Sunday, August 24, 2008

Crunch Time

Crunch Time

By Mike Whitney

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Sharp contractions in the money supply and recession are two spokes on the same wheel. When the money supply shrinks, there's less economic activity, and the economy slows. An article in this week's UK Telegraph by Ambrose Evans-Pritchard removes any doubt that a deep recession can still be avoided.

From the UK Telegraph:

"The US money supply has experienced the sharpest contraction in modern history, heightening the risk of a Wall Street crunch and a severe economic slowdown in coming months. Data compiled by Lombard Street Research shows that the M3 ''broad money" aggregates fell by almost $50bn in July, the biggest one-month fall since modern records began in 1959.
"Monthly data for July show that the broad money growth has almost collapsed," said Gabriel Stein, the group's leading monetary economist." (Ambrose Evans-Pritchard,"Sharp US Money Supply contraction points to a Wall Street crunch ahead", UK Telegraph)

The Telegraph confirms what many of the doomsayers have been saying for more than a year now; we're facing a severe bout of deflation. The persistent credit-drain from rising foreclosures and deleveraging financial institutions is shrinking the money supply. Now it's visible in the data. Bernanke's low interest rates haven't stopped the hemorrhaging; deflation is spreading like Kudzu. According to Evans-Pritchard, "The growth in bank loans has turned negative" (while) "the overall debt burden in the US economy is currently at record levels, raising concerns that a recession - if it occurs - could set off a sharp downward spiral."


The under-capitalized banking system has slowed its lending and consumers have stopped borrowing; all the main economic indicators are pointing down. In fact, according to the Conference Board, "weakness among the leading indicators continues to be widespread" and dropped more than 0.7% in July alone. The report is a composite of selected indicators that show the overall direction of the economy. At present, they're all in negative territory.

The Fed lowered interest rates to 2 per cent hoping to help recapitalize the banks and stimulate consumer spending, but it hasn't worked. The banks still don't have the capacity to lend, so the main artery for credit distribution remains clogged and GDP is dropping off. A python has wrapped itself around the financial system and is gradually cutting-off the oxygen supply. Naturally, when the credit system is broken, the money supply contracts. That's true here, as well. What's troubling is the speed at which it is all of this is taking place. It's "the biggest one-month fall since modern records began in 1959". The process is accelerating and will require the Fed to slash rates at its September meeting.

Economist Nouriel Roubini puts it like this:

"Over time inflation will be the last problem that the Fed will have to face as a severe US recession and global slowdown will lead to a sharp reduction in inflationary pressures in the U.S.: slack in goods markets with demand falling below supply will reduce pricing power of firms; slack in labor markets with unemployment rising will reduce wage pressures and labor costs pressures; a fall in commodity prices of the order of 30% will further reduce inflationary pressure.

The Fed will have to cut the Fed Funds rate much more as severe downside risks to growth and to financial stability will dominate any short-term upward inflationary pressures. Leaving aside the risk of a collapse of the US dollar given this easier monetary policy the Fed Funds rate may end up being closer to 0% than 1% by the end of this financial crisis and severe recession cycle."

Interest rates are going down not up as the futures market believes.

Federal Reserve chief Bernanke understands the problem, but has no way to fix it. The market is simply correcting from massive credit imbalances. The economy needs time to cool off and rebalance. Bernanke's various "auction facilities" were created to keep the banking system afloat while the government delivered "stimulus checks" to working people. The plan was designed to bypass the dysfunctional banking system and give money directly to taxpayers. Unfortunately, the strategy failed and added to the bulging fiscal deficits. Martin Feldstein summed it up like this in the Wall Street Journal:

"Recent government statistics show that only between 10% and 20% of the rebate dollars were spent. The rebates added nearly $80 billion to the permanent national debt but less than $20 billion to consumer spending....Here are the facts. Tax rebates of $78 billion arrived in the second quarter of the year. The government's recent GDP figures show that the level of consumer outlays only rose by an extra $12 billion, or 15% of the lost revenue. The rest went into savings, including the paydown of debt....Consumer outlays increased to $36 billion from $24 billion. So the additional $12 billion of consumer spending was less than 16% of the extra $76 billion of disposable personal income. By comparison, savings rose by $62 billion, or five times as much....This experience confirms earlier studies showing that one-time tax rebates are not a cost-effective way to increase economic activity."


The whole "stimulus" plan backfired. Americans did the responsible thing and used the money to pay off debts or stash it in savings instead of than wasting it Walmart or Target on more useless knick-knacks. It just goes to show that average working people can change their spending habits and making prudent choices when they see that times are tough. The culture of consumerism is the result of Madison Ave. saturation-campaigns and propaganda; there's nothing inherently wrong with the American people. Workers are constantly being blamed for "living beyond their means", but the real problem originates from flawed monetary policy and destructive commercialism. It's the prevailing "sicko" corporate culture that has created a nation of spendthrifts and speculators. Ordinary people are not at fault.


Fiscal stimulus can work if it is used properly, like if it was applied to the payroll tax. That would be the same as giving every working man and woman in America a sizable raise in pay that could used to give the economy a boost. (Couples making under $70,000 per year spend 100% of their earnings. They represent 50% of total GDP) The problem, however, is that that would violate a central tenet of neoliberalism which dictates that the payroll tax be used in the General Fund as a de facto flat tax levied against the poor and middle class to ensure that the ruling elite don't not have to pay their fair share for the maintenance of the empire. Bush and his ilk would rather run the economy off a cliff than compromise on their core values. The real reason we are faced with the current economic downturn is because wages have not kept pace with production which means that workers have had to increase their borrowing to maintain their same standard of living and keep the economy growing. If wages are flat the economy can't grow; it's as simple as that. That's why banking elites have lowered standards for lending; it's just a way to generate profits and create growth without giving workers the raise they deserve. It has the added benefit of pushing people into a life of debt-peonage. Americans are deeper in debt than anytime in history and are struggling just to make the interest payments on their loans. As a result, more and more homeowners are walking away from their mortgages and leaving the banks with huge, unanticipated debts. The architects of America's debt-slavery system are turning out to be its biggest victims.

Currently, billions of dollars are disappearing in the secondary market where bets were placed on mortgage-backed securities that are now virtually worthless. As market volatility increases, frazzled investors are moving into cash. Credit is being wrung from the system while the money supply continues to contract.

Mike Shedlock of Mish's Global Economic Trend Analysis gives this technical analysis:

"The recent plunge in M3 (ed.--M3 is the broadest measure of money used by economists to estimate the entire supply of money) makes it likely that credit lines have been fully tapped and/or banks have simply turned off the spigot. Liquidity shrinks by the day. Banks scrambling to refinance long-term debt are going to have a very tough go of it. Weekly unemployment claims are soaring. Consumers out of a job are going to have a tough time paying bills. Those looking for a bottom in these conditions are simply barking up the wrong tree."

