Friday, October 24, 2008

A Wasted Vote by Chuck Baldwin

A Wasted Vote

by Chuck Baldwin

Go To Original

When asked why they will not vote for a third party candidate, many people will respond by saying something like, "He cannot win." Or, "I don't want to waste my vote." It is true: America has not elected a third party candidate since 1860. Does that automatically mean, however, that every vote cast for one of the two major party candidates is not a wasted vote? I don't think so.

In the first place, a wasted vote is a vote for someone you know does not represent your own beliefs and principles. A wasted vote is a vote for someone you know will not lead the country in the way it should go. A wasted vote is a vote for the "lesser of two evils." Or, in the case of John McCain and Barack Obama, what we have is a choice between the "evil of two lessers."

Albert Einstein is credited with saying that insanity is doing the same thing over and over again, and expecting a different result. For years now, Republicans and Democrats have been leading the country in the same basic direction: toward bigger and bigger government; more and more socialism, globalism, corporatism, and foreign interventionism; and the dismantling of constitutional liberties. Yet, voters continue to think that they are voting for "change" when they vote for a Republican or Democrat. This is truly insane!

Take a look at the recent $700 billion Wall Street bailout: both John McCain and Barack Obama endorsed and lobbied for it. Both McCain and Obama will continue to bail out these international banksters on the backs of the American taxpayers. Both McCain and Obama support giving illegal aliens amnesty and a path to citizenship. In the debate this past Tuesday night, both McCain and Obama expressed support for sending U.S. forces around the world for "peacekeeping" purposes. They also expressed support for sending combat forces against foreign countries even if those countries do not pose a threat to the United States. Neither Obama nor McCain will do anything to stem the tide of a burgeoning police state or a mushrooming New World Order. Both Obama and McCain support NAFTA and similar "free trade" deals. Neither candidate will do anything to rid America of the Federal Reserve, or work to eliminate the personal income tax, or disband the Internal Revenue Service (IRS). Both Obama and McCain support the United Nations. So, pray tell, how is a vote for either McCain or Obama not a wasted vote?

But, back to the "he cannot win" argument: to vote for John McCain is to vote for a man who cannot win. Yes, I am saying it here and now: John McCain cannot win this election. The handwriting is on the wall. The Fat Lady is singing. It is all over. Finished. John McCain cannot win.

With only three weeks before the election, Barack Obama is pulling away. McCain has already pulled his campaign out of Michigan. In other key battleground states, McCain is slipping fast. He was ahead in Missouri; now it is a toss-up or leaning to Obama. A couple of weeks ago, Ohio, Pennsylvania, and Florida were all leaning towards McCain, or at least toss-up states. Now, they are all leaning to Obama. Even the longtime GOP bellwether state of Indiana is moving toward Obama. In addition, new voter registrations are at an all-time high, and few of them are registering as Republicans. In fact, the Republican Party now claims only around 25% of the electorate, and Independents are increasingly leaning toward Obama.

Ladies and gentlemen, Barack Obama is headed for an electoral landslide victory over John McCain. John McCain can no more beat Barack Obama than Bob Dole could beat Bill Clinton.

I ask, therefore, Are not conservatives and Christians who vote for John McCain guilty of the same thing that they accuse people who vote for third party candidates of doing? Are they not voting for someone who cannot win? Indeed, they are. In fact, conservatives and Christians who vote for John McCain are not only voting for a man who cannot win, they are voting for a man who does not share their own beliefs and principles. If this is not insanity, nothing is!

So, why not (for once in your life, perhaps) cast a vote purely for principle! Vote for someone who is truly pro-life. Someone who would quickly secure our nation's borders, and end the invasion of our country by illegal aliens. Someone who would, on his first day in office, release Border Patrol agents Ramos and Compean and fire U.S. Attorney Johnny Sutton. Someone who would immediately, upon assuming office, begin leading the charge to dismantle the Federal Reserve, overturn the 16th Amendment, expunge the IRS, and return America to sound money principles. Someone who would get the US out of the UN. Someone who would stop spending billions and trillions of dollars for foreign aid. Someone who would prosecute the Wall Street bankers who defrauded the American people out of billions of dollars. Someone who would work to repeal NAFTA, CAFTA, GATT, the WTO, and stop the NAFTA superhighway. Someone who would say a resounding "No" to the New World Order. Someone who would stop using our brave men and women in uniform as global cops for the United Nations. Someone who would stop America's global adventurism and interventionism. Someone who would steadfastly support and defend the right of the people to keep and bear arms.

As John Quincy Adams said, "Always vote for principle, though you may vote alone, and you may cherish the sweetest reflection that your vote is never lost."

Eastern European economies face bankruptcy

Eastern European economies face bankruptcy

By Niall Green
Go To Original

The economies of central and eastern Europe are being rocked by the crisis of world capitalism, compounded by the corrupt and pro-big business policies of their local elites.

Defying many economists and commentators, who had forecast that the region would be well placed to deal with the credit crisis due to the lower relative weight of finance capital within their national economies, much of Eastern Europe stands on the verge of insolvency and deep and protracted recession.

Following the collapse of the Soviet Union and the Stalinist states, central and eastern Europe provided global capitalism with vast new sources of cheap labour and raw materials. In the early 1990s the recession affecting the Western economies, accelerated the flow of capital into the former-Soviet countries, with transnational corporations seeking to cut costs by outsourcing to these newly opened-up low tax, cheap labour areas.

Major global manufacturers such as General Motors, Volkswagen and Nokia invested hundreds of millions of dollars into new factories, taking advantage of the large pools of highly-skilled and educated workers, many of whom had lost jobs in the old state-owned industries that were closed following the restoration of capitalism. Western financial institutions profited from financing the development of new industrial plants, as well as property speculation among the new bourgeois elite and foreign investors in major urban areas like Prague, Warsaw and Bratislava.

Business consultancy, Capital Economics, reports that 17 years after the restoration of capitalism and four years after most joined the European Union (EU), wages in the eastern EU states are still only one fifth of the average of those in Western Europe.

An estimated five million workers have left the eastern European countries for Western Europe between 2004 and 2007. The mass migration from the ex-Soviet states has left key sectors of the economy and public services such as healthcare critically short of skilled workers. Poland and Ukraine almost had to abandon their status as co-hosts of the 2012 European Football Championship due to the chronic shortages of labour needed to renew facilities for the competition.

Only a few months ago, a recession in Western Europe was viewed as a potential boon to overheated Eastern Europe economies. Inflation, running at 15 percent in Russia and Latvia, seemed to be the greatest threat. However, as the full impact of the global crisis unfolds, the alleged ability of Eastern Europe to weather the storm relatively better than its Western counterparts has been thrown into question.

All the economies of the eastern European region are highly dependent on credit from the international markets. The Institute of International Finance has estimated that total private capital and credit flows into eastern Europe, the former USSR and Turkey, are likely to fall from nearly $400 billion in 2007 to an estimated $262 billion next year, a figure which may fall even further as it is based on optimistic forecasts of the effectiveness of the international governmental bailouts of the banks.

