Sunday, January 9, 2011

World economy faces deepening turmoil

World economy faces deepening turmoil

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The New Year has opened with expressions of concern that two years after the financial meltdown sparked by the collapse of Lehman Brothers, the global economy and financial system, far from recovering, has entered an era of unprecedented economic and political turmoil. In short, the realisation is growing that the financial crisis was not a cyclical downturn to be followed by an upswing, but the beginning of a new era of economic breakdown.

In a comment published last month, Jeffrey Garten, undersecretary of commerce in the Clinton administration and now Yale University international trade and finance professor wrote: “As the first decade of the 21st century comes to a close, leaving the steady growth of last century’s second half a distant memory, what does the future hold for the global economy? For the next several years, we can expect exceptional turbulence as the waning days of the global economic order we have known plays [sic] out chaotically, possibly destructively.”

The focus of immediate attention is Europe where, according to a comment by former International Monetary Fund chief economist Simon Johnson, published in the New York Times on December 30, “most experienced watchers of the eurozone are expecting another serious crisis in early 2011, tied to the rollover funding needs of its weaker governments.”

But as Johnson went on to warn, the turbulence will not stop at the Atlantic. “When the financial markets are done with Europe, they will come to test the fiscal resolve of the United States.” Notwithstanding the belief of the entire American elite that “we are different from the Europeans because we issue the dollar and therefore have some special privileges” the age of American predominance, he insisted, was now over.

The Financial Times also pointed to the likelihood that the European financial crisis would spread in the next few months. “Last year brought the eurozone debt crisis. Greece and Ireland had to be bailed out and big question marks still hang over Portugal and Spain. But the focus is now likely to widen. The question for 2011 is how much of the western world will be caught up,” it noted on January 3.

The FT comment cited a survey conducted by a major US investment bank of its largest institutional investors, who were asked when they thought the debt crisis afflicting Europe would reach the United States. Fewer than 10 per cent said “never”.

As economic and financial problems deepen in Europe and the US, the still growing Chinese economy, far from providing a new foundation for global economic expansion, may itself become the source of a new wave of international turbulence.

Rising inflation has led authorities to lift interest rates, sparking concerns that if these increases are too rapid, they will cause a collapse of the investment and real estate bubble—much of it promoted by local government authorities—that has played such a central role in Chinese economic growth over the past two years.

According to Beijing university professor Michael Pettis: “Debt levels are worryingly high and starting to act as a serious constraint on rebalancing. It is becoming increasingly difficult for the People’s Bank of China to raise interest rates without causing a great deal of financial distress in government related entities.”

The deepening problems within the Chinese economy, while exacerbated by the global financial crisis, are rooted in long-term processes. According to a comment by a former member of the monetary policy committee of the Peoples’ Bank of China, Yu Yongding, published in the December 23 edition of the China Daily, the “East Asian growth pattern” that formed the basis of China’s progress over the past three decades “has now almost exhausted its potential.” Consequently “China has reached a crucial juncture” and “without painful structural adjustments, the momentum of its economic growth could be lost.”

The actions of the United States are fuelling the escalating turbulence in the world economy.

For much of the post-war period the US functioned as the anchor of the world capitalist economy. Today it is one of the main sources of destabilisation as it seeks to overcome its mounting economic problems at the expense of its rivals.

The US Federal Reserve’s policy of so-called “quantitative easing,” which sees it pumping billions of dollars into the global financial system—increasing the availability of cheap finance and pushing down the value of the US dollar—is sending shock waves through the world economy.

One of the immediate consequences has been renewed speculation in food and other basic commodities, such as oil. This week, the UN’s Food and Agriculture Organization issued a warning that food prices had now surpassed the levels reached in the price hikes of 2007-2008.

Faced with “hot money” inflows sparked by quantitative easing, a number of countries have sought to impose new financial controls. Brazil has just announced new banking regulations to try to curb the inflow of finance, while Chilean authorities have intervened in money markets to try to hold down the value of the peso.

Pointing to the deepening divisions in the world economy, Nobel laureate economist Joseph Stiglitz noted that the coordinated policy response of the major powers to the economic crisis in 2009 was now a “faint memory”.

“Worse,” he continued, “America’s quantitative easing is now viewed as an update of the policies that marked the Great Depression. The world is waking up to the way that exchange rates can be used in self-promotion at the expense of others—discouraging imports and enhancing exports.… Such beggar-thy-neighbour policies didn’t work in the 1930s, because countries responded in kind. Today the same will happen.”

The eruption of currency wars threatens to fracture the world market in the same way that tariff barriers in the 1930s divided the world into a series of hostile economic blocs, leading to the eruption of war by the end of the decade.

Mounting tensions between the major powers are being accompanied by an increasingly ferocious assault on the social position of the working class. The unleashing of state violence against students, youth and workers by governments in Britain, Greece, Spain and France in order to impose the austerity measures being dictated by banks and financial markets is only a foretaste of what is to come as the ruling classes everywhere seek to make the working class pay for the historic bankruptcy of the profit system.

Just as the breakdown of the capitalist order proceeds across borders and continents, so the working class must develop its own global response. The task ahead is to develop a unified movement of the international working class that will take political power and establish workers’ governments, placing key economic and financial resources in public hands and reorganising the economy to meet social needs. That is the perspective of the International Committee of the Fourth International.

Biggest cover-up in US history

Biggest cover-up in US history

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Months after the US government declared the waters in the Gulf of Mexico safe, thick layers of oil have been found along Louisiana coastal marshes, prompting local officials to accuse relevant authorities of 'cover-up.'

Louisiana officials say parts of the state's coastline are still being fouled more than eight months after British Petroleum's (BP) Deepwater Horizon rig caused the biggest oil disaster in the United States.

"This is the biggest cover-up in the history of America,'' AP quoted Plaquemines Parish President Billy Nungesser as saying.

On Friday, Robert Barham, secretary of Louisiana Department of Wildlife and Fisheries, joined Nungesser on a tour of the area.

"It has been eight months since the Deepwater Horizon oil rig explosion, and five months since the well was capped. While workers along the coast dedicated themselves to cleaning up our shores there is still so much to be done," Barham said in a statement.

The heavily saturated area that reporters saw was 30 feet (9 meters) to 100 feet (30 meters) wide in sections.

"There's been no mechanism to clean that up thus far," the parish president said.

