Wednesday, February 25, 2009

Tech Layoffs Jump 75% in 2008

Tech Layoffs Jump 75% in 2008

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According to a recent report, layoffs in the US technology sector rose 74.2% in 2008 as compared with the previous year. The industry was battered by an unrelenting wave of layoffs.

186,955 jobs in the telecommunications, computer, and electronics sectors were slashed in 2008 according to the report by outplacement consulting firm Challenger, Gray & Christmas.

The rate of increase in the layoffs is frightening as the bulk of the job cuts in 2008 (Nearly 75%), cam in the last six months of the year. The total unemployed techies are at a level not seen since 2003. In the Silicon Valley, for just the month of December, the unemployment rate rose to 7.7 percent.

AT&T, for example, announced 12,000 job cuts last year, while Sun Microsystems unveiled plans to cut 6,000 positions, and Xerox 3,000 jobs.

Jobs cuts for 2009 are exptected to be even worse.

Why Is Geithner Continuing Paulson's Policy of Violating the Law?

Why Is Geithner Continuing Paulson's Policy of Violating the Law?

Why Is Geithner Continuing Paulson's Policy of Violating the Law?

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Whatever happened to the law (Title 12, Sec. 1831o) mandating that banking regulators take "prompt corrective action" to resolve any troubled bank? The law mandates that the administration place troubled banks, well before they become insolvent, in receivership, appoint competent managers, and restrain senior executive compensation (i.e., no bonuses and no raises may be paid to them). The law does not provide that the taxpayers are to bail out troubled banks. Treasury Secretary Paulson and other senior Bush financial regulators flouted the law. (The Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) are both bureaus within Treasury.) The Bush administration wanted to cover up the depth of the financial crisis that its policies had caused.

Mr. Geithner, as President of the Federal Reserve Bank of New York since October 2003, was one of those senior regulators who failed to take any effective regulatory action to prevent the crisis, but instead covered up its depth. He was supposed to regulate many of the largest bank holding companies in the United States. Far too many of these institutions are now deeply insolvent because the banks they own are deeply insolvent. The law mandated that Geithner and his colleagues place troubled banks in receivership long before they became insolvent. Why are the banking regulators, particularly Treasury Secretary Geithner, continuing to disobey the law?

We need a Pecora investigation

We can understand now why the administration and so many committee chairs are virulently opposed to the single most essential step we need to take to diminish future crises -- a modern Pecora investigation. Pecora was the prosecutor hired by the Senate banking committee to investigate the misconduct that helped cause the Great Depression. You must vigilantly study past failures to learn causation and to enact remedies. If we were dealing with a crisis of airplane crashes and someone opposed studying the causes of the failures we would (correctly) label him a lunatic. Congress largely stopped conducting meaningful oversight hearings of financial regulation during the Bush administration. The results were horrific. It appears that only intense public pressure will suffice to overcome congressional and administration resistance to a Pecora investigation. I hope readers will add their voices to this call.

The financial cost of Paulson's and Geithner's flouting of the law

Paulson and Geithner's refusal to comply with the law has already cost the taxpayers scores of billions of dollars in unnecessary costs. Geithner indicated Friday, February 20 that he would continue to flout the law. If he is allowed to do so it will add hundreds of billions of dollars to the eventual cost to taxpayers. The amount of taxpayer money wasted due to Paulson and Geithner's violations of the prompt corrective action law will exceed the total present value cost of resolving the S&L debacle, $150 billion ($1993). The waste will take the form of the U.S. taxpayers subsidizing the officers, shareholders and subordinated debt holders of failed banks -- who are disproportionately wealthy, frequently profited from the accounting fraud that caused the banks to fail, and are often foreign. The prompt corrective action law was passed in large part to prevent such a subsidy.

The S&L debacle led to a new financial regulatory system premised on "prompt corrective action" (PCA). Future posts will explain more fully why this system failed, but it is remarkable that the system, the phrase, and the law have disappeared from the coverage of the banking crises. PCA's premise was that regulatory discretion led to cover-ups of failed banks and excessive losses to the taxpayers. The PCA solution was to require higher capital requirements and to mandate that the regulators take over troubled banks before they deteriorated to the point that the failure would impose a cost on the Federal Deposit Insurance Corporation (FDIC). PCA also recognized that failing bankers had perverse incentives to "live large" and cause larger losses to the FDIC and taxpayers. PCA's answer was to mandate that the regulators stop these abuses by, for example, strictly limiting executive compensation and forbidding payments on subordinated debt.

PCA's purpose is "to resolve... problems... at the least possible long-term cost to the [FDIC]." That means the least possible cost to taxpayers. Secretary Geithner's priority is protecting private shareholders:

We have a financial system that is run by private shareholders, managed by private institutions, and we'd like to do our best to preserve that system....

We have a law that says when banks are at or near insolvency private shareholders should be eliminated unless we can arrange a transaction that has no cost to the FDIC. Receiverships produce "private institutions." The FDIC manages the failed institution only long enough to get it in shape to be sold at the least cost to the taxpayers. Receiverships end unnecessary bailouts of private shareholders, reducing the cost to the FDIC, as the law requires. Receiverships place banks back in the hands of new shareholders. Geithner has so twisted the framing of this issue that he is warning that a cheaper, more effective means of resolving failed banks used under President Reagan is some alien form of socialism that President Obama must slay before it destroys capitalism. Geithner is channeling Rove when he conflates receiverships with "nationalization."

Secretaries Paulson and Geithner subverted the PCA law by allowing failed banks to engage in massive accounting fraud (which also means they are engaged in securities fraud). Treasury is telling the world that resolving the failed banks will require roughly $2 trillion dollars. That has to mean that the failed banks are insolvent by roughly $2 trillion. The failed banks, however, are reporting that they are not simply solvent, but "well capitalized." The regulators flout PCA by permitting this massive accounting and securities fraud. (Note that by countenancing this fraud they make it extremely difficult to ever prosecute these elite white-collar frauds.)

Judge Questions Law Giving Telecoms Immunity

Judge questions law giving telecoms immunity

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A federal judge in San Francisco is raising questions about the constitutionality of a law designed to dismiss suits against telecommunications companies accused of cooperating with government wiretapping.

Chief U.S. District Judge Vaughn Walker has asked President Obama's Justice Department to present its views by Wednesday on whether the law gives the attorney general too much power to decide whether a company is immune from lawsuits. Obama supported the measure as a senator when Congress approved it last year.

Department spokesman Charles Miller declined to discuss the administration's response before Wednesday's filing. But Obama's vote for the bill last summer, and statements by Attorney General Eric Holder at his confirmation hearing last month, indicate the department will defend the law.

Walker is presiding over lawsuits in which telecommunications companies' customers have accused the firms of illegally sharing their telephone and e-mail records with federal agents.

Then-President George W. Bush acknowledged in 2005 that he had ordered the National Security Agency to intercept messages between Americans and suspected foreign terrorists without approval from the courts or Congress. His administration refused to discuss telecommunications companies' role in the wiretapping program.

After Walker allowed AT&T customers to proceed with their lawsuit, Bush won congressional approval last year of a law that authorized the surveillance program and sought to shield the companies from legal claims.

Under the law, a judge is required to dismiss a wiretapping suit against a telecommunications firm if the attorney general explains the firm's role to the judge in a confidential statement. The government would say either that the firm had no role or that it participated based on assurances that the president had approved the eavesdropping to protect the nation from terrorism.

Bush's attorney general, Michael Mukasey, filed a statement with Walker seeking dismissal of the AT&T suit. Holder, questioned at his Senate confirmation hearing last month, said he would reaffirm Mukasey's statement and defend the law unless he had "compelling reasons" to do otherwise.