The prospects of a deep and protracted downturn are now greater than ever. Financial institutions are either pulling back and preparing for the storm ahead or taking advantage of existing credit lines while they last. The herky-jerky market action suggests that a growing number of CEOs and CFOs can see that the walls are closing in on them. The crash-alert flag is about half-way up the pole.


Author Ellen Hodgson Brown's new book "The Web of Debt", points out some of the parallels some between our present predicament and events leading up to the Great Depression:

"The problem began in the Roaring Twenties when the Fed made money plentiful by keeping interest rates low. Money seemed to be plentiful, but what was actually flowing freely was 'credit' or 'debt'. Production was up more than wages, so more goods were available than money to pay for them; but people could borrow. ...Money was so easy to get that people were borrowing just to invest, taking out short-term, low interest loans that were readily available from the banks".

Sound familiar?

Brown continues: "The Fed began selling securities in the open market, reducing the money supply by reducing the reserves available for backing loans..The result was a huge liquidity squeeze---a lack of available money. Short-term loans suddenly became available only at much higher interest rates, making buying stock on margin much less attractive. As fewer people bought, stock prices fell, removing the incentive for new buyers to purchase stocks bought by earlier buyers on margin...The stock market crashed overnight."

The money supply contracted dramatically during the first few years of the Great Depression. Free-market guru, Milton Friedman, went so far as to blame the Central Bank for the disaster. He said, "The Federal Reserve definitely caused the Great Depression by contracting the amount of currency in circulation by one-third from 1929 to 1933."

As a result, interest rates rose and credit became scarcer. To some extent, these things are taking place already. Long-term interest rates and LIBOR have been rising and are headed higher. These are much more accurate gages of the "real" price of credit than the Fed's artificial Fed Funds Rate (2 per cent) which is just a give-away to the banks.


Brown does a good job of connecting the dots and showing how the Federal Reserve engineered the Depression with their failed monetary policies and serial bubble making. In another chapter, she quotes Louis T. McFadden, Chairman of the House Banking and Currency Committee, who is explicit in his condemnation of the Fed:

(The Depression) was not accidental. It was a carefully contrived occurrence. ...The international bankers sought to bring about a condition of despair here so that they might emerge as rulers of us all". (Ellen Hodgson Brown; "The Web of Debt", page 146)

Whether the present economic crisis was deliberate or not is irrelevant. The ultimate responsibility for our economic woes lies with the Fed; that's who created the speculative bubble that is now wreaking havoc on the broader economy. Millions of people will lose their homes, trillions of dollars of equity will be wiped out, and hundreds of banks will fail. Eventually, there will be more consolidation among the banks and greater concentration of wealth among fewer people. An self-regulated system run by unelected businessmen naturally gravitates towards monopoly and, yes, tyranny.

Charles Lindbergh summed up the role of the Federal Reserve like this:

"The financial system has been turned over to ...a purely profiteering group. The system is private, conducted for the sole purpose of obtaining the greatest possible profits from the use of other people's money." (Ellen Hodgson Brown; "The Web of Debt")

The impending global recession has nothing to do with crafty mortgage lenders, opportunistic loan applicants, dodgy rating agencies, or crooked home appraisers. That's like blaming Lindy England for Abu Ghraib. The source of the troubles is the Federal Reserve and monetary policies that are designed to rob people of their life savings.

Abolish the Fed.

The Great Consumer Crash of 2009

The Great Consumer Crash of 2009

Go To Original

“It is easy to ignore the storm if you look at the opposite horizon. When the storm reaches your location there can be no more ignorance.”

I hate to tell you, but the storm has reached your location and it is a Category 5 hurricane. The levees are leaking. Ignore it at your own peril. The 6,000 sq ft McMansion buying, BMW leasing, $5 Starbucks latte drinking, granite countertop upgrading, home equity borrowing days are coming to an end. The American consumer will not go without a fight. For the last seven years the American consumer has carried the weight of the world on its shoulders. This has been a heavy burden, but when you take steroids it doesn’t seem so heavy. The steroid of choice for the American consumer has been debt. We have utilized home equity loans, cash out refinancing, credit card debt, and auto loans to live above our means. It has been a fun ride, but the ride is over. We can’t get steroids from our dealer (banks) anymore.

After examining these charts it is clear to me that the tremendous prosperity that began during the Reagan years of the early 1980’s has been a false prosperity built upon easy credit. Household debt reached $13.8 trillion in 2007, with $10.5 trillion of that mortgage debt. The leading edge of the baby boomers turned 30 years of age in the late 1970’s, just as the usage of debt began to accelerate. Debt took off like a rocket ship after 9/11 with the President urging Americans to spend and Alan Greenspan lowering interest rates to 1%. Only in the bizzaro world of America in the last 7 years, while in the midst of 2 foreign wars, would a President urge his citizens to show their patriotism by buying cars and TVs. When did our priorities become so warped?

How Did I Get Here

And you may find yourself behind the wheel of a large automobile
And you may find yourself in a beautiful house, with a beautiful wife
And you may ask yourself-Well...How did I get here?


And you may ask yourself
Where is that large automobile?
And you may tell yourself
This is not my beautiful house!
And you may tell yourself
This is not my beautiful wife!
- Talking Heads, David Byrne lyrics to Once in a Lifetime

By 2005 practically everyone had a large automobile and a beautiful house. By 2010 many of these people will be asking where is that large automobile and will realize as the sheriff escorts them out of their house that this is not my beautiful house. There is plenty of blame to go round for this predicament. According to Northern Trust economist Paul Kasriel, “We’re a what’s my monthly payment nation. The idea is to have my monthly payments as high as I can take. If you cut interest rates, I’ll get a bigger car.” Major banks offer credit cards using your home equity as a way to pay everyday expenses like groceries, gas and clothes. Eating your house was never so easy.

I have been accused by many of my friends and family as someone who sees the glass as half empty. I disagree with their assessment. I see the glass as it is. I find myself scratching my head trying to figure out why a society that always saved for a rainy day, consistently saving between 8% and 11% of their disposable income, now has a negative savings rate. I believe that keeping up with the Jones’ is the primary reason that Americans have taken on so much debt.

The authors of the book, Why Middle Class Mothers and Fathers Are Going Broke contend that the costs of housing and a good education for their children are killing them. It now takes two incomes to provide what one income provided 30 years ago: a middle-class house in a safe neighborhood with a decent public school. Bidding wars erupted for homes in what are thought to be good school districts, making homes in those areas ever more expensive. A phenomenon called “expenditure cascade” has occurred in the U.S. according to Cornell Professor Robert Frank. When top earners build large multi-million dollar mansions, they shift the frame of reference for those just below them on the income scale. Those people then respond by building bigger houses and so on down the food chain. This has resulted in families living on the edge. If one parent loses their job, it’s an easy slide into bankruptcy.