Erik Berglof, chief economist of the European Bank for Reconstruction and Development, stated that the eastern European countries, “could deal with rising borrowing costs and an economic slowdown coming from the US and Western Europe, but a complete shutdown of international borrowing—nobody can withstand that.”

The International Monetary Fund forecasts a fall in the growth rate for gross domestic product (GDP) for central and southeast Europe from 5 percent this year to 3.5 percent in 2009. For Russia and the former Soviet Union, it predicts growth of around 7 percent for this year and 5.5 percent for 2009.

Emergency bailout for Hungary

Even these figures fail to show the full impact of the economic crisis on countries whose economies are heavily dependent on exports to the wealthier western EU.

The impact of a recession in France, Germany and Britain will be acutely painful to the eastern economies of Europe. The Czech Republic, for example, relies on exports to the wealthier euro currency zone for 40 percent of its GDP. As the British magazine, the Economist, stated, “If Germany gets a headache, eastern Europe gets a migraine.”

On October 16, the same day countries across the EU pledged to shore up the banking system with a package whose total could exceed €2 trillion, the European Central Bank (ECB) granted Hungary a bailout worth €5 billion, saving its economy from a financial meltdown.

The International Monetary Fund (IMF) is poised to offer the country a further, and probably much larger, bailout loan.

Last week, Hungary put tight controls on foreign exchange lending in an effort to stabilise the country’s troubled financial sector. This prompted a massive drop in the value of the Hungarian currency and stock market, quickly followed by sharp rises on the news of the ECB bailout.

Hungary has a very high level of foreign public debt—60 percent of GDP—meaning that the country is less attractive to foreign investors and less creditworthy to private and international lenders. Global credit ratings agencies Fitch and Standard and Poor’s have lowered Hungary’s rating to BBB+ , the third lowest investment grade offered to any country.

In addition, many ordinary citizens and local firms have loans with Hungarian banks that have been packaged in complex schemes based on the speculation that the Hungarian forint would stay on the same exchange rate as the euro. That situation is likely to change as Hungary’s high budget and current account deficits pressure the devaluation of its currency, which is now trading at a two-year low, further destabilising its banking system.

The government of Prime Minister Ferenc Gyurcsany has reduced its official GDP growth forecast for 2009 from three percent to just 1.2 percent, and has acknowledged it is planning a budget based on a zero percent growth rate next year. The Hungarian government has pledged to cut its budget deficit, meaning that public services spending and wages will be driven down.

Nick Chamie, of RBC Capital Markets, has warned that much of eastern Europe is ill-equipped to bail out the financial system and may suffer the same fate as Iceland, whose financial system has seized-up with the collapse of its three major banks.

“The three Baltic states along with Ukraine, Kazakhstan, Bulgaria and Romania—and of course Iceland—are top of the list,” of those vulnerable to an investment exodus, Chamie warned.

Baltic states in crisis

Latvia and Estonia are officially the first economies in the eastern EU to fall into recession. Lithuania, whose growth has been slower than its Baltic neighbours, is likely to officially enter a recession in early 2009 and has been forced to guarantee the deposits of savers up to the value of €100,000, double the average EU guaranteed amount.

The Lithuanian prime minister was forced to appeal for calm in early October, stating that “There is no danger for any Lithuanian bank to go bankrupt. We monitor the situation constantly.” The country’s banking sector is dominated by the Swedish bank SEB.

The heads of government of all three Baltic states issued statements October 10 insisting that their countries were not headed for insolvency. “It is impossible to compare Lithuania with Iceland,” Prime Minister Gediminas Kirkilas told a joint news conference with his Latvian counterpart.

Reinhard Cluse, “emerging Europe” economist for Switzerland’s UBS bank, was more cautious, stating in response to the financial situation in the Baltic states:

“Iceland was a special case, but the same rising waters that flooded Iceland first are a problem for others, too.”

The three countries have seen an explosion of credit fuelled by property speculation over the past decade, while current account deficits have soared to among the highest in Europe. In Estonia, domestic and foreign debt stands at twice the country’s GDP, leaving it heavily exposed to the problems of bad debt that have beset the global financial system. Property prices in the capital Tallinn, have fallen by one quarter since 2007 and home foreclosures are on the increase.

“There are going to be some pretty big casualties in property-related sectors and retail,” warned Joakim Helenius, head of Tallinn based investment group Tigon Capital.

In Latvia, the central bank had to intervene this month to prop up its currency with public funds. The cost of bailouts, combined with falling domestic tax and customs revenues, mean that all three states are likely to suffer large budget deficits next year. The Latvian Central Bank estimates its government’s overspending to be 5.5 percent of GDP in 2009.

This will force government borrowing, bringing with it demands from international lenders that state budgets be slashed. The EU budgetary commissioner has already condemned Lithuania’s draft budget for 2009 as far too high and has demanded that President Valdas Adamkus refuse to sign it into law.

Meanwhile, the increase in government indebtedness of these tiny countries, with limited resources to draw upon, will likely restrict investor confidence, further deepening recessionary pressures.

The banking sector in the Baltic states is dominated by Scandinavian capital. Swedish company Swedbank has seen a 50 percent fall in its share value, largely due to its heavy exposure in the Baltic countries, while its credit rating has been slashed. Swedbank expects profits from its Baltic subsidiaries to be cut in half in 2009. Swedbank maintains it and other banks will continue to pump credit into the Baltic markets in order to prevent an economic crisis there from spreading into Scandinavia.

Poland, Slovakia and the Czech Republic

Bulgaria and Romania, who joined the EU in 2007, are also in a highly precarious position. Citibank’s evaluation cited their high vulnerability to financial instability. Bulgaria already has a national deficit of 21.5 percent of GDP. This figure is likely to rise as Hungary borrows from international lenders such as the European Central Bank and the International Monetary Fund to save its banks, and the government itself, from insolvency.

Poland, Slovakia and the Czech Republic are widely portrayed as being in a better position than most other states in the region, with less dependence on loans from foreign finance capital. They are, however, highly dependent on direct investment from transnational corporations and sales of manufactured goods and services to Western Europe.

The three countries have become major centres of manufacturing for the EU market, with the Polish and Czech economies booming from the development of plants making cars, electrical equipment, household goods and industrial plant largely for sale to Western Europe. Slovakia has become a virtual single auto-industry state, with the major automobile manufacturers closing factories in Western Europe and relocating tens of thousands of jobs there in an effort to slash wages.

While the foreign direct investment (FDI) that Poland, Slovakia and the Czech Republic are heavily reliant upon, is due to rise modestly to $90 billion across Eastern Europe in 2009, this figure represents a small fraction of total investment capital which has sharply contracted. FDI could freeze up next year if cash strapped companies hoard their resources in the event that global finance credit remains in limited supply.

With exports of commercial and domestic manufactured goods to Western Europe likely to fall over the coming period, combined with greatly restricted credit, even the relatively stable economies of the ex-Soviet region are likely to be plunged into recession.

Shares on the Polish stock exchange are trading at less than half their peak. Poland has mirrored the steps taken across the EU, pouring public money into a bailout of its banks.