In a Feb. 11 order, Walker said the law appeared to set no criteria for the attorney general to use in deciding whether to seek immunity for a company.

Walker asked the opposing sides in the AT&T case to submit arguments by Wednesday on whether the law violates a 1944 Supreme Court ruling that set constitutional limits on laws granting power to the president.

The point of the 1944 ruling, said the phone customers' lawyer, Cindy Cohn of the Electronic Frontier Foundation, was that "Congress is supposed to write the laws. Congress isn't supposed to abdicate the ability to write those laws to the president."

The Appearance Of Strength

The Appearance Of Strength

Posted By Jim Sinclair

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The outrageous machinations of the market place, as Trader Dan has described to you this afternoon, are a combination of hedge funds attacking by shorting the middle European low cap currencies, the Cando and the Down Unders, which by mirror reflection display an image of temporary dollar strength.

One of the tools of a short against a country’s currency is to work the Default Derivative Index violently upwards on the bonds of that country, thereby making the debt of the country look terminal.

All of this is feeding into the EUR/USD cross rate. Markets in securities and general commodities are in turn raked by the emotional fallout of paper implosions in the currency markets. As the hedgie sharks eat each other only a few fat hedgie sharks remain. The mega wealth they represent will in time turn their big guns broadside to the US dollar and long side to gold, producing levels on both that few consider possible, even today. It must happen because already the algorithm of gold is beginning to demand it.

As the hedgies go for cover in the middle European currency units, the momentum of the dollar will roll over, triggering the early dollar algorithm to magnetize money to the short side.

The same fund right now raping the middle European currencies will eventually dig a grave for the buck.

World flows of money know no human feelings, but like the demons at their heart, spread death and destruction wherever they flow. It is like a massive volcanic eruption poisoning the air and water, bringing with it a planetary malaise.

Remember that JP Morgan had to get Jesse Livermore to agree to stop raiding stocks, commodities and currencies short before Morgan could rescue the US banking system from a credit lock up.

I may be the only one who knows why the world is ending in the equity markets and why no 1930 style rally with staying power can occur until certain procedural trading matters are worked out

Hell has broken lose. It will be more than two generations before this plague of greed is overcome. This is not a short-term aberration. It is a cataclysm brought about by the uncontrolled greed of an army of sociopaths.

Gold is the only safe haven because unlike paper money it is impossible to create twice as much with the strike of a bailout plan pen.

Gold is your only insurance.

Gold is the difference from being the cause of your future or a victim of this colossal theft of unprecedented proportions. Be a survivor, and save yourself for you and your families sake.


Jim Sinclair’s Commentary

The South Koreans central bank knows exactly what is going on as this article shows. Please read it as it is a clear road to understanding what I have been trying so hard to enlighten you on regarding the reasoning for an appearance of dollar strength that is limited in time.

" In a warning to hedge fund traders who may try to take advantage of a currency shortage, the government threatened to intervene in currency markets to support the won against perceived manipulation. Region wide expansion of currency swap arrangements denominated in dollars from 80B to 120B is being pursued at this week’s ASEAN+3 Finance Minister’s Conference."

Here also is an example of the technical dollar flows that have nothing to do with the underlying dollar fundamentals which means there will be an eventual collapse.

Did Minerva Actually Do the Government a Favor
23 FEBRUARY 2009

Though it may not have been his intention, Minerva may have actually done the government a favor with his post late last year predicting a "Yellow Rabbit" crisis during late February to March of this year.

It was this prediction that put him in the legal cross-hairs of Lee Myungbak’s government. His since fired finance minister, Kang Mangsoo, publicly responded and even offered to meet one on one. When a man named Park was arrested, jailed without bond and indicted for being Minerva, the original charge was related to Minerva’s claim that the government had told currency traders to stop selling won and buying dollars on December 27th. Nevertheless, it was the March crisis prediction that really set the government on edge.

The problem is that the Korean banks and other financial institutions borrowed a lot of money denominated in foreign currencies, particularly the Japanese yen and the American dollar. A lot of that money is coming due over the next month or so and Minerva’s fear was that Japan banks, most of which close their books at the end of March, would not want to continue financing Korean financial institutions. This situation would be exacerbated by Japanese hedge funds (or Yellow Rabbits) betting aggressively against the won and foreign indirect investment money (money invested in the bond and stock markets) flowing out of Korea.

The Korean government’s responses to Minerva’s post were two-fold. First, they set out to find and arrest him, a strategy which made them look foolish at best and repressively anti-democratic at worst. Their second strategy, however, was to proactively take steps to prevent a liquidity crisis. Lee’s government negotiated currency swap agreements and this week announced an open ended expansion designed to prevent the very crisis Minerva predicted. In a warning to hedge fund traders who may try to take advantage of a currency shortage, the government threatened to intervene in currency markets to support the won against perceived manipulation. Region wide expansion of currency swap arrangements denominated in dollars from 80B to 120B is being pursued at this week’s ASEAN+3 Finance Minister’s Conference.

Personally, I don’t see a major collapse this March, primarily because it’s become so widely known and the Korean government has taken the necessary steps. Also, the Japanese are hurting as bad as anybody with the overly high yen killing Japan’s economy. Real exports fell at an annualized rate of 45% in the fourth quarter of 2008, the last quarter for which we have data. Industrial production has fallen 50% on an annualized rate since September. Thus, the Japanese banks and government have just as strong an incentive to help Korea through whatever liquidity issues emerge as Korea does, because they would be badly hurt by any further unwinding of the yen carry-trade and escalation of the yen.

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Hillary Clinton presses China to keep buying US debt

Hillary Clinton presses China to keep buying US debt

By Bill Van Auken

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US Secretary of State Hillary Clinton concluded her weeklong Asian tour Sunday with an explicit appeal to the Beijing government to keep up its purchases of US treasury notes or risk the onset of an even deeper economic crisis engulfing China and the US itself.

On her first overseas trip since being tapped by President Barack Obama, her former rival for the Democratic nomination, as his chief foreign policy representative, Clinton assumed the role of an official high-pressure bond saleswoman.

While the tour also took her to Japan, South Korea and Indonesia, the focus was clearly on economic relations between the US and China.

Her aim was to convince China to keep investing its foreign exchange reserves in US treasury securities in order to help finance the bailout of failing US banks and pay for the $787 billion US stimulus package. The US treasury has indicated it must raise nearly $500 billion in the first quarter of this year alone.

In an interview on China's Dragon TV just before concluding her trip and returning to Washington Sunday, Clinton warned that if the US economy collapsed China would pay a steep price as well. "It would not be in China's interest if we were unable to get our economy moving," she told her interviewer.

"Our economies are so intertwined," she said on the talk show. "The Chinese know that in order to start exporting again to its biggest market ... the United States has to take some drastic measures with the stimulus package. We have to incur more debt."

Clinton added, "We are truly going to rise or fall together. By continuing to support American treasury instruments, the Chinese are recognizing our interconnection."

While in her interview Clinton stressed that US treasury bonds are "a good investment, a safe investment," at a joint press conference the day before, China's foreign minister, Yang Jiechi, dodged a question as to whether Beijing would continue buying the US notes, saying only that China would seek safe, high-value and liquid investments for its foreign currency reserves, which at $1.95 trillion are the world's largest.

The Chinese government's policy of buying up US debt has come under increasing criticism from economists within the country. Beijing already holds approximately $700 billion dollars in US treasury bonds, and the critics argue that its exposure is too great and too dangerous given the deep economic crisis in the US and the threat of a dollar depreciation slashing the value of these bonds.

