill that provides Treasury Secretary Henry Paulson the power to make equity purchases in Fannie Mae and Freddie Mac. Paulson asked for the authority July 13 after the shares of the firms, which own or guarantee almost half of the $12 trillion of U.S. mortgages, slid to the lowest level in more than 17 years.

The Fed provides loans to commercial banks of as long as 90 days through the traditional discount window, which carries an interest rate of 2.25 percent, a quarter-point higher than the Fed's benchmark rate. Lending rose to a record daily average of $16.4 billion in the week ended July 23.

Economists compared the TSLF options program to a Fed initiative aimed at potential money shortages during the 2000 computer-system changeover. The Fed sold options on almost $500 billion of repurchase agreements for standby financing. None were exercised.

Economy hitting elderly especially hard

Economy hitting elderly especially hard

Bankruptcies soar as retirees, agencies struggle to keep up with rising costs

By Alex Johnson

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Bob Emily put in an honest day’s labor every day of his life.

“I worked for the railroad, for the town marshal, security, bars, Sealy down here, UPS,” said Emily, 82, of Commerce City, Colo. “Worked hard all my life until I got sick.”

Then the bills started piling up.

“Hospital bills built up,” said Emily, who didn’t have health insurance. “I had to get loans to take care of my bills. Then I was getting behind on the loans.”

Every day, more calls and letters would come in from creditors and collectors. “I just got tired of it,” Emily said, so three months ago, he filed for bankruptcy.

That could take some of the pressure off. Then again, it might not. Food prices and medical costs are still rising, tarnishing what are supposed to be the golden years for the elderly, perhaps the hardest-hit victims of the slumping economy.

Elderly Americans are filing for bankruptcy in record numbers, according to a study by AARP, formerly the American Association of Retired Persons. At the same time, support is drying up from meal, transportation and other home assistance agencies that can’t pay their own bills.

“There's no question that the downturn in the economy is dramatically impacting those at the doorstep of retirement and those that have already decided to retire,” said Mark Kitchens, a senior vice president of AARP.

Soaring bankruptcy among the elderly
The numbers are stark. Of the more than 1 million Americans who filed for bankruptcy last year, nearly a quarter were 55 and up, AARP found. Bankruptcy filings among those ages 75 to 84 skyrocketed by 433 percent from 1991 to 2007.

Halfway into 2008, workers at agencies that serve the elderly say the problem is only getting worse.

“We are getting more and more calls from seniors looking for jobs, every day,” said Peggy Clarke, director of a job bank run by Positive Maturity, a senior agency in Birmingham, Ala.

“Plus, their age is higher every time,” Clarke said. “We’re talking about people in their 80s who are saying that they have to go back to work, even if it’s part-time.”

At a bankruptcy hotline operated by Utah Legal Services, a nonprofit support agency, pleas for help pour in from seniors in debt, intimidated by persistent calls from bill collectors.

“They’re calling because they want to file for bankruptcy,” said Sylvia Bosen, a spokeswoman for the agency. “Some of them think they may go to jail.”

Services strain to keep up
Only 21 percent of employers offer supplemental health coverage to retired employees enrolled in Medicare, according to the AFL-CIO, making government and private senior service agencies crucial to keeping America’s elderly clothed, housed and fed.

But those agencies are buckling, hit by the same double-whammy of higher costs for food and fuel.

More than 2,000 Meals on Wheels programs nationwide have waiting lists because it is too expensive to deliver to all who need it.

“When a Meals on Wheels program closes down, who feeds those seniors?” asked Enid Borden, chief executive of the Meals on Wheels Association of America. “What happens to those seniors? This is, in fact, a life-and-death situation.”

In Honolulu, where Meals on Wheels delivers to 700 elderly people a day, the number of volunteer drivers is down about 20 percent, because drivers can’t afford the gas for their trips. The agency’s 50-cent-a-mile reimbursement doesn’t begin to cover expenses; as a result, the agency estimates, drivers now spend more than $300 a year out of their own pocket.

“We’re losing a lot of them because of the gas prices,” said Ben Brown, a volunteer driver in Kapalama. “If we can’t get gas, seniors won’t be getting their meals.”

For residents of rural areas, the pinch is even harder. Because many have limited mobility, they rely on senior transportation services to fill the gap left by sparse public transit.

Older Adult Transit Services in Columbia, Mo., is trying to keep its services affordable for the 30,000 rides a year it provides to grocery stores and doctors’ offices. But gas prices are making it tough to hold the line on its $3-a-ride fee, said Jack Heusted, the agency’s director of regional services. Daily gas expenses recently topped $1,300 a day.

“By the nature of our clients, they are elderly and disabled with low income, and this is getting to be very expensive for them,” Heusted said.

As a result, some services are in danger of disappearing, said Gordon Walker, chief executive of the Jefferson Area Board for Aging in central Virginia. The agency’s state and federal funding has remained flat for more than three years; now there isn’t enough money to provide for everyone.

“We’re having to put people on waiting lists for home-delivered meals, and we have a waiting list for air conditioners,” Walker said.

Many senior citizens are old enough to have lived through the Great Depression and the shortages of World War II, and they know how they should cope — if they could.

In a survey for AARP last month, more than half of respondents ages 50 and over said they had cut back on their grocery expenses. Nearly 40 percent predicted that some food items would need to be rationed within the next year, and most dramatically, 18 percent said they had started eliminating some meals entirely.

But while some elderly people can cut back, those with health issues often don’t have that option, said Jonathan Evans, chief of geriatric medicine at the University of Virginia Health System.

“People need what they need, and that need doesn’t go away,” Evans said. “This isn’t discretionary.”

Retirement? What retirement?
Retirement plans and government benefits must provide for average life expectancies reaching 20 years longer than they did in the 1930s.

But inflation and stock plunges are eating away at retirement accounts, while Social Security is shrinking — the 2.3 percent increase in benefits announced in January was the smallest in four years. By comparison, consumer prices rose more than twice as much over the past year, the Labor Department said last week.

More and more able-bodied seniors are simply not retiring. They can’t afford it.

In a survey conducted in April, Woelfel Research of Dunn Loring, Va., found that 27 percent of Americans 45 or older expected to delay retirement because of the economic downturn. One of them is John Looney of Denver.

“I have been saving every year for some 40 years now trying to get ready for this moment where I might be able to have a little more time for family, for friends,” Looney said.

Now he expects to have to work for at least five more years.