Ex-Soviet regime

To the east of the EU member states, the situation could prove to be even worse. Russian authorities have set aside nearly $200 billion (€149 billion) for a financial market rescue. Despite the relatively small size of its financial sector, which has assets valued at just 65 percent of its GDP (compared to 250 percent of GDP for banks in the euro zone), the country is highly dependent on foreign finance capital to fuel growth.

Over the past decade hundreds of small banks have emerged, fuelled by debt borrowed from major Western financial institutions and used to pay for developments in certain industries and construction in the booming property sector in Moscow and other large cities.

The Medvedev-Putin regime in Russia has injected $700 billion into its financial system, a greater amount than the United States or most western EU states as a portion of GDP. This massive increase in state spending has been made even more dangerous to the Russian public finances by the sharp fall in the price of oil, which has halved from its peak earlier this year.

A similar story is taking place in Ukraine, where foreign finance has been heavily relied upon to boost growth in industry and commercial property construction. Like Russia, the Ukrainian economy is now faced with the double blow of greatly restricted access to Western finance combined with plummeting prices for its main industrial exports, especially steel.

The Ukrainian stock market has lost over three-quarters of its value in a year.

Ukraine’s central bank has been forced to prop up most of the country’s financial institutions with state funds, while a run on the country’s sixth largest bank, Prominvest, was caused by warning that it was likely to collapse.

The possibility of providing a stimulus to the Ukrainian economy by cutting interest rates, as has been put into effect across Europe and in the US, is limited by the fact that inflation is currently running at 25 percent. The Ukrainian Prime Minister, Yulia Tymoshenko, has requested a large loan from the IMF of up to $14 billion to shore up the economy.

US credit ratings agency Fitch downgraded Ukraine last week, stating:

“The downgrade reflects Fitch’s concern that the risk of a financial crisis in Ukraine involving large depreciation of the currency, further stress in the banking system and significant damage to Ukraine’s real economy is significant and rising.”

Tymoshenko is in a bitter political struggle with President Viktor Yushchenko, who has called early parliamentary elections for December in an effort to unseat his rival. Both former leaders of the “Orange revolution” are blaming each other for Ukraine’s economic woes. Tymoshenko has condemned the calling of fresh parliamentary elections, the third in three years, as a destabilising factor in the current economic crisis. She warned that all politicians must put aside “political ambitions” in an effort to bail out the economy at the expense of other areas of budgetary spending.

“We have to revise the state budget for the year 2008, and completely alter the draft state budget for 2009, because the whole world, and Ukraine as well, will see a certain stagnation of production, a certain fall of GDP growth, and, I think, the country will suffer the biggest blow in 2009. It means we have to transfer to a saving budget in 2008 and 2009,” Tymoshenko told the Ukrainian parliament on October 13.

US layoffs mount, home foreclosures rise

US layoffs mount, home foreclosures rise

By Patrick O’Connor
Go To Original

Indicators of a worsening social crisis in the US are mounting daily as the economic downturn takes an ever greater toll on jobs. Further layoffs were announced yesterday in the US and around the world. New data was also released showing escalating numbers of American families losing their homes through foreclosure, further driving down house prices.

A Reuters roundup of some of the US corporations which have made major layoff announcements in the last two days alone included:

• Chrysler, which announced an additional 1,825 layoffs on Thursday

• Goldman Sachs, which said it will cut 10 percent of its staff, or almost 3,300 jobs

• Pharmaceutical giant Merck, which announced it is shedding 12 percent of its workforce

• Biotechnology company Maxygen, which said it will cut nearly 30 percent of its workforce

• Money manager Janus Capital Group, which is sacking 9 percent of its workforce

• Xerox, which said yesterday it will cut 5 percent of its staff, or 3,000 positions

• Mining equipment maker Terex Corporation, which is laying off hundreds of its workers

• United Parcel Service, which announced plans to cut an unspecified number of jobs next year

• Fidelity National Financial Inc., which announced it will slash 1,000 jobs and cut pay by 10 percent

• Financial services conglomerate Popular Inc., which is cutting 600 jobs and closing more than a quarter of its branches in the US.

The US Labor Department reported that new applications for unemployment insurance increased by 15,000 to 478,000 in the week ending October 18, significantly more than was anticipated by economists. A year ago, new jobless claims stood at 333,000.

The Labor Department also found that inflation-adjusted wages for non-managerial workers declined by 1.9 percent in the twelve months up to September. This extraordinary figure indicates the extent to which the social position of the working class is being further undermined as the financial crisis and recession unfold.

The Washington Post yesterday reported that leading temp agencies are receiving far higher numbers of inquiries from job-seekers, including from people who are currently working but fear for their jobs. The article noted that many desperate workers "are also willing to make less money, even as the cost of living goes up." An example was call center jobs that paid $9 an hour last year but now pay $8.50.

Workers in the auto industry continue to bear much of the brunt of the growing assault on jobs and conditions. Chrysler announced 1,825 layoffs through the elimination of a shift at an assembly plant in Toledo, Ohio and said it would bring forward the closure date of a plant in Newark, Delaware that had been scheduled to close in December 2009.

Chrysler released figures yesterday revealing that it lost more than $1 billion in the first six months of 2008. Standard and Poor's has said that both Chrysler and GM may run out of cash in 2009 as auto sales fall to their lowest level since 1991.

Germany's Daimler AG, which has a 19.9 percent stake in Chrysler, said yesterday it was revising the book value of its stake to zero. This is down from $220 million three months ago and $1.2 billion at the end of 2007.

GM is in an equally severe crisis. A JPMorgan analyst told Reuters he expects the company to lose more than $12 billion next year. Like Chrysler, GM is slashing costs ahead of a potential merger between the two companies.

GM announced Wednesday it was considering selling AC Delco, its international parts subsidiary, a measure which will inevitably lead to further job losses. The company also said it will suspend many salaried employee benefits, including matching contributions for workers' 401(k) retirement plans.

Job losses continue to mount in the European auto industry. Sweden's Volvo AB said yesterday it would sack 850 more workers at its construction equipment unit. This follows an earlier announcement of 500 layoffs in the same unit, as well as 1,400 layoff notices issued to workers at truck factories in Sweden and Belgium.

Germany's Frankfurter Allgemeine Zeitung reported yesterday that Volkswagen plans to cut most or all of its 25,000 temporary staff. A Volkswagen spokesman denied the report, insisting that no decision had yet been reached.

Polish government advisors have estimated that one third of the 1.2 million Polish workers in Britain and Ireland, i.e., 400,000 people, will either return to Poland or move to another country to try to find work. According to a number of reports, the exodus has already begun, with thousands of Polish workers relocating, either in response to being laid off or to the British pound's poor exchange rate, which has sharply reduced the value of immigrant workers' wages sent back to their families.

Workers in countries throughout Europe are also being hit with rapidly declining house prices and increased foreclosures. But nowhere is the crisis more severe than in the US.

A survey released yesterday by listing service RealtyTrac found that foreclosure filings—that is, default notices, auction sale notices and bank repossessions—were reported on 765,000 properties in the three months ending in September, up 71 percent from the third quarter in 2007. Six states—Nevada, California, Florida, Ohio, Michigan, and Arizona—accounted for more than 60 percent of all foreclosure activity. Nevada recorded the highest foreclosure rate, with one out of every 82 housing properties issued a foreclosure filing.

