Thursday, January 7, 2010

New Year in America: A portrait of social misery

New Year in America: A portrait of social misery

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The new decade finds the US working class suffering a level of social misery not seen since the Great Depression. Unemployment, poverty, hunger, utility cutoffs, homelessness, foreclosures and bankruptcies have become common experiences for millions.

But unlike in the Great Depression, when limited reforms were put in place in response to the crisis, the Obama administration, Congress, and state and local governments are taking no serious measures to provide relief. On the contrary, the two parties of big business are exacerbating the crisis through budget cuts at the state and local level and the federal government is preparing new austerity measures.

Unemployment: At over 10 percent, the official US jobless rate reached in October and November was the highest since June of 1983. A broader measure of unemployment, taking into account those who have fallen out of the official workforce, reveals that something approaching one in five workers is unemployed or underemployed.

The economy has not added jobs since December 2007, and in that same time span has lost 7.2 million jobs overall. Coupling these losses with population growth—the economy must add about 150,000 jobs per month to break even—the net jobs deficit in the period is well over 10.5 million.

It is widely acknowledged that most of the jobs lost will not return for years, if ever. Even by the optimistic forecast of the Federal Reserve Board, the jobless rate will remain above 7 percent through 2011. Those without jobs face long periods of unemployment, the most recent figures showing that 38.3 percent of the unemployed have been without work for 27 weeks or longer.

Data for November show that all 50 states have witnessed an increase in unemployment since the end of 2008. Michigan continued to have the highest official jobless rate at 14.7 percent. Detroit, its principal city and the longtime hub of US auto production, had an official unemployment rate of 27 percent. The real rate approaches 50 percent, a number in line with the worst levels of big city unemployment during the Great Depression.

In California, 12.3 percent of the official workforce was unemployed in November. The most populous US state had by itself shed 617,000 jobs over the previous year.

What remains of the US social safety net is woefully unprepared to meet this crisis, with jobless benefits reaching well under half of unemployed workers. In December nearly ten million workers in the US were receiving jobless benefits, not quite half of these in the form of extended or emergency relief. There were some 5.6 million workers who had both exhausted their unemployment benefits and given up looking up for work.

Those fortunate enough to keep their jobs in 2009 saw their hours, wages and benefits cut, even as employers drove up their productivity. In real terms, average weekly wages fell by 1 percent last year, while worker productivity was ratcheted up by 8.1 percent in the third quarter and 6.4 percent in the second.

Foreclosures and bankruptcies: Increasing numbers of unemployed and financially stressed workers have been unable to meet their mortgage payments. During the third quarter, the number of US homes in foreclosure surpassed one million. In October, a survey by the Mortgage Bankers Association found that about one in ten mortgages was at least one payment behind, while 4.47 percent were in the process of foreclosure.

Most of the recent increase in foreclosures has occurred outside of the subprime loan market, among households that had previously qualified for loans based on stable employment and income.

The Wall Street Journal reported on Monday that filings for personal bankruptcy rose to 1.41 million in 2009, up by almost one third. The newspaper called the increase “a surge largely driven by foreclosures and job losses.”

Poverty and hunger: Poverty and hunger, already on the rise in 2008 before the brunt of the economic crisis hit, have intensified.

Analysis of the 2008 US census using criteria favored by the National Academy of Sciences shows that 47.4 million Americans, 15.8 percent of the population, were living below the official poverty line. The official government tally recorded 39.8 million people in poverty in 2008, or 13.2 percent of the population. One in five US children was living in poverty in 2008, according to the official data.

The real poverty rate is far higher, since the income threshold set by the government—$22,000 for a family of four—is absurdly low.

According to Judy Putnam, a spokesperson for the Michigan League for Human Services, 22 percent of the state’s children under five are growing up in poverty. For African American children, the figure is 45 percent, with half the children in Detroit growing up poor.

“Many of those who would have received cash assistance in past recessions are not getting it now,” Putnam said. “Only a third are getting cash assistance compared with two-thirds before ‘welfare reform’ in 1996. All of these folks who need assistance have been squeezed off the safety net. People in Michigan are heavily dependent on food stamps and, if they qualify, for unemployment benefits. But unlike previous recessions only the very, very poor qualify for cash assistance.”

The evidence of widespread hunger in the US is unmistakable. In December, the National Conference of Mayors released a study of 27 major cities conducted between October 2008 and September 2009. The report revealed the largest increase in those seeking food assistance since 1991.

In November, the United States Department of Agriculture reported that a record 49.1 million Americans, one sixth of the population, lacked dependable access to adequate food in 2008.

Also in November, Feeding America, a national food assistance organization, released details of an economic impact survey of some of its 63,000 member food charities. It found that between summer 2008 and summer 2009, demand for food charity rose by over 30 percent nationally.

Many of those reliant on food assistance have no other source of income, a new analysis of state data by the New York Times reveals. Six million Americans, or 1 in 50, report no income beyond what they receive in food stamps through the joint federal-state Supplemental Nutrition Assistance Program (SNAP).

According to a recent study published in the Archives of Pediatrics and Adolescent Medicine, about half of US children will rely on food stamps at some point during their childhood. The figure is 90 percent for black children.

Homelessness and utility cutoffs: With a bitter cold snap settling over much of the nation last week, those suffering homelessness and utility cutoffs found themselves in dangerous conditions.

The caseload of the government’s Low-Income Home Energy Assistance Program (LIHEAP) increased by 25 percent in 2009, and is projected to increase by another 20 percent in 2010.

Among the 27 major cities surveyed by the US Conference of Mayors report, 19 reported an increase in family homelessness between the autumns of 2008 and 2009. The largest increases were in Dallas (20 percent), Boston and Kansas City (22 percent each), and Charleston (41 percent).

Across the US, shantytowns reminiscent of the “Hoovervilles” of the 1930s have emerged. People in these encampments live in tents or shacks built of old wood, scrap metal, cardboard and other waste, with no running water, electricity, plumbing, or garbage removal.

An indelible scene took place in Detroit on October 5, when an estimated 50,000 city residents formed a long line stretching around the Cobo Hall convention center after hearing rumors that the city was dispensing assistance for utility bills and housing payments. City officials said only a tiny fraction of those seeking assistance would receive help.

Conditions of the youth: The economic crisis has exacted perhaps its greatest toll on the youth. All of the data related to hunger, homelessness and unemployment show that young people are disproportionately affected.

A study by the Pew Research Center published in November shows that one in ten adults under the age of 35 has moved back to his parents’ home as a result of the recession. Overall, half of those aged 18 to 24 now live with their parents. Only about half of young people have jobs, the lowest figure on record dating back to 1948.

A recent study showed that less than half of students graduate on schedule after signing up for a two- or four-year college program, and that most who quit or delay their studies do so on account of economic hardship.

Those who do graduate enter the worst market for degree holders in 30 years, and with record levels of student debt. The average college graduate in 2008 carried a burden of $23,000 in student loan debt, while the unemployment rate for college graduates aged 20 to 24 reached 10.6 percent in the third quarter.

Meanwhile, one in ten male high school dropouts, ages 16 to 24, is currently either in prison or juvenile detention. Among black male high school dropouts, more than a fifth are incarcerated, a study by researchers at Northeastern University shows. For the population as a whole, the Justice Department recently reported that 1 in 31 US adults is behind bars or on probation or parole.

The response of the government: The response of state and local governments to this social catastrophe is drastic reductions in social services and job cuts, under conditions where the Obama administration refuses to provide emergency aid to help cover budget deficits.

The total deficit of the states from 2009 to 2012 is now estimated at $460 billion, a figure that is likely to grow as more state capitals adjust estimates for rapidly declining tax revenue.

”Anything and everything’s on the table,” said Todd Haggerty, a policy associate with the National Conference of State Legislators. States have “cut the fat, cut the muscle and are now cutting bone. The easy decisions have already been made.”

The fiscal situation confronting the states is expected to deteriorate sharply next year when funds from the federal economic stimulus package, the American Recovery and Reinvestment Act, are exhausted.