"The rapidly expanding national debt of the US will affect the credit rating for US Treasury bonds," He Jun, a financial analyst, wrote in China Business News. "US Treasury bonds may become hard pressed to keep their AAA rating."

He continued: "The US Treasury bond bubble is ballooning and is set to burst. Global investors are keeping a close eye on the mounting risks, but few expect the bubble to explode soon. They are waiting for the best time to dump the bonds. Many of them, however, think that it will be too late to leave the game when China and Japan decide to stop buying or begin selling the US Treasury bonds. China's financial security is banded tightly with US Treasury bonds, which are fast becoming a risky option."

Su Chang, a Beijing-based economist with the CEBM consulting group, spelled out China's dilemma to the AFP news agency: "If it ceased to buy US treasuries, the value of existing holdings of dollar-denominated assets would drop sharply," he said. "(But) if China continues to buy them, it needs to worry about the possible depreciation of the dollar in future."

Similarly, Yu Zuyao, an economist at the Chinese Academy of Social Sciences, a government think tank, told the Xinhua news agency, "To rescue the ailing US economy by increasing government borrowing will create a record-high federal deficit. This can further lead to catastrophic consequences such as serious inflation and US dollar depreciation."

Meanwhile, with some 26 million migrant workers having lost their jobs and 670,000 businesses having shut down because of collapsing export markets for Chinese-made electronics, toys, apparel and other consumer items, there is growing unrest and increasing popular demand that the money be spent at home to alleviate deepening social misery.

China has launched its own $600 billion stimulus package which it must pay for under conditions of sharply decreased tax revenues.

While an 8.8 percent economic growth rate is needed just to generate sufficient jobs for the 24 million new workers who enter the Chinese labor market each year, latest forecasts for 2009 project 5.5 percent growth or worse—down from 11.9 percent in 2007.

Increasingly, government officials are warning that the economic crisis may generate intense social upheavals. According to the People's Daily, Sun Chunlan, the vice chair of the government-controlled All-China Federation of Trade Unions, warned union bureaucrats and local government officials against the threat posed by mounting unemployment. "Be on guard for hostile forces from both home and abroad that use the problems that businesses are facing to infiltrate and undermine the migrant workforce," she said.

Clinton made reference to the deepening jobs crisis while defending herself against criticism from human rights groups.

"When you think about the drastic rise in unemployment in China, many would argue that that's a human rights issue," she declared. "There's going to be a lot of suffering that will come from that."

The US secretary of state deliberately soft-peddled Washington's habitual criticism of the Chinese regime's human rights record, insisting that such issues "can't interfere with the global economic crisis."

The election of Obama had initially triggered fears in Beijing that the new Democratic administration could pursue a more hard-line policy towards China. During the 2008 election campaign, Clinton herself had argued that China's heavy investment in US debt posed a threat to national security, and she called on Bush to boycott the opening of the Olympics in Beijing to protest China's policy in Tibet and its human rights record.

Yet there was no public criticism from Clinton, even as it was reported that Chinese security forces were placing a number of dissidents in detention or under house arrest for the duration of her visit.

Also absent was any repeat of the recent charges of currency manipulation, voiced less than a month ago by Timothy Geithner during his confirmation hearings as US treasury secretary. Despite this discrete silence on the part of Washington, trade tensions are continuing to mount.

On Monday, just after Clinton left China, a top official in the country's steel industry denounced the "Buy American" provision introduced into the US stimulus package as a violation of rules set by the World Trade Organization. "Such a clause violates the rules of the World Trade Organization," Luo Bingsheng, vice-chairman of China Iron and Steel Association, told China Daily. "It is an act of discrimination against steel products not from only China but other economies, such as Japan, South Korea and Europe."

Despite the evident attempts by Clinton to subordinate all other issues to securing Beijing's agreement to continue purchasing US debt, the objective crisis is rapidly undermining the entire debt-recycling arrangement.

China's role in this process stems from its emergence over the past three decades as the principal cheap-labor platform for corporations from around the world, creating elevated profit rates for them and substantial exchange surpluses for China itself. By recycling its export earnings back into the US, China helped finance the huge US trade and budget deficits, while allowing the maintenance of low interest rates that fueled the housing bubble as well as debt-driven consumption in the US that ensured a market for Chinese-made goods.

The global economic crisis, however, means that far fewer dollars are flowing into China that can then be recycled. Export earnings figures for last month fell by 18 percent compared to a year ago. Even more ominous, imports, much of which consist of parts and materials for manufacturing, plummeted by 43 percent, a figure that foreshadows even steeper declines still to come.

Obama outlines policy of austerity at budget summit

Obama outlines policy of austerity at budget summit

By Tom Eley
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In advance of his address to Congress on Tuesday and the release of his federal budget on Thursday, President Barack Obama on Monday hosted a White House Federal Budget Summit to launch a campaign for "fiscal responsibility."

While largely a public relations event, the gathering underscored the right-wing character of the new administration's policies. Obama's opening remarks, taken together with those delivered by other speakers, indicated that his administration will seek to reduce spending on major entitlement programs such as Social Security, Medicare and Medicaid, upon which tens of millions of Americans depend for retirement and health care.

Social Security is the federal retirement insurance system in the US based on the payroll contributions of current workers. Medicare provides health insurance to the elderly and Medicaid provides health assistance to the poor.

Though left unstated, resources drained from these and other social programs will be redirected to the coffers of the financial aristocracy. Underscoring the hypocrisy of Obama's calls for "shared sacrifice" and "living within our means," that very morning the Treasury Department and the Federal Reserve Board issued a statement reassuring Wall Street of the government's open-ended commitment to bailing out the banks and major financial firms and keeping them in private hands.

In his address, Obama announced a goal of cutting the federal deficit, currently at over $1.3 trillion, in half by the end of his first term to $530 billion. Considering the enormous outlays his administration has already made to Wall Street and its promise to carry on "the global war on terror," this can only mean massive cuts to social spending.

Obama's four-year budget plan is based on a best-case scenario that envisions savings generated largely from improvements in government efficiency and a reduction of expenditures on the war in Iraq. The notion that finances will be saved on the Iraq war has been publicly thrown into doubt by statements from members of the military brass contradicting Obama's proposals for a rapid troop drawdown. More importantly, his proposals do not appear to take into account the rapid increase in spending that will inevitably accompany his escalation of hostilities in Afghanistan and Pakistan.

While the speakers at the summit who preceded Obama—Peter Orszag, director of the Office of Management and Budget; Robert Greenstein, director of the Center on Budget and Policy Priorities, a liberal Democratic think tank; and Mark Zandi, chief economist at Moody's—emphasized the need to limit spending on health care, they said nothing about the trillions handed out to the financial industry nor the enormous cost of military spending and the wars in Iraq and Central Asia, which at nearly $700 billion in 2008 nearly doubled spending on Medicare.

That the event was designed to conciliate the Republican right was indicated by the presence of leading congressional Republicans and Zandi, who was a top economic advisor to defeated 2008 Republican presidential candidate John McCain. Zandi was given prominence as the event's first speaker. Also in attendance were union leaders, promising the labor bureaucracy's political support for cuts in social spending.

Greenstein argued that "the increases projected in federal spending in coming decades as a share of the economy are due entirely to the projected growth in Medicare, Medicaid and Social Security." Among these "problems," Greenstein emphasized Medicare costs.

Likewise Orszag, who addressed himself "to my fellow budget hawks in this room and in the rest of the country," emphasized that "health care reform is entitlement reform. The path to fiscal responsibility must run directly through health care."

After the speeches, the conference's 120 attendees entered discussions in various "breakout groups" moderated by administration officials. Upon completion of these sessions, the entire group reconvened and Obama took questions. He called on McCain to raise the first question.