If anyone should know, it’s John Looney. He works for AARP.

Cloned Beef Has Already Entered U.S. Food Supply, Even Before FDA Nod

Cloned Beef Has Already Entered U.S. Food Supply, Even Before FDA Nod

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The major cattle cloning companies in the United States have admitted that they have not bothered to try and keep meat from the offspring of clones out of the U.S. food supply, in spite of a request by the FDA several years ago.

"This is a fairy tale that this technology is not being used and is not already in the food chain," said Donald Coover, who owns a specialty cattle semen business. "Anyone who tells you otherwise either doesn't know what they're talking about, or they're not being honest."

Coover admitted that for several years, he has been openly selling semen from cloned bulls. He is sure, he added, that others are doing the same.

The revelation came as the FDA approved cloned beef as safe for human consumption but the U.S. Department of Agriculture (USDA) asked farmers to keep it out of the food supply anyway.

The USDA's primary concern is that if cloned beef enters the U.S. food supply, other countries might refuse to purchase beef from the United States. Similar problems have emerged in the past with genetically modified U.S. crops being rejected, particularly in Europe but also in parts of Africa, Asia and the Americas. Insiders from agencies such as the USDA and Office of the U.S. Trade Representative noted that a product that no other country wants to buy might do the United States more harm than good.

The USDA's request for a moratorium on cloned beef is meant to give time for "an acceptance process" that will be needed "given the emotional nature of this issue."

A survey by the International Food Information Council Foundation found that 22 percent of U.S. residents surveyed had a favorable impression of cloned meat in 2007, as opposed to 16 percent in 2006. Approximately 50 percent had a negative impression of such food.

The FDA has rejected calls to require the labeling of food produced from cloned animals.

Welcome To The 21st Century Police State

Welcome To The 21st Century Police State

Lee Rogers

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It is becoming increasingly clear that we are living in a police state the likes of which Adolf Hitler would have approved of. In the past week, a couple of disturbing news stories detailing extreme police brutality has been reported. In Arkansas a young man was tasered 19 times while he was incapacitated on the ground injured with a broken back. The young man had fallen off a bridge and instead of the police helping him, they decided it was necessary to taser him multiple times despite the fact that it was obvious he couldn’t be any sort of threat. In New York City, a cowardly police officer brutally assaulted a bike rider for no reason and to add insult to injury, the police charged the bike rider with assault and other crimes. The police officers who have engaged in this behavior are cowardly pieces of trash who need to be taken away to prison. If these cops think they are so tough, we should give them the opportunity to pick fights with hardened criminals in a maximum security prison.

Below is a clip taken from a local NBC News affiliate in the Arkansas area detailing how a young man fell from a bridge, broke his back and then was tasered 19 times by the cowardly authorities while he was incapacitated on the ground.

There is simply no reason to taser somebody who is injured on the ground with a broken back. Someone who is injured on the ground with a broken back is certainly no threat to anyone. There was no reason to taser the young man once let alone 19 times as was reported. Whoever did this should be charged and put in prison immediately. The young man and his family should sue the police department and the officers that were involved in this brutal assault.

In addition to that fiasco, another cowardly police officer was caught on tape assaulting a bike rider for no reason. In the video clip, Officer Patrick Pogan assaults Christopher Long a bike rider who was merely trying to get around him by shoving him off his bike. Long could have potentially broken his neck and even died from this vicious assault by the cowardly police officer. Fortunately, Pogan has had his badge and gun stripped as a result of his actions. The following is taken from a New York post report on this situation.

A rookie cop - the son of a highly respected New York City detective - has been stripped of his badge and gun after being caught on video viciously attacking a bicyclist who was part of a Times Square demonstration. '

The startling YouTube video shows Officer Patrick Pogan, 22, apparently setting his sights on - and then tackling - a bicyclist as he pedaled along Seventh Avenue as part of last Friday's controversial Critical Mass ride.

The video footage clearly shows that Pogan’s actions were unwarranted. Of course the criminal complaint drafted by Pogan does not match up at all to what happened. Pogan subsequently arrested Long for attempted assault in the third degree, resisting arrest and disorderly conduct even though the video shows that Pogan was the one that assaulted Long.

Below is another blurb from the New York Post report.

What the video doesn't show is Pogan arresting Long for attempted assault in the third degree, resisting arrest and disorderly conduct - charges that kept the Bloomfield, NJ, man behind bars for 26 hours before his release late Saturday.

Adding insult to injury, the criminal complaint drafted by Pogan bears little resemblance to what was witnessed by onlookers and recorded on video.

In court papers, Pogan accused Long of purposely swerving his bicycle to block traffic and then using it as a weapon to run down the officer, knocking him off his feet and causing a "laceration" on his forearm. "You are pawns in the game. I'm going to have your job," Long told Pogan, as he flailed and kicked his arms and legs, according to the complaint.

Even if you believe that the Critical Mass bike ride protests are an annoyance that does not excuse Pogan’s actions. The protests were authorized by the city which makes Pogan’s actions all the more ridiculous. All charges should be dropped against Long and Pogan should be put in prison and charged with assault and perhaps even an attempt on his life. Such an assault could have resulted in Long’s death considering that Pogan pushed him over when he was in a defenseless position.

Of course this type of thing is becoming a regular occurrence in the United States of America. This country is gone and is being slowly turned into a 21st century version of Nazi Germany. As we see more and more of these types of news stories, it shows us that police departments around the country are being transformed into criminal enterprises. Welcome to the 21st century police state.

House formally apologizes for slavery and Jim Crow

House formally apologizes for slavery and Jim Crow

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WASHINGTON - The House on Tuesday issued an unprecedented apology to black Americans for the wrongs committed against them and their ancestors who suffered under slavery and Jim Crow segregation laws.

"Today represents a milestone in our nation's efforts to remedy the ills of our past," said Rep. Carolyn Cheeks Kilpatrick, D-Mich., chairwoman of the Congressional Black Caucus.

The resolution, passed by voice vote, was the work of Tennessee Democrat Steve Cohen, the only white lawmaker to represent a majority black district. Cohen faces a formidable black challenger in a primary face-off next week.

Congress has issued apologies before — to Japanese-Americans for their internment during World War II and to native Hawaiians for the overthrow of the Hawaiian kingdom in 1893. In 2005, the Senate apologized for failing to pass anti-lynching laws.