Like the states, the federal government faces a fiscal catastrophe, with cumulative US budget deficits expected to top $10 trillion by the end of the new decade, according to the Obama administration’s rather optimistic forecast. Cuts in spending must be put in place, in part, to convince creditors, especially China, that the US “can get its finances back in order,” the Wall Street Journal wrote Monday in a feature on the annual gathering of the American Economic Association.

The response of the Obama administration is to call for an unprecedented program of fiscal austerity and sharp cuts in social spending, to be announced in his State of the Union address early next month and outlined in the new federal budget proposal shortly thereafter. Obama’s repeated insistence on the need for Americans to reduce their consumption—even as trillions more are allocated for the banks and for ever-expanding wars in Central Asia and the Middle East—is code language for a deepening of the assault on the working class.

The discussion of possible deficit reduction measures includes regressive taxes such as a national sales tax and sweeping cuts in entitlement programs on which millions of people rely, such as Medicare and Social Security.

Such measures are on top of the administration’s health care overhaul, which will reduce costs for corporations and the government while slashing benefits and increasing out-of-pocket expenses for millions of working people.

US home sales plummet, personal bankruptcies soar

US home sales plummet, personal bankruptcies soar

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An important measure of future home sales fell far more sharply in November than economists had expected. The National Association of Realtors (NAR) index on pending home sales—contracts agreed upon but not finalized—dropped by 16 percent in November, more than three times what economists interviewed by the Dow Jones Newswires had anticipated.

The pending home sales index registered declines in every region: 26 percent in the Northeast and Midwest, 15 percent in the South, and 3 percent in the West.

“It will be at least early spring before we see notable gains in sales activity as home buyers respond to the recently extended and expanded tax credit,” said Lawrence Yun, chief economist for the NAR.

The sharp drop-off was caused, in part, by a surge of pending home sales in October, as buyers sought to take advantage of a federal tax credit set to expire on November 30. After Congress reinstated the credit until April 30, the pressure to buy before the deadline was removed and the pool of home buyers shrank.

Yun expressed guarded optimism over the fact that the NAR pending sales index remained 15.1 percent above the abysmal reading from last November. “The fact that pending home sales are comfortably above year-ago levels shows the market has gained sufficient momentum on its own,” he said.

Currency markets seemed not to share the sentiment. The dollar had a turbulent day in wake of the NAR report, first tumbling against the yen and the euro as investors speculated the home sales figures would lessen the likelihood of an interest rate increase by the Federal Reserve Board, but then recuperating its losses as the “safe haven” currency of choice.

The NAR report follows the release last week of a Case-Schiller report showing home prices were flat in October, in spite of the surge in purchases based on the home buyer tax credit and exceptionally low mortgage interest rates. This was not enough, a Tuesday New York Times editorial points out, “to overcome the drag created by a glut of 3.2 million new and existing unsold single-family homes—about a seven-month supply.”

“The situation, we fear, will only get worse in months to come,” the Times writes, citing increasing mortgage rates, the eventual ending of the home buyer tax, and an anticipated “flood” of foreclosed homes.

Foreclosures continue to increase. In 2008, more than 1.7 million mortgages fell to foreclosure or similar actions. In 2009, the number swelled to 2 million, and in 2010, the figure is expected to increase to 2.4 million, according to Moody’s Economy.com.

The looming glut of new foreclosed homes will drive down home values by as much 10 percent next year, bringing to 40 percent the four-year drop-off, the New York Times reports. This will swell the ranks of “under water” homeowners—those who owe more on their mortgage than their home’s market worth. Moody’s estimates that one third of all US homeowners, 16 million in all, find themselves in this predicament. The abandonment of homes in negative equity is now a leading cause of foreclosures.

Last spring, President Obama claimed that his $75 billion Making Home Affordable Act would help to permanently renegotiate the mortgage payment terms for millions of homeowners by providing incentives to lenders to lessen monthly payments. The administration ruled out lowering principal, the outstanding and typically overvalued balances homeowners owe banks on mortgages.

An almost statistically insignificant share of homeowners, about 30,000, have seen their mortgages permanently modified as a result of the program. Many of the roughly 750,000 homeowners approved for temporary modifications may be in worse shape than before. Banks admit reporting homeowners accepting modifications to credit ratings agencies as delinquent. Most of the modifications last only three to five months.

Obama’s “housing rescue” was in fact another facet of the multitrillion-dollar Wall Street bailout, only serving to shield the banks from writing down the value of their grossly overvalued mortgage loans while providing rich new revenue streams to carry out “trial” loan modifications.

In the interim, the banking industry has, with the support of the Obama administration and both parties in Congress, successfully thwarted legislation that would have allowed bankruptcy judges to write down the outstanding balances on overvalued homes.

Also on Tuesday, the National Bankruptcy Research Center released data showing that 1.41 million personal bankruptcy petitions were filed in 2009, a figure representing more than 1 percent of all US households and an increase of 32 percent from the previous year. The year has seen the most bankruptcies since 2005, when Congress passed legislation at the behest of the banking and credit card industries aimed at preventing filings by putting in place punitive restrictions.

Significantly, a large majority of filings occurred in the Chapter 7 category, which forces filers to liquidate assets in order to gain debt relief. Chapter 7 filings increased by 42 percent in 2009. The 2005 law aimed to steer those entering bankruptcy toward Chapter 13, which requires those seeking relief to submit to a debt repayment plan.

There were 113,274 filings in December, up one third from December 2008. It was the 12th straight month in which filings exceeded 100,000.

Bankruptcy filings increased in all 50 states in 2009. The states with the highest filing rates were Nevada, Tennessee, Georgia, Alabama and Indiana. Those with the sharpest increases over 2008 filing rates were Arizona, Nevada, California, Wyoming and Utah, all of which saw increases of between about 60 percent and 80 percent, according to Professor Ronald Mann of Columbia Law School, who analyzed the data. At the county level, the highest bankruptcy rates occurred in three suburban counties in the South around Memphis, Tennessee, and Atlanta, Georgia.

Bankruptcies are affecting wider layers of the population, the data indicate. Courts have seen an increase in joint-bankruptcy filings, suggesting that more families are seeking protection from their creditors.

“I can’t see over the top of the files on my desk,” Cathleen Moran, a California bankruptcy attorney, told the Wall Street Journal. “Ms. Moran’s clients in 2008 typically were people who earned between $40,000 and $80,000. That changed last year when a rash of people who earned $100,000 to $300,000 began filing as well,” the newspaper explains.

Local figures from the US Bankruptcy Court for Eastern Wisconsin reported by the Green Bay Gazette verify the national data. Filings increased there by 31.5 percent between September 2008 and September 2009, with a sizable majority of Chapter 7 petitions.

Bobbie Lison, budget counselor at the local Catholic Charities, pinned the increase on job losses. “A lot of people, when they first lost their jobs or their hours were cut, used credit cards to supplement their spending,” he told the Gazette. “But a lot of credit card companies have cut limits or raised interest rates. If you’re at the point where you have no more credit or your rates or minimum payments went up, you might be out of options.”

Lison also cited medical bills. “People have tremendous medical bills,” he said. “And they might not have insurance because either they lost their job or they work part-time. They might not be able to afford COBRA prices, and even something minor can get very expensive.”

The economic crisis is also driving large numbers of small businesses into bankruptcy. The credit analysis company Equifax recently reported that small business bankruptcies increased by 44 percent nationally for the year ending on September 30 over the previous year. In California, the percentage increase was nearly twice as large, 81 percent.

Economists sought solace in recent figures from the manufacturing sector. US factory orders increased by 1.1 percent last month to a seasonally adjusted $365 billion, the Commerce Department reported Tuesday. The increase was greater than expected, and is partially attributable to increasing oil prices. The figures came on the heels of a survey released Monday by the Institute for Supply Management suggesting that manufacturing activity increased for the fifth straight month and similarly positive industrial production data from other countries.

Yet US manufacturing output in November remained more than 13 percent lower than its level in December 2007.