Among the topics discussed in the breakout sessions was Social Security. Social Security has long been a target of Wall Street, which seeks access to the financial resources allocated to the retirement savings program created during President Franklin Roosevelt's New Deal in response to the Great Depression. In spite of claims that the program is or will soon be insolvent, Social Security has run large surpluses for decades, from which the federal government has borrowed to fund tax cuts for the wealthy and military spending.

The creation of private Social Security accounts invested in Wall Street has become a political impossibility given the financial collapse. Orszag has long advocated a different sort of solution, co-authoring a book in 2004 called Saving Social Security: A Balanced Approach, in which he advocated a combination of payroll and "benefits adjustments"—i.e., cuts in social security payments to retirees.

Beyond the ominous warnings of cuts to entitlements and vague reference to rooting out "inefficiency" in spending, there was only one specific policy proposal made. Obama said that he would seek to reinstate budgetary "pay-as-you-go" rules previously instituted during the Clinton administration. Significantly, Obama characterized the measure as "insist[ing] upon any spending increases being offset by spending cuts from elsewhere in the federal budget," omitting any reference to tax increases.

The statement issued earlier by the Treasury and the Federal Reserve revealed the class interests that underlie the Obama administration's campaign for "fiscal responsibility." It announced a change in the terms of taxpayer handouts to the banks, retroactive as well as going forward, that will relieve the financial firms of interest payments and allow them to voluntarily convert government-held preferred stock to common stock in order to bolster their balance sheets, while assuring the banks that the government will protect their shareholders and avoid nationalizing them.

"The US government stands firmly behind the banking system [and] will ensure that banks have the capital and liquidity they need," the statement read. It concluded that "the strong presumption of the Capital Assistance Program is that banks should remain in private hands."

Since the onset of the financial crisis, economists estimate that the government has allocated somewhere between $7 trillion and $9 trillion to the big financial institutions in the form of direct cash infusions, low-cost loans, guarantees of bad debt and other subsidies. In comparison, the total federal budget for 2008 was $2.9 trillion, of which approximately $1.2 trillion was allocated to Social Security, Medicare and Medicaid.

Obama’s Afghan “surge” sows seeds of new wars

Obama’s Afghan “surge” sows seeds of new wars

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US imperialism is set on a course to expand and intensify the Afghan War—vastly increasing the number of troops deployed to Afghanistan and extending the war into neighboring Pakistan.

The Obama administration's Afghan troop "surge" and the ensuing ratcheting up of violence will have catastrophic consequences for the Afghani and Pakistani peoples. It adds a new, explosive dynamic to the decades-old geopolitical rivalry between India and Pakistan and will intensify the great power competition for control of oil-rich Central Asia, sowing the seeds for even larger and more destructive wars.

President Barack Obama announced last week the deployment of a further 17,000 US troops to Afghanistan, increasing US troop strength in the impoverished Central Asian state by almost 40 percent. At Washington's urging, the Afghan government has begun arming tribal groups, copying a tactic the Pentagon employed in Iraq.

Since last August, the US has carried out 38 missile strikes inside Pakistan, the two most recent coming within days of a visit to Pakistan by Richard Holbrooke, Obama's special envoy to Afghanistan and Pakistan. According to an article in last Saturday's New York Times the two latest air strikes represented a change in US policy, bringing it even more directly into Pakistan's internal politics. For the first time the US targeted Islamist militia who have not been involved in the Afghan insurgency.

The Times has also revealed that US Special Forces are carrying out covert land operations inside Pakistan and that since last summer 70 US military personnel have been deployed to Pakistan to train Pakistani soldiers and paratroopers in counter-insurgency warfare.

It has become a veritable mantra of the Obama administration and US geo-political think tanks that suppressing Taliban "safe-havens" in Pakistan is pivotal to stamping out the anti-US insurgency in Afghanistan and that this requires that Islamabad "do more."

Under pressure from Washington, the Pakistani military and government have for years been conducting offensive operations in the traditionally autonomous Federally Administered Tribal Areas (FATA), strafing villages, "disappearing" alleged opponents of the US occupation of Afghanistan, and imposing colonial-style collective punishments on "uncooperative" tribes. Over the past six months these military operations have been expanded. Earlier this month, the United Nations refugee agency said the fighting has displaced 450,000 people in northwest Pakistan and it fears the total will reach 600,000 in a matter of weeks. Holbrooke himself told PBS television that he had seen "flattened villages" when touring FATA by air. But Washington is adamant that its Pakistani allies must be even more ruthless, even if such action further stokes popular anger against the government and threatens to divide the military, many of whose recruits are drawn from Pakistan's Pashtun community. The Pashtuns have borne the brunt of the US occupation of Afghanistan and the Pakistani government's drive to assert its authority in FATA.

The New York Times and other liberal supporters of the Obama administration have promoted the Afghan war as the so-called "good war,' in contrast with the Iraq war (which the Times nonetheless also enthusiastically supported.) In fact, the two wars are of a piece. Both have been waged with the aim of imposing US hegemony in regions where there are vast reserves of oil and thereby securing US global predominance, under conditions where the US's economic power has been vastly eroded.

The Afghani and Pakistani peoples have already paid a horrific price for Washington's and Wall Street's predatory ambitions. Dating back to the early 1950s, the Pakistani military has served as a tool of US geopolitical strategy and Washington, in turn, has served as the bulwark of a succession of right-wing military dictatorships, including that of George W. Bush's "friend" and "indispensable ally in the war on terror," General Pervez Musharraf.

The current US intervention in Afghanistan is the culmination of three decades of intrigue and subversion, which first saw the US arm Islamic guerrillas, in order to destabilize a pro-Soviet government in Kabul and draw the Soviet Union into a disastrous land war, and later, in the name of fighting "Islamist terrorism," occupy Afghanistan and install a corrupt and violent puppet government.

The intensification of the war in Afghanistan will only further destabilize the entire region. Pakistan deeply resents Washington's forging of a "global, strategic partnership" with India. With the aim of building up India as a counterweight to a rising China, the Bush administration said that it wanted to help India become a "world power," and in way of proof, offered New Delhi a civilian nuclear treaty that effectively ended the embargo on nuclear trade with India, allowing it to focus its indigenous nuclear program on the development of its nuclear arsenal.

Islamabad charges that India, with the US's blessing, has greatly increased its influence in Afghanistan since 2001. Indeed, India has lavished aid on the Afghan government of Hamid Karzai and, according to a recent report in the news magazine India Today, Indian strategists view Afghanistan as "a strategic pivot for India... They believe that in case Islamabad cannot be disciplined through diplomatic means, Afghanistan could prove to be a launching pad for action against the Afghan border."

The Indian elite, meanwhile, resents Pakistan's pivotal role in the Afghan war—more than 80 percent of supplies for US forces in Afghanistan are transported through Pakistan—and fear that the Obama administration's focus on the Afghan war is causing it to attach less importance on ties with India than did Bush.

A key reason India took such a bellicose, anti-Pakistan stance following last November's terrorist atrocity in Mumbai—labeling Pakistan the center of world terrorism—was to preempt any move by Washington to become more involved in negotiating an end to the Indo-Pakistani dispute over Kashmir. During the presidential election campaign, Obama and several of his aides said the US should take up the Kashmir question, with the suggestion that assisting Islamabad in wrenching concessions from India could be a quid pro quo for Pakistan doing Washington's bidding in the Afghan war.