The RealtyTrac report concluded that the third quarter figures probably underestimate the situation. Several states have passed new laws requiring lenders to issue extended notices before filing default notices. These laws artificially suppressed September's foreclosure figures by temporarily postponing the full impact. Rising unemployment will further accelerate the catastrophe.

The company said 81,300 homes had been foreclosed in September, and a total of 851,000 had been repossessed by lenders since August of 2007.

Rod Dubitsky, managing director for asset-backed securities at Credit Suisse, told BusinessWeek he expects that more than 5 million American families will lose their homes through the year 2012. He said 1.69 million families will lose their homes in 2008.

Falling property values have also hit homeowners. Over the last period, the family home was widely regarded as the primary asset to fund people's retirement, their children's college education, and even to cover unanticipated health expenses. But yesterday, the Federal Housing Finance Agency reported that house prices in August were 5.9 percent lower than they were a year earlier. The decline was the greatest recorded since 1991, when data was first collected.

Union Card or Master Card -- How a Nation of Workers Became a Nation of Debtors

Union Card or Master Card -- How a Nation of Workers Became a Nation of Debtors

By Frank Joyce

Go To Original

It has been apparent for some time that the 20th Century US social contract is defunct beyond repair. Now the economic system faces the prospect of collapse as well. Not surprisingly, these developments are related. They did not come about overnight.

Looking back, it's easy to see that the system which emerged from the post-Bolshevik revolution, mass industrial production era of the 1920's, 30's and 40's was beginning to unravel by the end of the 1970's.

Union membership provides a helpful lens through which to view the process.

During the 1960's union membership bounced up and down within a narrow range ending the decade slightly higher than it began. But starting in 1970, it began a steady decline. In 1970 union workers were 29.6 percent of the work force. At those numbers, unions were able to exert considerable leverage over the wages, benefits and working conditions of all workers. By 1980 union workers were down to 23.2 percent of the total workforce. By the year 2000, union members represented just 13.5 percent of all workers. Today it is about 12.1 percent.

Conventional wisdom holds that Ronald Reagan caused the decline of unions by busting the air traffic controllers union (PATCO) in 1981. Not so. What Reagan and his advisors understood was that union power was already on the wane. Did they know for certain that they could attack PATCO and get away with it? Probably. But even if they didn't, they deemed it a risk--a "probe," if you will--worth taking.

Either way, they did bust PATCO. Consequently, the message that unions could be beat came through for all to see. Employers got the point and stepped up their already fierce resistance at the bargaining table. And they devoted new and effective resources to defeating organizing efforts by their workers.

Workers also got it that unions were weakening. That too made organizing tougher. Corruption scandals and other difficulties added to problems of unions. As the power of unions declined, real wages for workers declined too. Most economists agree that measured in constant dollars, wages in the US have been effectively stagnant since about 1975.

Unions were indisputably an effective instrument for building a broad "middle" class. They did so by applying sufficient power to assure that workers shared in the value that they were helping to create. As industrialization brought enormous innovation and productivity, workers waged epic struggles that won them the wages to buy what they were making. Working conditions improved. Home ownership, car ownership and college for the children of workers became widespread. Pensions and employer paid health care became the norm.

But. But. But. For many reasons unions were less effective at sustaining the newly huge middle-class than they had been at creating it. (The how and the why of the inability of US unions to perceive, let alone counteract, the new forces coming into play in the 1970's is an interesting and important but different topic.)

Declining union membership and power is, however, only one variable in the equation that has brought us to the white hot economic and political meltdown now dominating our news and our lives. Another critical variable is this: as the wallets of workers held fewer and fewer union cards, credit cards were filling up those very same wallets. Workers were in effect trading union cards for MasterCard's.

In the process workers became the proverbial frogs in the pot on the stove. The temperature kept getting closer to the boiling point. But the water felt just fine. Because even though worker power was in decline, worker consumption was going up. Color TV's replaced black and white TV's, only to be replaced again by bigger screen TV's and now LCD's and Plasmas. Vehicles got bigger and better and working families had more of them. Shopping malls proliferated and shopping itself became the national religion. Cell phones, computers, video games, boats, iPods and snowmobiles--workers had stuff, lots and lots of stuff. The whole economy grew.

How could this happen in the face of stagnant real wages? Three reasons. Technological political and economic forces made global production both possible and necessary. That in turn made it possible to stabilize and in many cases lower costs and prices for goods and services.

The social upheaval of the 60's helped create conditions that brought women into the workforce in great numbers. The added income helped to offset the decline in wages for men.

Last and anything but least, credit, not wages, came to drive purchasing and consumption. For workers, debt came from all over: credit cards; longer and longer terms for auto loans; huge college loans; "creative" financing for mortgages. A whole kit and caboodle of financial entanglements enmeshed workers, students, just about everybody. The "middle" class became the debtor class.

Between 1970 and 2000, according to the Bureau of Economic Analysis of the Federal Reserve Bank, household debt relative to disposable personal income nearly doubled. In 2006, David A. Gaffen reported in the Wall Street Journal that "households'...debt-to-income ratio reached an all time high 131.1%." (Exploding public debt is an important component of this dynamic too. According to Federal Reserve Board data, between 1957 and 2007 the inflation adjusted total debt load per person in the US increased $145,432, equivalent to an increase of $581,728 per family of 4. That number, of course, does not include long-term costs of the war in Iraq or of ongoing taxpayer funded bailouts of financial companies.)

That debt is bondage is a profound moral truth. But it is an important shaper of political and economic consciousness as well. The more you are in debt, the less likely you are to rock the boat. Take on your employer? Go on strike? Risk your job by trying to start a union? What, and miss a credit card payment? Don't you get it? I'm maxed out. Risk getting my car getting reposed? You've got to be kidding.

Some of this attitude is quite conscious. Much of is more below the surface. Either way, this kind of debt profoundly changes many things including the relationship of the worker to the employer. It's one thing to "owe my soul to the company store." But this debt is different. This debt creates a mindset by which the paycheck and the employer who provides it come to be seen as a protector from the demands of the lender. It is the credit card company and the collection agency that become the greatest source of worry and harassment.

To be sure, there are those who have felt little or no grief at all. Others have overcome financial challenges and setbacks. There is no denying that for quite a long time, this system seemed to work just fine. In garden variety daily life terms, living standards were going up. Millions of working class families had fulfilling and decent lives. Many still do.

But this arrangement changes politics too. Economically satisfied workers can "afford" political engagement on social issues such as gun ownership or abortion if they choose to be involved at all. And if you have a growing 401 K--which you have been led to believe is far more secure than Social Security--why wouldn't you have a literally "conservative" political outlook? Why not align with the politics that come with living in a "gated" community to defend against the less well off hordes? From that outlook, it's easy to imagine immigrants and/or "angry" African Americans as being seen as a much bigger threat than financial shenanigans on Wall Street. Thus are born "Reagan Democrats."