The dubious nature of the rebound in manufacturing was illustrated by new sales figures released Tuesday by the auto industry. Among the Big Three US auto companies, only Ford saw an increase in December 2009 from December 2008, when the collapse in auto sales was already under way. Ford’s sales for the year as a whole fell by 15 percent.

General Motors suffered a 6 percent decline in December sales, capping a dismal year that saw total sales drop by almost one third. Chrysler, which like GM was forced into bankruptcy by the Obama administration and is now controlled by Italian automaker Fiat, also saw a December sales drop of 4 percent. In 2009, its sales volume fell by 36 percent from 2008, plummeting below the 1 million vehicle mark for the first time since 1962. For the industry as a whole, 2009 is likely to produce the worst year since 1970.

As bad as these numbers are, they would have been far worse were it not for the Obama administration’s “cash-for-clunkers” tax credit for auto purchases. The program primarily served to rid automakers of bloated inventory.

New York Times economics columnist Paul Krugman on Monday warned that the overall increase in manufacturing output may well follow a similarly illusory trajectory.

“To work off their excess inventories, [companies] slash production; once the excess has been disposed of, they raise production again, which shows up as a burst of growth in GDP,” Krugman wrote. “Unfortunately, growth caused by an inventory bounce is a one-shot affair unless underlying sources of demand, such as consumer spending and long-term investment, pick up.”

But consumer spending, which counts for some two thirds of US economic output, will not improve absent a major expansion in jobs and improving wages, or a sudden rebound in home values. No serious observer expects any of these events to take place in the short term, if ever.

Another survey released Tuesday by the Conference Board found that the lowest proportion of American workers ever, 45 percent, report being happy with their jobs. Among the leading causes of worker dissatisfaction, according to the report, are wages failing to keep pace with inflation and increasing health insurance costs absorbing take-home pay.

Six million in the US with no income but food stamps

Six million in the US with no income but food stamps

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Some six million Americans—one in 50 people in the US—are living on no income other than $100 or $200 a month in food stamps, according to an analysis of state data by the New York Times. The number of people who reported that they are unemployed and receive no cash aid—neither welfare, nor unemployment insurance, pension benefits, child support or disability pay—the newspaper reported, has jumped by 50 percent over the last two years, as the recession has taken hold.

According to the January 3 article, the number of people reporting no income tripled in Nevada over the past two years, doubled in Florida and New York, and increased nearly 90 percent in Minnesota and Utah. In Wayne County, Michigan—which includes Detroit, where half the population is unemployed or underemployed—one out of every 25 residents reports an income of only food stamps. In Yakima County, Washington, the figure is one out of every 17.

The figures reveal the vast scale of human suffering in the US as the new decade begins and puts the lie to talk of an economic “recovery.” The 6 million people in households reporting no income—which includes 1.2 million children—is equivalent to the entire population of Indiana or Massachusetts, or the combined populations of Los Angeles, Philadelphia and Boston.

Such a social catastrophe underscores the indifference of the Obama administration, which has done virtually nothing to provide relief to those who have lost their jobs, homes and livelihoods—even as it spares no expense to shore up the fortunes of the financial elite and fund its ongoing wars.

The number of people without an income has been on the rise since 1996, when Democratic President Bill Clinton and the Republican Congress ended welfare as a universal entitlement, a status the federal relief program had enjoyed since its inception in the 1930s. Pledging to “end the cycle of dependency,” the Democrats and Republicans imposed lifetime limits on benefits, drastically reduced the level of cash assistance, and imposed restrictive “workfare” and other requirements on further aid.

Despite the increased need for relief, Obama has opposed any additional funding for what remains of the welfare program, called Temporary Assistance for Needy Families. Since their peak in the 1990s, welfare rolls are down nearly 75 percent, the Times reported.

“Many of those who would have received cash assistance in past recessions are not getting it now,” Judy Putnam, a spokesperson for the Michigan League for Human Services, told the World Socialist Web Site. “Only a third of the state’s children living in poverty are getting cash assistance compared with two-thirds before ‘welfare reform’ in 1996. People in Michigan are heavily dependent on food stamps.”

With jobless benefits covering only half of the unemployed, food stamps—which provide an average of $1 per meal per person, or around $100 per person each month for individuals or families earning up to 130 percent of the official poverty level—have become the safety net of last resort. A record 36 million people—one in eight people and one in four children—now rely on the food stamp program. The joint federal-state Supplemental Nutrition Assistance Program (SNAP) is expanding by 20,000 people per day, but is still estimated to serve only two-thirds of those who qualify.

An earlier Times study showed there are more than 200 US counties where food stamp usage shot up by at least two-thirds, including Riverside County, California, most of greater Phoenix and Las Vegas, a ring of Atlanta suburbs, and a 150-mile stretch of southwest Florida from Bradenton to the Everglades. The study found there are over 800 counties where food stamps feed one third of all children.

Late last year, researchers at Washington University in St. Louis released a study showing that 50 percent of all children and 90 percent of African American children will receive food stamps at some point before their 20th birthday. “Rather than being a time of security and safety,” said Mark Rank, Ph.D., one of the authors of the report, “the childhood years for many American children are a time of economic turmoil, risk, and hardship.”

The January 3 Times report focused on Florida, where the number of people with no income beyond food stamps has doubled in two years and more than tripled along the southwest coast, where a housing boom turned into a bust of foreclosed and abandoned homes. According to state data, those without income were split evenly between families with children and individuals. Those affected were also racially mixed—about 42 percent white, 32 percent black, and 22 percent Latino—with whites making up the fastest growing segment during the recession.

This plunge into destitution has affected wide layers of the population. The Times article cites a middle-aged mother of two, Isabel Bermudez, who moved from a Bronx housing project to sell real estate in Florida. Once enjoying a six-figure income, a house with a pool and investment property, she lost her job and home and ran out of unemployment benefits. Ms. Bermudez’s sole income is now $320 a month in food stamps. “I went from making $180,000 to relying on food stamps,” she told the newspaper, adding that without the program she wouldn’t be able to feed her children.

The increasing reliance on meager food stamp allowances exposes the absence of anything that can properly be called a social safety net in the US. The situation will only get worse, as both the Democrats and Republicans prepare to slash what remains of publicly funded programs in order to pay for the multitrillion-dollar Wall Street bailout and expansion of US military action around the world.

The theme of Obama’s State of the Union address—expected early next month—will be long-term deficit reduction and a further demand that the American people reduce their consumption. The White House is backing a bipartisan commission to recommend major cuts in basic social programs along with regressive taxes on consumption, and Obama’s budget director, Peter Orszag, has said the administration will take measures to reduce the deficit in its next budget due out in February. Such actions will throw millions more into poverty.

The social crisis facing working people—depression levels of unemployment, home foreclosures, the growth of hunger, poverty and homelessness—is the most graphic expression of the failure of capitalism, an economic system that benefits the wealthy few at the expense of the vast majority.

In the midst of this worsening situation for the working population, it was reported last week that the top three banks—Goldman Sachs, JPMorgan Chase and Morgan Stanley—which received tens of billions in public funds under the Troubled Asset Relief Program—will hand out $49.5 billion in end-of-year cash bonuses and stock awards. All told, US banks will dispense an estimated $200 billion in total compensation.

The Obama administration is continuing and accelerating the transfer of wealth from working people to those who are responsible for precipitating the worst economic breakdown since the Great Depression.

Who Would Benefit Politically from a Terrorist Incident on American Soil? The Strange Case of Umar Farouk Abdul Mutallab

Who Would Benefit Politically from a Terrorist Incident on American Soil? The Strange Case of Umar Farouk Abdul Mutallab

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Despite some $40 billion dollars spent by the American people on airline security since 2001, allegedly to thwart attacks on the Heimat, the botched attempt by Umar Farouk Abdul Mutallab to bring down Northwest Airlines Flight 253 over Detroit on Christmas Day was foiled, not by a bloated counterterrorist bureaucracy, but by the passengers themselves.

Talk about validating that old Wobbly slogan: Direct action gets the goods!