India's Hindu chauvinist right and sections of its military establishment complain that while the US mounts military strikes in Pakistan and gave Israel carte blanche to pummel Gaza, it demands that India take no action against Kashmiri insurgents in Pakistan, so as not to disrupt the war in Afghanistan. "Let us not forget," former Indian Foreign Minister Jawant Singh told Outlook magazine, "that the Americans are caught in a bind. They have destabilized the region and are trying to retrieve something for themselves."

No less incendiary will be the impact of the increased US intervention on the broader geopolitical equation in Eurasia. Both Russia and China view limiting US influence in Central Asia to be imperative for their long-term military and economic interests.

China fears US encirclement, as Washington seeks to add India to its longstanding Japanese-anchored system of Pacific Rim allies, and Beijing views Central Asia as a big part of the solution to its burgeoning energy needs. For Russia, Central Asia is an historic area of dominance. Moreover, limiting US access to the region's oil and natural gas resources greatly strengthens Russia's attempt to use its own vast energy reserves as a source of geopolitical power.

Russia has been particularly active in respect to Afghanistan. To the shock and dismay of Washington, Kyrgyzstan recently announced that US forces must vacate the Manus Air Base within six months. The announcement came shortly after Moscow announced a substantial aid package to Kyrgyzstan.

Russia has offered to allow some US and NATO supplies to reach Afghanistan by passing through its territory. But its intention is clearly to trade access for US concessions, including over the positioning of US antiballistic missiles in Eastern Europe. And in what is a direct challenge to NATO's extension of its sphere of operations into Central Asia, the Russian-led Collective Security Treaty Organization recently announced it was setting up a rapid deployment force to counter terrorism and other threats to "stability" in the Caucasus and Central Asia.

Washington is desperate to secure additional supply lines to Afghanistan, because insurgents in Pakistan have been highly effective in disrupting the main line that passes through the northwest tribal areas of Pakistan, and the "surge" will require a vast increase in shipments of weapons, oil and food.

Iran, for its part, is likely to see the increased US presence in Afghanistan as a threat, but also as a potential opportunity to bargain for a new modus vivendi with Washington. (India recently finished building a highway to connect Kabul to the Iranian border, thereby opening the possibility for Iran to serve as an alternate US-NATO supply route.)

The explosive geopolitical tensions that are being stoked by the US drive to extend its reach into Central Asia were starkly revealed in last August's eruption of the Russo-Georgian war.

The development of a global depression will only intensify the great power struggle for markets, resources and geopolitical advantage. Already, government are turning to beggar-thy-neighbor economic policies.

War will not be averted by appealing to one or another reactionary national bourgeois clique or, for that matter, to the United Nations. It only serves as clearing house for the mercenary deals made between rival capitalist nation states. In the case of Afghanistan, the UN has given its imprimatur to the US occupation.

U.S. Military Preparing for “Violent, Strategic Dislocation Inside the United States”

Bad News From America’s Top Spy

By Chris Hedges

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We have a remarkable ability to create our own monsters. A few decades of meddling in the Middle East with our Israeli doppelgänger and we get Hezbollah, Hamas, al-Qaida, the Iraqi resistance movement and a resurgent Taliban. Now we trash the world economy and destroy the ecosystem and sit back to watch our handiwork. Hints of our brave new world seeped out Thursday when Washington’s new director of national intelligence, retired Adm. Dennis Blair, testified before the Senate Intelligence Committee. He warned that the deepening economic crisis posed perhaps our gravest threat to stability and national security. It could trigger, he said, a return to the “violent extremism” of the 1920s and 1930s.

It turns out that Wall Street, rather than Islamic jihad, has produced our most dangerous terrorists. You wouldn’t know this from the Obama administration, which seems hellbent on draining the blood out of the body politic and transfusing it into the corpse of our financial system. But by the time Barack Obama is done all we will be left with is a corpse—a corpse and no blood. And then what? We will see accelerated plant and retail closures, inflation, an epidemic of bankruptcies, new rounds of foreclosures, bread lines, unemployment surpassing the levels of the Great Depression and, as Blair fears, social upheaval.

The United Nations’ International Labor Organization estimates that some 50 million workers will lose their jobs worldwide this year. The collapse has already seen 3.6 million lost jobs in the United States. The International Monetary Fund’s prediction for global economic growth in 2009 is 0.5 percent—the worst since World War II. There are 2.3 million properties in the United States that received a default notice or were repossessed last year. And this number is set to rise in 2009, especially as vacant commercial real estate begins to be foreclosed. About 20,000 major global banks collapsed, were sold or were nationalized in 2008. There are an estimated 62,000 U.S. companies expected to shut down this year. Unemployment, when you add people no longer looking for jobs and part-time workers who cannot find full-time employment, is close to 14 percent.

And we have few tools left to dig our way out. The manufacturing sector in the United States has been destroyed by globalization. Consumers, thanks to credit card companies and easy lines of credit, are $14 trillion in debt. The government has pledged trillions toward the crisis, most of it borrowed or printed in the form of new money. It is borrowing trillions more to fund our wars in Afghanistan and Iraq. And no one states the obvious: We will never be able to pay these loans back. We are supposed to somehow spend our way out of the crisis and maintain our imperial project on credit. Let our kids worry about it. There is no coherent and realistic plan, one built around our severe limitations, to stanch the bleeding or ameliorate the mounting deprivations we will suffer as citizens. Contrast this with the national security state’s strategies to crush potential civil unrest and you get a glimpse of the future. It doesn’t look good.

“The primary near-term security concern of the United States is the global economic crisis and its geopolitical implications,” Blair told the Senate. “The crisis has been ongoing for over a year, and economists are divided over whether and when we could hit bottom. Some even fear that the recession could further deepen and reach the level of the Great Depression. Of course, all of us recall the dramatic political consequences wrought by the economic turmoil of the 1920s and 1930s in Europe, the instability, and high levels of violent extremism.”

The specter of social unrest was raised at the U.S. Army War College in November in a monograph [click on Policypointers’ pdf link to see the report] titled “Known Unknowns: Unconventional ‘Strategic Shocks’ in Defense Strategy Development.” The military must be prepared, the document warned, for a “violent, strategic dislocation inside the United States,” which could be provoked by “unforeseen economic collapse,” “purposeful domestic resistance,” “pervasive public health emergencies” or “loss of functioning political and legal order.” The “widespread civil violence,” the document said, “would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security.”

“An American government and defense establishment lulled into complacency by a long-secure domestic order would be forced to rapidly divest some or most external security commitments in order to address rapidly expanding human insecurity at home,” it went on.

“Under the most extreme circumstances, this might include use of military force against hostile groups inside the United States. Further, DoD [the Department of Defense] would be, by necessity, an essential enabling hub for the continuity of political authority in a multi-state or nationwide civil conflict or disturbance,” the document read.

In plain English, something bureaucrats and the military seem incapable of employing, this translates into the imposition of martial law and a de facto government being run out of the Department of Defense. They are considering it. So should you.

Adm. Blair warned the Senate that “roughly a quarter of the countries in the world have already experienced low-level instability such as government changes because of the current slowdown.” He noted that the “bulk of anti-state demonstrations” internationally have been seen in Europe and the former Soviet Union, but this did not mean they could not spread to the United States. He told the senators that the collapse of the global financial system is “likely to produce a wave of economic crises in emerging market nations over the next year.” He added that “much of Latin America, former Soviet Union states and sub-Saharan Africa lack sufficient cash reserves, access to international aid or credit, or other coping mechanism.”

“When those growth rates go down, my gut tells me that there are going to be problems coming out of that, and we’re looking for that,” he said. He referred to “statistical modeling” showing that “economic crises increase the risk of regime-threatening instability if they persist over a one to two year period.”

