Saturday, February 27, 2010

How Big Banks' Greek-Style Schemes Are Bankrupting States Across the U.S.

How Big Banks' Greek-Style Schemes Are Bankrupting States Across the U.S.

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Just when you thought Wall Street couldn't get any more clever in their attempts at predatory lending, they have.

Big Banks have created an exotic financial instrument that is the equivalent of a payday loan for cash-strapped state and local governments, innocently labeled an "interest rate swap."

In the United States, states and local governments cannot run deficits. This year states face a $357 billion budget shortfall and local governments are facing an additional $82 billion budget shortfall. States have begun cutting basic services like snow removal, reduced garbage pickup, and in Colorado Springs they went to the pawn shop - selling police helicopters on the Internet.

In a desperate effort to meet budget needs, states and local governments over the last decade have gone to the big banks to ask for exotic instruments known as interest rate swaps. These desperate state and local governments were taken advantage of in the same way that Greece was by Goldman Sachs. Likewise, these swaps are threatening the economic health of local cities and states.

These interest rate swaps have cost American taxpayers $28 billion alone in fees and excessive interest. The money which could have been used for badly needed basic services instead goes to help the big banks develop more sophisticated practices to steal money off of regular Americans. Big banks led by Goldman Sachs used deceptive marketing to get states and local governments to buy these swaps.

How do they work? State and local governments take out variable rate bonds to pay for infrastructure projects. In the typical deal, these governments agreed to "swap" interest rates on variable-rate bonds. The government would pay the bank a fixed rate in exchange for a variable payment that would track the interest actually due on the bonds. Make much sense to you? Me neither, at first. That's why banks loved these things.

They sound like easy money to broke states and municipalities, but it's really easy profits for the banks. Basically a bank would peg the interest of a bond at a fixed rate in exchange for the interest rate of the bond that was set by larger macroeconomic forces, such as the Federal Reserve. According to the sales pitch, each party to the transaction might occasionally pay more than the other, but the payments would likely balance out over the life of the contract. Slick-tongued bankers assured the governments that in the end they would end up with something like a low-cost, fixed rate bonds.

Part-time municipal council members all over America desperate to fund infrastructure projects during the Bush economy signed up without understanding that these swaps were worse than most payday loans. On the other hand, many of the people involved in these transactions knew they were losing propositions. According to Economist Susan Ozawa of the New School:

The markets were pricing in serious falls in the prime interest rate.... So it would have been clear that this was not going to be a good deal over the life of the contracts. So the states and municipalities were entering into these long maturity swaps out of necessity. They were desperate, if not naive, and couldn't look to the Federal Government or Congress and had to turn themselves over to the banks.

Like payday loans, the states and local government taking out these interest rate swaps knew they were bad deals, but had to take them anyway. They had no other way of getting money.

As almost all reasoned economists had predicted in the wake of a deepening recession, the federal government aggressively drove down interest rates to save the big banks. This created opportunity for banks - whose variable payments on the derivative deals were tied to interest rates set largely by the Federal Reserve and Government - to profit excessively at the expense of state and local governments. While banks are still collecting fixed rates of from 4 percent to 6 percent, they are now regularly paying state and local governments as a little as a tenth of one percent on the outstanding bonds - with no end to the low rates in sight.

Banks and states were supposed to be paying equal rates. However, with the fed lowering interest rates, which was anticipated, now states and local governments are paying about 50 times what the banks are paying. Talk about a windfall profit the banks are making off of the suffering of local economies.

To make matters worse, these state and local governments have no way of getting out these deals. Banks are demanding that state and local governments pay tens or hundreds of millions of dollars in fees to exit these deals. In some cases, banks are forcing termination of the deals against the will of state and local governments, using obscure contract provisions written in the fine print. As Business Week points out, Detroit signed a similar deal that seemed too good to be true:

A few years ago, Detroit struck a derivatives deal with UBS (UBS) and other banks that allowed it to save more than $2 million a year in interest on $800 million worth of bonds. But the fine print carried a potentially devastating condition. If the city's credit rating dropped, the banks could opt out of the deal and demand a sizable breakup fee. That's precisely what happened in January: After years of fiscal trouble, Detroit saw its credit rating slashed to junk. Suddenly the sputtering Motor City was on the hook for a $400 million tab.

The banks were responsible for the ruined economy and weakening credit market. And the sad part is the banks that are responsible for the crisis are profiting off of their ruin and projected to collect $28 billions. They wouldn't be able to receive these kind of profits unless the economy crashed. In essence, banks designed a clever manipulative way to bail themselves out on the back of American taxpayers at the state and local level that most of us can barely understand. Except this time, the banks might not get away with it.

The U.S. Department of Justice and the California, Florida, and Connecticut attorneys general are currently investigating the fact that it appears that nearly every major bank was involved in a nationwide conspiracy to rig bids and drive up the fixed rates state and local governments pay in these exotic loans. Sen. Robert Menendez and Rep. John Lewis have introduced legislation which would impose a 100% tax on derivative termination fees to keep banks from seeking to collect on these deals, but banks cannot wait to act.

On Tuesday, the Service employees International Union launched a major action in Los Angeles to get that city to terminate such toxic loans and demand their money back. SEIU, in conjunction with a variety of union and community groups, are launching campaigns to get back the money that states invested in these toxic deals.

However, let us not forget the bigger point of this story: States shouldn't have to pay $28 billion a year to Wall Street in order to balance their budgets. The states, which unlike Wall Street didn't wreck the economy, shouldn't suffer the consequences of Wall Street's irresponsible behavior. The states and local government should have been bailed out by the federal government long before Wall Street.

However, during stimulus negotiations last year, Republicans in Congress demanded that hundreds of billions of dollars of money for the states and local government be cut from the stimulus. As a result, states and local government are now facing a $469 billion budget shortfall. In order for state and local governments to balance their budget, it's expected that they are going to cut 900,000 teachers, firefighters, highway workers, nurses and other public employees. This will only further slow our economic recovery.

In December, the House passed a version of their Jobs Bill where they took $75 billion of unused TARP Funds and gave it in aid to the states. This was a step in the right direction.

However, Senate Republicans vowed to filibuster any attempt to use TARP money for anything other than making Wall Street bonuses the largest on record. They refused to allow that $75 billion to be used to help states maintain basic services. The Republicans would hate to see the profits of their friend on Wall Street. They would see rather see local economies falter, bridges collapse, and garbage go uncollected than hurt the profits of their friend on Wall Street.

So that means it's time for us as citizens to fight to clean up Wall Street. It's time we prohibit these kind of risky financial instruments as well as predatory lending. Furthermore, we need to take the last $75 billion slated to be given to Wall Street and instead given to the states and local governments that the banks bankrupted in the first place.

Listen to the Heroes of Israel

Listen to the Heroes of Israel

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I phoned Rami Elhanan the other day. We had not spoken for six years and much has happened in Israel and Palestine. Rami is an Israeli graphic designer who lives with his family in Jerusalem. His father survived Auschwitz. His grandparents and six aunts and uncles perished in the Holocaust. Whenever I am asked about heroes, I say Rami and his wife Nurit without hesitation.

Soon after when we met, Rami gave me a home videotape that was difficult to watch. It shows his daughter Smadar, aged 14, throwing her head back, laughing and playing the piano. "She loved to dance," he said. On the afternoon of 4 September, 1997, Smadar and her best friend, Sivane, had auditions for admission to a dance school. She had argued that morning with her mother, who was anxious about her going to the centre of Jerusalem. "I didn’t want to row," said Nurit, "so I let her go."

Rami was in his car when he turned on the radio to catch the three o’clock news. There had been a suicide bombing in Ben Yehuda shopping precinct. More than 200 hundred people were injured and several were dead. Within minutes, his mobile phone rang. It was Nurit, crying. They searched the hospitals in vain, then the morgue; and so began, as Rami describes it, their "descent into darkness."

Rami and Nurit are two of the founders of the Parents Circle, or Bereaved Families Forum, which brings together Israelis and Palestinians who have lost loved ones. "It’s painful to acknowledge," he said. "but there is no basic moral difference between the [Israeli] soldier at the checkpoint who prevents a woman who is having a baby from going through, causing her to lose the baby, and the man who killed my daughter. And just as my daughter was a victim [of the occupation], so was he." Rami describes the Israeli occupation and the dispossession of Palestinians as a "cancer in our heart." Nothing changes, he says, until the occupation ends.