And yet, the closer one looks at the available evidence surrounding the strange case of Umar Farouk Abdul Mutallab, the more sinister alleged "intelligence failures" become. As this story unfolds it is becoming abundantly clear that U.S. security officials had far more information on the would-be lap bomber than we've been told.

The Observer revealed January 3 that the British secret state had Abdulmutallab on their radar for several years and that he had become "politically involved" with "extremist networks" while a student at University College London, where he served as president of the Islamic Society.

Examining "e-mail and text traffic," security officers claim to have belatedly discovered that "he has been in contact with jihadists from across the world since 2007."

Indeed, The Sunday Times disclosed that the 23-year-old terrorism suspect was "'reaching out' to extremists whom MI5 had under surveillance." The officials said that Abdulmutallab was "'starting out on a journey' in Britain" that culminated with last week's attempt to destroy Flight 253.

It is claimed by unnamed "British officials" that "none of this information was passed" to their American counterparts; on the face of it, this appears to be a rank mendacity.

The Sunday Times further reported that security officials have "now passed a file" to American counterterrorism officers that show "his repeated contacts with MI5 targets who were subject to phone taps, email intercepts and other forms of surveillance."

None of this should surprise anyone, however. In light of multiple prior warnings which preceded past terrorist atrocities, the selective leaking of information to the British media in its own way, buttresses the official story that the near-tragedy aboard Flight 253 was simply the result of ubiquitous "intelligence failures."

But as we have seen with Mohamed Atta, Richard Reid and Mohammad Sidique Khan, Abdul Mutallab's "journey" was one undertaken by many before, often with a wink-and-a-nod by British and American security officials when it served the geostrategic ambitions of their political masters.

As security researcher and analyst Nafeez Mosaddeq Ahmed wrote in the New Internationalist (October 2009): "Islamist terrorism cannot be understood without acknowledging the extent to which its networks are being used by Western military intelligence services, both to control strategic energy resources and to counter their geopolitical rivals. Even now, nearly a decade after 9/11, covert sponsorship of al-Qaeda networks continues."

Ahmed's findings track closely with those of Michel Chossudovsky, Peter Dale Scott and Richard Labévière, who have painstakingly documented that the complex of jihadi groups known as al-Qaeda have enjoyed the closest ties with Western intelligence agencies stretching back decades.

That intelligence officers, including those at the highest levels of the secret state's security apparat, did nothing to hamper an alleged al-Qaeda operative from getting on that plane--in a chilling echo of the 9/11 attacks--calls into question the thin tissue of lies outlined in the official narrative.

An Intelligence "Failure," or a Wild "Success" for Security Corporations?

Charged December 26 with attempting to blow up a U.S. airliner, according to The Washington Post Abdulmutallab "was listed in a U.S. terrorism database."

The Post reported that the suspect's name "was added in November to the Terrorist Identities Datamart Environment, or TIDE." It is further described as a "catch-all list" which "contains about 550,000 individuals" and is maintained by "the Office of the Director of National Intelligence at the National Counterterrorism Center."

However, The New York Times revealed December 31 that the "National Security Agency four months ago intercepted conversations among leaders of Al Qaeda in Yemen discussing a plot to use a Nigerian man for a coming terrorist attack."

Times' reporters Mark Mazzetti and Eric Lipton, citing unnamed "government officials," disclosed that "the electronic intercepts were translated and disseminated across classified computer networks" months before Abdulmutallab boarded Flight 253 in Amsterdam.

But when the NSA intercepts landed at the National Counterterrorism Center (NCTC), overseen by the Office of the Director of National Intelligence (ODNI), analysts there "did not synthesize the eavesdropping intelligence with information gathered in November" when Abdulmutallab's father provided the U.S. Embassy in Nigeria crucial information on his son's involvement with the Afghan-Arab database of disposable Western intelligence assets, also known as al-Qaeda.

Seeking comment from NCTC proved to be a daunting task. As the Times delicately put it, "officials at the counterterrorist center ... maintained a stoic silence on Wednesday, noting that the review ordered by President Obama was still under way."

Despite revelations in the British press, the White House maintains that U.S. intelligence agencies "did not miss a 'smoking gun'" that could have prevented the botched attack, the Associated Press reported January 3.

White House aide John Brennan, citing "lapses" and "errors" in sharing intelligence said, "There was no single piece of intelligence that said, 'this guy is going to get on a plane.'"

As we will soon see, Mr. Brennan has every reason to hide behind such mendacities.

Investigative journalist Tim Shorrock, the author of the essential book Spies For Hire, reported in CorpWatch, that NCTC is an outsourced counterterrorist agency chock-a-block with security contractors in the heavily-leveraged homeland security market.

Indeed, The Analysis Corporation (TAC), a wholly-owned subsidiary of defense and intelligence contractor Global Strategies Group/North America, "specializes in providing counterterrorism analysis and watchlists to U.S. government agencies."

"It is best known" according to Shorrock, "for its connection to John O. Brennan, its former CEO, a 35-year veteran of the CIA and currently President Obama's chief counterterrorism adviser. Brennan, the first director of the National Counterterrorism Center (NCTC), retired from government in November 2005 and immediately joined TAC."

Shorrock reports that "much of TAC's business is with the NCTC itself. In fact, the NCTC is one of the company's largest customers, and TAC provides counterterrorism (CT) support to 'most of the agencies within the intelligence community,' according to a company press release. One of its biggest customers is the Office of the Director of National Intelligence, which manages the NCTC."

"During the 1990s" Shorrock relates, "TAC developed the U.S. government's first terrorist database, 'Tipoff,' on behalf of the State Department."

Shorrock chronicles how "the database was initially conceived as a tool to help U.S. consular officials and customs inspectors determine if foreigners trying to enter the United States were known or suspected terrorists."

In the wake of the 9/11 attacks and subsequent reorganization of the U.S. security bureaucracy, the investigative journalist tells us that "in 2003, management of the database--which received information collected by a large number of agencies including the CIA, NSA, and FBI--was transferred to the CIA's Terrorist Threat Integration Center (TTIC) and, later, to the National Counterterrorism Center."

"In 2005" Shorrock discloses, "Tipoff was expanded and renamed the Terrorist Identities Datamart Environment, or TIDE, and fingerprint and facial recognition software was added to help identify suspects as they crossed U.S. borders."

Despite the utter worthlessness of a bloated database containing more than 1.3 million names according to the American Civil Liberties Union, and not the grossly undercounted figure of 550,000 cited by corporate media, TIDE has been a boon for TAC.

"In the five years after 9/11" Shorrock reveals, "its income quintupled, from less than $5 million in 2001 to $24 million in 2006. In 2006, TAC increased its visibility in the intelligence community by creating a 'senior advisory board' that included three heavy hitters from the CIA: former Director George J. Tenet, former Chief Information Officer Alan Wade, and former senior analyst John P. Young."

And what have the American people gained from inflating the corporatist bottom line? In light of the Christmas Day bombing attempt, not much.

As investigative journalists Susan and Joseph Trento revealed in their overlooked but highly-disturbing 2006 book, Unsafe At Any Altitude, most of the 9/11 hijackers, including Mohamed Atta, Hani Hanjour, Khalid al-Mihdhar and Majed Moqed "were flagged by CAPPS (Computer-Assisted Passenger Prescreening System)."

But because of CIA and FBI monkey-business that rendered watch-list information useless to stop suspected terrorists from boarding an airliner, "the only thing that was done as a result was that the baggage of several members of the Al Qaeda team was held on the ground until the cabin crew confirmed they had boarded as passengers."

And when you consider that Abdulmutallab didn't even have any baggage to check, alleged security "lapses" are even more glaring.

According to the Trentos, "the FBI, CIA, NSA, and Department of Homeland Security refuse to give the airlines an accurate no fly list, thereby allowing the most threatening terrorists to continue to fly." Is there a pattern here? You bet there is!