"Every day, this shoreline is moving inland," lessening flood protection for residents, Nungesser added.

This is while US President Barack Obama and one his daughters went for a swim in the Gulf of Mexico last summer in an attempt to portray the water as safe and boost tourism industry reeling in the affected areas after millions of barrels of oil leaked into the gulf.

Nungesser has been a frequent and outspoken critic of the cleanup effort ever since the oil explosion began infiltrating the environmentally delicate Louisiana coast line in April 20.

The wildlife and fisheries department, meanwhile, said oiled boom remains in "numerous locations, forgotten or lost by contractors charged with their maintenance and removal."

The officials said biologists have found several oiled birds in the past few days, including at least two dead brown pelicans.

The explosion that destroyed the BP-leased Deepwater Horizon rig killed 11 workers and, according to the government estimates, led to more than 200 million gallons (757 million liters) of oil spewing from a hole a mile beneath the Gulf of Mexico.

US Police Wage War on Cameras

Free Market Fraud

Free Market Fraud

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At first glance, the December jobs report seems to be a step in the right direction. An unemployment rate of 9.4 percent, the lowest level in 19 months. And a president, happy to boast about another 103,000 jobs being created last month.

However, renowned economist Peter Morici points out two important caveats. For one, 260,000 Americans simply dropped out of the labor force in December. They are out of work, yet no longer counted as unemployed by the government. And secondly, 103,000 jobs is nowhere near the number of jobs we need to be adding each month. To bring unemployment down to 6 percent by 2013, businesses need to hire an average of 350,000 new workers each month.

Even Federal Reserve Chairman Ben Bernanke, who continues to defend his Quantitative Easing (aka money-printing) program, couldn't ignore the writing on the wall during a Senate hearing Friday morning. "If we continue at this pace", said Bernanke, "we are not going to see sustained declines to the unemployment rate."

This "pace" that we're operating at is working out just fine for the incumbent power structure, but it is strangling the rest of America. And it's not the first time a group of outdated industries has controlled our government for their own benefit, and at the detriment of everyone else.

It took a courageous -- and at the time crazy -- leader by the name of Teddy Roosevelt to step up and change that. He took on the biggest financial giant there was, JP Morgan, and he won. Roosevelt's underlying premise -- if you're too powerful and you're profiting at the expense of the American people -- then you are an enemy of freedom and the government must break you up. It was that simple.

Here we find ourselves today in a similar situation, where six industries have a stranglehold over Washington. And the draining of our current and future wealth will only continue as both the media and the political class not only tolerates but spreads the phrase "free market" when the reality doesn't match the rhetoric.

Our politicians continue to take money from massive corporations to subsidize them in a rigged marketplace that only cares about protecting the incumbent structure. At the same time, the American people are drowning in a red sea of debt caused by perpetuating banking, health care, energy and defense systems that are expensive, ineffective and protected from competition.

So I have a challenge for those so-called free market Republicans who rode a wave of voter discontent into Washington. I challenge you to end massive corporate subsidies. To end tax loopholes. And to end rigged trade with China and release the true power of free markets.

This can no longer be simply a talking point to win votes. Because this broken system is not only costing American jobs... it's costing us the very prosperity and freedoms that this country was founded on.

Will Our Economy Ever Recover From the "Greatest Recovery"?,

Will Our Economy Ever Recover From the "Greatest Recovery"?

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In a January 2009 ABC interview with George Stephanopoulos, then President-elect Barack Obama said fixing the economy required shared sacrifice: "Everybody's going to have to give. Everybody's going to have to have some skin in the game." [1]

For the past two years, American workers submitted to the president's appeal - taking steep paycuts despite hectic productivity growth. By contrast, corporate executives have extracted record profits by sabotaging the recovery on every front - eliminating employees, repressing wages, withholding investment and shirking federal taxes.

The global recession increased unemployment in every country, but the American experience is unparalleled. According to a July Organization for Economic Cooperation and Development (OECD) report, the US accounted for half of all job losses among the 31 richest countries from 2007 to mid-2010.[2] The rise of US unemployment greatly exceeded the fall in economic output. Aside from Canada, US Gross Domestic Product (GDP) actually declined less than any other rich country from mid-2008 to mid-2010.[3]

Washington's embrace of labor market flexibility ensured companies encountered little resistance when they launched their brutal recovery plans. Leading into the recession, the US had the weakest worker protections against individual and collective dismissals in the world, according to a 2008 OECD study.[4] Blackrock's Robert Doll explains, "When the markets faltered in 2008 and revenue growth stalled, US companies moved decisively to cut costs - unlike their European and Japanese counterparts." [5] The US now has the highest unemployment rate among the ten major developed countries.[6]

The private sector has not only been the chief source of massive dislocation in the labor market, but has also been a beneficiary. Over the past two years, productivity has soared while unit labor costs have plummeted. By imposing layoffs and wage concessions, US companies are supplying their own demand for a tractable labor market. Private sector union membership is the lowest on record.[7] Deutsche Bank Chief Economist Joseph LaVorgna notes that profits-per-employee are the highest on record, adding, "I think what investors are missing - and even the Federal Reserve - is the phenomenal health of the corporate sector." [8]

Due to falling tax revenues, state and local government layoffs are accelerating. In contrast, US companies increased their headcounts in November at the fastest pace in three years, marking the tenth consecutive month of private sector job creation. The headline numbers conceal a dismal reality; after a lost decade of employment growth, the private sector cannot keep pace with new entrants into the workforce.

The few new jobs are unlikely to satisfy Americans who lost careers. In November, temporary labor represented an astonishing 80 percent of private sector job growth. Companies are transforming temporary labor into a permanent feature of the American workforce. United Press International (UPI) reports that, "This year, 26.2 percent of new private sector jobs are temporary, compared to 10.9 percent in the recovery after the 1990s recession and 7.1 percent in previous recoveries." [9] The remainder of 2010 private sector job growth has consisted mainly of low-wage, scant-benefit service sector jobs, especially bars and restaurants, which added 143,000 jobs, growing at four times the rate of the rest of the economy.[10]

Aside from job fairs, large corporations have been conspicuously absent from the tepid jobs recovery - but they are leading the profit recovery. Part of the reason is the expansion of overseas sales, but the profit recovery is primarily coming off the backs of American workers. After decades of globalization, US multinationals still employ two-thirds of their global workforce from the US (21.1 million workers out of a total 31.2 million).[11] Corporate executives are hammering American workers precisely because they are so dependent on them.