The U.S. is the country in the developed world with the lowest savings rate. Canada and Japan are trying to keep pace. Germany and France have social programs which allow for more savings. We may come in last in savings, but no other country in the world can spend like us. Our motto is live for today, the government will bail me out in the future.

We have outsourced our savings to the emerging economies, along with our manufacturing jobs. The Chinese are saving the money we’ve paid them for flat screen TVs and the Middle Eastern countries are saving the money we’ve paid them for oil. You need savings in order to increase investment. The emerging markets are making the vast majority of the investments in the world. While the U.S. endlessly debates drilling and construction of nuclear plants (none built in U.S. since 1987) and oil refineries (none built in U.S. since 1977), China brought four oil refineries online in 2008 and plans to build 30 nuclear reactors in the next twelve years. The Asian Century has begun, but the U.S. has tried to keep up by using debt. It will not work. If anything, this has accelerated the shift of power to Asia.

Source: Creditwritedowns.com

Positive Feedback Loop

The last thing that anyone thought would result while watching the >Twin Towers collapse on September 11, 2001 was the greatest housing boom in the history of the world. When a country goes to war, it usually asks its citizens to sacrifice.

“I have nothing to offer but blood, toil, tears, and sweat. We have before us an ordeal of the most grievous kind. We have before us many, many months of struggle and suffering.”
- Winston Churchill – May 13, 1940

In the true spirit of Winston Churchill, President Bush could have paraphrased Churchill by saying: I have nothing to offer but tax cuts, tax rebates, 0% auto financing, and no-doc mortgages. Americans grieved for a few weeks and then did their patriotic part by buying everything they could get their hands on. As Alan Greenspan denies causing the housing crisis today, his words from November 2002 come back to haunt him, “our extraordinary housing boom…financed by very large increases in mortgage debt, cannot continue indefinitely into the future.” After making this statement, he proceeded to slash the discount rate to 1% in June 2003 and left it at that level for a year. This began the positive feedback loop:

1. The Federal government cut taxes and sent rebates to all Americans.

2. The Federal Reserve cut interest rates to 1%.

3. Government officials urged Americans to spend in order to defeat terrorism.

4. Alan Greenspan told people that adjustable rate mortgages were a good thing.

5. Congress and President Bush believed that everyone should own a home and pressured lenders to provide mortgages to low income people.

6. GM, Ford, and Chrysler offered 0% financing on their cars through their finance arms, while also encouraging low rate leases. Credit card companies sent out 5.3 billion offers in 2007. In 1968, when the credit card was a new concept, total credit debt was $8 billion. Now the total exceeds $880 billion, according to the Federal Reserve.

7. Wall Street created new investment vehicles that allowed mortgages to be packaged and sold to investors throughout the world with investment grade ratings provided by Moody’s and S&P, for a price.

8. Mortgage companies and lenders developed ARMs, Option ARMs, teaser rate loans, no-doc loans, negative amortization loans and 100% financing loans.

9. Low income people started buying homes, with these exotic mortgage products, from middle income people. Middle income people started to buy larger houses from rich people, boosting demand for new homes. Rich people bought mansions and second homes. Bidding wars for houses were common.

10. The demand caused by this influx of new home buyers drove prices skyward, with home prices doubling in five years. This price rise brought in the speculators/flippers, who began to buy multiple houses with nothing down, pre-construction, with plans to sell them for a profit without ever moving into them.

11. Average Americans who saw their paper wealth growing rapidly, as their home value increased, took advantage of this by refinancing their mortgages and extracting the equity from their homes and spending it. The chart below shows that in 2004 and 2005, Americans sucked $800 billion from their homes in each year.

Source: Calculated Risk.com

12. Homebuilders throughout the U.S, but particularly in California, Arizona, Florida, and Nevada, went on the biggest building binge in the history of the U.S. These builders either believed their own bull about demographics, or just decided to ride the wave as far as it would take them. This binge led to 8.5 million total home sales in 2005, about 3.5 million more than what would have been expected based on historical rates.

13. The massive number of excess home sales and equity withdrawal led to huge demand for home furnishings, remodeling services, appliances, electronic gadgets, BMWs, and exotic vacations. This led to massive expansion by retail and restaurant chains based on extrapolation of this demand.

14. Retailers, homebuilders, restaurants, and car makers extrapolated the false demand far into the future. There are now over 7,000 Wal-Marts, 6,000 CVSs, and 30,000 McDonalds. Any company that built their business on false assumptions and excess debt will be meeting their maker, shortly.

15. Because the originators of virtually all loans to consumers were immediately selling the loans off, they had no incentive to follow any guidelines or due diligence when issuing the loans. Anyone with a pulse could get a mortgage, car loan, or credit card. Unscrupulous mortgage brokers popped up everywhere, luring uneducated and willing people to join the party. Greedy appraisers went along with the scam by overvaluing houses to whatever the banks desired.

16. The debt induced spending that occurred from 2001 until 2007 accounted for virtually all the GDP growth over this time. Without the mortgage equity withdrawal, the U.S. would have had less than 1% average GDP growth for the entire period.

Source: John Mauldin

Negative Feedback Loop – Underway

The pseudo-wealth that has been created in the last seven years has begun to unwind, but will increase in speed in 2009. You only know how you’ve lived your life over the last seven years. Your neighbor who has been getting their house upgraded, sending their kids to private school, driving a BMW, and taking exotic vacations may have been living the high life on debt. As usual, Warren Buffet’s wisdom comes in handy.

Only when the tide goes out do you discover who’s been swimming naked.”

The tide is on its way out, and the naked swimmers are numbered in the millions. Mohamed El-Erian, the number two man at PIMCO, fears a negative feedback loop consuming the country. I believe we have begun the negative feedback loop and it is starting to accelerate. The stages are as follows:

1. Home prices reached an unsustainable level in 2006. Prices had gone parabolic between 2001 and 2006, with the average price reaching above $225,000. In 2001, prices were just above $125,000. As the pundits keep looking for a bottom in housing, the chart below clearly shows there is a long way to go.

2. The massive overbuilding based on false demand has led to 3.5 million excess homes in the U.S. based upon historical trends. The most shocking fact is that there are 1.5 million vacant homes. This oversupply can only be corrected by massive price decreases.

3. With the tremendous price increases in houses over the last decade, you would think that equity would be at all-time highs. But no, owner equity as a percentage of house value has reached an all-time low of 45%. People have sucked the equity out of their homes and spent it faster than the prices were rising. The problem is that house prices can and will fall, debt remains like an anchor around your neck until paid off or it drags you down into bankruptcy.