An unnamed "counterterrorist official" told The Wall Street Journal December 31: "'If you look back to these audit reports, there are significant issues raised with the accuracy and omissions to the watchlisting process that haven't been fixed, clearly,' as of Dec. 25. 'Essentially you're screening blindly, and that's not effective'."

However, we can be sure there will be very little in the way of a hard-hitting investigation into this alleged security breach. The New York Times reported that TAC's former CEO John O. Brennan, has been "granted a special ethics waiver ... to conduct a review of the intelligence and screening breakdown that preceded the failed Christmas Day bombing attempt on an American passenger plane over Detroit."

Enter the CIA, Stage (Far) Right

What "other government agency" may have suppressed intelligence on the would-be bomber?

The CBS Evening News revealed December 29 that "as early as August of 2009," tracking closely with the time-frame of NSA intercepts, "the Central Intelligence Agency was picking up information on a person of interest dubbed 'The Nigerian,' suspected of meeting with 'terrorist elements' in Yemen."

Unnamed "intelligence sources" told CBS, "'The Nigerian' has now turned out to be Umar Farouk Abdulmutallab." But that connection "was not made when Abdulmutallab's father went to the U.S. Embassy in Nigeria three months later, on November 19, 2009. It was then he expressed deep concerns to a CIA officer about his son's ties to extremists in Yemen, a hotbed of al Qaeda activity." CBS claims "this information was not connected until after the attempted Christmas Day bombing."

Earlier reports have alleged that Umar's father, a wealthy Nigerian banker and former high state official, Alhaji Umaru Mutallab, had only provided Embassy officials with a vague concern that his son's estrangement "may have" something to do with his growing "religious fervor." This too, turns out to be a lie.

The Times reported that a "family cousin quoted the father as warning officials from the State Department and the Central Intelligence Agency in Nigeria: 'Look at the texts he's sending. He's a security threat'."

Nothing vague in this disclosure, but rather more concrete evidence in the form of "texts" which we now know were shortstopped by British security and included "phone taps, email intercepts and other forms of surveillance" by MI5 that led an anguished father to express well-placed fears about his son to U.S officials.

But as the Times were told by their source, "They promised to look into it. They didn't take him seriously."

And here's where things take a decidedly malevolent turn. According to the Times, "C.I.A. officials in Nigeria also prepared a separate report compiling biographical information about Mr. Abdulmutallab, including his educational background and the fact that he was considering pursuing academic studies in Islamic law in Yemen."

"That cable was sent to C.I.A. headquarters in Langley, Va.," Mark Mazzetti and Eric Lipton disclosed, "but not disseminated to other intelligence agencies, government officials said on Wednesday."

Then again, perhaps they knew all-too-well of Abdulmutallab's glide path and chose instead to turn a blind eye. Coming on the heels of disclosures in the British media, the evidence suggests that CIA intelligence provided by NSA intercepts, their own on-the-ground operatives in Yemen and MI5 surveillance reports were scrupulously ignored by factions within the secret state who sat on critical information that withheld, would disarm and paralyze normal security procedures in the face of an attack they knew was imminent.

We were told by corporate media, infamously serving as an echo chamber for grifting politicians, Bushist officials and the 9/11 Commission's 2004 whitewash, that the September 11, 2001 terrorist attacks resulted from "a failure of imagination" by counterterrorism officials to "connect the dots."

Seems there were plenty of "dots" in Abdulmutallab's case and yet, inexplicably, if you buy the official story, and sinisterly, if you don't, not a single one was "connected" prior to the time he took his seat on Flight 253.

Despite the fact that Abdulmutallab was denied re-entry into Britain, paid $2,800 in cash for his "ticket to Paradise," and had no luggage that normally would accompany a person holding a 2-year entry visa into the U.S., the erstwhile lap bomber scored a goal each time and eluded every intrusive "profile" presumably in place to keep us "safe." Talk about a hat trick!

Available evidence suggests that Abdulmutallab should have landed on TSA's hush-hush "Selectee list" for additional screening, or the agency's "No-fly list." And given NSA intercepts and a CIA biographical report on the suspect, this alone should have barred him from entering the country if "normal" security procedures were followed. They weren't.

As The Independent on Sunday reported last week, "the revelation of Abdulmutallab's background has confounded terror experts." One such "expert," Dr Magnus Ranstorp of the Center for Asymmetric Threat Studies at the Swedish National Defence College, told IoS that "the attempted bombing 'didn't square'."

"On the one hand" Ranstorp said, "it seems he's been on the terror watch list but not on the no-fly list."

"That doesn't square" Ranstorp elaborated, "because the American Department for Homeland Security has pretty stringent data-mining capability. I don't understand how he had a valid visa if he was known on the terror watch list."

Good question, Dr. Ranstorp. Perhaps because someone wanted him on that plane. The question is, who?

One would have thought, given the "special treatment" afforded antiwar activists by TSA at airports, that a warning about Abdul Mutallab's possible involvement with terrorists, by his own father no less, a former top official in a government friendly to Washington, numerous NSA intercepts, a CIA dossier and MI5 reports would have raised at least one red flag!

In the suspect's case, there were so many red flags flying you'd have thought the Red Army was parading through Amsterdam's Schiphol Airport!

Then again, perhaps Abdul Mutallab was on that plane because, as journalist Daniel Hopsicker was told by a former aviation executive during his investigation of the 9/11 attacks: "Sometimes when things don't make business sense ... its because they do make sense...just in some other way."

As the World Socialist Web Site points out:

The general outlines of the Northwest bombing attempt and the 9/11 attacks are startlingly similar. One might even say that what is involved is a modus operandi. In both cases, those alleged to have carried out the actions had been the subject of US intelligence investigations and surveillance and had been allowed to enter the country and board flights under conditions that would normally have set off multiple security alarms.

Both then and now, the government and the media expect the public to accept that all that was involved was mistakes. But why should anyone assume that the failure to act on the extensive intelligence leading to Abdulmutallab involved merely "innocent" mistakes--and not something far more sinister? (Bill Van Auken, "The Northwest Flight 253 intelligence failure: Negligence or conspiracy?," World Socialist Web Site, December 31, 2009)

And so dear readers with are left to ponder the question, cui bono?

Who would benefit politically from a major terrorist incident on American soil, ready, willing and able to step into the breach and exploit the catastrophic loss of human life that would follow in its wake?

Who indeed.

Court Backs War Powers Over Rights of Detainees

Court Backs War Powers Over Rights of Detainees

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A federal appeals court panel on Tuesday strongly backed the powers of the government to hold Guantánamo detainees and other noncitizens suspected of committing terrorist acts.

In a sweeping opinion, a three-judge panel of the United States Court of Appeals for the District of Columbia Circuit found that the presidential war power to detain those suspected of terrorism is not limited even by international law of war.

The decision, if it is not reversed by the Supreme Court, could apply to all cases involving detainees at Guantánamo Bay, Cuba, since all of those cases are heard by the District of Columbia Circuit. As a result, the Obama administration will have a stronger position when opposing a court order to release a terrorism suspect.

In its ruling, the court denied a request by Ghaleb Nassar al-Bihani, a former cook for a Taliban paramilitary brigade, to be released from the detention center at Guantánamo. It is the first case to directly apply a landmark 2008 Supreme Court decision that allowed prisoners to challenge their detention.

Mr. Bihani, who is from Yemen, was captured in 2002 when his brigade surrendered. He challenged his detention with a petition for habeas corpus, which the courts did not act on before the decision of the 2008 Supreme Court case, Boumediene v. Bush, which said federal judges had jurisdiction to hear such claims.

Last year, a federal district court denied Mr. Bihani’s petition for release; Tuesday’s decision upheld the lower court.

Mr. Bihani argued that his continued detention violated international law because he was not part of the military of a nation at war, and had not committed “a direct hostile act” like firing his weapon. His petition for release, he said, should have been reviewed under standards like those for criminal defendants in the United States.

But the court found that granting such a high level of protection to the rights of detainees like Mr. Bihani would affect the military’s entire approach to war.

“From the moment a shot is fired, to battlefield capture, up to a detainee’s day in court, military operations would be compromised as the government strove to satisfy evidentiary standards in anticipation of habeas litigation,” the opinion said.