Every "Jerusalem Day" – the day Israel celebrates its military conquest of the city – Rami has stood in the street with a photograph of Smadar and crossed Israeli and Palestinian flags, and people spit at him and tell him it was a pity he was not blown up, too. And yet he and Nurit and their comrades have made extraordinary gains. Rami goes to Israeli schools with a Palestinian member of the group, and they show maps of what ought to be Palestine, and they hug each other. "This is like an earthquake to children who have been socialized and manipulated into hating," he said. "They say to us, ‘You have opened my eyes.’"

In October, Rami and Nurit sat in the Israeli High Court while the state counsel, "stammering, unprepared, and unkempt," wrote Nurit, "stood like a platoon commander in charge of new recruits and refuted … the allegations." Salwa and Bassam Aramin, Palestinian parents, were there, too. Tears streaked Salwa’s face. Their ten-year-old daughter Abir Aramin was killed by an Israeli soldier firing a rubber bullet point-blank at her small head while she was standing beside a kiosk buying sweets with her sister. The judges seemed bored and one of them remarked that Israeli soldiers were rarely indicted, so it would be best to forget it. The state counsel laughed. This was normal.

"Our children," said Nurit at a rally last December to mark the anniversary of the Israeli assault on Gaza, "have learned this year that all the disgusting qualities which anti-Semites attribute to Jews are actually manifested among our leaders: deceit, greed, and the murder of children … What values of beauty and goodness can we squeeze into such a sophisticated apparatus of brainwashing and reality distortion?"

Rami now tells me the High Court has decided to investigate the case of Abir Aramin after all. This is not normal: it is a victory.

"Where are the other victories?" I asked him.

"In America last year, a Palestinian and I spoke five times a day in front of thousands. There is a big shift in American public opinion, and that’s where the hope lies. It’s only pressure from outside Israel – from Jews especially – that will end this nightmare. People in the West must know that while there is a silence, this looking away, this profane abuse of Israel’s critics as anti-Jew, they are no different from those who stood aside during the days of the Holocaust."

Since Israel’s onslaught on Lebanon in 2006, its devastation of Gaza in 2008-9 and Mossad’s recent political murder in Dubai, the criminality of the Israeli state has been impossible to disguise. On 11 February, the influential Reut Institute in Tel Aviv reported to the Israeli Cabinet, which it advises, that violence had failed to achieve Israel’s ends and had produced worldwide revulsion. "In last year’s Gaza operation," said the report, "our superior military power was offset by an offensive on Israel’s legitimacy that led to a significant setback in our international standing and will constrain future Israeli military planning and operations …" In other words, proof of the murderous, racist toll of Zionism has been an epiphany for many people; justice for the Palestinians, wrote the expatriate Israeli musician Gilad Altzmon, is now "at the heart of the battle for a better world."

However, his fellow Jews in Western countries, particularly Britain and Australia, whose influence is critical, are still mostly silent, still looking away, still accepting, as Nurit said, "the brainwashing and reality distortion." And yet the responsibility to speak out could not be clearer and the lessons of history — family history for many — ensure that it renders them culpable should their silence persist. For inspiration, I recommend the moral courage of Rami and Nurit.

Tortillas and the Corporate State

Tortillas and the Corporate State

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Near midnight and I am making tortillas on an iron skillet over a gas flame. Some three thousand miles to the north, my wife and dog nestle in sleep in the wake of a 34-inch snowstorm, while the dogs of Ajijic are barking at the witching hour and roosters crow all too early for the dawn. While my good Mexican neighbors along Zaragoza Street sleep.

Yet here I am awake and patting out tortillas, haunted by the empire that I have called home most of my life.

I like to think that, for the most part, I no longer live up there in the U.S., but southward of its ticking social, political and economic bombs. Because the US debt bomb has not yet gone off, Social Security still exists, and the occasional royalty check or book advance still comes in, allowing me to remain here. And so long as America's perverse commodities economy keeps stumbling along and making lifelike noises, so long as the American people accept permanent debt subjugation -- I can drink, think and burn tortillas. Believe me, I take no smugness in this irony.

There is a terrible science fiction-like awe in the autonomous American economic monolith, in the way that it provides for us, feeds on us and keeps us as its both its lavish pets and slaves. The commodity economy long ago enslaved Americans and other "developed" capitalist societies. But Americans in particular. The most profound slavery must be that in which the slaves can conceive of no other possible or better world than their bondage. Inescapable, global, all permeating, the commodities economy rules so thoroughly most cannot imagine any other possible kind of economy.


It comes down to owning stuff, and that the stuff we own also owns us (as anyone paying rent for a storage locker can attest). Transmogrified by industrial materialism, we have become what we own. More specifically, what we are observed by the rest of our society as owning. In the commodified society of industrial materialism, owning is being. So much so, that politicians bandy the term "ownership society" about, not only without causing the public to gag, but to cheers. Even liberals who claim to dislike the term don't want to be in a "We don't own shit society."

Early modern capitalism was more or less understandable, if not always pleasant. One can see why a pre-industrial world that had owned less would embrace owning a bit more. Who gave a damn if it came from Adam Smith's "unseen hand," the hand that was taking care of the already rich, who in turn managed the order of the world as seen through the lens of aristocratic and bourgeoisie English commerce. "If we work our guts out Nellie, we can buy a pork knuckle every Sunday. And a featherbed, if you get my drift. Woo Hoo!"

Enter the reign of the bourgeoisie, self-appointed and self-interested middlemen to anything and everything. The sheer complexity of the industrial revolution and associated finance was a dog that could fatten many fleas.

When the bourgeoisie did not get what it felt was a good cut of the action from the monarchies, it raised hell, sometimes enough to cause revolutions. If they won, as they did in America, they took credit for establishing democracy. If they lost, they fobbed it off as a "people's revolution," leaving the working slobs, the actual producers of wealth, to face the king's hangmen.

Even when "the people" occasionally win one of those "people's revolutions", we never really win. Not in the end. For instance, here in Mexico, contrary to what we've seen in Zapata movies, there has never been a successful people's revolution in terms of lasting and real egalitarian reform. Just armed struggle, and many promises of reform, always to be abandoned after the revolution. They were subsequently wiped out by the politically potent urban middle class, in league with traditional elites, such as the haciendados and corporatists. The bourgeoisie never gives up its profitable connections to the elites. Same as in America. The bourgeoisie lives at the pleasure of the elites.

However, in the people's revolutions it was mainly "the people" who got killed. So they get naming rights. The people own their revolution only in death. Just as in the U.S., the elites here and the business classes get everything else and rent it back to us as mortgages or whatever.

You can argue that people have always screwed other people for a buck, or a drachma or a shekel. You will win with that argument every time. However, the real issue is about how many people got screwed and how hard by how few. Under 250 years of capitalism, the rising take from the ongoing screw job has grown astronomical. Enough to buy every political tub-thumper in Washington and a Supreme Court. Enough that if the elite cartels on Wall Street rip 300 million Americans for trillions, leaving them squinting at the fine print on their eviction notices, they cannot do jack about it. Except pay the next ransom demand for their credit . On their credit cards. Then sign their children into future debt slavery.

We are all Mexicans now

Thanks to the autonomous commodities economy, Mexico literally cannot keep itself in tortillas. No longer food self-sufficient, Mexico, where corn was first bred and developed into a staple, buys corn on the world market. The price of tortillas in the tiendas along my street is up 40 percent and climbing at ten times the rate of Mexico's minimum wage.

Mexico was food self-sufficient in 1982. Minimum daily wage then was the equivalent of 8.2 kilos of eggs, or 23 liters of milk, or 33 kilos of tortillas. Eighty-five percent of the people had access to government medical care and the country was fifth worldwide in GNP growth. Now, thanks to international financial pirates, Mexico cannot even keep itself in tortillas.

This has happened repeatedly to Mexico, each time due to a different pirate gang, the French, the English, the Germans. But most often, it is the Americans and their institutions and policies, the IMF, GATT and NAFTA. Mexico is continually robbed from within and without. Within lives the tapeworm of government-business corruption feeding on money passing through the nation's economic bowel. From without come the assaults of American and global corporate financialism.

Loathe as Americans are to believe it, the Mexican people and the American people are in the same situation of being mugged. However, they are robbed at a different rate and from different positions in the global pecking order. We rob the Mexicans and global capitalism robs us. Fortunately we can still afford to buy our national food staple from Dominoes. Which makes us a superior people.

Humping the Big Lie

Meanwhile, somebody has to hump The Big Lie, maintain the appearance to the rest of the world that American cowboy capitalism is stable. Also keep Americans sold on The Big Lie's flip side, the number two tune: "We are the richest and most blessed people on earth because of capitalism (but currently going through a rough patch). Proof is offered: "Step right up and see for yourselves! Just look at the spectacular services and goods that bury us in wonderment! Now go buy a PT Cruiser."