4. The millions of exotic mortgages (subprime, alt-A, ARMs, no-doc, and negative amortization), which have started to blow up, has led to a tsunami of foreclosures. In 2005 there were less than 600,000 foreclosures in the U.S. In the 1st two quarters of 2008 there have been more than 1,350,000 foreclosures, with the pace accelerating. Approximately 15% of all subprime mortgages and 7% of all Alt-A mortgages are in delinquency. According to UBS, 27.2% of subprime mortgages originated in 2007 by Washington Mutual are in delinquency. Washington Mutual is the poster child for how not to run a savings and loan.

Source: MBA

  1. The combination of oversupply, over-leverage, and foreclosure tsunami has now taken on a life of its own. Home prices have been spiraling downward for two years to the point where 29% of all households that purchased in the last five years owe more than their house is worth according to Zillow, the home valuation company. For those who bought in 2006, 45% have negative equity. It is now making economic sense for people to just walk away from their house and send the keys to the lender. This is referred to as ‘jingle mail’.
  2. The ongoing housing price decreases are now affecting prime mortgages, home equity loans, and home equity lines of credit. Prime mortgages for less than $417,000 had a delinquency rate of 2.44% in May, up 77% from last year. Prime jumbo loans over $417,000 had a 4.03% delinquency rate in May, up 263% from last year. According to the ABA, 1.1% of all home equity lines are in delinquency, the highest level since 1987.
  3. Consumers have dramatically increased the use of credit cards, now that the housing ATM has run out of cash. The average American household has credit card debt of $9,840 versus $2,966 in 1990, at an average interest rate of 19%. Credit card delinquencies have increased to 4.51% in the 1st quarter. Amex just announced a major unexpected write-off because its prime customers have hit the wall and are defaulting. Consumers used their credit and debit cards to buy $51 billion of fast food in 2006 according to Carddata. According to the Federal Reserve, 40% of American families spend more than they earn. This has led to the result in the chart below. The reversal of this trend will be necessary but traumatic. It has already begun, with the savings rate increasing to 2.6% in early 2008. David Rosenberg, the brilliant economist from Merrill Lynch, describes what has happened and what is to come:

"This is an epic event; we're talking about the end of a 20-year secular credit expansion that went absolutely parabolic from 2001-2007."

“Before the US economy can truly begin to expand again, the savings rate must rise to pre-bubble levels of 8pc, that the US housing stocks must fall to below eight months' supply, and that the household interest coverage ratio must fall from 14pc to 10.5pc.”

"It's important to note what sort of surgery that is going to require. We will probably have to eliminate $2 trillion of household debt to get there," he predicts, saying this will happen either through debt being written off, as major financial institutions continue to do, or for consumers themselves to shrink their own "balance sheets".

The elimination of $2 trillion of household debt will lead to the closing of thousands of retail stores, strip malls, restaurants, and bank branches. There should be a lot of vacant buildings available in the next few years, and a few suspicious fires.


Source: Creditwritedowns.com

  1. Banks are doing what they usually do. They are closing the barn door after the pigs have escaped. As their losses have crossed the $500 billion mark, it is getting tougher for them to convince more suckers to buy their stock. They have so much toxic waste “assets” on and off their books at inflated values that they can not or will not lend. The Federal Reserve reported that banks have tightened standards for all loans in record numbers. After giving loans to anyone with a pulse for the last five years, this information is refreshing. But based on the well qualified assessments of Bridgewater Associates and NYU economist Nouriel Roubini, there is still $1.0 to $1.5 trillion in losses to go. Bank lending to consumers will be subdued for years.

Source: Mike Shedlock

  1. Government unemployment figures have begun to skyrocket, while the true unadjusted unemployment figures point to a major recession. If the number of people who have given up looking for a job were included, the official 5.7% unemployment rate would jump to 14%. People without jobs can’t spend money or make mortgage payments. With the deep recession that I anticipate, the official figures will reach 7%. This will result in lower consumption.


Source: Haver Analytics

  1. Car sales have plummeted. The major car manufacturers have stopped leasing cars to consumers. J.D. Power and Associates forecasts car sales of 14.2 million units in 2008, a 12% decrease over the 16.1 million units in 2007. This would be the lowest level since 1993. For many years, virtually anyone could lease a luxury automobile and appear to be successful. In 2007, one of every five new vehicles was leased. When that current lease runs out, good luck trying to get a new one. Chrysler, GMAC, Wells Fargo and others will no longer offer auto leasing. They have taken massive losses due to the huge decline in residual value not accounted for in their nice little financial models. You can’t give away a truck that gets 10 MPG today. Expect to see more junkers on the road.

Source: J.D. Power

  1. Retail store closings and retail bankruptcies have begun to accelerate. This will lead to hundreds of thousands in job losses. Barry Ritholtz recently documented the fate of many retailers so far:

Ann Taylor closing 117 stores nationwide

Bombay Company: to close all 384 U.S.-based Bombay Company stores.

Cache, a women’s retailer is closing 20 to 23 stores this year

CompUSA (CLOSED).

Disney Store owner has the right to close 98 stores.

Dillard's Inc. will close another six stores this year.

Eddie Bauer to close more stores after closing 27 stores in the first quarter

Ethan Allen Interiors: plans to close 12 of 300 stores to cut costs.

Foot Locker to close 140 stores

Gap Inc. closing 85 stores

Home Depot store closings 15 of them amid a slumping US economy and housing market. The move will affect 1,300 employees. It is the first time the world's largest home improvement store chain has ever closed a flagship store.

J. C. Penney, Lowe's and Office Depot are all scaling back

Lane Bryant, Fashion Bug, Catherines closing 150 stores nationwide

Levitz - the furniture retailer, announced it was going out of business and closing all 76 of its stores in December. The retailer dates back to 1910.
Macy's
- 9 stores closed

Movie Gallery – video rental company plans to close 400 of 3,500 Movie Gallery and Hollywood Video stores in addition to the 520 locations the video rental chain closed last fall as part of bankruptcy.

Pacific Sunwear - 153 Demo stores closing

Pep Boys - 33 stores of auto parts supplier closing

Sprint Nextel - 125 retail locations to close with 4,000 employees following 5,000 layoffs last year

Talbots, J. Jill closing stores. Talbots will close all 78 of its kids and men's stores plus another 22 underperforming stores. The 22 stores will be a mix of Talbots women's and J. Jill

Wickes Furniture is going out of business and closing all of its stores. The 37-year-old retailer that targets middle-income customers, filed for bankruptcy protection last month.

Wilsons the Leather Experts – closing 158 stores

Zales, Piercing Pagoda plans to close 82 stores by July 31 followed by closing another 23 underperforming stores.

I know Linens & Things just went belly up, and Steve & Barrys recently filed for bankruptcy protection and sale.