A lawyer for Mr. Bihani did not return calls seeking comment. A Department of Justice spokesman also declined to comment.

Eric M. Freedman, a law professor at Hofstra University and an expert in habeas cases, said the appeals court had “gone out of its way to poke a stick in the eye of the Supreme Court” by taking a view that expands government power beyond the limits laid out in decisions like Boumediene.

The 25-page opinion was written by Judge Janice Rogers Brown and joined by Judge Brett M. Kavanaugh, both appointees of President George W. Bush. Both are considered among the most conservative judges on the circuit.

The third member of the panel, who joined in denying Mr. Bihani’s petition but not in the complete reasoning of the decision, was Judge Stephen F. Williams., a senior judge who was appointed by President Ronald Reagan. In a concurring opinion, Judge Williams, wrote that the majority’s argument that the president’s war powers are not bound by the international laws of war actually “goes well beyond even what the government has argued in this case.”

In a separate concurrence, Judge Brown wrote that the war placed the nation “past the leading edge of a new and frightening paradigm, one that demands new rules be written.”

She wrote, “War is a challenge to law, and the law must adjust.”

Aid convoy breaks Gaza siege

Aid convoy breaks Gaza siege

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A humanitarian aid convoy carrying food and medical supplies has arrived in the Gaza Strip nearly a month after it embarked from the UK.

Members of the much-delayed Viva Palestina convoy began passing through Egypt's Rafah border crossing into Gaza on Wednesday, waving Palestinian flags and raising their hands in peace signs.

Al Jazeera's Ayman Mohyeldin, reporting from Gaza, said the first wave of vehicles was greeted by Gaza's Hamas leaders as well as members of a Turkish humanitarian organisation that aided in bringing the convoy to the strip.

"We had been expecting the arrival of the convoy amid much fanfare but it almost caught the Palestinians here by surprise," he said.

"The doors suddenly flung open and within minutes the first batch of about 12 or so vehicles made their way from the Egyptian side to the Palestinians."

More than 100 vehicles followed the first batch into Gaza shortly afterward, he said.

Violent clashes

Participants of the convoy are expected to spend the next 48 hours distributing the aid supplies.

Viva Palestina's arrival in Gaza followed violent clashes between Egyptian security forces, Palestinians and members of the convoy.

Hours before the convoy's arrival, an Egyptian soldier was shot dead during a clash with Palestinian protesters who had gathered along the border to protest a delay in the convoy's arrival.

Egyptian forces opened fire to disperse the stone-throwing protesters, and at least 35 Palestinians were wounded in the ensuing clash, according to Hamas officials.

Late on Tuesday, more than 50 people were wounded during a clash between Egyptian authorities and international members of the convoy.

The protests were sparked by an Egyptian decision to allow 139 vehicles to enter Gaza through the Rafah crossing, but requiring a remaining 59 vehicles to pass via Israel.

Bitter disputes

The convoy, led by George Galloway, a British MP, had already been delayed by more than a week, after he and a delegation of Turkish MPs failed to persuade the Egyptians to change their mind.

The convoy of nearly 200 vehicles arrived in Egypt's port city of al-Arish on Monday after a dispute with Cairo on the route.

But the arrival came after a bitter dispute between its organisers and the government, which banned the convoy from entering Egypt's Sinai from Jordan by ferry, forcing it to drive north to the Syrian port of Lattakia.

Al Jazeera's Amr El Kahky, who has been travelling with the convoy, said Viva Palestina's organisers had hoped to reach Gaza by December 27.

"We're talking about an almost 10 day delay. The convoy members are happy to have reached their destination," he said.

"Many of them have taken time off from their jobs in Europe and other areas and that's why they're happy to deliver the aid and go back home to resume their normal lives. So their jubilation is justified."

Gaza blockade

Israel and Egypt have severely restricted travel to and from the Gaza Strip since Hamas seized power there in June 2007, after winning Palestinian legislative elections in 2006.

The blockade currently allows only very basic supplies into Gaza.

The siege has severely restricted essential supplies and placed Gazans in a dire situation, made worse by Israel's military assault last winter that reduced much of the territory to ruins.

Galloway, the convoy organiser, said the mission represents only "a drop in the ocean" as long as the siege on Gaza continues.

"No number of convoys is going to solve the problems here," he told Al Jazeera.

"So we're not only trying to bring in aid, we're trying to show the world there is a siege.

"If there is anyone who doubted there is a siege on Gaza, they certainly aren't doubting it now after the events of the last 31 days with this convoy."

Economy USA 2010: From the Scandalous Past to the Uncertain Future

Economy USA 2010: From the Scandalous Past to the Uncertain Future

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“Homes rose markedly in value, especially in hot markets like Florida and New York City. Borrowers believed that home purchases were no-risk ventures certain to escalade, and they went out on a limb to buy. Lenders who had once required large down payments now permitted home purchasers to combine two and three loans to buy a home. People took out what were called “buffet” loans, which were interest-only loans that buyers were told they should refinance in three years or five years. Lenders told home buyers not to worry; homes were rising so fast in value that it would always be easy to refinance into another loan. Developers built larger houses. Why not? Borrowers wanted larger homes. They needed the space to hold all the things they were buying.” —U. S. Housing market in 1928-29, in Kristin Downey, The Woman Behind the New Deal (Frances Perkins), 2009, p. 106, from Gail Radford, Modern Housing for America: Policy Struggles in the New Deal, 1996, pp.10-22


"I place economy (saving) among the first and most important virtues, and debt as the greatest of dangers to be feared." Thomas Jefferson: 3rd US President (1801-09)

"America is more communist than China is right now. You can see that this is welfare of the rich, it is socialism for the rich -- it's just bailing out financial institutions. This is madness; this is insanity; they have more than doubled the American national debt in one weekend for a bunch of crooks and incompetents." Jim Rogers, American investor

After a decade plus of unchecked greed by money-changers, of the political dismantling of financial regulation, of large “too-big-to-fail” banks made larger, of artificial easy money by the central bank, of the risky securitization of all kinds of debt instruments and of leveraged buy-outs of scores of companies with their own debts by financial operators, it was no surprise that the financial house of cards came crashing down in 2007-2008. It was like a pre-programmed financial crisis. A perfect financial storm.

What lessons can be drawn from the recent unhealthy and unpalatable past? And, what is in store for the near future, considering that hardly anything in the financial environment has changed? A crisis caused by a near total absence of financial regulation, by a too easy monetary policy and by too much debt, has been met with no additional financial regulation, by an even easier monetary policy and by even more debt. In fact, the U.S. ratio of total debt ($57 trillion) to the economy (GDP: $14.5 trillion in 2009) is even higher today at 3.9, then it was before the onset of the crisis in 2007-08, when it stood at 3.4.

That is why we will argue here that the problems of U.S. financial dysfunction have not been solved. On the contrary, they have been swept under the large rug of even easier money and of even larger debts, which is only postponing the day of reckoning. For sure, the large Wall Street banks' bad debts have been transferred to the public sector (the Treasury and the Fed) and to the quasi public sector (Fannie Mae and Freddie Mac), but the overall debt load of the U.S. economy has not been reduced; it has been increased. That is why the U.S. is condemned to continue its foreign borrowing binge for some time to come.

In general, too much foreign borrowing is bad for an economy, especially if it is done to finance an excessive level of domestic consumption. When this happens, it is a sign that total domestic expenditures (government, corporations, consumers) exceed total incomes. The country lives beyond its means and the gap has to be filled with net foreign borrowings.

The principal indicator of this situation is the current account (a broader measure than the external trade balance) of the country. When a country's current account turns negative, more money for imports and interest payments is flowing out of the country than is coming in through exports and investment income. Like any individual, of course, a country can borrow abroad if its credit rating is good. The question is how much and for how long. For countries that have fully convertible currencies or, better, for countries like the United States whose national currency also serves as an international key-currency, the situation can endure for a longer period, but there is always a day of reckoning.