An annual study by USA Today found that private sector paychecks as a share of Americans' total income fell to 41.9 percent earlier this year, a record low. [12] Conservative analysts seized on the report as proof of President Obama's agenda to redistribute wealth from, in their words, those "pulling the cart" to those "simply riding in it." Their accusation withstands the evidence - only it's corporate executives and wealthy investors enjoying the free ride. Corporate executives have found a simple formula: the less they contribute to the economy, the more they keep for themselves and shareholders. A Federal Reserve flow of funds report reveals corporate profits represented a near-record 11.2 percent of national income in the second quarter.[13]

Nonfinancial companies have amassed nearly $2 trillion in cash, representing 11 percent of total assets, a sixty-year high. Companies have not deployed the cash on hiring as weak demand and excess capacity plague most industries. Companies have found better use for the cash. As Robert Doll explains, "High cash levels are already generating dividend increases, share buybacks, capital investments and M&A [mergers and acquisitions] activity - all extremely shareholder-friendly."

Companies invested $262 billion in equipment and software investment in the third quarter;[14] that compares with nearly $80 billion in share buybacks.[15] The paradox of substantial liquid assets accompanying a shortfall in investment validates Keynes's idea that slumps are caused by excess savings. Three decades of lopsided expansions have hampered demand by clotting the circulation of national income in corporate balance sheets. An article in the July issue of The Economist observes that, "business investment is as low as it has ever been as a share of GDP." [16]

The decades-long shift in the tax burden from corporations to working Americans has accelerated under President Obama. For the past two years, executives have reported record profits to their shareholders, partially because they are paying a pittance in federal taxes. Corporate taxes as a percentage of GDP in 2009 and 2010 are the lowest on record at just over 1 percent.[17]

Corporate executives complain that the US has the highest corporate tax rate in the world, but there's a considerable difference between the statutory 35 percent rate and what companies actually pay (the effective rate). Here again, large corporations lead the charge in tax arbitrage. US tax law allows multinationals to indefinitely defer their tax obligations on foreign earned profits until they "repatriate" (send back) the profits to the US. US corporations have increased their overseas stash by 70 percent in four years, now over $1 trillion - largely by dodging US taxes through a practice known as "transfer pricing." Transfer pricing allows companies to allocate costs in countries with high tax rates and book profits in low-tax jurisdictions and tax havens - regardless of the origin of sale. US companies are using transfer pricing to avoid US tax obligations to the tune of $60 billion dollars annually, according to a study by Kimberly A. Clausing, an economics professor at Reed College in Portland, Oregon.[18]

The corporate cash glut has become a point of recurrent contention between the Obama administration and corporate executives. In mid-December, a group of 20 corporate executives met with the Obama administration and pleaded for a tax holiday on the $1 trillion stashed overseas, claiming the money will spur jobs and investment. In 2004, corporate executives convinced President Bush and Congress to include a similar amnesty provision in the American Jobs Creation Act; 842 companies participated in the program, repatriating $312 billion back to the US at 5.25 percent rather than at 35 percent.[19] In 2009, the Congressional Research Service concluded that most of the money went to stock buybacks and dividends - in direct violation of the Act.[20]

The Obama administration and corporate executives saved American capitalism. The US economy may never recover.

1. "This Week," ABC News with George Stephanopoulos, January 2009.

2. "OECD report, U.S. lost most jobs among rich countries," ABC News. July 7, 2010.

3. "Five Surprises of the Great Recession," Carnegie Endowment for International Peace, Policy Brief 89, Uri Dadush and Vera Eidelman. November, 2010.

4. OECD Indicators of Employment Protection.

5. "The Bullish Case for U.S. Equities." Robert Doll, The Wall Street Journal, June 8, 2010.

6. Bureau of Labor Statistics. International Labor Comparisons. Updated December 2, 2010.

7. "Union membership in the private sector declines to record low," Holly Rosenkrantz, Bloomberg Businessweek. January 22, 2010.

8. "When will profits translate into jobs?" CNBC, Joseph Lavorgna quote.

9. "Temp work becomes a fixture," UPI. December 20th, 2010.

10. "Restaurant industry's hiring helping to revive economy," Dayton Daily News - McClatchy-Tribune Information Services via COMTEX, November 28, 2010.

11. "U.S. Multinationals Cut U.S. Jobs While Expanding Abroad," Martin A. Sullivan, Tax Notes.

12. "Private pay shrinks to historic lows as gov't payouts rise," USA Today, May 26, 2010.

13. "Visualizing Booming Profits," Catherine Rampell, New York Times Economix blog, November 23, 2010.

14. $262 billion in equipment and software investment, calculated from EconStats.

15. "S&P 500 Companies More Than Double Buybacks in 3Q," Mark Jewell, ABC News. December 20, 2010.

16. "Show us the money," The Economist.

17. Corporate Income Tax as a Share of GDP, 1946-2009.

18. "U.S. Companies Dodge $60 Billion in Taxes with Global Odyssey," Bloomberg, May 13, 2010.

19. "Dodging Repatriation Tax Lets U.S. Companies Bring Home Cash," Jesse Drucker, Bloomberg. December 29, 2010.

20. "Proposed Tax Break For Multinationals Would Be Poor Stimulus," Robert Greenstein and Chye-Ching Huang, Center for Budget and Policy Priorities. February 2009.

Oil and Gas Collection: Hydraulic Fracturing, Toxic Chemicals and the Surge of Earthquake Activity in Arkansas

Oil and Gas Collection: Hydraulic Fracturing, Toxic Chemicals and the Surge of Earthquake Activity in Arkansas

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The last four months of 2010, nearly 500 earthquakes rattled Guy, Arkansas. [1] The entire state experienced 38 quakes in 2009. [2] The spike in quake frequency precedes and coincides with the 100,000 dead fish on a 20-mile stretch of the Arkansas River that included Roseville Township on December 30. The next night, 5,000 red-winged blackbirds and starlings dropped dead out of the sky in Beebe. [3] Hydraulic fracturing is the most likely culprit for all three events, as it causes earthquakes with a resultant release of toxins into the environment. [4]

A close look at Arkansas’ history of earthquakes and drilling reveals a shocking surge in quake frequency following advanced drilling. The number of quakes in 2010 nearly equals all of Arkansas’ quakes for the entire 20th century. The oil and gas industry denies any correlation, but the advent of hydrofracking followed by earthquakes is a story repeated across the nation. It isn’t going to stop any time soon, either. Fracking has gone global.