12. Mall owners and commercial developers are on the brink of bankruptcy. Commercial developer CB Richard Ellis didn’t sound too optimistic in their recent 10Q filing:

"We are highly leveraged and have significant debt service obligations. Although our management believes that the incurrence of long-term indebtedness has been important in the development of our business, including facilitating our acquisitions of Insignia and Trammell Crow Company, the cash flow necessary to service this debt is not available for other general corporate purposes, which may limit our flexibility in planning for, or reacting to, changes in our business and in the commercial real estate services industry. Notwithstanding the actions described above, however, our level of indebtedness and the operating and financial restrictions in our debt agreements both place constraints on the operation of our business."

General Growth, a mall developer, looks like a prime candidate for bankruptcy based on their recent 10Q info. Mike Shedlock assesses their situation:

“Interest expense for 3 months ending June 30, 2008 was $312,943,000.Net Income for 3 months ending June 30, 2008 was $34,082,000 Earnings per share from continuing operations was $.01 Earnings per share from discontinued operations was $.12 If the cost to refinance $18 billion were to rise to 8.0%, interest expense would rise by 50% to a whopping $469,414,000 per quarter. Even 7% would be a killer based on the numbers presented above."

Given that the Shopping Center Economic Model Is History and credit is tightening everywhere, General Growth Properties is going to be in deep trouble if credit conditions remain as they are, or even if they improve slightly. I expect credit conditions to worsen.”

  1. Consumer and business confidence is shot. Consumer confidence is at multi-decade low levels. Small business confidence is also at historic lows. Small businesses do most of the hiring in the U.S. Consumers and businesses are correct in their assessment of the situation. It is our political and corporate “leaders” that are in denial.

Source: Haver Analytics

In conclusion, the gathering storm has arrived. It will be long, painful and destructive. Those who prepared for the storm by not taking on excessive debt and living above their means, will ride it out unscathed. Those who built their house on sand by leveraging up and living the “good” life, will see their house swept out to sea. The storm will pass and we will rebuild. Our country is resilient. The purging of this massive debt will result in the creative destruction that is the hallmark of American capitalism. New opportunities, new technologies and a new attitude will put us back on course.

There has been and will be resistance to the inevitable deep recession that is coming. The American consumer is not cutting back willingly. They are being dragged kicking and screaming towards the joys of frugality. The “material generation” needs to dematerialize. My biggest concern is that our politician leaders and their cronies running our government will continue to try and reverse the normal capitalistic course of recession and expansion. Companies need to fail, housing needs to find its bottom based on supply, demand and price. Those who gambled must be allowed to lose and suffer the consequences. If the government attempts to shift the losses to those who lived lifestyles of thrift, an angry uprising will ensue. Government intervention in this natural process could lead to a decade long depression. Let’s hope that reasonable heads prevail.

A grim forecast for heating costs

A grim forecast for heating costs

Report warns that average 2009 oil bill for Mass. household could top $3,000

By Erin Ailworth

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Massachusetts residents who heat their homes with natural gas or oil could end up paying nearly $1 billion more this year than they did in 2007, about a 30 percent increase, according to a University of Massachusetts report set to be released today.

"It's a tremendous amount of money out of people's pockets," said Robin Sherman, the report's lead author. "People can cut back on [heating] to some extent if it gets too expensive, but there's obviously a floor beyond which they can't go to keep themselves in their homes without freezing."

The increase will have an especially dramatic impact on the nearly 1 million households that are heated with oil, which now sells for about $4.70 a gallon, up from $2.59 a year ago, according to the Massachusetts Department of Energy Resources.

Heating costs are expected to keep rising, the report says. The state's average household oil bill next year could top $3,000, according to the report by the UMass Donahue Institute, a university think tank. All told, consumers can expect to spend $4.45 billion for gas and oil heat in 2009 - a $469 million increase from 2008.

Sherman said the cost of heating a home depends on factors such as the constantly changing price of oil - which some analysts believe is being driven by speculation - and predictions of an unusually cold winter, which could cause prices to spike even higher than they are now.

Natural gas customers also are expected to see significant price increases - about 15.6 percent from 2008 to 2009, UMass researchers said. In May, natural gas sold for $18.49 per thousand cubic feet, up from $17.03 a year ago, according to the US Energy Information administration, a statistical agency of the US Department of Energy. The institute based its findings on several sources, including US Census and federal Energy Information Administration data.

Numbers in the Donahue Institute's report may actually be conservative, Sherman said, partially because the report excludes renters who do not pay separate heating bills.

The UMass prediction comes at a time when Massachusetts residents are already bracing for historically high heating costs this winter.

"Maybe the people who are very, very wealthy won't bat an eyelash. But for the regular people who are working from paycheck to paycheck and week to week, and don't have anything in the bank account, this is devastating," said Joseph P. Kennedy II, chairman of Citizens Energy Corp., a Boston-based nonprofit. Kennedy's company provides discounted oil to low-income residents and senior citizens. To help reduce bills, he said, the state should create an energy bank to finance energy-efficient home improvements.

Dorchester homeowner John F. MacPherson is one of those struggling to make ends meet because of energy expenses. The 82-year-old World War II veteran said a large chunk of the $1,032 he receives monthly from Social Security and veterans disability checks goes to pay for heating. Though MacPherson gets financial assistance from Action for Boston Community Development, which helps low-income families with their fuel bills, he only recently finished settling oil bills from last winter.

"People ask me, 'How do you get by?' I sacrifice a lot of stuff," said MacPherson, who has taken to eating inexpensive Cup Noodles for many of his meals, limits how often he drives, and keeps the thermostat in his four-bedroom home at 68 degrees in winter. "I don't drink, I don't smoke, I don't go out," he said.

Just how dire the situation will become is hard to predict, though many in the oil industry say the home heating oil-dependent region is on the brink of a crisis - if not already in one. New England is much more dependent on oil heat than the rest of the country. About 8 million US households use oil heat, with Massachusetts alone accounting for nearly 1 million of those homes.

"Any type of increase [in cost] especially of this magnitude, is just going to make life so precarious, so difficult - perhaps even unlivable - unless we can subsidize those households so that they can make it," said John J. Drew, executive vice president of Action for Boston Community Development. "I can't even think about the next two winters. It's obviously a horror show in the making."

In anticipation of winter heating bills, Governor Deval Patrick and legislators last month created a "Winter Energy Costs" task force to figure out how to help residents cope. Patrick, along with lawmakers in several other New England states, has requested that the federal government boost the region's home heating assistance to $1 billion, from $267 million last winter. Without the increase, which would provide the Commonwealth with up to $500 million in home heating assistance, the state will be hard-pressed to help even a fraction of those in need, said Lisa Capone, a spokeswoman for the state Executive Office of Energy and Environmental Affairs.