In general, for a normal economy, a negative current account that exceeds six (6) percent of Gross Domestic Product (GDP), especially if this is due to a negative trade balance, usually indicates a non sustainable situation of foreign borrowing and foreign indebtedness that can lead to a financial crisis. Countries like Mexico (1994-95) and Thailand (1997-98) experienced such a financial crisis in the 1990's. Such was the case also with Argentina at the turn of the century.

Since 2000, and coinciding with the arrival of the George W. Bush Republican administration, the United States has also embarked upon a policy of excessive domestic spending, resulting in larger and larger and persistent current account deficits and huge foreign borrowings. Indeed, the adoption of an imperial foreign policy of permanent war throughout the world, financed on credit, and an ideological preference for large fiscal deficits, have translated into large American current account deficits.

In 2006, the U.S. (external) current account deficit reached 6.5 percent of GDP. This was the apex of external debt sustainability and a harbinger of economic troubles to come for the U.S. economy. As a matter of fact, this induced me to write an article on October 16, 2006 entitled “Headwinds for the US Economy”, in which I warned that it was a "matter of months, not years", before the U.S. economy and the U.S. dollar begin to experience some downward pressures. I repeated the warning a few months later when I wrote on May 5, 2007, (A Slowdown or a Recession in the U.S. in 2008?), that we could expect "the collapse of one and possibly several major financial institutions under the pressures of bad loans and record foreclosures... The rate of foreclosure is bound to spike in the coming months, possibly culminating in the next two years into a financial hurricane." This was said many months before the onset of the 2008-09 recession and the September 15, 2008 failure of the large investment bank Lehman Brothers.

In 2008, in the midst of the economic recession, the U.S. current account deficit was still estimated at –$706 billion (nearly all caused by a –$707.8 billion trade deficit) for a $14,441 U. S. GDP, that translated into a 4.9 percent current account deficit relative to the economy.

With the 2008–09 economic crisis and recession, the US current account deficit has since been somewhat reduced due to a drop in incomes and in imports, and partly due to a sharp decline in oil prices, but it is expected to remain above four percent of GDP. In the coming years, this ratio is likely to increase again as the long-term U.S. fiscal deficit is expected to remain at 10 percent of GDP for years to come.

The Fed's Role in Creating Asset Price Bubbles

The causes of a financial crisis are complex and can vary from one country to the next. In general, however, they usually stem from the central bank becoming subservient to the government when the latter decides to embark upon a policy of large fiscal deficits. If the central government opts in favor of monetizing the public deficits and keeping interest rates low, an asset bubble is bound to emerge.

Unfortunately, that's pretty much what the Greenspan Fed elected to do in maintaining an easy money policy for too long and in keeping interest rates too low, for too long, in the late 1990s and in the first part of the 2000 decade. Indeed, most economists agree that in 2003-04, the U.S. Fed should have raised short-term interest rates (pushed down to 1 percent in June 2003 from 6.5 percent in December 2000). But the then Greenspan Fed (current Fed Chairman Ben S. Bernanke has been a Fed Board member since 2002) was deeply embroiled in the Bush political agenda. Chairman Alan Greenspan publicly acknowledged this fact when he declared on September 17, 2007, in an interview with the Financial Times, that “raising interest rates sooner and faster (before the 2004 presidential election) would not have been acceptable to the political establishment given the very low (official) rate of inflation”.

In financial matters, the American central bank (the Fed or the Federal Reserve System) is a curious animal. It is an institution that is entrusted to regulate banks and other financial institutions, but it is partly owned by the large money center banks. It is in a perpetual conflict of interests. In fact, it can be said that the Fed is the banks' own private government. In good times, large Wall Street banks, bank holding companies and other large integrated financial groups, such as AIG (American International Group), are pretty much left alone and allowed to build profitable but risky and shaky financial pyramids, with scant supervision. When things go bad, however, the Fed stands ready to bail them out with automatic discounting, zero-interest loans and other goodies, the overall cost being transferred to the general public through an inflation tax and a debased currency. We know since 2008 that the U.S. Treasury also stands ready with public money to bailout the large Wall Street banks when their gambles go sour. The $700 billion Troubled Assets Relief Program (TARP) is testimony to that effect.

A central bank can always print new money. But this is hardly a magic recipe for prosperity. If it were so, many Third World countries could claim to have discovered this magic potion. The current Bernanke Fed is tragically wrong in its belief that it can reverse the current over-indebtedness situation in the economy and its mismanagement of the financial crisis by printing money. It is not true that the real economy always respond positively to heavy doses of monetary stimulus. In fact, the contrary is usually the case. If it were true, Zimbabwe, which is an African economic basket case with an uncontrolled bout of hyperinflation, would be prosperous. The U.S. economy is not exempt from fundamental economic laws. A few years down the road, people will see why.

It is my feeling that the U.S. economy is presently in the eye of a powerful financial hurricane of debt liquidation. Such systemic crisis happens no more than twice in a century and it takes at least a decade to work itself out. In this environment, one should be wary of the stock market as a barometer of the real economy. There could be artificially created short-term “liquidity” rallies, when all the while the real economy remains in the doldrums. The 2009 liquidity-driven stock market rally has all the appearances of such a bear market rally destined to fail and trap many unwary investors. In fact, this rally looks like a mirror repeat of the 1930 stock market rally that saw stocks retrace some fifty percent of their initial 1929 losses. We know now that this was only a mirage, and that the worst was still to come.

In my last July 10 blog, I stated that there is likely to be a prolonged 2007-2017 economic stagnation period in the U.S. —I reconfirm this assessment, which is reinforced by my conviction that the Bernanke Fed is making matters worse by its unlimited printing press so-called “solution” of discounting everything but the kitchen sink. It is my contention that this imprudent Fed is paving the way for the mother load of bubble and subsequent crash. This is because, as alluded to above, they seem to have forgotten that the credit cycle and the process of debt build-up, and the subsequent debt liquidation that follows, are the primary driving forces in the underlying economic cycle.

This time the crash will be initiated in the huge bond market, will spread to the commercial loan market and ultimately to the stock market, and then will further crush the real economy in a way that few understand today but will learn the hard way in the coming years.

Let us keep in mind that in the recent past, the Fed and the U.S. Treasury did not see the subprime and housing crises coming. They were completely taken off-guard. In 2005, according to then Fed member Ben Bernanke, “there was no housing bubble”, even though everybody and his uncle could see that the real estate bubble was about to burst.

And now, let us look at the figures. At the end of 2009, reflecting a binge of printing new money by the Fed, the U.S. monetary base, i.e. money circulating through the public and banking reserves on deposit with the Federal Reserve, stood at more than $2,016,136,000,000, after having increased 146 percent in three years. This is unprecedented. —Even if one subtracts the inactive excess bank reserves at the Fed, worth more than $1 trillion (and earning interest!), the U.S.'s monetary base has grown 22 percent in three years, from a starting point of $818 billion in early 2006.

Nevertheless, Fed Chairman Ben Bernanke said in 2009, that he does not fear inflation and that, in fact, inflation could even go down from then on. He could be right for the next few months, but how about the next few years?

Those who listened to Chairman B. B. in 2005, and kept buying leveraged real estate, lost their shirt. I am of the feeling that those who believed Chairman B.B in 2009, and kept buying long-term U.S. Treasury bonds, are also going to lose their shirt. Because of the huge federal deficits and Fed policy to monetize a big chunk of them, U.S. long-term rates are bound to increase in the coming years, whether the real economy grows or not. That would be the next Fed-created bubble bursting, the bubble of artificially low interest rates, excessive money creation and artificially high asset prices for long-term Treasury bonds.

In the past, the big losers of this policy were the millions of people who lost their homes through mortgage foreclosures, the millions of people who lost their jobs through bankruptcies and the millions of retirees who saw their retirement incomes plummet with near zero interest rates. In the future, the principal losers will still be middle class families who will continue being the victims of a massive spoliation and will still have trouble making ends meet, plus retirees whose retirement capital will be further eroded. Where is AARP when we need it?