Decades ago, the spectacle of commodity capitalism, the sheer variety of possible stuff to own, ways to be, possible appearances of being, came to constitute a commodity in itself -- enchantment as a product, product as enchantment. Materialistic enchantment as commodity was so powerful in scale and scope, and so thorough in mind saturation that it came to colonize our consciousness in what Guy Debord aptly deemed "the society of the spectacle."

No ordinary person could ever have withstood such a colonization of human consciousness as the American people have seen. Consciousness being simply awareness, there was no surviving the onslaught. The tsunami of false possibilities and pseudo choices constituted entire constellations in the psyche, of goods, and images of goods large and small: hair dryers, iPods, anti-bacterial wipes, cable television, ammunition, plastic siding, gourmet foods, this HP notebook computer in my lap, the Prius and the Porsche, even words such as Google, Microsoft, China Mobile, Vodafone, Marlboro… They all have psychological and social meaning in our commoditized consciousness, that battlefield where each commodity vies for preeminence with every other commodity in the shifting exposition of stuff we are permitted to labor to pay for.

It can now be honestly stated that mere goods and services express the citizenry and the American culture in its entirety. Citizenship in a consumer society is consumership. Consumer culture consumes all rival cultures, replacing them with "pop culture," which is simply deeming the marketplace as culture. Hip Hop is a good example. So is the modern cinema, and all of the music and book publishing industry. Corporate industry and its products are not culture, despite all the new definitions of culture bourgeois academia and the marketplace come up with on behalf of the corporations that fund both of them.

Your iPod shall set you free!

Freedom and personal identity exists as freedom to choose identity from among the commodities, and particularly the entertainments, offered. The Mac person as opposed to the Windows person. The Mariah Carey or Rihanna Fenty fan as opposed to the Eric Clapton fan. Each is convinced he or she is different because of their chosen commodity. Yet at the root of this, they all purchased a computer or a CD from a faceless corporation grounded in the toxic wastelands and sweatshops of Asia and elsewhere. Those who, in a fit of defiance, choose Indy music choose a product originating in and listened to through digital equipment produced in the bowels of monolithic corporate commodities generators.

We may gaze at the hologram and dream of living larger, or conversely, living the uncorrupted "simple life" on that little organic farm in Vermont. In the end though, the lucky ones among us, all those people out there in anonymous Terra Condominia, out there in the sprawling suburban nether land, must be content with a flat screen television. Watching those commercials for the Super Bowl commercials, delivered to us breathlessly as "news," The News is the liturgy of the commodity economy -- whose scope and omniscience no man can grasp, but only consume as manna. We are feasters at the table of goods and services, most of which are not only unnecessary, distractive and mind killing, but earth destroying in both their manufacture and their use. This matters not a bit in an illusionary world of appearances. The commodity economy in its bounty, also offers us a chance to "buy green." To text a link to the Earth First website.

It ain't fascism, it's practicality

If our national and individual minds have been colonized, occupied, then we necessarily live in an occupied nation. We have arrived at the destination where the trajectory of material consumer capitalism was always headed, toward an occupied (and preoccupied) totalitarian society. Rational, practical, productive and autonomous.

Cliché as the word is, you would have to call it overshoot. In judging the arc and trajectory of that technical rationality Western society so prides itself upon, we reduced the Enlightenment, the original launching pad of ration, to the merely practical, material and economic. The practical is scripture now. Without it material production and profit, the only concerns of capitalism, do not exist. All power rests in the practical.

What is most practical is hierarchy and specialization. Technical specialization -- within engineering specialization -- within scientific specialization. All contained within the economic specializations of the state sanctioned economy and ideology governing the conditions of our daily existence. By definition, this is totalitarian.

Totalitarianism calls ideology philosophy. It salutes itself in every medium and every product, material, legal, political. And we salute it in return through meaningless work and consumption.

In all likelihood, you the reader are younger than I. Possibly less cynical and surely less tired. You may believe yet that violent overthrow of such a monstrous system is still possible.

A year or so ago, I still believed that. Events in the world and at home have since convinced me otherwise. Maybe the system could have even been changed from within forty years ago. If it could have been and was not, then that most certainly is the greatest failure of my generation. The Sixties were a critical point at which important choices were offered us as a people. At the time, a minority realized revolution was still possible and warranted. Violent revolution, if necessary. But as a generation, we were no better at acting in unselfish concert than yours.

As Chris Hedges recently pointed out, violence today only assures the survival of the most violent, criminals of one sort or another, petty or international. Beyond that, the state now has the technological capability to inflict the most violence in every case, and therefore win. Realistic thinkers say aloud that what is so far advanced can no longer be stopped or turned around by revolution, violent or otherwise. Most other thinkers on the subject secretly suspect the same.

Mr. Popularity and the marmot

The rest of the country is oblivious, lost in the anxious clamor for an economic "recovery." The voice of the state defines recovery for them as a return to former levels of the unsustainable superheated capitalism, and increased indebtedness of the populace. "Oh when, oh when will the bankers loosen the credit markets so we can again buy things?" As if their debt slavery were a great gift! The banksters simply do not issue more credit to people they know are dead broke -- because they broke 'em, they will continue to make more money by letting the people wail, and taking the people's money directly from the state as bailouts. Stretched out over the coming years, we will see more of them. It should give us chills.

President Obama at some point asked himself if bailouts for those who caused the collapse will truly result in an end to the "current crisis" (a term calculated to make our slow inevitable collapse look temporary). How does getting the masses to accept more debt add up to anything but worse crisis later? Obama is a smart fellow, smarter than George Bush, which is what got him elected, right? (Of course after Bush a marmot could have run on the "smarter than Bush" ticket and looked good). So he must have asked that. And like any highly educated (indoctrinated) American politician who has interiorized the capitalist system -- you do not become a presidential candidate without interiorizing capitalism lock stock and barrel -- his first reflex was: "The system must be saved at all costs!" Members of Congress, whose butts arrived in the Washington through the same processes as Obama's, agreed. That cost us all plenty.

Obama is himself a commodity, the most telegenic political commodity since Kennedy. One that suits American style capitalism best this particular historical political moment. He is a useful illusion, the same as George W. Bush was a useful illusion. What is the difference between George Bush managing the country through media performances and Obama doing the same? Both are telegenic, which is everything today, but in different ways. One was stupid but radiated virility and manly appearance; the other is attractive for his intelligence and so smart he's stupid. Both lives are absorbed in "appearing to be" in the Great American Hologram of appearances. We are a nation following the appearance of national leadership.


It is cold comfort that we are not alone in this ultimate folly. Globally, it is estimated that the economic crisis has seen at least $50 trillion in financial assets -- approximately equal to the value of the entire global GDP -- wiped out. Given the bullshit "science" that is economics, and that economists serve the purposes of the money masters of their particular age, and that money is always in motion, it is very doubtful that anyone really knows the global GDP. But the illusion that someone does is necessary in preserving and controlling perceptions of the present system. Otherwise the concept of money itself would have to be reexamined and changed to fit the world reality. Better to proclaim a "crisis" and scare the shit out of the peasantry, than give them an opportunity to question the new feudalism of credit cards, mortgages, car loans, educational loans and general debt slavery. The word crisis scares people, flogs them into anxious submission, lest some fucking socialist come along and ask, Why don't you take charge of your own lives and destiny? Do you really need these people?

The "crisis" was set in motion by institutions lending each other non-existent money none of them can pay back. Consequently, the masses are once again expected to produce enough material value in the world to make the funny money real, and shore up the system one more time. To "raise the money" to do this will require generations of future productivity shoveled into the furnace of corporate capitalism's banking machinery. There was nothing left to steal, so extorting the future was the only option left. Assuming the skimmers and the scammers manage to extract enough public monies to pump up corporations one more time, there will be another and bigger disaster not far down the road. We don't need the Oracle of Delphi to predict this. Capitalism is unstable as hell, like an unbalanced dreidel that keeps tilting ever more wildly off center until it falls over or eventually hits the wall. We can now see the wall from here: Massive ecological collapse and species extinction. "Economic downturn," even "crisis," does not quite describe that approaching wall. All of America hopes we will miss that wall at least one more time.