Hydraulic fracturing (fracking) pumps water and chemicals into the ground at a pressurized rate exceeding what the bedrock can withstand, resulting in a microquake that produces rock fractures. Though initiated in 1947, technological advances now allow horizontal fracturing, vastly increasing oil and gas collection. [5] In 1996, shale-gas production in the U.S. accounted for 2 percent of all domestic natural gas production, reports Christopher Bateman in Vanity Fair. “Some industry analysts predict shale gas will represent a full half of total domestic gas production within 10 years.” [6] In 2000, U.S. gas reserve estimates stood at 177 trillion cubic feet, but ramped up to 245 tcf in 2008. These new technologies prompt experts to increase global gas reserve estimates ninefold. [7]

The grid below shows a section of the Arkansas River, with Roseville Township at bottom, where the first reports of the fish kill originated. The green lines surrounding and crossing the river indicate gas pipes, ranging from 8-20” in diameter. Any number of leaks in the pipes can explain the fish kill. Gas wells are shown by yellow ‘suns’ (see red arrows) and range from 1,500 to 6,500 feet deep. (Disposal wells, where drilling waste products are injected at high pressures, go as deep as 12,000 feet.) The red numbers next to the ‘suns’ give the number of gas wells in that spot, numbering close to 50 in this small area. [8]

(The gray numbers relate to the Township Numbering System. Each square equals one square mile. Click map for larger image.)

In December alone, over 150 earthquakes rocked Arkansas. [1] The swarm of quakes in Guy likely results from six years of intense drilling. Guy sits within the Fayetteville Shale Formation which, according to the Arkansas Geological Survey (AGS), is “the current focus of a regional shale-gas exploration and development program.” A billion cubic feet of gas has been produced from this area since 2004. [9]

Thousands of wells are in operation in North-Central Arkansas (blue section of the following map). [10] Beebe, where the bird kill occurred, is in White County and Guy is at the northern end of Faulkner Co., where the anomalous earthquakes continue.

Red-winged blackbirds roost in clusters up to a million or more birds, often with other species like starlings and cowbirds. (In the 1950s and ’60s, roosts could number 20 million birds.) Blackbirds prefer low, dense vegetative cover in wetlands or near streams. Though some may perch 30 feet above the water, most perch within one to two feet of it, and some will roost with their feet resting in water. Blackbirds can range up to 50 miles a day from roost to feeding sites, but they all settle in for the night before sunset. [11]

An earthquake of whatever scale can release a stream or cloud of gas and fracking chemicals which could easily explain why sleeping birds would suddenly take flight, and then quickly dye as they succumbed to the toxic fumes. Of note, eight measured quakes within 40 miles of Beebe, and within 75 miles of Roseville, hit the area on December 30 thru several minutes past midnight on January 1st. [12] This excludes any micro- or miniquakes which can have the same effect. Significantly, the area is known for its prolific microquakes — numbering 40,000 since 1982. [1]

Canadian Geologist Jack Century crusades against induced seismicity from irresponsible drilling. In a 2009 speech before the Peace River Environmental Society, he provided a brief explanation of how fracking induces earthquakes, completely refuting industry denial that fracking causes quakes. Fracking induces not only micro- and mini-seismic actions that can compromise the integrity of well casings, but also large earthquakes registering on the order of 5 to 7 on the Richter Scale, resulting in human deaths. [13]

Scott Ausbrooks, geohazards supervisor for AGS, told CNN in December that while earthquakes aren’t unusual in Arkansas, the frequency is. [14] Indeed, they’ve had a 1,200 percent increase in earthquakes over 2009 data just in the last four months of 2010. All of the quakes registered less than 3 on the Richter Scale; over 98% of them occurred near Guy, where we find the largest concentration of gas wells; and 99% occurred outside the New Madrid Fault zone (circled in red below) where seismic activity is expected, implying they are human induced [1]:

Though AGS publicly claims no earthquake relation to drilling, in early December, Arkansas banned new drilling permits until further notice.

CNN reported that “According to the Arkansas Oil and Gas Commission, there are at least a half dozen ‘disposal wells’ within a 500-square-mile zone around Guy.” Ausbrooks noted similar “incidents in Colorado in the 1960s at Rocky Mountain Arsenal, where deep water injection was tied to earthquakes.” [14]

Arkansas Earthquake and Drilling History

When comparing Arkansas’ earthquake history with its drilling history, a causative correlation becomes obvious.

The entire 19th century saw 15 recorded earthquakes and none in the first decade of the new century. A total of 694 quakes rocked Arkansas in the 20th century. That number was surpassed in 2009-2010, with the bulk (483) occurring the last three months of 2010. Table 1 was prepared using complete quake data thru 2009 [15], complete data from August thru December, 2010 [1], and just North Central Arkansas quake data from January thru July, 2010. [16]

Arkla, Inc., through its many morphs, mergers and acquisitions, is and has been a key gas driller in Arkansas. Between 1975 and the early 1980s, the company found more gas than it produced. By 1982, Arkla was able to sell Central Louisiana Electric Company more than 100 million cubic feet of gas daily. By the early 1990s, it operated the sixth-largest pipeline system in the United States and was among the ten largest operators of natural gas reserves. [17] Its production timeline coincides with the massive jump in earthquakes in the 1970s and 1980s. Today, 37 companies drill for gas and oil in Arkansas. [18]

Unregulated Fracking on a Global March

The U.S. and Canada are not alone in exploiting this highly destructive technology. Poland also embraces fracking. Several energy companies are currently exploring Poland’s reserves, including Conoco-Phillips, ExxonMobil, Marathon, Chevron, Talisman, Lane Energy, BNK Petroleum, Emfesz, EurEnergy Resources, RAG, San Leon Energy and Sorgenia E&P. [19] These new technologies will significantly impact the global trade in natural gas, according to Forbes [20]:

“Poland consumes 14 billion cubic meters of gas a year and imports more than 70% of it from Russia. It is easy to see how the country could benefit from starting shale gas drilling as soon as possible. Not only could it decrease its dependency on Russia, it might even turn into a gas exporter.”