Five states have issued apologies for slavery, but past proposals in Congress have stalled, partly over concerns that an apology would lead to demands for reparations — payment for damages.

The Cohen resolution does not mention reparations. It does commit the House to rectifying "the lingering consequences of the misdeeds committed against African-Americans under slavery and Jim Crow."

It says that Africans forced into slavery "were brutalized, humiliated, dehumanized and subjected to the indignity of being stripped of their names and heritage" and that black Americans today continue to suffer from the consequences of slavery and Jim Crow laws that fostered discrimination and segregation.

The House "apologizes to African-Americans on behalf of the people of the United States, for the wrongs committed against them and their ancestors who suffered under slavery and Jim Crow."

"Slavery and Jim Crow are stains upon what is the greatest nation on the face of the earth," Cohen said. Part of forming a more perfect union, he said, "is such a resolution as we have before us today where we face up to our mistakes and apologize as anyone should apologize for things that were done in the past that were wrong."

Cohen became the first white to represent the 60 percent black district in Memphis in more than three decades when he captured a 2006 primary where a dozen black candidates split the vote. He has sought to reach out to his black constituents, and early in his term showed interest in joining the Congressional Black Caucus until learning that was against caucus rules.

Another of his first acts as a freshman congressman in early 2007 was to introduce the slavery apology resolution. His office said that the House resolution was brought to the floor only after learning that the Senate would be unable to join in a joint resolution.

More than a dozen of the 42 Congressional Black Caucus members in the House were original co-sponsors of the measure. The caucus has not endorsed either Cohen or his chief rival, attorney Nikki Tinker, in the Memphis primary, although Cohen is backed by several senior members, including Judiciary Committee Chairman John Conyers, D-Mich., and Ways and Means Committee Chairman Charles Rangel, D-N.Y. Tinker is the former campaign manager of Harold Ford, Jr., who held Cohen's seat until he stepped down in an unsuccessful run for the Senate in 2006.


The bill is H. Res. 194

On the Net:


Privatization of Mexican Oil Will Advance SPP Objectives

Privatization of Mexican Oil Will Advance SPP Objectives

By Dana Gabriel

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Mexican President Felipe Calderon has proposed sweeping reforms to its state-owned oil company Petroleos Mexicanos (PEMEX). He denies that his reforms constitute privatization and claims they will serve to make PEMEX stronger. Many view his proposals as a threat to Mexican sovereignty and nothing more then an energy grab. It is through NAFTA and the Security and Prosperity Partnership (SPP) that the U.S. is further securing access and control to Canadian and Mexican resources. Former presidential candidate, Andres Manuel Lopez Obrador, who lost to Calderon, is spearheading a movement to stop oil privatization and pushing for a referendum. Opponents of the reforms were able to force the Mexican Congress to hold a series of debates which ended on July 22. There is a swell of national sentiment spreading across the country as the majority of Mexicans wish to retain control of one of their last symbols of sovereignty.

Mexico’s oil industry was nationalized in 1938, and its constitution forbids foreign investment in the oil sector, including private corporate ownership. Calderon insists that his reforms are necessary for the very survival of the country. He describes PEMEX as broken and bankrupt, and believes that the only way to further develop any deepwater drilling is by opening it up to foreign investment. The reforms will allow for key components of PEMEX to be taken over by private companies. Opponents of the plan have called it backdoor privatization and fear it will lead to the complete takeover of the industry. If passed, the reforms will allow private companies to build refineries, transport oil, and own pipeline networks. It will open 37 of PEMEX’s 41divisions to private subcontractors. It has been reported that Halliburton already has a contract with PEMEX to drill for new wells and maintain pipelines. The move to privatize Mexican oil runs contrary to a worldwide trend to further nationalize oil reserves.

There is little doubt that there are many problems associated with PEMEX, but there should be the necessary funds in place to make upgrades and pay for future development. There have been allegations of corruption, including massive money deviations and other improprieties. Some of its profits also went to pay down Mexico’s foreign debt. The point is that there has been very little in the way of accountability of money allocations. PEMEX also turns over 60% of its revenue to the government in the form of taxes. Some of this money is used for social programs and public work projects. It has been suggested that, by lifting the tax burden imposed on PEMEX, it would be able to reinvest in its own development. What is at stake is Mexico’s future as a sovereign nation. There are fears that the privatization of PEMEX will only lead to more social unrest and plunge Mexico into even deeper poverty. What are needed are reforms that truly strengthen PEMEX and guarantee its oil supply for Mexican demand. This runs contrary to the SPP and a North American resource pact which ultimately favors the United States.

The SPP is designed to consolidate U.S. control over North American energy supplies by expanding oil production in Canada and Mexico. This includes gaining more access by further deregulating energy markets. Under NAFTA, Mexico refused to privatize its state-owned oil industry. The SPP is being used to bypass the Mexican constitution, and privatization of North American energy resources is at the very core of its agenda. Stuart Trew of the Council of Canadians said that the North American Competitiveness Council is, “providing input into the SPP through the North American Energy Working Group, and their intentions are clear. In the case of energy, what they want is a fast-tracked continental integration policy.” Laura Carlsen, the director of the Americas Program at the U.S.-based Center for International Policy, has stated that Calderon’s reforms will help in achieving some SPP objectives. She said, “The first is to increase U.S. energy security by guaranteeing access to extensive deepwater reserves in the Gulf of Mexico, including Mexico’s portion of it.” She went on to say that, “The second objective is to open up oil and gas production and market to foreign companies.” The SPP is paving the way for a North American Union.

Since Calderon came to power, he has aggressively promoted NAFTA, free trade, the SPP, and the further privatization of Mexican institutions. All represent steps toward a North American Union. Last year, former Mexican President Vincente Fox, made some amazing revelations on the Larry King and Daily Show. He discussed how he had been working with President Bush towards the creation of a single currency for North America. He also argued in favor of a North American Union, using the EU as its model. For all the talk of a North American Union being a conspiracy theory, it was an incredible admission by a most senior former government official. This was not a slip of the tongue, and was meant to test the waters and further condition the population for continental integration.

In Mexico, a movement is gaining momentum, fueled by anti-NAFTA sentiments and plans to privatize its oil industry. NAFTA has been a disaster for the average Mexican and has increased U.S. and Mexican income disparities and further widened the gap between rich and poor. Mexico represents the third world component of NAFTA, and this could spread to the U.S. and Canada. Some Mexican legislators have been working in conjunction with their NAFTA counterparts to try and stop the SPP. It appears as if a North American Union will be a hard sell in Mexico as much of the population has woken up to the evils of globalization, and are prepared to take action to stop it.