Americans are hope fiends. We always see hope somewhere down every road, chiefly because honestly looking at the present situation would destroy just about everything we hold as reality. Personally, as I often state and catch readership hell for, I do not like hope. When Obama ran it up the flagpole for us to salute, and so many saluted, my blood chilled. Made me feel that we were all in deeper shit than I had supposed (Nevertheless, I reluctantly voted for Obama. At the time it seemed It was either Obama, or continuing war, debt, and diminishing civil liberties. Ha!) Hope is magic thinking, believing that somehow, some larger unknown force is in motion to set things right.

The world is what it is, and its injustices are set right by peoples and nations morally intact enough to challenge its malevolent forces.

Hope is political pabulum for an infantilized nation.

A shot at economic justice (gets you shot at)

On those rare occasions when I do see nations take concrete steps toward liberation, the heart is cheered at having at least some reason for reality based optimism. After more than a century of taking it up the shorts from autonomous capitalism, Latin America is moving toward alternatives to the free trade cowboy capitalism that has so long raped them.

One step is ALBA (Alianza Bolivariana para los Pueblos de Nuestra América). ALBA is aimed solely at meeting human need instead of profit. Bartering and mutual economic and material aid outside of so-called free trade agreements. Out of the reach of global banking. For example, Venezuela gives Cuba over 100,000 barrels of oil daily at production cost. In exchange Cuba has sent 20,000 state-employed doctors and medical staffers. And if Venezuelans' medical problems require higher medical specialism, they may travel to Cuba for specialized care free of charge. No profits allowed. Take it or leave it.

The takers are lining up. Venezuela, Ecuador, Cuba, Saint Vincent , the Grenadines , Dominica, Honduras, Antigua and Barbuda, Nicaragua and Bolivia. ALBA nations are in the process of introducing a new regional currency, the SUCRE. (Sistema Único de Compensación Regional, or Single Regional Payment Compensation System) to replace the U.S. dollar. Now a common virtual currency, it is scheduled to become a hard currency.

Countries such as Argentina are experimenting with an economy based on worker self-management and balanced job complexes. Venezuela is developing community owned and directed banks. A common goal is to develop an economy not dependent, as is capitalism, on limitless exponential growth, but on consuming fewer resources, operating without debt, and using less or none of the global banking system's money. When the IMF and the world's banksters dubbed these nations "developing countries" (a fine example of Newspeak, that both renamed miserable poverty, and suggested that the international bankers' robbery was benefiting those countries), this is not the kind of development they had in mind. This is pure wide-open socialism based on the universal socialist and democratic socialist vision. The stuff of capitalist nightmares.

The traditional answer to such challengers to autonomous capitalism has been simple. Kill 'em. And we do our best. The U.S. has always had its provocative agents and hit squads working in those counties. Castro has survived or foiled some 638 assassination attempts, one every few weeks of his long presidency. Attempts on Chavez are so common the Venezuelan press no longer bothers to report them. After all, besides being old hat, they don't seem to be working anyway. Which means we will be forced to bomb the piss out of Venezuela and Cuba at some point. But they will have to get in line behind Iran.

By the way, a Latin American country does not have to be socialistic to get hammered by capitalist interests. Even Mexico, governed by corrupt capitalist and business overlords of the first order, men who have consistently sold their country out to foreign capitalist interests both before and since its revolution, is a target for covert action and sabotage -- from Israel of all places. In October 2001, a month after 9/11, two Israelis, MOSSAD agent Salvador Guersson Smecke and another Israeli who slipped into the country covertly, were arrested inside the halls of the Mexican congress, while posing as two rather lumpy looking photographers. The lumps turned out to be nine hand grenades, a dozen sticks of dynamite, detonators and detonator wiring and two Glock 9mm automatics. Immediately following the arrest, Ariel Sharon sent a top envoy, who sprang them, following strong pressure from Israeli government. They were whisked off, leaving Mexicans to wonder, What in the hell was THAT all about?" One neighbor here in Mexico says wryly, "That must have cost the Israelis millions in bribes." (*see footnote)

Born with the disease?

It would be nice if we could neatly lay all the blame on the nasty monolith of autonomous capitalism as an outside malignant force of its own. A systemic pathogen that somehow infected a decent and unsuspecting America. Looks like I just did, in fact.

Nevertheless, America and its national character were founded on the purest greed. From the beginning the people who came here wanted more of the material world. Sure, there were some religious dissenters (of which too much has been made for propaganda purposes). But the English and Dutch stock companies that established the first colonies came looking for profits. And the common people who came here were looking for "a better life," which to them was, above all else, becoming as wealthy as possible. America was its own self-selecting process.

Read Tocqueville's description of earlier Americans' relentless buying and selling fever. Everything and everyone was always up for sale from the start. Read about the greed and stinginess of the "refugees from religious persecution," such as slave owning Quakers, Presbyterians and Methodists. Read about how the founding fathers ripped off the Revolutionary War veterans for the IOU script they so patiently held for many years in payment for fighting, buying it up for pennies on the dollar, then passing legislation to pay up on the script. Or how not only the business class, but also the supposedly bucolic and wise heartland American farmers cheered as the government troops shot down hungry striking miners, burned out their families, lest they disturb the order of the Republic of commerce.

There were the exploited working masses then, just as there are now. And there was always the petty bourgeoisie, more than happy to do the dirty work of the most elite owning class, in hopes of currying its favor. Always happy to sanction the "wet jobs" on the Italian, Polish, Chinese and Irish immigrant laborer. You could then, and you can now, depend on the true middle class, that 15% or so, capitalism's commissars, to crush the working class. They will do anything to remain in a more privileged zone of consumption, the boundaries of which are maintained by agreement of state authorities. From their petty perches, they have deemed themselves "the middle class." In reality they are the mitigating class, the petty anointed whose job it is to obscure class awareness in America.

Shut up and let the green stuff talk

An awareness of class makes clear who is fucking whom. That's why American capitalism's official line is that we area "classless society." Denying the existence of class, deeming all Americans (excepting a few too-obvious-to-be denied cases, such as inner city blacks and the poorest of immigrants), "middle class" was one of American capitalism's great strokes of genius. It blurred the line between workers and capitalism's middle class commissariat -- the petty business, mid-management, teaching and owning class managing the rest of us for the elites.

And just in case that line was not blurred enough, the bourgeoisie, particularly the academic institutions, successfully wrote the labor and the working masses out of American political history as taught in the public schools. We workers now have no continuous organic chain of memory and experience from which to draw.

The owning/business class has always been institutionalized as the state and the custodians of the entire American social and political process. History as we learn it in school is the owning class' version. Despite what we were taught, America's Constitution is mainly a property rights document, and those with the most property are naturally ascendant at all times in this country. Generation after generation of this ascent was bound to lead to what we see now. The ultimate triumph of property and money. A Supreme Court that, without the slightest hesitation, declares that money is speech and as such, will do most of the talking from here on out. The autonomous economy now has a tongue.

We can well imagine its future admonishments, its smug edicts, proclamations of terror afoot, more need for surveillance camera eyes, oil pipelines for its circulatory system. The autonomous economy not only has the bullhorn of the national media. It has a voice capable of drowning out what little of the people's voice remained, replacing our small national dialogue with soulless monologue. The bourgeoisie will listen closely though, for opportunity, a buck to be made in Kevlar, or perhaps the next new antidepressant for a demoralized, passive and discouraged republic.

In all honesty, I am sick of thinking about it, tired of burning up unrecoverable hours at the end of my 63-year old candle writing about it. So are many of my colleagues in cybernetic left-space.

Distance and solitude seem the only refuge. Which is why I am "aging Mexican," and almost monastically absorbed in the small daily rituals of sustenance these days. I do not kid myself that it is permanent or a real solution to the unbearable ugliness of the American condition.

But at the moment, four AM, a cricket chirps in the orange tree by my window, and my tortillas are perfectly lovely.

US Federal Reserve chairman calls for auste rity plan

US Federal Reserve chairman calls for austerity plan

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In two days of testimony before the banking committees of the House of Representatives and Senate this week, Federal Reserve Board Chairman Ben Bernanke called for the Obama administration and Congress to agree on a plan to sharply reduce the US budget deficit over the next decade.

Bernanke delivered the Federal Reserve’s “Semiannual Monetary Policy Report to Congress” to the House Financial Services Committee on Wednesday and the Senate Banking Committee on Thursday. Both his opening statements and the ensuing discussions with committee members, Democrats no less than Republicans, reflected the concerns of the banks and finance houses, with only the most perfunctory references to the desperate plight facing tens of millions of Americans confronted with the worst jobs crisis since the Great Depression.

Under questioning from Republican legislators, Bernanke said the current budget projections of the Obama administration were “unsustainable” and implied that major cuts in social programs and taxes on consumption would be required.