Moreover, from church, media and political pulpit alike comes a very sophisticated propaganda drumbeat. Relentlessly it pumps out the message that is that if you are on debt overload, you and you alone made bad choices. You didn't manage your money well. You should be contrite, even ashamed. The last thing you should do is think you have anything in common with any one else--even if millions are in exactly the same situation. Even less should you consider that you are a victim of extremely cynical and deliberate manipulation.

Did not the Credit Card Masters of the Universe barefacedly testify before Congress that it was they who needed protection from irresponsible borrowers? And did not a substantial majority of the "people's" representatives from both political parties in Congress agree with them? (As the righteous Elizabeth Warren has pointed out, those very same credit card companies routinely troll bankruptcy fillings to get names of bankruptcy filers to whom they then send credit cards solicitations! See here for terrific information on debt dynamics from Elizabeth Warren and her band of researchers. The New York Timesan excellent article on this subject as well.) recently published

But credit card solicitations are not the only toxic Kool-Aid that's been on offer. The same institutions told us too that 401-K's are safer and better than either social security or a union negotiated pension. Why? Because private investments and personal responsibility are good and government and collective action are bad, that's why.

It's all enough to make your head swim. Partly that's because through it all You're On Your Own (YOYO). Even now, workers have some degree of union protection--whether they belong to a union or not. Unions and the threat of unions retain a small degree of leverage over some employer behavior.

Debtors have nothing. No one even pretends to care about them except lenders who will offer more credit at terms worse than what you have now or "credit counselors" who will help you--oh, and incidentally help themselves and help the lenders who got you into trouble in the first place too.

The result is now before us. Absent any restraining force whatsoever, the financial masters of the universe went wild. They invented ways to make money out of whole cloth. They ENRONed the economy of the world.

Let's take a deep breath and go back to the beginning for a minute. The "cost" of forming or joining a union seems high. As a worker, you are told over and over again that you might lose your job because you'll get fired for being a union supporter or that your employer will close up shop altogether if it goes union. And enough employers do just that, so the threat is entirely credible.

And even if you get a union you'll pay dues. And you will hear again and again what a dumb thing that is. You will learn repeatedly about workers who go on strike only to settle for wages and benefits that are worse, not better. The media will tell you over and over about union companies that shrink or move all their work to Mexico or China or go out of business entirely.

At the same time workers get offers of "cheap" credit in the mail virtually every day. The choice seems clear. Union membership? Expensive. Risky. At least a little bit scary.

The credit that gets you your car(s), your plasma TV, your home and college tuition for your children? That seems "cheap." Isn't the word "free" the single most common word in credit solicitations?

Admittedly sometimes there can be a downside to all this credit. Well actually, more often than not the lenders, especially credit card companies do treat their customers like shit. They raise rates and add incomprehensible and ever more expensive fees. When you call them to argue or just get an explanation you enter voice mail hell. Or if you do reach someone they might respond by lowering your credit limit or adding yet another fee. Collection agencies can really make you life miserable.

And yes, politicians of both parties do keep changing the rules so that lenders can basically do whatever they want. Until just the last few weeks they were virtually all for "deregulation." (Suddenly they are all "born again" regulators. Hmmm.) Speak up as Dennis Kucinich, Danny Schecter and others have done and you will be marginalized as a kook, a whiner or an extremist.

And yes it can be annoying that the perpetrators of this economic bondage are living very large while you are struggling more and more every day.

But, hey, don't be ungrateful. You live in the "ownership society"!

Really? Do you own your stuff? Or is it in effect rented? Or is it maybe that the finance companies own you? And by the way, if they are so morally and otherwise superior, how are they doing at managing the system they created?

Sisters and brothers, the debt society truly is a house of cards. MasterCard's, VISA cards, Discover Cards, Debit cards. And it is built on sand at that. The whole damn thing rests on a foundation of credit default swaps and commercial paper and sub-prime mortgage bundles and hedges and leverage and god only knows what other hocus pocus.

But now. But now? Make no mistake about it--the financial equivalent of Hurricane Katrina is blowing that house down. Naturally, the very same people who built the house in the first place are trying to patch it up. Why wouldn't they? In the short term we should probably wish them the best. So far, however, the only solution they seem to have to the debt crisis is to create a more debt. A lot more debt.

Clearly, we need to start designing and building a new house altogether. In the 20th century, the Flint sit-down strike and the Montgomery Bus Boycott stand as icons of successful struggles by working men and women to win economic and social justice against daunting opposition. It's time to do it again.

Early Voting Sees Reports of Voter Intimidation, Machine Malfunctions

Early Voting Sees Reports of Voter Intimidation, Machine Malfunctions

Credit Suisse reports £670m loss

Credit Suisse reports £670m loss

Swiss bank Credit Suisse reported its second quarterly loss this year after writing down the value of leveraged loans and commercial property assets.

Go To Original

The third-quarter net loss amounted to 1.26bn Swiss francs (£670m), compared with a profit of 1.3bn francs a year ago, Switzerland's second-biggest bank said. The result was in line with a preliminary estimate Credit Suisse announced last week.

Credit Suisse last week declined to join UBS AG in seeking government assistance, and instead raised 10 billion francs from investors in Qatar, Israel and Saudi Arabia to show the bank can weather the financial crisis alone.

Chief executive Brady Dougan, who has reduced risky assets and cut the capital allocated to the investment bank, said last week that markets remain ‘‘challenging.''

‘‘Credit Suisse cannot walk on water,'' Stefan-Michael Stalmann, an analyst at Dresdner Kleinwort with a ‘‘hold'' recommendation on the stock, said. ‘‘The sheer magnitude of underlying trading losses largely in September are a big set-back to management's strategy of making the investment bank a more reliable, less volatile performer.''

Credit Suisse shares have declined 32pc this year, compared with a 53 percent drop in the 69-member Bloomberg Europe Banks and Financial Services Index.

Early voting trickle quickly becoming a torrent

Early voting trickle quickly becoming a torrent

Democratic turnout high, as millions encounter long lines, faulty equipment

By Alex Johnson

Go To Original

Serenaded by their world famous marching band, almost a thousand students, faculty and administrators marched off the campus of Florida A&M University on Monday. It was not a protest march — at the head of the line was the university’s president, James Ammons.

Forty-five minutes later, they decamped on the lawn of the Leon County Courthouse in Tallahassee. And they voted.

“I feel today is a very important day in history,” said Robert Jones of Orlando, a student at the historically black college. “Hope to elect the first black president of the United States.”

Election Day isn’t until next month, but these Rattlers of FAMU have already cast their ballots in the presidential election. That’s because Florida opens it polling places and allows registered voters to do their civic duty well before Election Day.

Shortly after the FAMU contingent showed up, a second wave of student voters from Florida State University arrived en masse at the courthouse, a turnout that Ion Sancho, Leon County’s supervisor of elections, said was emblematic of overwhelming enthusiasm for early voting this year.

“Early voting is really going to set all-time records here in Leon County,” Sancho said. “I would probably say across the state, they’re going to set records, as well.”

In fact, election experts predict that up to 40 percent of the electorate will vote early in Florida, one of 31 states that let registered voters show up early and vote without restriction. Three other states and the District of Columbia allow voters to cast their ballots in person ahead of time if they have an approved excuse for not being able to make it on Election Day.