Why We're Working More and Earning Less

The Big Squeeze: Steven Greenhouse on Tough Times for the American Worker

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JUAN GONZALEZ: The federal minimum wage increased last week from $5.85 to $6.55. The increase gave nearly two million American workers a raise. The seventy-cent increase is the second of three enacted under a 2007 law that saw the first minimum wage hike in more than a decade.

But, adjusted for inflation, the minimum wage remains lower in real terms than it was forty years ago, despite record corporate profits.

A new book by the New York Times labor reporter Steven Greenhouse examines how much of the American workforce is working more but earning less. Wages have stagnated, health and pension benefits have grown stingier, and job security has shriveled. The book is titled The Big Squeeze: Tough Times for the American Worker.

Steven Greenhouse joins us here in the firehouse studio. Welcome.

STEVEN GREENHOUSE: Nice to be here, Juan.

JUAN GONZALEZ: An amazing book, Steve. You’ve traveled all around America, obviously, as a labor reporter for the New York Times, and you take us into all kinds—not just to factories, but the Silicon Valley jobs, the service jobs, to give us a sense of what is happening to the everyday worker.

STEVEN GREENHOUSE: I—we all love Barbara Ehrenreich’s book Nickel and Dimed, and I felt, I’m going to try building on that. And I really try looking across the board what’s happening to the nation’s workers. I look at, you know, farm workers. I look at Microsoft workers. I look at, you know, factory workers, whose jobs are disappearing to Mexico. And I look at, you know, software engineers at Hewlett-Packard, at some other places, you know, that have lost their jobs to India. I look at janitors in Houston who—I focus on one janitor in Houston, who, after ten years, is making just $5.25 an hour. I write about a Dominican worker in Brooklyn who works eleven hours a day for just $35 a day. You know, the whole panoply of what’s happening, to show that there’s this big squeeze on the nation’s workers, where, as you were just saying, wages have been flat, health and pension benefits are getting worse, at the same time corporate profits have gone up very, very nicely. Employee productivity has gone up 15, 20 percent, yet wages have been flat, plus companies are pressuring workers, you know, to work harder and harder.

JUAN GONZALEZ: The health insurance situation, I think you had a starting story about one worker, a security guard, who had caught many shoplifters at his store. He hurts himself in the process of capturing one of them or arresting one of them and then ends up being fired, because now he requires medical treatment that his employers don’t want to give him. The impact of the health insurance crisis on America’s workers?

STEVEN GREENHOUSE: It’s—I write about this worker, Mike Michell, who works as security guard for a Wal-Mart in Texas, and he was a great security guard. He caught 180 shoplifters over a two-year period. One day, he runs out into the parking lot to chase after someone who’s using stolen checks. The woman’s accomplice floors the accelerator, hits Mike, you know, messes up his back, breaks his kneecap. You know, Mike asks for a few weeks off, because he needs surgery on his knee. He applies for workers’ comp, and boom, he’s fired. And this shows how companies sometimes retaliate against people who file for workers’ comp.

And that’s part of a broader health crisis in the nation, where, since the year 2000, even though we’ve had pretty good economic times until the last few months, nine million more Americans are out of work than was the case in 2000. So now, almost 50 million Americans, nearly one-sixth of the workforce, is uninsured. And you think how crazy that is, in ways. You know, we’re the world’s wealthiest nation, yet one-in-six workers are out of work.

And another, you know, health statistic that surprised me when I was researching the book was, United States spends about $6,500 per person for health coverage, which is more than twice what France and Germany spent, about two-and-a-half times what Japan spent, yet, you know, they have universal health coverage. They have longer life spans than Americans. Yet, you know, we spend twice as much, and one-in-six people are uninsured. So something is badly broken in the health system.

JUAN GONZALEZ: Now, given the record corporate profits that we’ve seen and the relative prosperity of so many American companies over recent decades, why do we have this continuing spiral downward, in terms of the living standard of the average worker?

STEVEN GREENHOUSE: You know, if there’s any one theme in my book, Juan, it’s that things are out of whack, out of balance in the workplace, that corporate profits have hit record levels, employee productivity has really zoomed upward 15, 20 percent over the past six, seven years, yet, you know, wages have gone nowhere. You know, corporate profits, as a percentage of overall national income, have hit record levels, and wages, as a percentage of income, national income, have fallen to the lowest level since basically the Depression.

So, what’s wrong here? That’s a good question. I think part of it is that employees unions have much less bargaining power, much less power vis-a-vis corporations than was the case thirty, forty, fifty years ago. Part of that is weaker unions. Part of that is globalization has really increased corporate power over workers, because corporations can tell employees, “Look, if you don’t accept a wage freeze, we’ll just move your job to China or India. If you’re too vocal in demanding wage increases, raises, well, maybe you’ll be caught up in the next round of downsizing.” So I think globalization has really enabled corporations to increase pressure.

And another thing, Juan, is, you know, Wall Street—I think Wall Street, since the 1980s and the rise of the institutional investor, the rise of mutual funds, hedge funds, pension funds, Wall Street is exerting much more pressure on corporations to maximize their share prices, as you know, which means maximize profits, which often translates into lowering costs and especially lowering payroll costs. So a lot of managers will say, you know, the area where they have most flexibility to reduce cost and increase profits is on payroll. So that’s why we’re seeing all these waves of downsizing.

JUAN GONZALEZ: You know, one of the things that I’ve often wondered about, especially over the last twenty years, is—as we’ve both covered the labor movement for many years—is that the impact of the lack of alternatives on the world scale, that it seems that during the period when there were a considerable number of socialist countries in the world, for all their problems that these countries had, they at least provided an alternative vision of the kind of society—how workers would be treated. And as a result, the capitalist countries almost had to provide more benefits to their workers to prevent them from trying to institute a socialist society, so that, in essence, once the socialist camp collapsed, really the Western capitalists felt that pretty much, hey, we don’t have to worry about our workers taking any other roads, so we can do whatever we want with them. It seems to me that, in some degree, one benefit to us in the United States and Europe by the existence of the Soviet Union and China, all these others, was that the governments had to be more careful about how they treated their workers. Any thoughts on that?