He said the structural deficit for 2013 to 2020 would have to be cut from estimated levels of 4 to 7 percent of gross domestic product to below 3 percent.

To underscore the urgency of adopting an austerity program, Bernanke said at several points that failure to do so could have a negative impact on short-term economic developments, in the form of rising interest rates and a serious decline in the value of the dollar.

He told the House Financial Services Committee on Wednesday, “One risk that I’ve described is that if there’s a long-term loss of confidence in the long-term ability of the government to balance its affairs, that could raise interest rates today, which would have a drag effect on the economy. Another possibility, which I think is relatively unlikely, but it’s certainly possible, is that if there’s a loss of confidence in the government’s ability to achieve fiscal stability…the dollar could decline, which would have a potential inflationary impact on the economy.”

In response to a question from Senator David Vitter (Republican from Louisiana), who asked how quickly the current level of US budget deficits would “become a major problem in terms of the economy,” Bernanke said, “It come become a problem tomorrow if bond markets are not persuaded that Congress is serious about bringing down the deficit over time.”

Bernanke made a point in his opening remarks of reassuring nervous financial markets, shaken by the Fed’s decision last week to raise its largely symbolic discount rate, that the move did not signal an intention to push forward plans for an eventual hike in the key federal funds rate, which broadly impacts short-term interest rates across the economy.

Banks and big investors want the Fed to keep the federal funds rate—the interest on overnight inter-bank loans—at the current level of zero to 0.25 percent as long as possible. The extraordinarily low rate, which has been maintained since the height of the financial crisis in December 2008, provides a virtually unlimited supply of cheap credit to major banks and finance houses, enabling them to make huge profits by speculating on stocks, bonds, currencies and commodities.

At the same time, the financial elite wishes to avoid having to pay for the inevitable consequences of debt and asset bubbles, skyrocketing government deficits, and the bankrupting of the state as a result of the bailout of the banks. It wants to place the full burden on the working class through historic reductions in basic social programs such as Medicare and Social Security, new taxes on consumption, long-term high unemployment and continuous wage-cutting.

On both counts, Bernanke provided assurances to Wall Street, with virtually no opposition from the congressmen and senators.

Bernanke pointedly repeated in his opening remarks the mantra that the Fed has used since December 2008 to signal that it intends to hold the federal funds rate at near-zero. He twice stated that the Fed expects to maintain “exceptionally low levels of the federal funds rate for an extended period,” and added that last week’s hike in the discount rate “should not be interpreted as signaling any change in the outlook for monetary policy.…”

There were no suggestions from either Bernanke or the committee members that any serious measures to create jobs, such as a public works program, should be adopted, or any limits imposed on bank profits and pay. This is despite Bernanke’s acknowledgement in his statement that while financial markets have “stabilized,” the job market “remains quite weak, with the unemployment rate near 10 percent and job openings scarce.” The Fed chairman pointed, in particular, to the “increasing incidence of long-term unemployment,” noting that “more than 40 percent of the unemployed have been out of work six months or more, nearly doubled the share of a year ago.”

Bernanke went on say the unemployment rate would decline “only slowly,” remaining as high as 7.5 percent at the end of 2012.

The social crisis was underscored by the release of government reports on Wednesday and Thursday showing that while Wall Street profits are soaring, the economic situation facing the American people is worsening. On Wednesday, the Commerce Department reported that sales of newly built homes fell in January by 11.2 percent from December to the lowest total in almost 50 years.

On Thursday, the Labor Department reported that initial claims for unemployment benefits rose by 22,000 to 496,000 for the week ending February 20, the sixth weekly increase in the last two months. Continuing claims also rose, with the four-week average hitting 4.6 million.

Also on Wednesday, the Federal Deposit Insurance Corporation (FDIC) reported that US banks reduced lending in 2009 at the sharpest pace since 1942. This demonstrates the class interests that underlay the multitrillion-dollar government bailout of the banks, which Bernanke played a key role in engineering. When the financial crisis erupted in the fall of 2008, politicians—including then-presidential candidate Barack Obama—promised that bailing out the financial industry would revive lending to consumers and businesses and prevent a sharp rise in unemployment.

The bailout passed by the Democratic-controlled Congress imposed no strings on the banks that received taxpayer dollars, resulting in the opposite from what was said at the time to justify plundering the Treasury to cover the bad debts of the financial elite. The big banks have hoarded their profits, using them to pay record bonuses and speculate on the financial markets rather than increasing lending.

In his report, Bernanke declared that the Fed “strongly supports Congress’ ongoing efforts to achieve comprehensive financial reform” and is “taking the lead in ensuring that compensation structures at banking organizations provide appropriate incentives without encouraging excessive risk-taking.” On both counts, the Fed chairman was being disingenuous.

Neither the Fed, nor the Obama administration, nor Congress is proposing any serious reform of the banking system. A Democratic bill passed last year by the House of Representatives would impose only token restrictions on derivatives trading, while establishing a permanent mechanism for the government to use public funds to undergird the financial markets by winding down “too-big-to-fail” financial firms threatened with collapse.

The House bill is stalled in the Senate as a result of a massive lobbying effort, including the injection of millions of dollars into the campaign coffers of politicians of both parties, by the banking industry, which opposes certain of its provisions, including the creation of a toothless consumer financial protection agency.

On Wednesday, the day of Bernanke’s appearance before the House Financial Services Committee, the Wall Street Journal reported that the Democratic chairman of the Senate Banking Committee, Christopher Dodd of Connecticut, had agreed with Republican committee members to oppose a proposal announced in January by Obama to bar depository banks from using their own money to speculate on risky assets.

The ban on so-called “proprietary trading,” which Obama dubbed the “Volcker rule,” after its main proponent, former Fed chairman Paul Volcker, was fiercely opposed by Wall Street because it would have partially reinstated the wall between commercial and investment banking erected by Depression-era bank reforms and repealed under the Clinton administration.

As for ensuring “appropriate incentives” for bank executives and traders, the New York State comptroller on Tuesday issued a report estimating that Wall Street bonuses rose 17 percent in 2009 to $20.3 billion and overall average compensation rose 27 percent. The comptroller further reported that New York Stock Exchange broker-dealer firms are on track to net more than $55 billion in profits for all of 2009—nearly three times greater than the previous all-time record.

No politician from either party at either of the hearings challenged Bernanke’s statements on bank regulatory reform or bankers’ pay. As MarketWatch reported Wednesday, “The tone of the House hearing was overwhelmingly cordial toward Bernanke.” At the Senate hearing on Thursday, committee chairman Dodd thanked Bernanke for saving the banking system and told the Fed chairman he was “impressed by your leadership.”

Democrats vote to renew Patriot Act

Democrats vote to renew Patriot Act

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With almost no debate, the Democratic leadership in Congress pushed through an unamended extension of the USA Patriot Act’s most notorious provisions, granting sweeping powers to eavesdrop and seize library, Internet and other personal records of US citizens.

The provisions were set to expire by Sunday. President Barack Obama is expected to sign the legislation before then, securing his administration the ability to continue and expand the domestic spying and attacks on basic democratic rights that he and other Democrats had pretended to oppose under the Bush administration.

The three extended provisions give US intelligence agencies the power to: 1) conduct “roving” wiretaps without specifying a particular phone number or e-mail account; 2) force institutions to surrender credit, banking, medical, mental health and library records; and 3) spy on so-called lone-wolf foreign nationals, who have no affiliation to either terrorist organizations or foreign governments.

The Senate approved the one-year extension Wednesday by a voice vote and without any debate. The House followed suit on Thursday night, voting 315 to 97 in favor of the legislation.

Originally, the three provisions were to expire at the end of December, but Congress passed a two-month extension late last year, while continuing to discuss proposed amendments that would ostensibly introduce greater protection of privacy and constitutional rights.

Last fall, the Senate Judiciary Committee approved President Obama’s request to renew the measures after debating various limited proposals to increase judicial oversight and otherwise reform the legislation, while keeping its essential powers intact. The Obama administration offered no support for even the most modest changes, with both the Justice Department and the FBI calling for the provisions to be extended as is.

Among the proposed changes was an amendment that would have barred the government from using National Security Letters (NSLs)—administrative subpoenas issued by the FBI, the CIA and the Pentagon—to obtain confidential records of US citizens who are not suspected of terrorism or espionage. Another would have let the “lone-wolf” provision expire. A third would have required the government to issue written statements setting out the factual basis for obtaining an NSL. There was also a proposal to allow recipients of NSLs limited ability to challenge the so-called gag orders that bar them from informing anyone that they have been targeted for investigation.