Bateman noted that Western and Central Europe have leased their lands to frackers. Australians are suffering from the same frack contaminations as Americans, and China is also exploiting the new technology. [6]

Josh Fox’s 2010 film, Gasland, documents a multitude of harmful consequences on animal and human life, as well as property values. The most infamous scene shows people able to ignite their contaminated tap water [21]:

Fox makes the point that Dick Cheney’s former company, Halliburton, lobbied for and won exemptions from the Clean Air Act, the Clean Water Act, Superfund, and the Safe Drinking Water Act, thanks to our corporate-owned Congress. Though it did not hesitate to pass on Wall Street’s gambling debts to the public (twice), Congress has not found the will to pass the Fracturing Responsibility and Awareness of Chemicals (FRAC) Act.

Nor do drillers have to disclose the toxic chemicals used, contrary to the 1986 Emergency Planning and Community Right-to-Know Act. [22]

In 2004, the Environmental Protection Agency determined that fracking poses no threat to water supplies and that no further studies were needed. [23] From some Orwellian nightmare, however, at least 65 of the chemicals used in fracking are considered hazardous by the EPA. They have been linked to “cancer; liver, kidney, brain, respiratory and skin disorders; birth defects; and other health problems,” according to a 2005 report by the Oil and Gas Accountability Project. Of primary concern to citizens, OGAP notes that “Approximately half of the water that Americans rely on for drinking comes from underground sources.” [24]

Wyoming took a proactive stance on full disclosure of fracking chemicals when it passed new rules in September. Loopholes, however, still allow companies to claim proprietary ownership of such information, restricting the information from public view. [25]

Given the EPA’s position that fracking is safe, it’s not likely that Arkansas citizens will get much help from the federal government. Nor will they find a friend at the state level. The Arkansas Department of Environmental Quality has so far been unwilling or unable to stop UMETCO Minerals Corporation from illegally dumping toxic chemicals into streams. [26]

The same situation applies across the nation where state governments protect industry over environmental and human health. Recently, outgoing Governor David Paterson vetoed legislation that would have put a moratorium on vertical and horizontal hydraulic drilling. [27] Already, Pennsylvania leases a third of its public lands to private energy drillers. [21]

Given government bias toward energy giants, and BP's destruction of the Gulf of Mexico is a case in point, more direct action may be required by citizens, if environmental and human health are to be saved from the fossil fuel industry.

Rady Ananda holds a B.S. in Natural Resources from The Ohio State University’s School of Agriculture.


1. Arkansas Geological Survey, “Arkansas Earthquake Updates.”

2. Arkansas Geological Survey, “2009 Earthquakes.”

3. Food Freedom, “Massive fish kill and 1000s of birds fall from the sky in Arkansas,” 2 Jan. 2010.

4. Earthworks, “Hydraulic Fracturing and Earthquakes.”

Also see:

Ben Cassleman, “Temblors Rattle Texas Town: Residents Suspect a Drilling Boom Is Triggering Small Quakes, but Scientists Lack Proof,” Wall Street Journal, 12 June 2009.

James Glanz, “Deep in Bedrock, Clean Energy and Quake Fears,” New York Times, 23 June 2009.

James Glanz, Video: “The Danger of Digging Deeper,” New York Times, 23 June 2009.

5. U.S. Department of Energy, “Hydraulic Fracturing White Paper,” June 2004.

6. Christopher Bateman, “A Colossal Fracking Mess,” Vanity Fair, 16 June 2010.

7. Martin Walker, “Russia’s Fracked Future,” UPI, 1 Feb. 2010.

8. Arkansas Geological Survey, “Fayetteville Shale Gas Play West Map,” Last updated 2 March 2010.×44.pdf

9. Arkansas Geological Survey, “Gas.”

10. Arkansas Geological Survey, “Fayetteville Shale Gas Play.”

11. Brooke Meanley, “The Roosting Behavior of the Red-Winged Blackbird in the Southern United States,” Wilson Bulletin, Vol. 77 No.3, pp 217-228, Sept. 1965.

12. U.S. Geological Survey, “Map Centered at 35°N, 93°W” Accessed Jan. 5, 2010:

13. Jack Century, “Earthquake Risks: Building a Nuclear Power Plant near Peace River, Alberta,” Peace River Environmental Society, May 2009 (71 mins.); 8-part video at

14. CNN, “Arkansas Earthquakes,” 13 Dec. 2010.

15. Arkansas Geological Survey, “Earthquake Archive,” 2009.

16. Arkansas Geological Survey, “Recent and Historical Earthquakes in North-Central Arkansas,” October 2010

17. Funding Universe, “Arkla Inc.” n.d.

18., “37 Drilling Oil and Gas Wells Companies in Arkansas,” n.d.

19. STRATFOR, “Poland: Fracing On The Rise?” Forbes Magazine, 1 June 2010.

20. TREFIS Team, “ConocoPhillips Has Big Fracking Plans For Poland, Stock Has Upside,” Forbes Magazine, 14 Dec. 2010.

21. Josh Fox, Gasland, 2010. See trailer showing ignited tap water at

22. Sarah Collins and Tom Kenworthy, “Energy Industry Fights Chemical Disclosure: Natural gas companies want to prevent oversight of fracking,” Center for American Progress, April 2010.

23. U.S. Environmental Protection Agency, “Evaluation of Impacts to Underground Sources of Drinking Water by Hydraulic Fracturing of Coalbed Methane Reservoirs Study,” June 2004.

24. Lisa Sumi, “Our Drinking Water at Risk: What EPA and the Oil and Gas Industry Don’t Want Us to Know about Hydraulic Fracturing,” Oil and Gas Accountability Project, April 2005.

25. Earthworks, Powder River Basin Resources Council, “Wyoming Requires Disclosure of Chemicals in Natural Gas Drilling,” 16 Sep 2010.

26. Karoline Wightman, “UMETCO Minerals Corp not yet fined for releasing chemicals,” Fox News, 16 Nov. 2010.

27. Tom Zeller, “New York Governor Vetoes Fracking Bill,” New York Times, 11 Dec. 2010.

Jobs: The Crisis Continues

Jobs: The Crisis Continues

Whichever way you look at it, today’s employment report from the Bureau of Labor Statistics was disappointing. Many people, myself included, were expecting job creation to bounce back vigorously from last month’s flat figure, but it didn’t. Payrolls expanded by just a hundred and three thousand in December. (Based on some encouraging private surveys, a few optimists had expected the payroll number to top two hundred and fifty thousand.)