STEVEN GREENHOUSE: I kind of saw there are three camps. There’s like the American, you know, almost extreme free market model. There was the western European kind of social democracy model. And then there was the socialist-communist model of China, Russia. So that model has kind of fallen—the lesson has kind of fallen by the wayside, but I still think, you know, there’s a very strong western European model, which still remains quite different from the American model. And you speak to a lot of, you know, union people here, liberals here, progressives here, they say, “Well, we should have a lot more what western Europe has.”

You know, in researching the book, I was kind of surprised, even shocked, that the United States is the only industrial nation without universal health coverage. We’re the only industrial nation without – actually, one of the very few nations in the world, one of four nations of the world, without paid maternity leave. We’re the only industrialized nation without a law saying everyone gets x number of vacation days. In the European Union, the twenty-seven nations, every worker is guaranteed four weeks’ vacation. And also, we’re the only industrialized nation where workers are not by law guaranteed a set number of paid sick days. So, you know, I think we still have a lot to learn from the so-called social democracies of Europe, in terms of their model versus our model.

JUAN GONZALEZ: And hopefully they will last long enough for us to learn from them. Let me ask you about our labor movement. Obviously, a few years back, there was a big battle and division within the American labor movement between the AFL-CIO and the establishment of a new Change to Win coalition, led by the SEIU and others, but that coalition really hasn’t appeared to have had much of an impact on the overall direction that the labor movement is going in. What’s your sense of how this is shaking out, this split in the American—in organized labor?

STEVEN GREENHOUSE: The unions that quit the AFL-CIO – the Service Employees, the UNITE HERE apparel hotel workers, the Teamsters, the United Food and Commercial Workers—they say they needed, they wanted to leave the AFL-CIO to give them an opportunity to grow faster and mobilize more. I think you’re right, Juan. We haven’t yet seen real big changes in how much these unions have been organizing. The Service Employees were organizing, you know, more workers than any other union before the split; they continue to organize more than any other union. UNITE HERE was doing a lot of organizing before the split; it still is. But some of the unions in Change to Win that weren’t doing much organizing before, like the Teamsters, like United Food and Commercial Workers, unfortunately they’re still not doing much organizing. We keep hearing that Change to Win is working very hard with these unions to turn things around.

You know, in the book, I write about one kind of Change to Win or Service Employees organizing drive that does hold out a lot of hope for the labor movement. I write about the Service Employees’ effort to unionize 5,300 janitors in Houston, and the workers there really had it bad. I mention, you know, this worker who worked ten years as a janitor at a luxury office building, where, after ten years, she was still making $5.25 an hour, and she was an immigrant from El Salvador, refugee from El Salvador. And so, she got involved in this unionization drive. And, you know, the workers, these 5,300 janitors, virtually all of them were immigrants, virtually none of them spoke English. Many of them were undocumenteds. They were all part-time. They were all subcontract-–I mean, a very, very, very hard population to organize and, to boot, in a state that’s one of the most—Texas, one of the most anti-union in the nation.

And the Service Employees were able to unionize them using some very smart tactics that I describe in detail. And as a result of the contract, the workers’ wages rise, you know, 60 percent over three years, they go from twenty hours a week to thirty hours a week, so, in effect, their wages double in three years, plus they get health insurance. And I think that’s a wonderful model of how unions can still do important work in helping low-wage workers. You know, could they have done that before this split? Yes. I don’t know if the split really was needed to do that.

JUAN GONZALEZ: We’re talking with Steve Greenhouse, the labor reporter for the New York Times, and he’s written the new book The Big Squeeze: Tough Times for the American Worker. In talking about the SEIU, which is obviously the—I guess the preeminent union right now in the United States, certainly the fastest-growing and most politically influential, they’ve had their troubles, too, in recent years, because as they’ve grown, there’s also been criticism that they’ve become increasingly—sort of making arrangements or deals with companies or with political leaderships in order to get what they call a card check or neutrality agreements to bring in thousands and thousands of workers at one time, but that some are criticizing them for being too much of a top-down organization, rather than practicing sort of the rank-and-file democracy that unions have long espoused, at least in theory. Your sense of how this—these internal conflicts among the reformers in the labor movement are shaking out now?

STEVEN GREENHOUSE: There are—the Service Employees, I agree, Juan, are the fastest-growing union in the nation. I often think of the phrase about Reggie Jackson of the Yankees: they’re the rod that stirs the drink in the labor movement. They’re really, you know, kicking ass in many ways. They’re doing a lot.

And—but there’s a big debate within the union, that, you know, Andy Stern, you know, the leader, who is in many ways the most visionary leader in the labor movement—you know, people say, “Oh, he’s too top-down. He doesn’t listen enough to what’s happening at the grassroots.” And Stern—and he’s having a big fight with the head of the union’s biggest healthcare union in California, headed by Sal Rosselli. But Stern says, you know, “I’m pushing ahead. You know, we’re doing what’s needed to grow, and we have a good vision. And, you know, come along with us.” And as in any big institution, there are frictions. And as you say, Juan, you know, they have made some pragmatic choices that they’ll give perhaps some concessions on wages with a company to persuade that company to make it easier to allow card check when SEIU is trying to organize some of their non-union operations in other states. So there’s a big debate about how much—how many concessions should one make in order to get organizing rights to make it easier to organize non-union workers who have it worse than those, you know, who already are unionized.

JUAN GONZALEZ: One of the things that struck me in your book was when you talk about the companies that actually treat their workers well, which you mention Costco and some other companies, and it might come as a surprise to those of us who continue to labor under less-than-ideal conditions in our workplaces. Can you talk about those companies and how they came to the philosophy that they pursue in their business?

STEVEN GREENHOUSE: Sure. In the book, I write about a lot of things, wrong things, a company is doing. You know, and I have chapter after chapter about companies that make people work off the clock, or managers that erase hours from people’s time cards, or companies that horribly exploit undocumented workers.

But I thought it would be important to show that there are some, even a lot of, companies that do the right thing, that treat their workers very well. And at Costco—and I have a long section about Costco—the founder, Jim Senegal, son of a Pennsylvanian who was a coal miner and a steel worker and a good union man, you know, Senegal had this vision that “I’m going to treat my workers well. I’m going to have very low prices. I don’t want anyone thinking that I have low prices because our workers work under sweatshop conditions, though.” He decided, in setting up Costco, that Costco would have the best wages and benefits of any retailer, general retailer, in the nation. And—

JUAN GONZALEZ: And does it?