Blair articulated the newest narrative of fear. As the economic unraveling accelerates we will be told it is not the bearded Islamic extremists, although those in power will drag them out of the Halloween closet when they need to give us an exotic shock, but instead the domestic riffraff, environmentalists, anarchists, unions and enraged members of our dispossessed working class who threaten us. Crime, as it always does in times of turmoil, will grow. Those who oppose the iron fist of the state security apparatus will be lumped together in slick, corporate news reports with the growing criminal underclass.

The committee’s Republican vice chairman, Sen. Christopher Bond of Missouri, not quite knowing what to make of Blair’s testimony, said he was concerned that Blair was making the “conditions in the country” and the global economic crisis “the primary focus of the intelligence community.”

The economic collapse has exposed the stupidity of our collective faith in a free market and the absurdity of an economy based on the goals of endless growth, consumption, borrowing and expansion. The ideology of unlimited growth failed to take into account the massive depletion of the world’s resources, from fossil fuels to clean water to fish stocks to erosion, as well as overpopulation, global warming and climate change. The huge international flows of unregulated capital have wrecked the global financial system. An overvalued dollar (which will soon deflate), wild tech, stock and housing financial bubbles, unchecked greed, the decimation of our manufacturing sector, the empowerment of an oligarchic class, the corruption of our political elite, the impoverishment of workers, a bloated military and defense budget and unrestrained credit binges have conspired to bring us down. The financial crisis will soon become a currency crisis. This second shock will threaten our financial viability. We let the market rule. Now we are paying for it.

The corporate thieves, those who insisted they be paid tens of millions of dollars because they were the best and the brightest, have been exposed as con artists. Our elected officials, along with the press, have been exposed as corrupt and spineless corporate lackeys. Our business schools and intellectual elite have been exposed as frauds. The age of the West has ended. Look to China. Laissez-faire capitalism has destroyed itself. It is time to dust off your copies of Marx.

New global media to educate 'global citizens'

Emerging global elite to use new global media to educate 'global citizens'

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Elite members of the World Economic Forum (WEF) meeting in Davos, Switzerland, recently considered a proposal for a new global television network to usher in a state of “global governance.” The concept strikes some as authoritarian, even totalitarian. But the parent company of Fox News was one of the sponsors of this year's gathering.

The media proposal, which was included in “The Global Agenda 2009” report, is to create “a new global network” with “the capacity to connect the world, bridging cultures and peoples, and telling us who we are and what we mean to each other.” Several prominent U.S. media figures signed on to the alarming and controversial proposal.

Isn’t it nice that we might have a TV network telling us “who we are?” And “what we mean to each other?” Perhaps we will learn that we are global citizens. Perhaps a global leader of some sort will tell us that. Who might that be?This proposal doesn’t come from a fringe organization. The WEF is an exclusive club of very rich and powerful people from around the world. It describes itself as “an independent international organization committed to improving the state of the world by engaging leaders in partnerships to shape global, regional and industry agendas.”

This year’s conference featured speeches by U.N. Secretary-General Ban Ki-moon and Chinese Premier We Jiabao. Many U.S. corporations, including some getting Wall Street bailout money, were sponsors. News Corporation, the parent of Fox News, was a “strategic partner” of the event.

Valerie Jarrett, Assistant to the President for Intergovernmental Relations and Public Liaison, represented the Obama Administration at this year’s event and called leaders from all nations to “seize gladly” the duties of collaborating and boldly embrace “a new era of global financial responsibility.”

But the WEF also envisions cooperation and collaboration in global media ventures. It asks, “How can we save journalism to help it save the world?” Clearly, this is advocacy journalism on a global scale.

Indeed, the list of “Recommendations” says it is imperative to start “Communicating a global agenda, and motivating and mobilizing people to support it…”

Is this journalism? Or is it brainwashing and propaganda?

It says that “a genuine, global voice” is needed that shares a “fundamental commitment” to being an international media voice, and makes mention of “the media voices we think of as international” coming from London (the BBC), Qatar (Al-Jazeera) or Atlanta (CNN).

BBC is known for its anti-American programming, Al-Jazeera for its pro-terrorist slant, and CNN for its left-wing and pro-Democratic bias.

It will take “innovative public-private funding” to bring this new network into being, apparently meaning that the taxpayers in the U.S. will have to be soaked in order to help bring this about. But no price tag is put on the venture and no objection was apparently raised to government funding of such a network on a global basis. An “overview” statement does, however, decry “censorship and self-censorship.”

Elsewhere in the report (page 31) the idea of “international taxation” is proposed for “global action” of various kinds. Perhaps this is a vehicle for raising revenue for the new “global voice.”

The media proposal was developed by one of several “Global Agenda Councils” under the auspices of the WEF. The new TV network proposal was issued under the supervision of Pat Mitchell, the president of the Paley Center for Media and former President and Chief Executive Officer of the Public Broadcasting Service. She was the chair of the Global Agenda Council on the Future of Media.

Other members of the Council on the Future of Media were Betsy Morgan of the left-wing Huffington Post (former general manager of; Rui Chenggang of China Central Television, an official political propaganda arm of the communist regime; and Zafar Siddiqi of CNBC Arabiya, a subsidiary of General Electric which is described as a 24-hour Arabic language financial and business information channel.

There is no indication in the published report that the Huffington Post executive raised any objection to working hand-in-glove with the communist propaganda channel. Is the Chinese media model a precedent for the new “global network?”

The conference was covered by media organizations such as CNBC, CNN, Bloomberg, Forbes and Fox, but no coverage that we could find was devoted to the proposal for a government-financed global media network. Talk about self-censorship!

John J. DeGioia, President of Georgetown University and the “Rapporteur of the Global Agenda Councils focusing on Society and Values,” summarized the work of Mitchell’s panel. He says (page 46) that, “We believe that this new moment also calls for a new media platform, across all media channels, a global non-profit ‘CNN’ providing a new form of independent journalism to inform, illuminate and deepen knowledge about issues that improve the state of the world.”

According to DeGioia’s biography, he walks the walk and is dedicated to helping “prepare young people for leadership roles in the global community.” His bio adds, “He is a member of the U.S. National Commission for UNESCO and Chair of its Education Committee and he represents Georgetown at the World Economic Forum and on the Council on Foreign Relations.”

The media council took advantage of what a description of its work said was an “enormous opportunity” to “redefine the media and its roles in a global, interconnected society.”

Under the title of “Recommendations” (page 182), the Council on the Future of Media declares that “The Council is championing a new global, independent news and information service whose role is to inform, educate and improve the state of the world?one that would take advantage of all platforms of content delivery from mobile to satellite and online to create a new global network.”

It goes on, “In a world where there are calls for global governance as a response to a global financial crisis, where scientific research, capital flows and production chains are globalized, the media and the communities in which we imagine ourselves remain fiercely localized.” Hence, a global network will work against “localized” or national-based systems and convince people to go “global” with their outlook and solutions. In other words, the new network will help undermine old-fashioned notions of national sovereignty and patriotism.

There are 22 members (page 183) of the Council on the Future of Media. In addition to Mitchell and Morgan, American members include:

  • Alex S. Jones, former media reporter for the New York Times and now Director, Joan Shorenstein Center on the Press, Politics and Public Policy, John F. Kennedy School of Government, Harvard University.
  • Susan King, former Washington correspondent for ABC News and now Director, Journalism Initiative, Special Initiatives and Strategy, Carnegie Corporation of New York.
  • John Lavine, Dean, Medill School of Journalism Northwestern University.
  • Nicholas Lemann, former Washington Post reporter and now Dean, School of Journalism, Columbia University.
  • David Nordfors, Director, Innovation Journalism and Senior Research Scholar, Stanford Center for Innovations in Learning, Stanford University.
  • Monroe Price, Director, Centre for Global Communications Studies, Annenberg School for Communication, the University of Pennsylvania.
  • Orville H. Schell, Director, Center on US-China Relations, Asia Society.
There doesn’t appear to be one identifiable conservative member on the list. Of course, everyone on the list is a certified objective media proessional, neither liberal nor conservative. Just ask them.