A separate proposal called for the repeal of the section of the FISA Amendments Act that granted blanket immunity to telecommunications companies that cooperated with the government in its illegal warrantless wiretapping program.

Seeking bipartisan consensus on the legislation, all of these measures were defeated, with the committee ultimately adopting—with eight Democrats voting in favor and only three against—virtually meaningless proposals introduced by Senator Dianne Feinstein, a member of the Judiciary Committee and chairman of the Senate intelligence panel.

Even these toothless amendments were stripped from the final extension resolution. Democratic leaders justified the action on the grounds that it was necessary to secure Republican support.

Judiciary Committee Chairman Patrick Leahy justified extending the worst abuses in the Patriot Act without any changes by declaring, “I would have preferred to add oversight and judicial review improvements to any extension of expiring provisions in the USA Patriot Act, but I understand some Republican senators objected.”

The media has largely attributed the Democrats’ support for the renewal of the Patriot Act provisions and the scrapping of any attempt to amend them as an attempt to avoid any debate that would allow the Republican minority to portray them as “soft on terrorism” in the run-up to the midterm election.

While no doubt such cowardice and opportunism govern all of the decisions made by the Democrats like Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi, the reality is that support for the police state measures introduced with the Patriot Act has been bipartisan from the outset.

The measure was passed by the Senate in 2001 with just one dissenting vote and under conditions in which members of Congress acknowledged that they had not even read the legislation. The Democrats have provided the necessary votes for approving every attack on democratic rights enacted since, while leading members of the party in Congress have collaborated in covering up illegal surveillance activities.

While the Democratic Party won the 2008 election based on a platform that explicitly promised to overturn unconstitutional provisions in the Patriot Act and halt “the use of national security letters to spy on citizens who are not suspected of a crime,” since coming to office the Obama administration has continued and expanded these practices.

Successive reports have revealed that hundreds of thousands of NSLs have been issued since the Patriot Act was initially enacted, and there have been repeated revelations of illegal spying on American citizens—including reporters writing stories placing intelligence agencies in a bad light. Nonetheless, the Obama administration Justice Department insisted that there was no real abuse of authority under the Bush administration, and that therefore the act should be renewed.

At the same time, the administration has intervened repeatedly in lawsuits challenging illegal wiretapping under the Bush administration, invoking the “state secrets privilege” to have them quashed. Last October, US Attorney General Eric Holder used this method to seek the dismissal of a suit demanding a halt to the National Security Agency’s illegal dragnet surveillance of AT&T Internet communications and to hold Bush administration officials responsible for this unconstitutional program accountable.

The Obama White House opposes such lawsuits because it does not want its own powers curtailed and fears that any prosecution of former officials could set a legal precedent that could be used against it.

Similarly, it has opposed any probe of senior Bush administration and CIA officials responsible for the torture and killing of detainees, under conditions in which the Obama administration has upheld the policies of rendition and administrative detention without charges or trials.

Just as with its foreign policy that continues the wars and occupations in Iraq and Afghanistan and an economic policy designed to defend Wall Street at the expense of workers’ jobs, wages and benefits, the Obama administration is continuing the wholesale assault on democratic rights initiated by its predecessor.

The staggering repudiation of the promises made by the so-called candidate of “change” is not a matter merely of Obama’s own duplicity. He heads a government that is dedicated to the defense of the essential interests of a financial oligarchy.

Under conditions of deepening economic crisis and in the face of ever-wider social polarization at home, it can defend these interests only by embracing the unconstitutional methods adopted by the Bush administration. The Obama White House is continuing to build up a police state not for use against some ubiquitous terrorist threat, but to counter the inevitable growth of mass struggles by the American working class.

U.S. is Ranked #37 in Health Care in the World

U.S. is Ranked #37 in Health Care in the World

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Among people living in the 30 OECD (Organization for Economic Co-operation and Development) nations, Americans rate their personal health around the median for the group despite having one of the highest GDPs per capita.

Only 56% of Americans say they have confidence in the U.S. health care system according to a recent Gallup poll. The United States has the highest per-capita total health expenditures of any of the 30 countries yet Americans report only average levels of health. Except for the United States, the more money spent on health care in a nation translates to better health for the respondents.

The World Health Organization ranks the United States at 37th in the world.

We're number 37

Double Dip Recession Risk Is Near: CIO

Double Dip Recession Risk Is Near: CIO

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The global economy looks set to plunge back into recession as the sovereign debt pressure currently rocking Europe intensifies, Ashok Shah, CIO of London & Capital, told CNBC Wednesday.

"There's a risk of a double dip recession round the corner," Shah said. "Given the sovereign debt crisis that is going around the Mediterranean countries, this is going to put a lot of pressure on Europe."

The economic outlook for Europe is deteriorating very rapidly and that is adding to the factors dragging on the economic recovery, Shah told CNBC.

- Watch the full interview with Ashok Shah above.

Concerns over the strength of Europe's power-house economy, Germany, deepened Wednesday after its gross domestic product growth was shown to have stagnated in the fourth quarter. German private consumption fell in the quarter, official data showed, suggesting the country's economic recovery may not be assured.

Shah also pointed out that other major European economies such as Italy have still not escaped the recession.

If the economy does slip back into recession, governments won't be able to tackle the problem with more stimulus measures because they are already doing everything they can in that direction, Shah said.

"Everything that the authorities can do is on the table right now. The key question is can they keep it going rather than increasing it because the room to increase is very limited," he said.

It's too early for debt-laden governments to start cutting their public deficits because the recovery is so fragile, he told CNBC as Greece was gripped by protests against planned cuts to its public spending.

Meanwhile the cost for countries tapping fresh capital is rising, which could be a sign that the stock market is about to stall, he said.

"The credit default swaps on the sovereigns have been rising quite rapidly. This is telling you that the cost of capital is rising and when the cost of capital is rising in essence equity markets really can't make any progress," he said.

"After the huge rallies of last year I think it's time for the markets to consolidate," he added.

Investors need to see firm plans from governments to reduce their budget deficits, Shah said.

Tim Harris, CEO of Harris Capital, told CNBC that further weakness in the economic outlook could spark a flurry of selling in the stock market.

"People are the conservative side of neutral right now and it's going to take a macro sign, a crack in growth more so than inflation, which is going to get people to run for the hills," Harris said.

U.S. economy is a shambles, with no improvement in sight

U.S. economy is a shambles, with no improvement in sight

President Obama's claim that a second depression isn't possible doesn't square with the relevant numbers

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It has been one year since U.S. President Barack Obama signed the $787-billion stimulus bill, the Recovery Act, to lift the U.S. out of recession, and threw an additional $50-billion lifeline to American homeowners facing foreclosure. The package was subsequently enriched and is now estimated at $862 billion, while the pledge to stem foreclosures has risen to $275 billion.

"One year later, thanks to the Recovery Act, we can stand here again and say that a second depression is no longer a possibility," Obama said in marking the anniversary last week.

Oh no? Take another look at the numbers.

After all that spending -- actual and committed (Congress passed an additional $155 billion in aid in December) -- claims of job creation and economic growth remain highly suspect. The U.S. economy has shed more than eight million jobs since the recession began, and losses continue with 20,000 fewer jobs in January alone. A White House advisory council forecast that the economy will create 95,000 jobs per month this year. For forecasters, the year is not off to a good start. Unless the job generator shifts into a higher gear, one analysis concluded, it will take more than seven years to replace the jobs lost since 2007.

The U.S. Labor Department recorded 473,000 new jobless claims last week, up from 442,000 a week earlier, while the number of people on extended benefits (those who have exhausted the regular 26 weeks of benefits) rose by 274,000 to six million. The official unemployment rate eased to 9.7 per cent in January from 10.1 per cent in October, but few believe the Obama administration's boast that the stimulus has generated nearly two million jobs. According to a recent CBS News/ New York Times poll, only six per cent of Americans think the stimulus has created any jobs at all, and public support for the plan has dropped from 55 per cent in June to 38 per cent.

If the stimulus package has created jobs, they are in the public sector, displacing jobs that could have been created more efficiently in the private sector, costing taxpayers far more for each job than the sum of salary and benefits. That's what happens when capital is diverted from productive endeavours that create wealth to government spending programs that dissipate it.

Beyond the jobs front, things are even worse. Loans in foreclosure now represent 4.6 per cent of all mortgages, and the number of mortgages more than 90 days overdue has climbed to 5.1 per cent.