Last winter, Massachusetts received almost $115 million in federal home heating assistance, and kicked in another $15 million on its own. The money helped about 140,000 low-income households. To be eligible for the federal program, a household's income can't be more than 200 percent of federal poverty guidelines. In 2008, that meant a family of four could earn up to $41,300.

Meanwhile, Phil Hailer, spokesman for the state Department of Housing and Community Development, said his office is already fielding calls about winter heating bills.

"The good news is that people are talking about it now . . . when the weather is 85 degrees," Hailer said.

What Will Mac ’n’ Mae Cost You and Me?

What Will Mac ’n’ Mae Cost You and Me?

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THE inevitability of a taxpayer-funded bailout of Freddie Mac and Fannie Mae, the hobbled mortgage behemoths, shook investors last week, and shares in both companies plummeted on fears that existing stockholders would be wiped out.

These government-sponsored entities guarantee or hold $5.2 trillion in mortgages and have been hammered by defaults across the nation. Fannie Mae’s shares closed on Friday at $5, down from almost $70 a year ago. Freddie Mac fell to $2.61, which is down from about $65. Their heavily leveraged balance sheets magnify even a small rise in delinquencies.

There is no certainty about what form a Mac ’n’ Mae rescue would take. Naturally, this is giving investors the jitters. Up and down Fannie’s and Freddie’s capital structure, debt and equity holders want to know how a bailout would affect them.

It is widely assumed that debt issued by Fannie and Freddie will be backed by the taxpayers. Call it “too big to fail times two.”

But in our highly interconnected financial world, where one company’s ills have the potential to infect many others, no bailout exists in a vacuum. And the ripple effects that may result from shoring up these giants extend from the obvious — hammering their shareholders — to the fairly obscure, involving participants in the market for credit default swaps.

This is the huge arena where participants buy and sell insurance to protect against defaults by issuers of debt. Some $62 trillion of insurance has been written, with a fair value of $2 trillion at the end of 2007.

Back to the bailout du jour. Many analysts hypothesize that the Treasury will put cash into Fannie and Freddie, receiving dividend-paying preferred shares in return. Such an investment has occurred before, as noted last week by UBS research analysts in Mortgage Strategist, a weekly research report from the firm. In 1954, when the government began to change Fannie Mae into a shareholder-owned company, preferred stock was issued to Uncle Sam to help finance the process. Those shares were retired in 1968 when Fannie Mae became a publicly traded corporation.

If preferred shares are again issued in exchange for taxpayer cash, common stockholders could lose the most because new preferred shares would take precedence in the payment of dividends and if the companies were liquidated.

Investors holding the preferred stock already issued by Freddie and Fannie could also be vulnerable if the bailout puts the taxpayers’ investment ahead of them for dividend payments. Regional banks and savings and loans hold most of these shares; with these institutions already hurt by the mortgage mess, it seems unlikely that the Treasury would structure a Mac ’n’ Mae rescue in a manner that would pound them again.

But the potential effects of a rescue become more complex for the holders of Fannie’s and Freddie’s $19 billion in subordinated debt, so-called because it ranks below other bonds in the companies’ capital structures.

As UBS analysts point out, because Fannie’s and Freddie’s subordinated debt is used when they calculate capital — the financial cushion regulators require to support the companies’ operations — interest payments on the debt may have to stop if a bailout occurs. Such a hiatus could last up to five years.

While this would hurt subordinated debt holders, a deferral of interest payments has even broader ramifications. Halting those payments would put the bonds into default and force payouts on credit insurance that has already been written. In the debt market, this is known as a “credit event.”

ON its Web site, and in language that only a lawyer could love, Fannie Mae describes some terms of its subordinated debt. For the debt to qualify for capital calculations, it must require the deferral of interest payments “for up to five years if (1) Fannie Mae’s core capital falls below minimum capital and, pursuant to Fannie Mae’s request, the secretary of the Treasury exercises discretionary authority to purchase the company’s obligations under Section 304(c) of the Fannie Mae Charter Act, or (2) Fannie Mae’s core capital falls below 125 percent of critical capital.”

Here’s a translation: A bailout could mean no interest payments on the subordinated debt.

“If we reasonably assume that the Treasury would only intervene in the event that Fannie or Freddie is declared significantly undercapitalized by its regulator,” UBS analysts wrote, “then interest payments on the qualifying subordinated debt is automatically deferred for up to five years.”

Because nonpayment of interest would be seen as a credit event, UBS added, entities that have bought protection on Fannie’s and Freddie’s subordinated debt would be entitled to payment by the entities that wrote the insurance. This, even though taxpayers are standing behind Fannie’s and Freddie’s debt, not allowing it to fail. Talk about the laws of unintended consequences.

It is not clear how much insurance has been written on the subordinated debt. The actual holders of the debt very likely hedged their stakes with credit insurance, which is intended to protect buyers in the event of a default.

But speculators may have bought credit default swaps on the companies’ subordinated debt even if they did not own any of the debt. A gutsier gamble than selling short Fannie or Freddie shares, buying credit insurance on the companies’ debt was essentially a bet against the implicit government guarantee that many felt was backing all the companies’ obligations.

Because of the implied guarantee — and the belief that it meant they would never have to pay out on the swaps — sellers of credit insurance may have been overly eager to write contracts on Fannie’s and Freddie’s debt.

So the burning questions are these: Who wrote the insurance and do they have the money to pay those who bought it? If they don’t, what happens?

If the market for credit insurance were more transparent, we might know the answers. But these deals are private and largely hidden from view.

It is possible, of course, that a Mac ’n’ Mae bailout will be structured so as not to force credit default swap payouts. Or regulators could step in and require parties on both sides of the Fannie and Freddie credit insurance trade to unwind their stakes at heavily discounted levels. Such has been the nature of recent deals struck by financial guarantors like Ambac at the behest of the New York State Insurance Department. In one deal, the credit default swap buyer got just 13 cents on the dollar; in another deal, the buyer got 61 cents.

If regulators make such a move related to Fannie and Freddie, sellers of the insurance could escape dire financial problems associated with paying on the claims. But buyers of credit protection are apt to get far less than they think they are owed on the insurance. And if they have written the values of their holdings way up to reflect the increased likelihood of a default event, they will soon have to write them down again.

Nobody knows how the Fannie and Freddie situation will play out. But the implications of a default on the companies’ subordinated debt shows how complex and confounding — not to mention costly — this business of bailouts has become.

Freddie, Fannie Failure Could Be World `Catastrophe,' Yu Says

Freddie, Fannie Failure Could Be World ‘Catastrophe,' Yu Says

By Kevin Hamlin

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A failure of U.S. mortgage finance companies Fannie Mae and FreddieYu Yongding, a former adviser to China's central bank. Mac could be a catastrophe for the global financial system, said

‘‘If the U.S. government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic,'' Yu said in e-mailed answers to questions yesterday. ‘‘If it is not the end of the world, it is the end of the current international financial system.''