Millions of votes in the bank
Thanks to aggressive voter registration efforts by both parties and fueled by younger voters’ enthusiasm for Sen. Barack Obama, D-Ill., election experts predict that a third of the electorate will already have voted by Nov. 4, up from 15 percent in 2000 and 20 percent in 2004.

The relatively recent phenomenon of early voting — often categorized as “in-person absentee voting,” as opposed to mail-in absentee balloting — presents both opportunities and challenges for candidates and voters. And it means the familiar problems of faulty machines and frustrated voters are played out over weeks instead of hours.

By getting voters to the polls early, the campaigns of Obama and Sen. John McCain, R-Ariz., can bank millions of votes and focus their energies on other segments of the electorate.

Obama, in particular, has made early voting a cornerstone of his strategy, holding giant “Early Vote for Change” rallies urging Democrats to show up in advance. He has also blanketed Democrats and pastors in minority communities with “vote early” e-mail messages and placed ads in the backgrounds of more than a dozen popular video games.

McCain, by contrast, is relying on his firm supporters to make it to the polls on Nov. 4, Rich Beeson, political director for the Republican National Committee, told The Associated Press. Republicans are focusing their early voting efforts on first-time and swing voters, who might be discouraged by long lines on Election Day.

Partly as a result, election officials report a disproportionally high turnout among registered Democrats in early voting so far, especially in urban centers like Atlanta, Las Vegas and Houston.

Through Monday in Las Vegas, for example, early ballots were cast by 31,875 registered Democrats and 13,371 registered Republicans, the Clark County registrar said, while in Ohio, Democratic voters outnumbered Republicans by 2-to-1 on Monday. Democratic advantages were also reported in Iowa, Nevada, North Carolina and New Mexico.

How those voters actually voted will not be known until Election Day, but Alan Abramowitz, a political science professor at Emory University in Atlanta, said such numbers revealed an “enthusiasm gap,” with “Obama voters more enthusiastic than a lot of McCain supporters.”

But Abramowitz and other experts cautioned against reading too much into those numbers, because an early vote is still just one vote — the same as one cast on Election Day. They noted that Republicans were more likely to vote through the traditional absentee ballot, potentially evening out the imbalance.

In Florida, for example, the secretary of state’s office reported that Democratic voters outnumbered Republican voters by 2-to-1 on Monday, the first day of early voting. At the same time, it noted that Republicans held a 17 percentage point lead in traditional absentee ballot requests.

“The more important question is whether (early Democratic voting) will translate into higher turnout” than usual among Democrats overall, Abramowitz said.

‘Such a historic election’
Early voting was adopted in many states after the disputed 2000 election, and this year it has put down deep roots. Across the country, election officials report record-shattering early turnout.

“There is so much passion coming from both sides. This is such a historic election in so many different ways,” said Lynn Bailey, director of the Board of Elections in Richmond County, Ga.

Nearly 700,000 Georgians and 500,000 North Carolinians had already voted by Wednesday, with nearly two weeks to go, while Bruce Sherbet, elections administrator in Dallas County, Texas, predicted that early voting numbers from 2008 would swamp those of 2004.

“If it sustains and continues through the 12-day period like this, there’s not going to be anything close to compare it to,” he said.

Meanwhile, in Houston and the rest of Harris County, Texas, the turnout on Monday, the first day of early voting, was 83 percent higher that it was on the same day four years ago.

“There are many factors — from the first woman potential vice president to an African-American running for president,” Harris County Clerk Beverly B. Kaufman said. “No one will ever say that 2008 in Houston was ho hum.”

But while welcoming the show of civic interest, some election experts cautioned that early voting has potential downsides.

The problem for the candidates is that banking millions of votes in advance means those votes are locked in and cannot be swayed. That puts pressure on the campaigns to burn through their cash weeks ahead of the election, before too many votes are set in stone.

“You can’t hold your big guns right to the end,” said Paul Gronke, director of the Early Voting Information Center at Reed College in Portland, Ore. “When up to 25 or 30 percent of the electorate has already cast a ballot, it might not be wise to wait until the last minute” to try a game-changing play.

Voting early also means a voter is stuck with his or her decision, no matter what happens in the final days of the campaign.

“Once you cast that vote, there’s still two weeks or a month to go, and what happens if something eventful happens with a campaign or a candidate during that period and you change your mind?” said Craig Wilson, a political science professor at the University of Montana.

Still a few bugs in the system
Early balloting also means more opportunities for something to go wrong. In many states, long lines have led to long waits — two hours in parts of Florida, 90 minutes in Houston and Chicago and an hour in Charlotte, N.C.

And familiar problems of the past keep springing up:

  • In Florida — scene of the dispute that garbled the 2000 election — ballot-reading machines failed in Duval County, while in Miami-Dade and Broward counties, Democratic Rep. Kendrick Meek is threatening to file a lawsuit because some polling places have too few voter machines to handle the crowds.

    Meek, who said excessive waits could disenfranchise voters, compared Monday — the first day of early voting — to a churning hurricane. “Let’s consider this a Category 1 today,” he said. “By November 4, it will be a Category 5, if not 6.”

  • In Ohio, voters turned up at polling places in Wayne County this month only to find no ballots. Patty Johns, director of the county’s elections board, said they would be sent ballots in the mail.
  • In Indiana, a judge is weighing arguments in a motion to halt early voting and throw out the votes in heavily Democratic Gary, Hammond and East Chicago, where Republicans allege a procedural violation in the elections board’s vote to approve the voting locations.
  • In West Virginia, some Democratic voters in Putnam and Jackson counties complained that touch-screen machines changed their votes to Republican.
  • In Texas, voting machines failed in several locations this week. Voters in the Acres Homes area of Houston were told to go home and come back later when the machines were fixed. Meanwhile, the computer mainframe crashed under the weight of the heavy turnout in Corpus Christi and surrounding Nueces County, election officials said.

    “Here we are, the first day, again not being prepared,” said Rep. Sheila Jackson Lee, D-Texas.

    Election officials in all of the troubled jurisdictions chalked up the difficulties to first-day glitches. They promised that the problems would quickly be fixed and urged voters not to be discouraged.

    West Virginia Secretary of State Betty Ireland said the state’s touch screens were overly sensitive and needed to be recalibrated from time to time. She said voters concerned about their machines should ask poll workers to move them to another machine.

    Lester Sola, elections supervisor in Miami-Dade County, Fla., said officials “recognize that there is a concern, and we will be looking to address those concerns either with more personnel, more goodwill ambassadors and offering our voters the opportunity to cast an absentee ballot.”

  • Indiana judge rules against closing early voting sites

    Indiana judge rules against closing early voting sites

    Republican officials claimed the sites in the north-west region of the swing state violated local election rules

    Go To Original

    A Lake county, Indiana, superior court judge yesterday ordered early voting sites in heavily Democratic cities Hammond, Gary and East Chicago to remain open in a decision that could affect the presidential election in the battleground state.

    In her decision, Judge Diane Kavadias Schneider dismissed complaints from local Republican officials trying to block the sites on the grounds they violated local election rules and created a risk for voter fraud.