Americans' Standard of Living Permanently Changed

"Worst Is Yet to Come:" Americans' Standard of Living Permanently Changed

There's no question the American consumer is hurting in the face of a burst housing bubble, financial market meltdown and rising unemployment.

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But "the worst is yet to come," according to Howard Davidowitz, chairman of Davidowitz & Associates, who believes American's standard of living is undergoing a "permanent change" - and not for the better as a result of:

  • An $8 trillion negative wealth effect from declining home values.
  • A $10 trillion negative wealth effect from weakened capital markets.
  • A $14 trillion consumer debt load amid "exploding unemployment", leading to "exploding bankruptcies."

"The average American used to be able to borrow to buy a home, send their kids to a good school [and] buy a car," Davidowitz says. "A lot of that is gone."

Going forward, the veteran retail industry consultant foresees higher savings rate and people trading down in both the goods and services they buy - as well as their aspirations.

The end of rampant consumerism is ultimately a good thing, he says, but the unraveling of an economy built on debt-fueled spending will be painful for years to come.

New effort to win EU acceptance for genetically modified crops

New effort to win EU acceptance for genetically modified crops

By James Kanter

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The biotechnology industry, claiming the backing of European Union governments, signaled a new effort Monday to win greater leeway to grow genetically modified crops in Europe, a region where citizens have long been skeptical about the safety and value of the technology.

EU experts deadlocked Monday on whether France and Greece should lift their bans on growing the sole bioengineered seed approved for planting: an insect-resistant corn engineered by Monsanto.

Biotechnology industry executives say that a bigger vote expected next week could lead to two additional engineered corn seeds being given permission to be marketed in the EU by year-end. One is produced by Pioneer Hi-Bred International, a unit of DuPont, with Dow AgroSciences. The other is from Syngenta.

Even so, a variety of forces are pushing Europe into re-examining the potential of gene-altered seeds despite a view among many citizens across the trade bloc that the crops are unsafe, dangerous to the environment and represent an unwelcome incursion by corporations into agriculture.

Since 1998, the commission has not approved any applications for farming gene-altered crops, and that makes Europe an important test site for whether the biotechnology industry and its supporters can burnish the industry's image and win the right to begin growing in significant quantities - something it has yet to accomplish despite successes in other parts of the world.

Progress in Europe also is important because acceptance there increases the chances that more farmers in other regions that grow gene-altered crops, like the United States, will be willing to buy seed for crops destined for export. At the moment, traces of genetically modified grains in shipments sent to Europe can lead to shipments being sent back to the United States.

Nathalie Moll, a spokeswoman for the European Association for Bioindustries, or EuropaBio, the main industry group in Europe, said the vote Monday showed new momentum behind moves in Europe to open up the market to gene-altered crops. "More and more member states are following the science as to the safety of these GM products and listening to the voice of their farmers, who are increasingly interested in using new technologies," she said, referring to genetically modified crops.

Usually a maximum of five countries had sided with the European Commission, the executive body of the EU, in similar votes this decade. On Monday, nine had done so, Moll said.

But environmental campaigners said that reasoning failed to take into account entrenched opposition to the technology in Europe, particularly in big member states like France and Poland.

"With more than half of countries supporting the bans staying in place, we should expect these countries to continue supporting their colleagues' rights in France and Greece and other countries to have national bans," said Helen Holder, the European coordinator for genetically modified organisms at Friends of the Earth.

The Czech Republic, which holds the rotating EU presidency, will have 90 days to choose when governments will examine the matter of the French and Greek bans, once the commission sends the Czechs a request to do so. If there is further deadlock among governments, the commission must make a decision in the place of the governments. The commission is then entitled to enforce the lifting of the bans through a series of warnings and then, if necessary, through the European Court of Justice.

A spokesman for the Czech presidency said it was too early to say when a date would be set to discuss the bans. The Czechs are generally supportive of gene-altered crops as long as they are proved safe, but the only two countries consistently favorable to bioengineered crops have been Britain and Sweden.

The struggle over the right to plant genetically modified crops in Europe is emblematic of other challenges, too. As new forms of biology create opportunities to manipulate the plants and the animals that people eat, associated battles are simmering over a range of new crops, cloning and hormone treatments. These disputes pit champions of new technologies against a strong precautionary strain in the approach of many Europeans to novel foods and medicines.

The disputes also highlight concerns about corporate ethics that can be more entrenched in Europe than in other regions, including the United States. In particular, Europeans dislike the notion that big corporations are manipulating nature to create what some opponents of gene-altered crops call Frankenfoods.

Spain is currently the largest user of gene-altered seeds in Europe, and accounts for 75 percent of such farming on the Continent in terms of hectares planted. But the overall amount of bioengineered seeds used in European farming remains tiny compared with conventional agriculture.

Proponents of the technology say growing more bioengineered crops could lower food and feed costs after meteoric price rises last year, and that it would relieve legal pressure on Europe that is coming from important trading partners like the United States and from companies like Pioneer Hi-Bred, which sued the European Commission in 2007 for failing act swiftly enough in the approvals process.

Mike Hall, a spokesman for Pioneer, said the company now was waiting to see whether its corn seed, called 1507 and developed with Dow AgroSciences, would be approved by the EU this year before evaluating whether to keep the case open against the commission and possibly seeking damages for delay. Hall said he was aiming to enable farmers to buy the seed for planting in the spring of 2010.

Moreover, the continued efforts by the industry and the commission to allow the crops onto the market highlights how they are playing a long-term game to make the crops more common in Europe.

Last year the commission succeeded in pushing Austria - one of the nations most staunchly opposed to gene-altering technologies in foods and feeds - to lift its ban on the imports of the crops. And last week, the commission took new steps to push Austria to make it possible to start growing gene-altered products there.

The commission tried in 2007 to require Austria to lift its ban on farming bioengineered crops but governments deadlocked and derailed that effort. That led to a battle between Austria and the commission over the safety of Monsanto corn seed at the European Food Safety Authority, an advisory body to the European Commission.

Austria said the corn could harm the local ecology, including butterflies, and that the product might lose its efficacy against the pests it was designed to eliminate. The authority, however, affirmed that the corn seed did not pose risks and said Austria had failed to provide enough evidence that the ecology of Austria was threatened.

Similar opinions by the authority that Monsanto corn is safe led up to the vote on Monday by the so-called Standing Committee on the Food Chain and Animal Health, a group of experts nominated by national governments.

EU governments are to consider the Austrian case, and a ban by Hungary, on March 2.

U.S. housing starts drop to lowest ever

U.S. housing starts drop to lowest ever

By Jack Healy

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New-home construction fell to its lowest level on record in January as builders virtually closed up shop amid falling demand, tightened credit markets and a flood of foreclosure properties.

The Commerce Department reported on Wednesday that privately owned housing starts in January fell 16.8 percent from December, to an annual rate of 466,000. That was the slowest pace since at least 1959.

The numbers show a housing market that is still declining after more than two years of slumping prices and lower demand. Home values, which rose steadily for more than a decade, have fallen by an average of about 25 percent from their peaks, and economists expect that prices will continue to slide as more people lose their jobs and the economy slips deeper into recession.