True, the unemployment rate fell sharply—from 9.8 per cent to 9.4 per cent—but that was largely because so many jobless people have given up seeking work and dropped out of the labor force. The telling figure here is that the percentage of Americans in the labor force—the so-called “participation rate”—has fallen to 64.3 per cent, the lowest level seen yet since the recession began in December 2008.

As I’ve said before, one month doesn’t make a trend, but seven months surely does. Since July of last year, net employment creation has topped a hundred and ten thousand—roughly the rate needed to keep up with increases in population—just once: in October, when payrolls jumped a healthy two hundred and ten thousand, according to the latest revision. Setting aside October, the job figures have been dismal. Just when the recovery should have been shifting up a gear and creating many more jobs, hiring has stalled.

In the past twenty years, we have gotten used to the phrase “jobless recoveries.” There was one in the early nineties and another one in the early noughties. But as a new briefing paper from the Economic Policy Institute makes clear, the Great Recession and its aftermath is “far outside the experience of any this country has seen in 70 years.”

If you doubt this is true, look at this chart:


And if you aren’t depressed enough, here are a few more figures relating to the state of the labor market:

• 4.4 million—that is the number of workers who have “disappeared” from the labor force since the recession began. If all of these folks were seeking work, the unemployment rate would be about 10.7 per cent.

• 6.4 million—the number of Americans who have been out of a job for six months or more. Long-term unemployment is turning into a massive social problem. (Any unemployment person will confirm that the longer you are out of work, the harder it is to get a job.)

• 26.1 million—the number of people who are out of work or employed in part-time jobs when they would prefer to work full-time. The so-called “underemployment rate,” which includes the unemployed and people working part-time involuntarily, is now 16.7 per cent, or about one in six.

On the plus side, things might turn up this month. With demand for many goods and services increasing at a steady (if relatively modest) clip, the reluctance of firms to go out and hire more workers can only last for so long.

But I also said that last month…

The Problem Is That America's Richest 1% Are Raking It in -- Not Public Employee Pensions

The Problem Is That America's Richest 1% Are Raking It in -- Not Public Employee Pensions

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In 1968, 1,300 sanitation workers in Memphis went on strike. The Rev. Martin Luther King, Jr. came to support them. That was where he lost his life. Eventually Memphis heard the grievances of its sanitation workers. And in subsequent years millions of public employees across the nation have benefited from the job protections they’ve earned.

But now the right is going after public employees.

Public servants are convenient scapegoats. Republicans would rather deflect attention from corporate executive pay that continues to rise as corporate profits soar, even as corporations refuse to hire more workers. They don’t want stories about Wall Street bonuses, now higher than before taxpayers bailed out the Street. And they’d like to avoid a spotlight on the billions raked in by hedge-fund and private-equity managers whose income is treated as capital gains and subject to only a 15 percent tax, due to a loophole in the tax laws designed specifically for them.

It’s far more convenient to go after people who are doing the public’s work - sanitation workers, police officers, fire fighters, teachers, social workers, federal employees – to call them “faceless bureaucrats” and portray them as hooligans who are making off with your money and crippling federal and state budgets. The story fits better with the Republican’s Big Lie that our problems are due to a government that’s too big.

Above all, Republicans don’t want to have to justify continued tax cuts for the rich. As quietly as possible, they want to make them permanent.

But the right’s argument is shot-through with bad data, twisted evidence, and unsupported assertions.

They say public employees earn far more than private-sector workers. That’s untrue when you take account of level of education. Matched by education, public sector workers actually earn less than their private-sector counterparts.

The Republican trick is to compare apples with oranges — the average wage of public employees with the average wage of all private-sector employees. But only 23 percent of private-sector employees have college degrees; 48 percent of government workers do. Teachers, social workers, public lawyers who bring companies to justice, government accountants who try to make sure money is spent as it should be - all need at least four years of college.

Compare apples to apples and and you’d see that over the last fifteen years the pay of public sector workers has dropped relative to private-sector employees with the same level of education. Public sector workers now earn 11 percent less than comparable workers in the private sector, and local workers 12 percent less. (Even if you include health and retirement benefits, government employees still earn less than their private-sector counterparts with similar educations.)

Here’s another whopper. Republicans say public-sector pensions are crippling the nation. They say politicians have given in to the demands of public unions who want only to fatten their members’ retirement benefits without the public noticing. They charge that public-employee pensions obligations are out of control.

Some reforms do need to be made. Loopholes that allow public sector workers to “spike” their final salaries in order to get higher annuities must be closed. And no retired public employee should be allowed to “double dip,” collecting more than one public pension.

But these are the exceptions. Most public employees don’t have generous pensions. After a career with annual pay averaging less than $45,000, the typical newly-retired public employee receives a pension of $19,000 a year. Few would call that overly generous.

And most of that $19,000 isn’t even on taxpayers’ shoulders. While they’re working, most public employees contribute a portion of their salaries into their pension plans. Taxpayers are directly responsible for only about 14 percent of public retirement benefits. Remember also that many public workers aren’t covered by Social Security, so the government isn’t contributing 6.25 of their pay into the Social Security fund as private employers would.

Yes, there’s cause for concern about unfunded pension liabilities in future years. They’re way too big. But it’s much the same in the private sector. The main reason for underfunded pensions in both public and private sectors is investment losses that occurred during the Great Recession. Before then, public pension funds had an average of 86 percent of all the assets they needed to pay future benefits — better than many private pension plans.

The solution is no less to slash public pensions than it is to slash private ones. It’s for all employers to fully fund their pension plans.

The final Republican canard is that bargaining rights for public employees have caused state deficits to explode. In fact there’s no relationship between states whose employees have bargaining rights and states with big deficits. Some states that deny their employees bargaining rights - Nevada, North Carolina, and Arizona, for example, are running giant deficits of over 30 percent of spending. Many that give employees bargaining rights — Massachusetts, New Mexico, and Montana — have small deficits of less than 10 percent.

Public employees should have the right to bargain for better wages and working conditions, just like all employees do. They shouldn’t have the right to strike if striking would imperil the public, but they should at least have a voice. They often know more about whether public programs are working, or how to make them work better, than political appointees who hold their offices for only a few years.