STEVEN GREENHOUSE: Generally, it does, yes. Someone working at Costco for, say, five years, their wages and benefit package together will be two, two-and-a-half times what the wage and benefit package is together at Wal-Mart. You know, the health plan is extremely good.

There’s this funny story about Costco, where each year they do a survey of their workers, saying, “What’s the best thing about working at Costco? What’s the worst thing about working at Costco?” And one poll found that employees said the worst thing about working at Costco is they weren’t allowed to wear shorts to work year round. So, imagine if that were the biggest complaint at every company in the United States.

And, you know, Costco is a direct rival of Wal-Mart. You know, they’re competing for the same shoppers who want discounts. Yet Costco’s vision is, if you pay your workers well, if you treat them well, they’ll be loyal to you, they’ll be very productive, and they’ll smile to customers. And, you know, you want your customers to like you when they shop at your place.

JUAN GONZALEZ: And you say the CEO has been under a lot of pressure from Wall Street to change those conditions?

STEVEN GREENHOUSE: Well, there are folks on Wall Street who say, you know, “Senegal, your prices are too low. You should raise your prices. Your wages are too high. You could increase your profits by decreasing, you know, by holding down, by freezing your wages, by reducing your generous health benefits.” And he sticks to his guns, and he says, “That’s my vision, and that’s what we’re going to do.”

JUAN GONZALEZ: And some of the other companies that you mention there?

STEVEN GREENHOUSE: I write about Ernst & Young, you know, in Midtown Manhattan. I interviewed the former chairman of Ernst & Young, who said, “You know, when I was growing up, all the smartest girls in high school, all the smartest young women in—all the smartest people in college were women.” And then he said, when he went to work at Ernst & Young, you know, half the people hired were women, and they were the best workers, yet he was dismayed, he was shocked, that only five percent of Ernst & Young’s partners were women. So he said he was going to change that. So Ernst & Young has really—you know, he realized that the reason so many women were leaving in droves was that the job was too demanding. It made it nearly impossible to balance job and family. So he really developed—Ernst & Young has really developed this wonderful flex-time model that other companies should seek to emulate, I think. You know, workers, female workers, male workers, if they want, they could decide to just work three days a week or just four days a week, and as long as you work more than twenty hours a week, you still get full benefits. People can work, you know, seventy hours a week in the months before tax time, and then they could take the summer off.

I write about Patagonia, another wonderful company that believes in serious flex time. Patagonia in Ventura, California, right along the Pacific, kind of encourages its workers to go surfing at lunchtime. And they—you know, I interviewed some workers. They go surfing for two hours at lunchtime. And, you know, you think many companies would think, “That’s outrageous. How are you going to get your work done?” But Patagonia trusts its employees to use their flex time. You know, maybe they’ll finish working a project at home at night.

JUAN GONZALEZ: Well, in terms of what needs to be done to change the trend now, in terms of the treatment of American workers, if you had to single out one or two key turnarounds that the country needs, what would they be?

STEVEN GREENHOUSE: Very quickly, I think—we’ve lost one-fifth of our manufacturing jobs since the year 2000, 3.5 million jobs, generally, you know, good middle-class jobs with very good benefits. The nation, by and large, has paid way too little attention about strengthening its manufacturing sector. And I think it’s important to do that. One way to do it is put greater focus on green jobs, which can be manufacturing jobs making solar panels, making hybrid cars.

A second thing, I think the nation, by and large, hasn’t paid enough respect to workers as workers. You know, all the attention is about, you know, the Bill Gateses, the Warren Buffetts, the A-Rods, the Paris Hiltons, and not enough about workers. I think workers, in many ways, have become invisible as workers. They’re seen as Bud drinkers or Oprah watchers, but they’re not really seen as workers who, you know, bust their derrieres day in and day out, you know, making the trains run on time, you know, cleaning hotel rooms. And I think if the news media or if politicians really started paying more attention, more respect to workers, that might discourage corporations’ CEOs from squeezing their workers so much.

A third very quick thing is, you know, I think universal health coverage is very important, because whether you’re working, you’re constantly forking over more money each year for health premiums, or if you’re laid off, you know, you’re in the same position, that you, your spouse, your kids might lose health insurance. So I think universal health insurance is key to making life less insecure for workers.

JUAN GONZALEZ: And we’ve got about thirty seconds. How many labor reporters are there in American newspapers these days? Are you the last one? Are you the last one?

STEVEN GREENHOUSE: Well, you do a wonderful job for the Daily News, and you beat me on too many stories. I’m embarrassed to talk about that. The Wall Street Journal has a good young labor reporter. You know, Steve Franklin at the Chicago Tribune is a terrific labor reporter. He’s done a lot of great stuff about immigrant workers. But it’s a very small group. The LA Times no longer has a labor reporter, and the Washington Post really no longer has one, and it’s sad. I want more competition in this business.

JUAN GONZALEZ: More competition, right. OK, I want to thank you, Steve Greenhouse. The book is The Big Squeeze: Tough Times for the American Worker. Former—I mean, continuing labor reporter for the New York Times, Steve Greenhouse.

Eaten Up

Eaten Up

Raj Patel’s book Stuffed and Starved predicted the current global food crisis - spiralling food prices, starvation and obesity. Ed Pilkington meets the soothsayer of agro-economics and talks about what will happen when all the food finally runs out

By Ed Pilkington

here is a passage towards the end of Raj Patel’s book, Stuffed and Starved, which elevates its author to the rank of soothsayer. He wrote it at the beginning of 2007, well before the roar of anger about rising food prices that resounded across the planet and that he so uncannily and accurately predicted.

The passage begins with Patel’s summary of earlier sections of the book in which he depicts the wasteland, as he calls it, of the modern food system. It is a system that destroys rural communities, poisons poor city dwellers, is inhumane to animals, demands unsustainable levels of use of fossil fuels and water, contributes to global warming, spreads disease and limits our sensuousness and compassion. As if that litany wasn’t enough, he then adds this: “Perhaps most ironic, although it is controlled by some of the most powerful people on the planet, the food system is inherently weak. It has systemic and structural vulnerabilities that lie close to the surface of our daily lives. All it takes to expose them is a gentle jolt.”

When he wrote that passage, Patel had in mind his native Britain and its occasional history of food crises. There was the oil crisis of 1973 that prompted panic-buying in the shops. Or 2000, when protesting truckers blockaded the oil refineries and the shelves again came close to emptying. Those events inspired Patel to contemplate a startling question: “What would have happened,” he wrote, “had all the food on the shelves run out?”