Did U.S. Forces Execute Kids in Afghanistan?

Did U.S. Forces Execute Kids in Afghanistan?

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The Taliban suicide attack that killed a group of CIA agents in Afghanistan was big news in the U.S. over the past week. The attack took place on a base that was directing U.S. drone aircraft used to attack Taliban leaders. The airwaves and front pages were filled with sympathetic stories referring to the fact that the female station chief, who was among those killed, was the "mother of three children."

But the apparent mass murder of Afghan school children, including one as young as 11 years old, by U.S.-led troops, was pretty much blacked out in the American media. Especially blacked out was the claim by UN investigators that the students had not just been killed but executed, many of them after having first been rousted from their bedrooms and handcuffed.

Here is the excellent report on the incident that ran in the Times of London (like Fox News, a Rupert Murdoch-owned publication) on Dec. 31:


Western troops accused of executing 10 Afghan civilians, including children

By Jerome Starkey in Kabul

American-led troops were accused yesterday of dragging innocent children from their beds and shooting them during a night raid that left ten people dead.

Afghan government investigators said that eight schoolchildren were killed, all but one of them from the same family. Locals said that some victims were handcuffed before being killed.

Western military sources said that the dead were all part of an Afghan terrorist cell responsible for manufacturing improvised explosive devices (IEDs), which have claimed the lives of countless soldiers and civilians.

"This was a joint operation that was conducted against an IED cell that Afghan and US officials had been developing information against for some time," said a senior Nato insider. But he admitted that "the facts about what actually went down are in dispute."

The article goes on to say:

In a telephone interview last night, the headmaster [of the local school] said that the victims were asleep in three rooms when the troops arrived. "Seven students were in one room," said Rahman Jan Ehsas. "A student and one guest were in another room, a guest room, and a farmer was asleep with his wife in a third building.

"First the foreign troops entered the guest room and shot two of them. Then they entered another room and handcuffed the seven students. Then they killed them. Abdul Khaliq [the farmer] heard shooting and came outside. When they saw him they shot him as well. He was outside. That's why his wife wasn't killed."

A local elder, Jan Mohammed, said that three boys were killed in one room and five were handcuffed before they were shot. "I saw their school books covered in blood," he said.

The investigation found that eight of the victims were aged from 11 to 17. The guest was a shepherd boy, 12, called Samar Gul, the headmaster said. He said that six of the students were at high school and two were at primary school. He said that all the students were his nephews.

Compare this article to the one mention of the incident that appeared in the New York Times, one of the few American news outlets to even mention the incident. The article, which appeared on Dec. 28, focused entirely on the difficulty civilian killings cause for the U.S. war effort, and not on the allegations of a serious war crime:

Attack Puts Afghan Leader and NATO at Odds

By Alissa J. Rubin and Abdul Waheed Wafa

KABUL, Afghanistan -- The killing of at least nine men in a remote valley of eastern Afghanistan by a joint operation of Afghan and American forces put President Hamid Karzai and senior NATO officials at odds on Monday over whether those killed had been civilians or Taliban insurgents.

In a statement e-mailed to the news media, Mr. Karzai condemned the weekend attack and said the dead had been civilians, eight of them schoolboys. He called for an investigation.

Local officials, including the governor and members of Parliament from Kunar Province, where the deaths occurred, confirmed the reports. But the Kunar police chief, Khalilullah Ziayee, cautioned that his office was still investigating the killings and that outstanding questions remained, including why the eight young men had been in the same house at the time.

"There are still questions to be answered, like why these students were together and what they were doing on that night," Mr. Ziayee said.

A senior NATO official with knowledge of the operation said that the raid had been carried out by a joint Afghan-American force and that its target was a group of men who were known Taliban members and smugglers of homemade bombs, which the American and NATO forces call improvised explosive devices, or I.E.D.'s.

According to the NATO official, nine men were killed. "These were people who had a well-established network, they were I.E.D. smugglers and also were responsible for direct attacks on Afghan security and coalition forces in those areas," said the official, who spoke on the condition of anonymity because of the delicacy of the issue.

"When the raid took place they were armed and had material for making I.E.D.'s," the official added.

While the article in the New York Times eventually mentions the allegation that the victims were children, not grown men, it nonetheless begins with the unchallenged assertion in the lead that they were "men." There is no mention of the equally serious allegation that the victims had been handcuffed before being executed, and the story leaves the impression, made by NATO sources, that they were armed and had died fighting. There is no indication in the Times story that the reporters made any effort, as the more enterprising and skeptical London Times reporter did, to get local, non-official, sources of information. The New York Times reporters attributed the claim that the victims had been making bombs to an anonymous NATO source, even though there was no legitimate reason for the anonymity ("because of the delicacy of the situation" was the lame excuse offered). Indeed, the use of an anonymous source here would appear to violate the Times' own standards.

It's not that American newsrooms lacked the knowledge that a major war crime may have been committed. Nearly all American news organizations receive the AP news wire. Here is the AP report on the killings, which ran under the headline "UN says killed Afghans were students":

The United Nations says a raid last weekend by foreign troops in a tense eastern Afghan province killed eight local students.

The Afghan government says that all 10 people killed in a village in Kunar province were civilians. NATO says there is no evidence to substantiate the claim and has requested a joint investigation.

UN special representative in Afghanistan Kai Eide said in a statement Thursday that preliminary investigation shows there were insurgents in the area at the time of the attack. But he adds that eight of those killed were students in local schools.

Once again, the American media are falling down shamefully in providing honest reporting on a war, making it difficult for the American people to make informed judgments about what is being done in their name.

If the charges are correct -- that American forces, or American-led forces, are handcuffing their victims and then executing them -- they are committing egregious war crimes. If they are killing children, they are committing equally egregious war crimes. If they are handcuffing and executing children, the atrocity is beyond horrific. If true, this incident would actually be worse than the infamous war crime that occurred in My Lai during the Vietnam War. In that case, we had ordinary soldiers in the field, acting under the orders of several low-ranking officers in the heat of an operation, shooting and killing women, children and babies. But in this case we appear to have seasoned special forces troops actually directing the taking of captives, cuffing them, herding them into a room and spraying them with bullets, execution-style.

Given the history of the commanding general in Afghanistan, General Stanley McChrystal -- who is known to have run a massive death squad operation in Iraq before being named to his current post by President Obama, and who is known to have called for the same kind of tactics in Afghanistan -- it should not be surprising that the U.S. would now be committing atrocities in Afghanistan. If this is how this war is going to be conducted, the U.S. media should be making a major effort to uncover and expose the crime.

On January 1, the London Times' Jerome Starkey, in Afghanistan, followed up with a second story, reporting that Afghan President Hamid Karzai is calling for the U.S. to hand over the troops who killed the students. Starkey quoted a "NATO source" as saying that the "foreigners involved" in the incident were "non-military, suggesting that they were part of a secret paramilitary unit based in the capital" of Kabul. He goes on to quote a "Western official" as saying: "There's no doubt that there were insurgents there, and there may well have been an insurgent leader in the house, but that doesn't justify executing eight children who were all enrolled in local schools."

Good enterprise reporting by the London Times and its Kabul-based correspondent. Silence on these developments in the U.S. media.

Meanwhile, it has been a week since New York Times reporters Rubin and Wafa made their first flawed report on the incident, and there has been not a word since then about it in the paper. Are Rubin and Wafa or other Times reporters on the story? Will there be a follow-up?

On the evidence of past coverage of these U.S. wars and their ongoing atrocities by the Times and by other major U.S. corporate media news organizations, don't bet on it. You'll do better looking to the foreign media.

By the way, given that we're talking about allegations of a serious war crime, it is important to note that, under the Geneva Conventions, it is a legal requirement that the U.S. military chain of command immediately initiate an official investigation to determine whether such a crime has occurred. One would hope that the Commander-in-Chief, President Obama, would order such an inquiry.

Any effort to prevent such an inquiry, or to cover up a war crime, would be a war crime in itself. We just had one administration that did a lot of that. We don't need another one.