"Housing and the U.S. economy are still in a freefall," said Nariman Behravesh, chief economist at IHS Global Insight. "It's clear that we haven't done anything to stabilize housing. We haven't stabilized the rise in foreclosures. And until we do that, I think we're not going to see a bottom."

President Barack Obama is expected to address the foreclosure crisis and the floundering housing market, which lies at the center of the recession, in a speech later Wednesday in Phoenix. The administration has promised to use some $50 billion from the U.S. government financial bailout to try to keep people in their homes.

The pace of housing starts in January was 56.2 percent below its levels in January 2008, a sign of how dramatically builders have scaled back construction. Single-family housing starts fell 12 percent from December to an annual pace of 347,000.

Building permits, which offer a glimpse of future construction, were also lower in January, falling 4.8 percent to a seasonally adjusted rate of 521,000.

In normal times, builders need to construct anywhere from 1.25 million to 2 million new housing units every year to keep pace with immigration, the natural growth of the country's population and the demand for newer homes, said James Glassman, senior United States economist at JPMorgan Chase.

If there is one bright spot to dwindling new-home construction, it is that supplies will eventually fall in line with demand. At the end of December, the inventory of unsold homes fell to a 9.3-month supply from 11.2-month supply a month earlier, according to the National Association of Realtors.

"Eventually that's how you get your inventory in line," Glassman said. "The problem with the builders is that they're competing with property that's coming to the market from foreclosures. There's this tug of war going on between the resale market and the builders."

In another report, the Federal Reserve said that industry production throttled back in January, mostly because of the auto industry. Production at the nation's factories, mines and utilities fell 1.8 percent last month, the Fed reported. It was the third consecutive month where production was cut back.

Deeper North American Integration Still in the Cards

Newly poor swell lines at U.S. food banks

By Julie Bosman

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Cindy Dreeszen and her husband live in one of the wealthiest counties in the United States. They have steady jobs, his at a movie theater and hers at a government office. Together, they earn about $55,000 a year.

But with a 17-month-old son, another baby on the way, and, as Dreeszen put it, "the cost of everything going up and up," the couple went to a food pantry this month to ask for some free groceries.

"I didn't think we'd even be allowed to come here," said Dreeszen, 41, glancing around at the shelves of fruit, whole-wheat pasta and baby food. "This is totally something that I never expected to happen, to have to resort to this."

Once a crutch for the most needy, food pantries have responded to the deepening recession by opening their doors to what one pantry organizer described as "the next layer of people," a rapidly expanding group of child-care workers, nurse's aides, real estate agents and secretaries who are facing a financial crisis for the first time. Over all, demand at food banks across the country increased by 30 percent in 2008 from the previous year, according to a survey by Feeding America, which distributes more than two billion pounds of food every year. And while pantries usually see a drop in demand after the holiday season, many in upscale suburbs this year are experiencing the opposite.

Here in Morris County (median household income, $82,173), the Interfaith Food Pantry added extra hours this month after seeing a 24 percent increase in customers and 45 percent increase in food distributed in November, December and January compared with the same period last year.

In Lake Forest, Illinois, a wealthy Chicago suburb, a pantry in an Episcopal church that used to attract people from less affluent towns nearby has been flooded with people who have lost jobs. In Greenwich, Connecticut, one pantry organizer reported a "tremendous" increase in demand for food since December, with out-of-work landscapers and housekeepers as well as real estate professionals who have not made a sale in months filling the line.

And amid the million-dollar houses of Marin County, California, a pantry at the San Geronimo Valley Community Center last month changed its policy to allow people to stop by once a week instead of every other week, since there are so many new faces in line alongside the regulars.

"We're seeing people who work at banks, for software firms, for marketing firms, and they're all losing their jobs," said Dave Cort, the executive director. "Here we are in big, fancy Marin County, but we have people who are standing in line with their eyes wide open, thinking, 'Oh my God, I can't believe I'm here.' "

The demand is not limited to pantries, which distribute groceries from food banks, supermarket surplus and individuals who donate through church or school can drives. The number of food-stamp recipients was up by 17 percent across New York State, and 12 percent in New Jersey, in November from a year before. When a mobile unit of the Essex County welfare office, as part of a pilot program to distribute food-stamp applications in other counties, stopped in Shop-Rite parking lots recently in Morris County, it was swamped.

"If one of our richest counties has people signing up for food stamps who have never signed up before, that indicates the depth of this problem with the lack of food," said Kathleen DiChiara, executive director of Community FoodBank of New Jersey. "It's the canary in the coal mine."

Experts said that chronically poor people tend to adapt to the periods where money is scarce by asking for support from friends or tapping into social services, but that working-class people who suddenly lose jobs or homes often find themselves at sea, unsure how to navigate the system or ashamed to seek help.

It is those people who, over the last several months, have started arriving in growing numbers at food pantries, which are often the first tentative step for those whose incomes are too high to qualify for government assistance. (Many pantries have a no-questions policy, though they might determine how many bags of groceries a customer can receive by the number of people in their household.)

"These are people who never really had to ask for help before," said Brenda Beavers, human services director for the Salvation Army in New Jersey, which dispenses emergency food supplies at 30 pantries throughout the state. "They were once givers and now they're having to ask for assistance."

In Morristown, Rosemary Gilmartin, executive director of the Interfaith Food Pantry, has over the last several months watched a steady stream of new faces pushing shopping carts among the cardboard boxes on metal shelves in a former nursing home. In 2008, the pantry gave away 620,000 pounds of food, a 24 percent increase from 2007.

Along with fresh apples and Nature's Path Organic Soy Plus cereal, Gilmartin, who began volunteering at the pantry 13 years ago, gives children "Dora the Explorer" books. In the past few months, she has found herself fielding more inquiries about social service programs like the Earned Income Tax Credit from people who clearly had never before hovered this close to the poverty line.

"They look shellshocked," she said. "I've had people walk back out and say, 'I can't do this.' "

She recalled one recent walk-in, a television sound engineer who lost his house to foreclosure. "His life just went reee-eeer," Gilmartin said, twirling her finger in a downward circle.

Usually, the pantry distributes food at two locations several mornings a week, including most Saturdays, and on the first and third Wednesday evenings of the month. But this month, Gilmartin decided to also open on the second Wednesday because she has been having trouble accommodating everyone.

By 5:30 p.m. on that Wednesday, a half-hour before the pantry was to open, a line of nearly two dozen had formed. Once inside, people were escorted individually through the shelves of low-fat mozzarella cheese, dried beans and Pepperidge Farm chocolate chunk cookies, where a few paused — often reluctantly — to explain what had brought them.

"A deadbeat husband and a loss of a job," said one woman in her 20s, who spoke on condition of anonymity because she did not want her friends to know she had been visiting the pantry. It was her second visit. The first time, she could barely get out of her car. "Let me put it this way — it took me a long time to come here," the woman said as she added a bag of lentils to her cart. "I felt like a loser. I felt like a total lowlife."

A woman wearing gold earrings and a red Vera Bradley bag over her shoulder, who is in her 50s and gave only her first name, Louise, said she had recently lost her job and has been struggling to pay her bills.

"I can understand why people would be embarrassed to come here," she said, as she loaded her groceries into the trunk of her silver Chevy Malibu. "I guess I am a little embarrassed."

Joan Verba, 53, said she had been coming up short financially since she quit her job as an accountant after her husband became ill with cancer. When her husband died, leaving her and a 14-year-old son, she put off plans to re-enter the work force.

"The job market is so bad right now," she said. "My son eats 24-7. I just need this to supplement my food bills."

Her mother, Carol Morrison, stood nearby. "I'm just here for moral support," she said, inspecting the shelves. "And nosiness."