A Congressional panel reported earlier this month that half of approximately $1.4 trillion in commercial loans coming due over the next four years are under water, and hundreds of small-and mid-sized banks face insolvency. It warned of an impending commercial real estate crisis with property values down 40 per cent since 2007 and 18 per cent of office space sitting vacant.

The move last week by the Federal Reserve to raise its emergency loan rate looked more like public relations than economic policy, an attempt to signal that GDP growth -- seen at three per cent this year and four per cent in 2011 -- is real and that inflation remains a threat. But strip out energy prices and consumer prices fell 0.1 per cent in January, the first month of deflation since 1982.

Underlying the economic gloom is a national debt of $12.4 trillion. Obama, apparently unfazed, signed a law this month that raised the limit on public debt to $14.3 trillion. Government debt now amounts to more than $40,000 for each American, $113,000 for each taxpayer. Given its ballooning budget deficit, which is seen at $1.6 trillion this year, or 10.6 per cent of GDP -- a post-Second World War record -- it's difficult to see how the administration can put its fiscal house in order without massive spending cuts. But with soaring health care costs, an aging population, the environmental agenda, military commitments and more Obama-inspired social initiatives, spending cuts are unlikely.

China has indicated its lack of confidence in the crumbling U.S. economy by unloading $34.2 billion in U.S. bonds in December, relinquishing its status as the largest holder of U.S. foreign debt to Japan. As U.S. debt grows, so too does pressure on the interest rate on bills and bonds used to finance it. Rising debt service costs, perhaps accompanied by a downgrade from global ratings agencies, would help expose the phantom recovery for the charade it is.

A second depression impossible? Don't bet on it.

Underwater Mortgages Hit 11.3 Million

Underwater Mortgages Hit 11.3 Million

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There is a reason that 702 American banks, nearly one in ten, were on the FDIC “problem list” as of the end of 2009. A large number of small and mid-sized banks are burdened with home and commercial mortgages that are in default and may even go into foreclosure.

New data from First American CoreLogic shows why the solution to the problem banks face is so difficult to find. Eleven million, three hundreds thousand homes had underwater mortgages as of the fourth quarter of last year. That number represent 24% of all residential homes loans in America.The mortgage numbers are much worse when homes with equity of less than 5% are included. First American reports that ”an additional 2.3 million mortgages were approaching negative equity at the end of last year, meaning they had less than five percent equity.” That means that three out of ten homes have virtually no financial value to their owners.

The pressure that the home value trouble puts on banks is clear. The aggregate dollar value of negative equity was $801 billion at the end of last year, up $55 billion from $746 billion in Q3 2009. People who believe there is no hope of their homes ever having any economic value are more likely to default on mortgages, especially in an environment where unemployed and under-employed people make up 17% of the total available workforce nationwide. Many homeowners are as concerned about their employment future as they are about the value of their houses.

Problem home loans are concentrated in the regions where real estate values have fallen the most–Arizona, Florida, Nevada, Michigan, and California. First American says that “among the top five states, the average negative equity share was 42 percent, compared to 15 percent for the remaining 45 states.” In other words, the odds are relatively high that some of the home owners in those states will never sell their houses for more than the amount of their mortgages. That creates a vicious cycle in which high numbers of people with underwater loans default in the states where real estate values have dropped the most. There is no easy way to create a foundation under home prices.

The FDIC has closed 20 banks this year, Five of those were in the five states where mortgage equity problems are at their worst. The agency closed 15 banks in December. Of those, five were in Arizona, Florida, Nevada, Michigan, or California. The bank failure and mortgage failure problems area inextricably linked.

The First American numbers do not leave much hope for a home price rebound this year. It is too hard to sell a house with an underwater mortgage because the bank has to be paid the balance of the loan in cash at closing. Many people do not even try make home payments or cannot afford to under those circumstances. The Mortgage Bankers Association reported that a record 15% of American mortgage holders are either in foreclosure or at least one payment behind.

The difficulties that face small and mid-sized banks, which ultimately are a problem for the FDIC, are to a large extent still a fallout of the deteriorating real estate sector. The underwater mortgage problem is still growing and that almost certainly means bank closings will be high again this year as well.

New U.S. Homes Sales Plunged to Record Low in January

New U.S. Homes Sales Plunged to Record Low in January

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Sales of new U.S. homes plunged to a record low in January, underscoring the formidable challenges facing the housing industry as it tries to recover from the worst slump in decades.

Sales of new U.S. homes plunged to a record low in January, underscoring the formidable challenges facing the housing industry as it tries to recover from the worst slump in decades.

The Commerce Department reported Wednesday that new home sales dropped 11.2 percent last month to a seasonally adjusted annual sales pace of 309,000 units, the lowest level on records going back nearly a half century. The big drop was a surprise to economists who had expected sales would rebound to an annual rate of 360,000 units.

The January decline will heighten fears about the fledgling recovery in housing. Economists were already worried that an improvement in sales in the second half of last year could falter as various government support programs are withdrawn.

Blue-collar workers hanging on by thread

Blue-collar workers hanging on by thread

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They arrive at work at 7:25 a.m. and many of their cars are rusting buckets of crud. Except for the boss's. He drives a Volvo.

Walk in the door at Schaefer Screw Products and there is the enemy -- the clock. The oil vapors and solvents are overwhelming. The yellow light is dispiriting. The workers don't want to be here. The liquor bottles in the weedy lot out back tell part of the story. The graffiti in the bathroom -- profanely denouncing "hard workers" -- tells the rest.

The workers punch the clock at precisely 7:30 a.m., not a minute later since they would be docked 14 minutes and nobody in America works 14 minutes for free. A quiet resignation settles over them as the roar of the screw grinding machines rev up. Want it or not, they need to be here. After this place, there is no place. Not in today's America.

This machine shop may be the next wobbling domino in the collapse of the American manufacturing sector and the struggles of its blue-collar workers. There are at least seven shops nearby that are available for lease.

Schaefer Screw is in an industrial section of Garden City north of Ford Road, about two miles west of Detroit.

My brother Bill Parker and his wife Kim work there. Bill, 35, made $70,000 shuffling subprime mortgages for Rock Financial in 2006. He used to wear suits and now he wears oily jeans making $8.50 an hour counting and cleaning screws. For Christmas, he got a $43.80 bonus and evicted from the house he wrote the mortgage on.

"Dude, I was making more than that in high school," he said. Then he recited the new battle cry of a generation: "I'm just glad to be working."

Schaefer Screw is a three-generation mom-and-pop shop dating back to 1946. By all rights it should have a "For Sale sign" in the window. Its jobs should be overseas in places like Guangzhou and Juarez and Bangalore, where the labor is cheap.

Free trade is friend and foe

The ironic bit is this: Schaefer Screw would not be here at all had it not been for the cheap Chinese labor that supplies the plant with screws and bolts and fittings and nipples. Inside its 20,000-square-foot frame sits a snapshot of American lives of desperation: falling wages, fewer hours, homes nearing default, a business nearing failure, worker/management friction.

"I got a call from New York in 2001," recalled the owner Mike Szalay, 45, who along with his brother Mark took the place over from his father Sanford, who took it from his father Mike. The caller was a competitor, but also a friend. "He warned me that my prices were too high. He said guys in China are coming in and they're going to kill you. Get with it. NAFTA is here. So I kicked a few pieces over there I wasn't making money on, standard plumbing fittings. I thought I'd give it a try. They came back. The quality was good; the price was right."

NAFTA, the North American Free Trade Agreement, created a free trade block beginning in 1994. But that is only part of the story. The World Trade Organization (WTO) began quietly in 1995, encouraging a sort of worldwide NAFTA that all but eliminated international trade barriers. China was admitted in November 2001 and since then Michigan has lost nearly 400,000 manufacturing jobs or nearly 50 percent of its industrial work force.

"It's got its roots in the Big Three," Szalay said of the job losses. "The big boys made so much money, they gave the unions whatever they wanted, no matter what productivity was. They gave a guy $28 an hour to lean on a broom. So it trickled down and my guy wanted $20 to lean on a broom. It got so bad they figured out a way not to pay the guy with the broom. They moved whole factories, whole industries overseas.

"But now it's swung too far. We've got nothing left here. I'm employing people in menial jobs just to keep them going. And I'm scared to death that this place is going to die. How are we going to pay this national debt back? The stimulus? What sort of jobs are we going to tax? Where's the value in the money?"

Schaefer employs 20 people, down from 40 when the WTO began. It is considered a manufacturer, but only about 25 percent of the product is made on site. What choice did he have?

"I'm a distributor technically," said Szalay.

Except for the few machinists filling spot orders, the menial jobs consist basically of removing screws from a box that says Made in China, counting the bits, cleaning them and putting them into new boxes that do not say Made in China.