    Since local Republicans first sought to close the sites two weeks ago, the case has drawn attention from the presidential campaigns of both John McCain and Barack Obama because Indiana is a swing state.

    "This is one of a dozen-plus legal actions that our campaign is paying attention to," said Ben Porritt, a spokesman for the McCain-Palin campaign. "Most importantly, the goal of our campaign is to ensure that all eligible voters have an opportunity to vote, and their votes be counted. We obviously back early polling locations, as long as they are done according to state law. While we disagree with this decision, we will continue to monitor any further legal action that takes place."

    Yesterday's ruling was hailed by Democrats because it means more voters in a heavily Democratic region of Indiana have easier access to the polls. In the past, voters had to go to Crown Point, roughly 24 miles (38.6 kilometres) away from East Chicago, to cast early ballots.

    "Early voting has been a great success so far in Lake county. Thanks to Judge Kavadias Schneider's ruling today, thousands of Indiana voters had their rights protected and the opportunity granted to take part in early voting," said Jonathan Swain, the Indiana spokesman for Obama's campaign.

    "No matter which candidate or which party they are voting for, all Hoosiers who are eligible to vote deserve the right to have their voices heard in this critical election."

    Schneider was appointed by the Indiana supreme court to preside over the case brought by John B Curley, chairman of the Lake County Indiana Republican Central Committee, and Jim B Brown, a member of the Lake county board of elections, and others.

    The plaintiffs alleged that early voting sites in the three cities should not have been opened because there was no unanimous vote by the Lake county board of elections approving the locations.

    Attorneys from the other side said no unanimous vote was needed by the election board because the three locations - one in each city - are in government offices and not "satellite" voting sites. The election board must give unanimous approval for a satellite voting site. Closing the sites would disenfranchise poor and minority voters, the same attorneys said.

    "The decision is a complete victory for voters," said Jonathan Weissglass, an attorney who represented some of the groups fighting to keep the sites open. "People in Gary, Hammond and East Chicago: it's very difficult for them to get to Crown Point. There's not good public transportation. People don't have cars or time to make a trip to Crown Point."

    R Lawrence Steele, an attorney representing the plaintiffs, was not available for comment on yesterday.

    50 percent of all species could disappear within the lifetimes of people now living on Earth

    Genetically Unique Plants Matter Most in Current Mass Extinction

    Go To Original

    The sixth mass extinction of both plants and animals is underway, scientists say, warning that nearly 50 percent of all species could disappear within the lifetimes of people now living on Earth.

    Some species are more critical than others in preserving the functions of ecosystems and scientists researching grasslands around the world have found that the most valuable species are those that are genetically unique.

    "The current extinction event is due to human activity, paving the planet, creating pollution, many of the things that we are doing today," said scientist Bradley Cardinale, assistant professor of ecology, evolution and marine biology at the University of California-Santa Barbara.

    "The Earth might well lose half of its species in our lifetime," he said. "We want to know which ones deserve the highest priority for conservation."

    Cardinale and his team are attempting to determine which species must be saved. Their international study of grassland ecosystems with flowering plants, is published this week in the Proceedings of the National Academy of Sciences.

    The paper reviews 40 studies of grassland ecosystems around the world and reconstructs the evolutionary history of 177 flowering plants used in these studies by comparing the genetic makeup of the plants.

    "These 40 studies are showing the same thing for all plants around the world," said Cardinale. "This study is very robust. It includes studies of plants that are found throughout the U.S., Europe, and Asia. We can have a high degree of confidence in the results. And the results show that genetic diversity predicts whether or not species matter."

    "Given that we are losing species from ecosystems around the world, we need to know which species matter the most and which we should pour our resources into protecting," said first author Marc Cadotte, a postdoctoral fellow at the university's National Center for Ecological Analysis and Synthesis.

    Cadotte explained that the buttercup is a very unique species, evolutionarily. Losing the buttercup, where it occurs in grasslands, would have a much bigger impact on the system than losing a daisy or a sunflower, for example.

    A daisy and a sunflower are closely related species with similar genetic makeup. Each could, therefore, help fill the niche of the other, if one were to be lost, the scientists reason.

    Recent studies show that ecological systems with fewer species produce less biomass than those with more species. Less plant biomass means that less carbon dioxide is absorbed from the atmosphere and less oxygen is produced.

    So, as the biomass of plants shrinks around the globe, the composition of gases in the atmosphere that support life could be profoundly affected. There will be fewer plants for herbivorous animals to eat. Entire food chains can be disrupted, which can impact the production of crops and fisheries.

    The loss of species that are not closely related to other species in the ecosystem reduces productivity more than the loss of species with close relatives. And the more genetically distinct a species is, the more impact it has on the amount of biomass in an ecosystem.

    "Losing a very unique species may be worse than losing one with a close relative in the community," said co-author Todd Oakley, associate professor of ecology, evolution and marine biology at UC Santa Barbara. "The more evolutionary history that is represented in a plant community, the more productive it is."

    The last mass extinction near the current level took place 65 million years ago, called the Cretaceous Tertiary extinction event. Scientists believe it was the result of a meteor hitting the Earth. It is best known for the extinction of non-avian dinosaurs, but large numbers of plant species also became extinct at that time.

    Greenspan Concedes Error on Regulation

    Greenspan Concedes Error on Regulation

    Go To Original

    For years, a Congressional hearing with Alan Greenspan was a marquee event. Lawmakers doted on him as an economic sage. Markets jumped up or down depending on what he said. Politicians in both parties wanted the maestro on their side.

    But on Thursday, almost three years after stepping down as chairman of the Federal Reserve, a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending.

    “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” he told the House Committee on Oversight and Government Reform.

    Now 82, Mr. Greenspan came in for one of the harshest grillings of his life, as Democratic lawmakers asked him time and again whether he had been wrong, why he had been wrong and whether he was sorry.

    Critics, including many economists, now blame the former Fed chairman for the financial crisis that is tipping the economy into a potentially deep recession. Mr. Greenspan’s critics say that he encouraged the bubble in housing prices by keeping interest rates too low for too long and that he failed to rein in the explosive growth of risky and often fraudulent mortgage lending.

    “You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others,” said Representative Henry A. Waxman of California, chairman of the committee. “Do you feel that your ideology pushed you to make decisions that you wish you had not made?”

    Mr. Greenspan conceded: “Yes, I’ve found a flaw. I don’t know how significant or permanent it is. But I’ve been very distressed by that fact.”

    On a day that brought more bad news about rising home foreclosures and slumping employment, Mr. Greenspan refused to accept blame for the crisis but acknowledged that his belief in deregulation had been shaken.

    He noted that the immense and largely unregulated business of spreading financial risk widely, through the use of exotic financial instruments called derivatives, had gotten out of control and had added to the havoc of today’s crisis. As far back as 1994, Mr. Greenspan staunchly and successfully opposed tougher regulation on derivatives.

    But on Thursday, he agreed that the multitrillion-dollar market for credit default swaps, instruments originally created to insure bond investors against the risk of default, needed to be restrained.

    “This modern risk-management paradigm held sway for decades,” he said. “The whole intellectual edifice, however, collapsed in the summer of last year.”