He left that question dangling in the book. But he got thinking about it again as he was on a tour of Australia last August promoting the book. As he travelled from Perth to Melbourne and then Sydney he kept being asked the same question: how did the drought that by then was already biting hard on Australian farmers as well as on consumers who were suffering rising prices, fit into his critique of modern food production? As he faced his audiences, it began to look to Patel, in a tentative, creeping way, that the gentle jolt he had written about was really happening.

“What was weird was that the stories I was hearing about drought and farmers in desperation were very similar to the stories that had been told to me in India a couple of years before. They were all about small independent farmers up to their eyeballs in debt. They had borrowed hugely to make a go of it, and then there’d been a shock - in Australia it was drought, in India it might be harvest failure, in Britain foot-and-mouth. It only takes one small shock.”

And then the agricultural slurry really hit the fan. The first intimations of something truly out of the ordinary came in Mexico in early 2007, before he had finished writing Stuffed and Starved. There were reports of unrest in some of the larger cities about rising food prices, partly related to the decision of the US government to divert huge quantities of corn to ethanol production, in an attempt to reduce dependence on foreign oil. Then early this year some eight months after Patel had finished writing about the risk of gentle jolts - the so-called “silent tsunami” began. Food prices appeared to be out of control, spiralling up by 68% in the case of rice in the first four months of this year alone. Wheat and corn almost doubled in a year.

Such hikes on the costs of the basics of life hit the urban poor in the cities of the developing world hardest, and the misery was soon made manifest in the form of unrest. Impromptu protests grew into angry marches and then erupted into food riots. In Haiti six people died and the prime minister was ousted from power. Two days of rioting ensued in Egypt and 24 people died in Cameroon. The pattern repeated itself right across the developing world, from Guyana and Bolivia to Ivory Coast, Surinam and Senegal, Yemen, Uzbekistan, Bangladesh and South Korea. Wild events in turn prompted wild official responses. Vietnam introduced a night curfew on harvesting machines to stop illegal raiding of the fields; any Filipino caught hoarding rice was threatened with life in jail, Malaysia cancelled all public building works and switched instead to stockpiling food. Even the rich western world was hit. Food prices in the UK have risen almost 7% year on year, shaking the government’s economic confidence. And if any doubts remained about the severity of this crisis, Wal-Mart, the supermarket goliath that stands at the pinnacle of the modern food system, announced it was imposing a four-bag limit for rice on its cash-and-carry customers to stop a run on supplies.

For millions of people around the world the soaring prices have spelt disaster - the World Bank has put the number of people who have been pushed into hunger at 100 million. But for one person, the impact has been strangely and paradoxically counter-factual. When Stuffed and Starved - Patel’s first book - came out last August, he and his publishers imagined it would at best enjoy a specialist readership among globalisation activists attuned to issues of corporate greed and exploitation. But the food crisis has turned it from being a niche read into the literary equivalent of a crystal ball. As a result, the demand has in Patel’s words “gone bonkers”. Reprints have been ordered in Britain, the US and Spain, deals done for editions in Italy, China and South Korea and half a dozen translations are under discussion. “If I had been this popular at school I’d be a different man today,” he quips. His analysis of the crisis, as the author of the book that predicted it all, is now hotly sought after. Or as Patel, who has the savvy Londoner’s gift for self-deprecation, puts it: “Spank me, and call me Cassandra!”

We meet for lunch in a restaurant within a Big Mac’s throw from Capitol Hill in Washington. It’s trivial I know, but it’s impossible not to be curious - a little intimidated even - about what Patel will order from the menu. He points out in his book that the livestock industry is responsible for 18% of greenhouse gas emissions, more than cars. So will he go for the hanger steak?

He asks for a pizza with goat’s cheese and mushrooms, but when I ask whether his choice was politically or ethically motivated, he laughs. “I haven’t had a steak in my life. Growing up in a Hindu household, I clamoured for hamburgers like any other kid and my parents said: ‘Oh, if you must.’ But they drew the line at steak.”

Patel sees in himself, and his eating habits, a tale in microcosm of the globalisation he writes about. His family on his mother’s side were civil servants in Kenya, and tin miners in Fiji on his father’s side. They both were drawn to the mother country, arriving in London in the 60s, where they met. It later became a cliche, but they were among the first to open up “Mr Patel’s corner shop”, working 18-hour days in an era before 24-hour supermarkets. The earliest memories of their son, who was born in 1972, are of playing among the fags, mags and sweets in the shop in Golders Green. It would be too neat, I hazard, to suggest that his parents were forced to close down the shop because of competition with the supermarkets? “My dad did very well for himself,” he replies, speaking with a high-velocity stammer. “But they were certainly driven out. You can’t compete any more, the corner shop is a dying industry.”

Despite those difficulties, the Patels did proud by their son, sending him to a north London grammar school, then to Oxford where he studied PPE, and finally to Berkeley in California. Along the way, he became interested in, and engaged with, the anti-globalisation movement. He was among the thousands who protested in Seattle against the World Trade Organisation (WTO) in 1999, and it was there that he came face to face with what he calls the “march of the farmers’ movement” in the form of arguably the world’s largest network of independent organisations, La Via Campesina, which represents around 150 million farm workers and smallholders across the globe. “I was struck by their sophisticated and detailed critique of the WTO. Seven years before Seattle they had already translated the draft text of the Dunkel report [on trade] into Kannada and were distributing it in the fields.”

He began delving more deeply into the subject of trade, food policy and agricultural resistance as an analyst at Food First, a radical thinktank in Oakland, where an idea for a book emerged. It began life as a meditation on choice, or the lack of it - Coke v Pepsi, McDonald’s v Wendy’s. Its working title was Choice Cuts. Over the next three years he travelled to research the book from South Africa, Europe and South Korea to Brazil, Mexico and the US. In the process the thesis grew bigger in scope and more refined. Its focus was no longer just a lack of consumer choice, it embraced an entire world food system that can consign 800 million - more than one in 10 people on earth - to hunger while simultaneously inflicting obesity on an even greater number, 1 billion people. Hence the book’s new, and in his opinion better, title.