Don’t get me wrong. When times are tough, public employees should have to make the same sacrifices as everyone else. And they are right now. Pay has been frozen for federal workers, and for many state workers across the country as well.

But isn’t it curious that when it comes to sacrifice, Republicans don’t include the richest people in America? To the contrary, they insist the rich should sacrifice even less, enjoying even larger tax cuts that expand public-sector deficits. That means fewer public services, and even more pressure on the wages and benefits of public employees.

It’s only average workers – both in the public and the private sectors – who are being called upon to sacrifice.

This is what the current Republican attack on public-sector workers is really all about. Their version of class warfare is to pit private-sector workers against public servants. They’d rather set average working people against one another – comparing one group’s modest incomes and benefits with another group’s modest incomes and benefits – than have Americans see that the top 1 percent is now raking in a bigger share of national income than at any time since 1928, and paying at a lower tax rate. And Republicans would rather you didn’t know they want to cut taxes on the rich even more.

US tells Twitter to hand over WikiLeaks supporter's private messages

Icelandic MP fights US demand for her Twitter account details

Birgitta Jonsdottir brands efforts by US justice department to access her private information 'completely unacceptable'

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    A member of parliament in Iceland who is also a former WikiLeaks volunteer says the US justice department has ordered Twitter to hand over her private messages.

    Birgitta Jonsdottir, an MP for the Movement in Iceland, said last night on Twitter that the "USA government wants to know about all my tweets and more since november 1st 2009. Do they realize I am a member of parliament in Iceland?"

    She said she was starting a legal fight to stop the US getting hold of her messages, after being told by Twitter that a subpoena had been issued. She wrote: "department of justice are requesting twitter to provide the info – I got 10 days to stop it via legal process before twitter hands it over."

    She said the justice department was "just sending a message and of course they are asking for a lot more than just my tweets."

    Jonsdottir said she was demanding a meeting with the US ambassador to Iceland. "The justice department has gone completely over the top." She added that the US authorities had requested personal information from Twitter as well as her private messages and that she was now assessing her legal position.

    "It's not just about my information. It's a warning for anyone who had anything to do with WikiLeaks. It is completely unacceptable for the US justice department to flex its muscles like this. I am lucky, I'm a representative in parliament. But what of other people? It's my duty to do whatever I can to stop this abuse."

    Twitter would not comment on the case. In a statement, the company said: "We're not going to comment on specific requests, but, to help users protect their rights, it's our policy to notify users about law enforcement and governmental requests for their information, unless we are prevented by law from doing so."

    Most of Twitter's messages are public, but users can also send private messages on the service.

    Marc Rotenberg, president of the online watchdog the Electronic Privacy Information Centre (EPIC) in Washington, said it appeared the US justice department was looking at building a case against WikiLeaks and its founder, Julian Assange, over its publication of secret US documents.

    EPIC has already requested that the US authorities hand over information about their investigations into people who have donated to WikiLeaks via Mastercard, Visa or PayPal.

    "The government has the right to get information, but that has to be done in a lawful way. Is there a lawful prosecution that could be brought against WikiLeaks? It seems unlikely to me. But it's a huge question here in the US," said Rotenberg.

    Jonsdottir was involved in WikiLeaks' release last year of a video which showed a US military helicopter shooting two Reuters reporters in Iraq. US authorities believe the video was leaked by Private Bradley Manning.

    Adrian Lamo, the hacker who reported Manning to the authorities, indicated that Manning first contacted WikiLeaks in late November 2009 – a period covered by the request for Jonsdottir's tweet history.

    In 2009 Jonsdottir invited Assange to a party at the US embassy in Reykjavik where he chatted with the ambassador to Iceland. WikiLeaks had recently published a secret report on the collapse of the country's banks.

    "I said it would be a bit of a prank to take him and see if they knew who he was. I don't think they had any idea," Jonsdottir said last year.

    The MP has distanced herself from Assange and WikiLeaks, saying he should take a step back to deal with an investigation in Sweden. The 39-year-old is fighting extradition to the country, where two women have accused him of sexual misconduct. He denies the allegations.

    In Iceland she has championed the Icelandic Modern Media Initiative which is aimed at creating legislation to make Iceland a legal haven for journalists and media outlets.

    She is not the first WikiLeaks associate to be targeted by US officials. Last July Jacob Appelbaum, one of Assange's closest colleagues, was interrogated for three hours and had his phones confiscated upon entering the country at Newark airport. Customs officials photocopied receipts and searched his laptop.

    The justice department did not returns calls seeking comment last night.

CDC adjusts fluoride poisoning of America's water supply to a lower level

CDC adjusts fluoride poisoning of America's water supply to a lower level

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(NaturalNews) The U.S. Centers for Disease Control (CDC) today issued a startling report that admits 2 in 5 children in America show signs of fluoride poisoning (streaking, spotting or pitting of teeth due to dental fluorosis). The agency concluded that fluoride levels need to be lowered in municipal water supplies, reducing fluoride to 0.7 milligrams per liter (the previous recommended upper limit was 1.2 milligrams per liter).

This ends over five decades of the U.S. government recommending up to 1.2 milligrams of fluoride in every liter of water. But even the new lower levels are still more than enough to cause serious harm to children, and when mothers make infant formula using fluoridated tap water, they inadvertently poison their infants with hundreds of times the level of fluoride that would normally be found in healthy human breast milk.

Click this link to see images of what fluoride does to human teeth: (warning, graphic images!)

Fluoride is still a poison

It's so rare to find any agency of the federal government actually doing anything that even resembles a good decision these days that the CDC's decision deserves some level of kudos. Even though it doesn't end the destructive practice of poisoning the water supply with fluoride, it's a step in the right direction. But it doesn't go nearly far enough, say industry watchdogs.

"It' a good start that they've finally recognized that after 65 years they needed to lower the 'optimal' level of fluoride," Professor Paul Connett told NaturalNews. He's the executive director of the Fluoride Action Network (, which is spearheading the fight against water fluoridation in the United States. "It should have happened years ago."

Connett goes on to explain why the CDC's decision doesn't go nearly far enough:

"The bad news is that the CDC and ADA are still trying to maintain that the only issue of concern is dental fluorosis [while] they are trying to ignore all the other health concerns. If they were really serious about reducing dental fluorosis, they would stop fluoridated water altogether. But short of that, if they were really serious, then the next best thing would be to warn parents in fluoridated communities not to use fluoridated tap water to make baby formula. That's the most practical thing to do."