    Mr. Waxman noted that the Fed chairman had been one of the nation’s leading voices for deregulation, displaying past statements in which Mr. Greenspan had argued that government regulators were no better than markets at imposing discipline.

    “Were you wrong?” Mr. Waxman asked.

    “Partially,” the former Fed chairman reluctantly answered, before trying to parse his concession as thinly as possible.

    Mr. Greenspan, celebrated as the “Maestro” in a book about him by Bob Woodward, presided over the Fed for 18 years before he stepped down in January 2006. He steered the economy through one of the longest booms in history, while also presiding over a period of declining inflation.

    But as the Fed slashed interest rates to nearly record lows from 2001 until mid-2004, housing prices climbed far faster than inflation or household income year after year. By 2004, a growing number of economists were warning that a speculative bubble in home prices and home construction was under way, which posed the risk of a housing bust.

    Mr. Greenspan brushed aside worries about a potential bubble, arguing that housing prices had never endured a nationwide decline and that a bust was highly unlikely.

    Mr. Greenspan, along with most other banking regulators in Washington, also resisted calls for tighter regulation of subprime mortgages and other high-risk exotic mortgages that allowed people to borrow far more than they could afford.

    The Federal Reserve had broad authority to prohibit deceptive lending practices under a 1994 law called the Home Owner Equity Protection Act . But it took little action during the long housing boom, and fewer than 1 percent of all mortgages were subjected to restrictions under that law.

    This year, the Fed greatly tightened its restrictions. But by that time, the subprime market as well as the market for other kinds of exotic mortgages had already been wiped out.

    Mr. Greenspan said that he had publicly warned about the “underpricing of risk” in 2005 but that he had never expected the crisis that began to sweep the entire financial system in 2007.

    “This crisis,” he told lawmakers, “has turned out to be much broader than anything I could have imagined. It has morphed from one gripped by liquidity restraints to one in which fears of insolvency are now paramount.”

    Many Republican lawmakers on the oversight committee tried to blame the mortgage meltdown on the unchecked growth of Fannie Mae and Freddie Mac, the giant government-sponsored mortgage-finance companies that were placed in a government conservatorship last month. Republicans have argued that Democratic lawmakers blocked measures to reform the companies.

    But Mr. Greenspan, who was first appointed by President Ronald Reagan, placed far more blame on the Wall Street companies that bundled subprime mortgages into pools and sold them as mortgage-backed securities. Global demand for the securities was so high, he said, that Wall Street companies pressured lenders to lower their standards and produce more “paper.”

    “The evidence strongly suggests that without the excess demand from securitizers, subprime mortgage originations (undeniably the original source of the crisis) would have been far smaller and defaults accordingly far lower,” he said.

    Despite his chagrin over the mortgage mess, the former Fed chairman proposed only one specific regulation: that companies selling mortgage-backed securities be required to hold a significant number themselves.

    “Whatever regulatory changes are made, they will pale in comparison to the change already evident in today’s markets,” he said. “Those markets for an indefinite future will be far more restrained than would any currently contemplated new regulatory regime.”

    Redistributing To The Rich

    Redistributing To The Rich

    Go To Original

    Seizing on comments Sen. Barack Obama (D-IL) made to "Joe the Plumber," Sen. John McCain (R-AZ) campaign has argued that Obama's economic policies would redistribute the wealth of hard working Americans and provide "just another government giveaway to others." "The redistribution of wealth is the last thing America needs right now. The goal is not to redistribute wealth, but to create it," McCain said during an event in Manchester, NH. But as the Tax Policy Center points out, "today's tax code is riddled with examples of government 'taking' money from one taxpayer and giving it to another." "[F]or decades, government has used the tax code for much more than raising money. These days, redistributing tax revenues are the principal way government encourages people to do what it wants and discourages them from doing what it doesn't," TPC wrote. In fact, during the last eight years, President Bush's regressive economic policies have effectively redistributed the nation's wealth to the richest Americans. According to a recent report released by the Organization for Economic Cooperation and Development (OECD), "the United States has the highest inequality and poverty in the OECD after Mexico and Turkey, and the gap has increased rapidly since 2000." Unfortunately, McCain's proposed economic policies would give even more wealth to the richest Americans, exacerbate the nation's income inequality, and further erode opportunities for social mobility.

    BUSH REDISTRIBUTED TO THE WEALTHY: An analysis by the Center for American Progress Action Fund shows that President Bush's economic policies have "redistributed wealth to the richest Americansnearly twice the rate cut for those in the middle of the income spectrum." Meanwhile, the administration's failure to raise the minimum wage coupled with its poor enforcement of federal wage and hour laws, trade agreements, and union rights further undermined the economic security of middle and lower-income Americans. Data prepared by the IRS from tax returns filed during the post-9/11 recovery (2002 to 2006) reveals that household income grew by $863 billion during the period. "The 15,000 families at the top of the income scale saw their annual incomes go from about $15 million a year to nearly $30 million," accounting for more than 25 percent of all of the growth in income for the entire country. The remaining 1.7 million families in the top 1 percent of households accounted for nearly another 50 percent. But while the "top 10 percent of families accounted for 95.3 percent of the nation's income growthto a little less than $30,700." and left the majority with stagnating wages and declining household incomes." Looking at the effects of the first three Bush tax cuts, the Congressional Budget Office concluded that "the percentage by which the effective tax rate was cut for high-income families was between 2002 and 2006," the average real income for families in the bottom 90 percent of households increased by about $300

    MCCAIN WOULD DOUBLE DOWN: McCain claims that "in this country, we believe in spreading opportunity." But his Bush-like economic policies would only further America's income inequality. In fact, by extending Bush's tax cuts to the wealthy and proposing $175 billion in tax breaks to America's largest corporations, McCain's regressive economic agenda would redistribute wealth to the richest Americans during a period of stagnating wages and growing economic anxiety. The bottom 60 percent of taxpayers would see only 12 percent of the benefit from McCain's plan to extend Bush's tax cuts, while over 100 million middle class households would receive nothing from McCain's proposal. Moreover, even though corporate profits increased by an estimated 66 percent between 2000 and 2006, McCain's plan to slash the corporate tax rate to 25 percent from 35 percent would give even more benefits to America's richest corporations. According to a Center for American Progress Action Fund analysis of McCain's plan, the 200 largest companies stand to gain $45 billion a year from McCain's proposal. Highly profitable industries like energy companies and merchandising and retailing companies would receive billions from additional tax breaks.

    MOBILITY THREATENED: America's income concentration is at its highest level since 1928. According to the OECD report, "the richest 10 percent earn an average of US$93,000 -- the highest level in the OECD. The poorest 10 percent earn an average of US$5,800 -- about 20 percent lower than the OECD average." But income inequality is cause for even more concern than the simple numbers suggest, since it also has an effect on mobility. In fact, just "7 percent of children born to parents in the bottom wealth quintile make it to the top quintile in adulthood," and "36 percent of children born to parents in the bottom wealth quintile remain in the bottom as adults." As OECD Secretary General Angel Gurria has pointed out, "greater income inequality stifles upward mobility between generations, making it harder for talented and hard-working people to get the rewards they deserve."