Freddie and Fannie shares touched 20-year lows yesterday on speculation that a government bailout will leave the stocks worthless. Treasury Secretary Henry Paulson won approval from the U.S. Congress last month to pump unlimited amounts of capital into the companies in an emergency.

China's $376 billion of long-term U.S. agency debt is mostly in Fannie and Freddie assets, according to James McCormack, head of Asian sovereign ratings at Fitch Ratings Ltd. in Hong Kong. The Chinese government probably holds the bulk of that amount, according to McCormack.

Industrial & Commercial Bank of China yesterday reported a $2.7 billion holding. Bank of China Ltd. may have $20 billion, according to CLSA Ltd., the Hong Kong-based investment banking arm of France's Credit Agricole SA. CLSA puts the exposure of the six biggest Chinese banks at $30 billion.

‘Beyond Imagination'

‘‘The seriousness of such failures could be beyond the stretch of people's imagination,'' said Yu, a professor at the Institute of World Economics & Politics at the Chinese Academy of Social Sciences in Beijing. He didn't explain why he held that view.

China's government hasn't commented on Fannie and Freddie.

Yu is ‘‘influential'' among government officials and investors and has discussed economic issues with Premier Wen Jiabao this year, said Shen Minggao, a former Citigroup Inc. economist in Beijing, now an economist at business magazine Caijing.

Investor confidence in Fannie and Freddie has dwindled on speculation that government intervention is inevitable. Washington-based FannieFreddie of McLean, Virginia, has slumped 91 percent. has fallen 88 percent this year, while

Paulson got the power to make purchases of the two companies' debt or equity in legislation enacted July 30 that was aimed at shoring up confidence in the businesses. He has said the Treasury doesn't expect to use that authority.

The two companies combined account for more than half of the $12 trillion U.S. mortgage market.

US regulators shut Columbian Bank in Kansas

US regulators shut Columbian Bank in Kansas

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Federal regulators are shutting down Columbian Bank and Trust Co. in Kansas.

The Federal Deposit Insurance Corp. on Friday was appointed receiver of Columbian Bank of Topeka, which had $752 million in assets and $622 million in deposits as of June 30.

The FDIC said the bank's deposits will be assumed by Citizens Bank and Trust of Chillicothe, Mo. Its nine offices will reopen Monday as branches of Citizens Bank. Depositors of Columbian Bank will continue to have full access to their deposits, the agency said.

It was the ninth failure this year of an FDIC-insured bank.

There are four Columbian branches in Topeka.

A PDF copy of questions and answers for depositors that was handed out to customers by the FDIC ombudsman is available here.

If you are a depositor of the Columbian Bank, useful information and answers to frequently asked questions are available at the FDIC Web site, www.fdic.gov.

Also, Columbian Bank's Website www.columbianbank.com is linking to Citizen's Bank and Trust's Web site and can provide more information.

FDA Plots to Mislead Consumers Over Irradiated Foods

FDA Plots to Mislead Consumers Over Irradiated Foods

by Mike Adams

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NaturalNews has learned that the FDA is intentionally plotting to deceive consumers over the labeling of irradiated foods, attempting to eliminate any requirement for informative labeling or replace the word "irradiated" with "pasteurized."

In a feature story published by NaturalNews yesterday, we stated that the FDA does not require foods to be labeled as irradiated. We received a lot of questions from readers about that point, with some stating the FDA does, in fact, require foods to be labeled when irradiated. This is not always correct: Most foods are not required to be labeled as irradiated. This story explains the FDA's food irradiation labeling policy in more detail and reveals the FDA's plot to deceive consumers by misleading them into thinking irradiated foods are NOT irradiated.

Foods that are exempt from irradiation labeling

According to current FDA regulations, any food used as an ingredient in another food does NOT have to be labeled as irradiated. For example, if you buy coleslaw, and the cabbage in the coleslaw has been irradiated, there is no requirement that the coleslaw carry any labeling indicating it has been irradiated.

However, if raw cabbage is irradiated, then current FDA regulations do require it to carry an irradiation label. This label, however, is a symbol, not text, and many consumers have no idea what the symbol really means -- it actually looks like a "fresh" symbol of some sort. In no way does it clearly indicate the food has been irradiated. This is the FDA's way to "hide" the fact that these foods have been irradiated. (The symbol looks a lot more like leaves under the sun than food being irradiated...)

That same head of cabbage, by the way, if served in a restaurant, requires absolutely no irradiation labeling. All restaurant foods are excused from any irradiation labeling requirement. As stated at the FDA's own website (1):

Irradiation labeling requirements apply only to foods sold in stores. For example, irradiated spices or fresh strawberries should be labeled. When used as ingredients in other foods, however, the label of the other food does not need to describe these ingredients as irradiated. Irradiation labeling also does not apply to restaurant foods.

How the FDA plans to deceive consumers and further hide the fact that foods are being irradiated

As stated above, the FDA does not want consumers to realize their foods are being irradiated. Consumer awareness is considered undesirable by the FDA; an agency that also works hard to censor truthful statements about nutritional supplements and functional foods. Accordingly, the FDA pursues a policy of enforced ignorance of consumers regarding irradiated foods, nutritional supplements, medicinal herbs and all sorts of natural substances. It is currently illegal in the United States to state that cherries help ease arthritis inflammation if you are selling cherries. (http://www.naturalnews.com/019366.html)

On the food irradiation issue, the FDA is now proposing two things that are nothing short of astonishing in their degree of deceit:

FDA proposal #1: Irradiated foods shouldn't be labeled as irradiated unless consumers can visibly tell they're irradiated.

This ridiculous proposal by the FDA suggests that foods shouldn't be labeled as irradiated unless there is some obvious material damage to the foods (like their leaves are wilting). Thus, foods that don't appear to be irradiated should not have to be labeled as irradiated.

Imagine if this same ridiculous logic were used to regulate heavy metals content in foods: If consumers can't SEE the heavy metals, then they should be declared free of heavy metals!

FDA proposal #2: Irradiated foods should be labeled as "pasteurized," not "irradiated."

This FDA proposal is so bizarre that it makes you wonder whether the people working at the FDA are smoking crystal meth. They literally want irradiated foods to be labeled as "pasteurized."

And why? Because the word "pasteurized" sounds a lot more palatable to consumers, of course. Never mind the fact that it's a lie. Irradiated foods are not pasteurized, and pasteurized foods are not irradiated. These two words mean two different things, which is precisely why they each have their own entries in the dictionary. When you look up "irradiated," it does not say, "See pasteurized."