There are machines that can count and clean screws more quickly and efficiently than a human being, Szalay said, but the machines cost $50,000 plus maintenance and software. In today's America, a human being is cheaper than a machine in the short run.

At the same time, Szalay had to ask his workers for concessions: a 5 percent reduction in pay and a 20 percent cutback in hours. This is not unusual. The average hourly earnings for the American worker fell last year by nearly 2 percent when adjusted for inflation, according to the Bureau of Labor Statistics. Of the more than 8 million jobs lost in the past two years -- 2 million were the good-paying jobs in the manufacturing sector.

The workers were not pleased. When Szalay went back into his office, a machinist said this of the boss: "I'm sicka hearing about the economy. What's he gonna do? Trade in his Hummer for a Porsche?"

He traded it for the Volvo.

Struggling to get by

For workers here, Szalay is the closest they will come to THE MAN. And by THE MAN they mean the bozos in Washington, D.C., who voted for the trade agreements and the bank deregulations that let the jobs slip away and money disappear into thin air.

When they say THE MAN, they mean the wolves on Wall Street who amplified the housing bubble and nearly took the world economy down. Instead of paying the price and going out of business and collecting their own unemployment checks, the Wall Street wizards got a multibillion-dollar bailout paid for in part by that $43.80 screw factory bonus. Now those wizards are making beaucoupbonuses again while some see darker clouds on the horizon.

Goldman Sachs, which was a heartbeat away from failure in 2008 and received $40 billion in federal aid, paid out $16 billion in bonuses and compensation in 2009 -- an average of nearly $500,000 per employee. The bank paid just $14 million in taxes. At the same time, Deutsche Bank forecasts that a quarter of homeowners are underwater and reported 315,000 foreclosures in January, the most for that month on record. Many economists are predicting a bleak year in the housing market if wages and unemployment don't improve.

"You feel the whole thing's a swindle," says Cindi Borbi, the 59-year-old account manager behind a desk behind a cloud of cigarette smoke. Her husband took his life last year after being let go from his auto supply firm. He left his wife a broken heart, a mound of debt and a house she can't pay for. "I'm looking for a basement if you've got one."

Amanda Wollschlager, 26, is giving up her home. Her husband was laid off a year ago from a white-collar job at an auto supplier. His unemployment benefits will run out in March. They are packing up the baby and heading to Arizona. "We heard there's jobs out there, hopefully," she said.

Mike Straw, 42, must be the most honest man in America. Straw, a 12th-grade dropout, earns $8 an hour but takes home about $75 a week. Up to his neck in house payments on a house that is no longer worth what he owes, Straw has decided to pay instead of walk away.

Why?, he was asked. A lot of people are walking out on debts.

"A lot of people do, but I don't," he said. "If everybody walked away on what they owe, where would we be?"

And with that, the lunch bell rang. Everybody was huddled around the time clock like it was the only thing giving off heat.

A turning point in Europe

A turning point in Europe

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Wednesday’s general strike in Greece, involving two million workers in the public and private sectors, marks a turning point in the political situation throughout Europe. It represents the most significant manifestation of a growing movement of resistance to the attempt by Europe’s governments and corporations to make workers pay for the economic crisis and the multibillion-euro bailout of the banks.

At the very onset of this new movement of the working class, two fundamental characteristics have emerged: the movement assumes a cross-border and international character, and the workers immediately come up against the bankruptcy of their old trade union and political organizations—all of which are wedded to a nationalist program.

Indeed, austerity measures are being imposed by governments of the official “left” no less than those of the “centre” and “right.”

This week saw a succession of strikes and protests throughout Europe:

On Monday, Lufthansa’s 4,500 pilots in Germany struck. In France, air traffic controllers struck alongside workers at six French oil refineries. British Airways cabin crew voted by over 80 percent to strike.

On Tuesday, protest rallies took place in Madrid, Barcelona and Valencia against the austerity measures of the Spanish Socialist Workers Party (PSOE) government of José Zapatero. Trade unions in the Czech Republic announced that public transport would be halted next week.

A one-day general strike of the public sector is planned for March 4 in Portugal over the extension of a wage freeze as part of measures to cut the deficit from 9.3 percent of gross domestic product to 3 percent by 2013. French pilots have also announced plans to strike later this week.

These strikes and protests are only the initial response by Europe’s workers to the offensive being waged against them. The broadest mobilizations have been in those countries where the most savage cuts have been announced.

Portugal, Italy, Greece and Spain—the so-called “PIGS”—have been targeted by the banks and financial speculators and ordered by the European Union to drastically slash their budget deficits. This will set a precedent for similar cuts across Europe. But the fact that industrial unrest has spread to Germany, France and the UK indicates the potential development of a truly pan-European movement.

The same underlying tendencies that have given rise to the reemergence of the class struggle in Europe exist in North and South America, Asia and Africa.

Many of the protests and demonstrations were relatively small—a factor utilized by the financial press to demand that the respective governments stand firm in imposing austerity measures. Nevertheless, the more perceptive commentators were clear as to the broader implications of these actions. Writing in the Independent, Sean O’Grady stated that the strikes marked the onset of “Europe’s Winter of Discontent.” They “promise to be just the start of the greatest demonstration of public unrest seen on the continent since the revolutionary fervour of 1968,” he continued.

Commenting on the political impact of austerity measures that will see millions thrown into unemployment and social services gutted in Greece, Portugal, Spain and Italy, he noted, “The democratic strains in nations that had been ruled, well within living memory, by fascist leaders or the military are growing.”

The basis for a continent-wide social and political movement is rooted in the common problems faced by workers in a globalised economy dominated by huge international banks and corporations. These organizations, and the financial oligarchy they represent, are demanding unprecedented cuts in social programmes, wages and pensions in order to pay for the trillions of dollars handed over by European governments to the banks. They are speculating against any economy that is seen as debt-heavy and unwilling to carry forward the necessary attacks on the working class, thereby increasing the financial pressure on the targeted governments.

As yet, the objectively international character of the movement developing in Europe finds no political or organizational expression. On the contrary, everywhere it meets with the determined opposition of the trade unions, to the point of outright sabotage.

This week saw the betrayal of many of these initial attempts at resistance by the working class. The German pilots union, Vereinigung Cockpit, called off the strike at Lufthansa on its first day, and the General Confederation of Labour (CGT) called off the strike against the oil giant Total in France. In both cases, the unions capitulated without having won any of the workers’ demands. For its part, the Unite union announced yesterday that its members’ mandate for strike action against British Airways would be put “on hold” while further negotiations take place.

Those protests and strikes that have gone ahead are, from the standpoint of the unions, designed to let off steam rather than mobilize a political movement against the governments that are imposing austerity measures. The unions portray their respective governments as mere hostages to either the European Union or the speculators, rather than the political representatives of the capitalist class.

The most draconian cuts are being imposed by social democratic governments that came to power as a result of popular hostility to right-wing governments—PASOK in Greece, the PSOE in Spain, and the Socialist Party in Portugal. In every instance, they were elected with the support of the trade union bureaucracies, which have remained their allies as promised reforms have given way to austerity budgets.

The aim of the unions is to regulate social tensions and ensure that they do not pose a threat to big business and the state. A spokesman for the Greek General Confederation of Greek Workers (GSEE) made this clear when he said that imposition of PASOK’s planned austerity measures would be “tragic because it will provoke social unrest and clashes.”

Ireland is cited by global financiers as the model to be emulated for imposing cuts in wages and services of between 10 and 15 percent. The ability of the Fianna Fail government to do so is entirely dependent on the Irish unions, which called off strikes against the budget that had involved hundreds of thousands of workers.

The Irish Congress of Trade Unions is limiting action against the government to a public sector work-to-rule. Its leader, Jack O’Connor, declared, “There will be those who will represent us as endeavouring to reverse the budget and undermine the democratically elected government. I want to state emphatically that agreement can be reached.”

Whatever the intentions of the trade union bureaucracy, anger over the cuts being dictated by the banks and corporations will continue to grow. Their efforts to police this opposition, to stifle and betray it, will only lead to the development of a mass movement that must, of necessity, take the form of a political rebellion against the trade unions and the governments they defend.

There is no national solution to the crisis facing workers in Greece, Spain, Portugal or anywhere else. They are being thrust into a common struggle against globally organised capital. The fundamental question facing the entire European working class is the adoption of a socialist and internationalist program as the basis for a new political leadership and new mass organizations to wage the class struggle in opposition to the nationalist and pro-capitalist organisations of the official labour movement.