His analysis shows how communities around the planet have been disempowered by a system that appears to offer an abundance of cheap food, but in reality dictates unhealthy and limited choices to an overworked and underpaid workforce that cannot afford any better. “The figure that often stuns people outside the US when I tour with the book is that 20% of American fast-food meals are eaten in cars. People are incredulous and ask: is that because Americans so love their cars? But living here you see how hard people work, for a pittance, with no healthcare, no decent education, not even a hint of a pension - so it’s not surprising that the one hot meal you eat a day you eat off your lap. That’s where the food system becomes a lifestyle.”

Much of the broad argument in Stuffed and Starved will be familiar to those who have followed the debate on globalisation - how the liberalisation of trade has created a vast global market for heavily subsidised American and European agricultural products at the expense of local growers in the developing world; how relentless pressure to drive down food prices over 30 years has seen rich ecosystems replaced by monocultures that rely on oil-powered machines, chemical fertilisers and pesticides to drive up yields; and how international corporations and supermarkets that control the flow of technologies and of food itself have been the beneficiaries. It is a portrait of the agro-economics of the madhouse. “While we think our food is made for us, we are in fact being made for our food,” he says.

Take India, which he describes as a storm of contradictions. “India has the most people in the Forbes top 10 billionaires list, but in the past decade the average calorie intake of the poorest has fallen. There are levels of hunger we haven’t seen since the British left, combined with the world’s highest levels of type 2 diabetes from the pressure of eating too much of the wrong kinds of food.”

Or take the UK, where food producers are now less than one per cent of the workforce. The government may be committed to reducing global warming emissions, but meanwhile a quarter of all trucks on UK roads are carrying food and the average British family is driving 136 miles a year to buy it.

Or America. This is the country whose farmers, food giants and supermarkets benefit most from the global system. Such is the might of US food corporations that the double arches of McDonald’s are more widely recognised as a symbol than the cross. Wal-Mart is the largest private employer not only in the US, but also in Mexico where Walmex takes in three out of every 10 pesos Mexicans spend on food. Yet amid such largesse 35 million Americans don’t know where their next meal is coming from. “You are hearing these amazing stories of working American families adopting coping strategies that I learned about in development sociology - skipping meals, growing their own fruit and vegetables, giving up on meat. That’s happening right here right now.”

Which brings us back to the current food crisis. What surprised him, he says, is not that the food system felt a gentle jolt - after all, he predicted it - but that it has been pummelled all at once by a perfect storm of troubles. “We could have seen it coming because of the biofuels policy, which has always struck me as absurd, or the rising price of oil, or increased consumption of meat, or weird things happening with climate. But all these things happened at once, and that sent food prices through the roof.”

And this time, there were none of the safeguards of grain stores, strategic food reserves, or import barriers that used to protect vulnerable economies from the vagaries of world markets. They had all been removed in the liberalisation craze of the past few decades.

His prognosis is that in the short term at least the crisis will carry on biting. Major institutions such as the World Bank persist, he says, in responding to events with the same failed policies of liberalisation of markets. “There’s no reason why food prices should come down significantly. And if they don’t, and there’s no real impetus for governments to redistribute spending power, people will continue to take to the streets.”

In the medium term, he’s confident that change is in the air. He detects a growing seriousness and willingness to embrace new ideas in some unexpected quarters. The reason we are chatting in a DC restaurant is that Patel has just that morning been giving testimony before a Congressional committee investigating the World Bank’s approach to food and development. With representatives from the World Bank, UN, Monsanto and other monoliths listening in, he told the committee that industrial agriculture could no longer be relied upon to feed the world and that we need a shift towards less fossil-fuel dependent farming and a return to rich ecosystems based on natural crop rotations and organic fertilisers. “Those are the kinds of things that are anathema to the World Bank and development analysts at the moment, and Congress normally doesn’t want to hear them. That they called on someone like me is very weird, but very heartening.”

In the longer term, though, even the current food crisis may seem mild. The world population is set to rise from about six billion today to nine billion by 2050. Global warming is likely to disrupt growing patterns and extend drought across Africa and the American south-west. Water resources for irrigation will be depleted. If we are already in a perfect storm, then we lack the terminology to describe what lies ahead.

I put it to him that any attempt to change world food production is like a game of poker with extraordinarily high stakes: it not only has to meet the massive yield of industrial farming - and say what you like about the modern food system, the one thing it has done is churn out mountains of the stuff relatively cheaply - it also has to raise it to support three billion extra hungry mouths. Can his alternative model achieve that?

“We’ve got an energy problem, a fuel problem, a water problem and global warming all coming at us,” he replies. “Monoculture is heavily C02-emitting, water and fossil-fuel dependent. Clearly we can’t carry on as we are. We can and we must meet this challenge with something new. So the question is what?”

That’s not entirely an answer to my question. There is a slightly starry-eyed quality to Stuffed and Starved that is also striking about its author in the flesh. When he talks of alternative farming techniques that offer a way forward, the examples he chooses come from Cuba, Venezuela and a project in Oakland that follows in the footsteps of the Black Panthers. That’s hardly going to play well with sceptical American policy-makers.

The other element that is lacking from his prognosis is any role for science and technological innovation in the search for solutions. Where technology does appear it is in the role of villain - GM crops are a ruse by Monsanto and others to secure corporate profits at the expense of the rural poor.

But isn’t there a place for responsibly directed science in steering us through the coming maelstrom? Couldn’t GM, for instance, prove to be crucial in developing drought-resistant crops as global warming tightens its grip?

“I’m big on science, married to a neuroscientist, I love it,” he insists, protesting perhaps a little too much. “I like the way Cuban science approaches the problem. They say you can have GM crops if you can prove there’s no better way of doing things. So they don’t have GM crops, because there always is a better way.”

Not exactly a ringing endorsement for the value of science. But then that is not where Patel’s heart lies. For that you have to look to politics, and political resistance. The soothsayer’s next book, he says, will be a look at the individuals and communities who are refusing to bow down to the current global system. He will soon be starting another journey to meet them. On his list: the slum-dwellers of Durban and the homeless Americans who run the University of the Poor. He sees in them a lesson for us all. “We are victims,” he says as he polishes off his pizza and prepares to fly back to San Francisco where he now lives. “If we are choosing between Coke or Pepsi, Burger King or McDonald’s, that’s not choice. We should stop feeling guilty about that. We should start feeling angry”.

Ed Pilkington is the Guardian’s New York correspondent. He is a former national and foreign editor of the paper, and author of Beyond the Mother Country.