But the FDA is now playing the game of thought police by manipulating the public with screwy word replacement games that bear a strange resemblance to the kind of language used in the novel 1984 by George Orwell. And it is, indeed, an Orwellian kind of mind game that the FDA wants to play with the food supply: After unleashing Weapons of Mass Destruction (radiation) onto the foods, the FDA wants to label them all as simply being "pasteurized," keeping consumers ignorant and uninformed.

How do I know the FDA wants to do this? The agency said so itself in an April 4, 2007 document filed in the Federal Register (Volume 72, Number 64). As published in the document (2):

FDA is also proposing to allow a firm to petition FDA for use of an alternate term to "irradiation'' (other than "pasteurized''). In addition, FDA is proposing to permit a firm to use the term "pasteurized'' in lieu of "irradiated,'' provided it notifies the agency that the irradiation process being used meets the criteria specified for use of the term "pasteurized'' in the Federal Food, Drug, and Cosmetic Act (the act) and the agency does not object to the notification.

Did you follow all that mind-warping logic? The FDA is essentially begging a company to petition it to use the term "pasteurized" instead of "irradiated" as long as they both result in the food being killed. Once it receives such a petition, it will approve it, claiming it is meeting "the needs of industry."

The FDA already allows lots of word substitutions in the areas of health and medicine. The phrase "Toxic Poison" has been replaced with "Chemotherapy," for example. "Over-medicated with dangerous psychiatric drugs" has been replaced with the term, "Treatment." And the phrase, "Regulated with life-threatening synthetic chemicals" has been replaced with the word "managed," as in "her diabetes has been managed."

So why not introduce all sorts of other word substitutions that might continue the Orwellian "Ministry of Language" propaganda put forth by the FDA?

I say we substitute the word "medicated" with "treated" and "treated" with "rewarded." That way, when a patient describes what drugs she's on, she can say, "I've been rewarded with ten different prescriptions!"

Better yet, let's replace the word "surgery" with "enhancement." So anybody who undergoes heart bypass surgery, for example, can say they've really just had "Heart bypass enhancement!"

It sounds a lot easier to swallow, doesn't it? And that's what it's all about, folks, when it comes to irradiating the food supply: Making it all sounds a lot less treacherous than it really is. Control the words and you control people's ideas, and if there's one thing the tyrannical FDA is really, really good at, it's controlling words!

What the FDA really wants to accomplish

Let's get down to some blunt truth about the FDA's real genocidal agenda. What the FDA wants here is two things:

1) The destruction of the food supply (genocide)
2) The complete ignorance of the consuming public (nutritional illiteracy)

Genocide and illiteracy. Ignorance and fear. Tyranny, radiation and chemicals... These are the things the FDA truly stands for.

That pretty much sums up the FDA's intent on this whole food irradiation issue. Destroy the food and mislead the People. And then wait for the windfall of profits at Big Pharma as the People degenerate into a mass of diseased, disoriented and desperate health patients. It's business as usual at the FDA.

That's why Dr. James Duke, creator of the world's largest phytochemical database (http://www.ars-grin.gov/duke), had this to say about the FDA's food irradiation policy:

"Perhaps the FDA should call up a billion dollar team to consider irradiating another health hazard - the FDA itself, which is almost as dangerous to our health as the pharmaceutical industry."

Why I call this the unleashing of "Weapons of Mass Destruction"

In my previous article on this issue, I've called this food irradiation agenda a "Weapon of Mass Destruction" against the food supply. A couple of readers questioned me about that. Why, they asked, do I consider food irradiation to be a WMD?

WMDs include weapons that indiscriminately cause damage to people and infrastructure that serves the People. Dumping a radioactive substance into the water supply that serves a major city, for example, would be considered using a Weapon of Mass Destruction.

Interestingly, the use of Depleted Uranium by the U.S. military in Iraq and Afghanistan is also an example of Weapons of Mass Destruction, making the U.S. guilty of yet more crimes against humanity. (A previous example is the dropping of nuclear weapons on Japan's civilian population in World War II.)

Irradiating the food supply is also an application of Weapons of Mass Destruction, and here's a thought experiment that will clearly demonstrate it:

Suppose you wanted to irradiate your own garden vegetables. The minute you start trying to buy a machine that produces radiation, you would be quickly considered a terrorist and investigated by the FBI. They would visit your home and ask, "Why do you need a radiation machine?" And if you said you needed to irradiate your garden vegetables, they would look at you like you were completely nuts and probably haul you into the local FBI field office for yet more questioning, all while considering you a possible terrorist and likely adding your name to the no-fly list so you could never travel on commercial airlines.

If you don't believe me, try to acquire a high-powered radiation emitting device and see what happens...

So why is it considered bizarre and possibly criminal when an individual buys a radiation machine to irradiate their own foods, but when the FDA pushes the same agenda on a larger scale, they call it "safety?"

Irradiated food isn't altered, claims the FDA

Of course, the FDA says the irradiated food isn't altered by the radiation. This statement is an insult to the intelligence of anyone with a pulse. Why? Because if the radiation doesn't alter anything, then how can it kill e.coli and salmonella?

The whole point of the radiation is to kill living organisms. And it works by causing fatal damage to the tissues and DNA of those microorganisms. So guess what it does to the plants? Since radiation isn't selective, it also irradiates the plant fibers and tissues, causing DNA damage and the destruction of enzymes and phytochemicals.

Amazingly, the FDA claims this does not count as "altering" the food because these changes aren't visible.

If it weren't such a nutritional atrocity, it would be downright hilarious. DNA changes are not visible to the human eye, but they can result in serious health consequences. Just ask anyone born with two Y chromosomes.

Eat up, guinea pigs!

Of course, the radiation pushers will claim that nobody really knows whether irradiating the food kills just 1% of the phytochemicals or 99% (or something in between). And they don't know what the long-term effect is on human health, either. This is exactly my point: The irradiation of fresh produce is a dangerous experiment, and we've all been involuntarily recruited as guinea pigs.

I will be curious to see a serious scientific inquiry into the nutritional damage caused to fresh produce by irradiation. I also find it simply astonishing that this decision by the FDA has been made in the absence of such scientific studies. Much like it does with the pharmaceutical industry, the FDA prefers to poison the people first, and then figure out later just how much damage might have been caused.

I say when you're dealing with the food supply, you should err on the side of caution. We are talking about the health of the nation here. This is not a small matter. It should be treated with extreme caution, skepticism and scientific scrutiny. Instead, it is being addressed with a gung-ho attitude framed in mind games and enforced ignorance.

In other words, rather than figuring out whether food irradiation is actually safe, the FDA would rather simply pretend it is.

Welcome to Make Believe Land, where all your food is now safe and nutritious, courtesy of the FDA!

Sources:

(1) http://www.cfsan.fda.gov/~dms/qa-fdb33.html

(2) http://www.foodsafety.gov/~lrd/fr070404.html