It is unknown how many children in America and around the world have been poisoned by infant formula made with fluoridated tap water, but that number continues to grow each day that water fluoridation continues.

Is the announcement a P.R. stunt?

About the CDC's motives for this announcement, Connett characterizes it as a bit of a P.R. stunt:

"All that's happening here is really a P.R. exercise to make it look as if they are addressing the public's concerns without really doing anything substantial. [They] give the message that they're going to choose a level which would allow the water fluoridation program to continue. That's a travesty of science and another example where these Washington based agencies are more interested in protecting a policy than in protecting the health of the American people."

"They've completely ignored all the IQ studies and the notion that fluoride damages the brain," Connett explains.

Connett isn't the only one hoping to see the CDC ban fluoride outright. ABC News is reporting today that Dr Griffin Cole, a dentist in Austin, Texas, said, "I still don't think it's enough, honestly," he said. "I don't think there should be fluoride in the water at all."

"Ingesting fluoride in any form does nothing for your teeth," he said ( He also points out that dental fluorosis leads to costly (i.e. high-profit) dental work being needed to restore the patient's teeth. "When you see a case of somebody coming in with bad fluorosis, to restore those teeth you either have to crown them completely or at least do a veneer. So it's a very costly thing to fix."

That's sort of the whole point of fluoride, actually: To bring in repeat business to dental offices around the country. It's the same scam as mercury fillings which crack teeth and result in a steady stream of repeat business to repair the damage. Over half of today's practicing dentists have already stopped using mercury fillings ("silver fillings") due to the toxicity of mercury (

Both mercury and fluoride are founded in the corrupt dental industry which has, for over a hundred years, poisoned the American people in order to protect its business model of harming people in order to generate repeat business. The dental industry operates in almost precisely the same way as the pharmaceutical industry: If you keep people sick, they'll keep coming back for more "treatments."

Fluoride is dangerous to your health - here's why

Even though the CDC's decision still supports water fluoridation, it nevertheless sends a powerful message across the country that too much fluoride is dangerous for your health.

This should slap shut the mouths of at least some of the fluoride-pimping dentists and doctors who have been advocating this mass poisoning of our nation for the last several decades. But there's much more to this story that's not being reported anywhere else.

For one thing, do you know where fluoride comes from? It turns out that so-called "fluoride" is really fluorosilicic acid, a toxic waste byproduct of the phosphate mining industry. If it wasn't being dumped into the water supplies of major cities, it would have to be disposed as a hazardous toxic waste chemical under EPA rules.

See my fluoride CounterThink cartoon here:

When the phosphate mining industry used to release fluoride byproducts directly into the atmosphere (from the fumes of the acidic slurry used to process phosphate rock), it caused the widespread death of cattle and crops. In order to protect local livestock from fluoride poisoning, wet scrubbers were installed at the phosphate mining processing sites in order to collect the toxic fluoride and prevent it from being released into the atmosphere.

Fluorosilicic acid ( is derived from these wet scrubbers, then sold to cities and towns to have it dumped into the water supply. That's one reason why so-called "fluoride" is so toxic: It's not a naturally-occurring mineral! It's actually a toxic waste chemical that, if it were dumped into the water supply by a terrorist, would be called a Weapon of Mass Destruction. The act of dumping it into the water, from any rational perspective, must be considered an act of terrorism.

For the CDC to limit this act of terrorism to only 0.7 mg per liter rather than 1.2 mg per liter isn't exactly a huge victory. As Connett explains, it is actually an admission that the CDC supports the mass poisoning of the American people with a dangerous toxic chemical.

Take action to oppose fluoride in New York City and San Diego - NEW LINKS

If you live in San Diego, you may be subjected to water fluoride poisoning this year. Please use these new links that were just set up by the Fluoride Action Network:

Residents of San Diego use this link:

Non-Residents of San Diego use this link:

Also, if you live in NYC, or work in NYC or even live in the state of New York, please stay tuned to NaturalNews for upcoming action items on that front. A new bill is now slated to be introduced in New York City on January 18th that would eliminate water fluoridation throughout the city. We intend to garner grassroots support for that bill and thereby eliminate toxic fluoride from the NYC water supply.

After all, don't NYC citizens deserve clean water? Doesn't America? Doesn't the entire world?

By the way, the reason some dentists so vehemently support water fluoridation is because they know fluoridation brings them repeat business in the highly lucrative cosmetic dentistry industry. If fluoride is removed from the water supply, these dentists will lose out on one of their top sources of repeat business.

Interestingly, with today's report, the CDC has decided that "too much" fluoride is bad for you, but "a smaller amount of fluoride poison" is just fine for your health. Like I said, it's a step in the right direction, and the CDC deserves some credit for this decision, but until the fluoride poison is removed from ALL the water in America, children are still being harmed by fluoride. The CDC has a moral and regulatory responsibility to ban fluoride from being dumped into municipal water supplies.

Let us hope this agency will soon rise to this moral standard and take action to protect the health of the American people rather than protecting the financial interests of the morally repugnant (and highly corrupt) industry of conventional dentistry.

Why the World Is Financially Doomed in Four Charts

Why the World Is Financially Doomed in Four Charts

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The global economy is doomed to implosion, and here are four charts which explain why.

Though the complexities may appear endless, the global economy's coming implosion is really fairly easy to understand: here are four charts which do the heavy lifting. It boils down to these basics:

1. When money is dear and difficult to borrow, then productivity and capital accumulation are encouraged, speculation, malinvestment and debt-based consumption are discouraged.

2. When money is "free" (zero-interest rate policy) and liquidity is unlimited, then the opposite conditions hold: speculation in risk assets, malinvestment and debt-based consumption are all encouraged, and productivity and capital accumulation are heavily discouraged.

3. When debts exceed the value of the underlying assets, the only way out of the Tyranny of Debt is to write off the debt on both the borrower and lender's balance sheets, wiping out their capital via liquidation and bankruptcy.

4. The "extend and pretend" policy pursued by all major nations is simply transferring the impaired debt from private hands to the taxpayers (public debt), crippling the economy with higher taxes and higher debt service.

5. The Central State's "extend and pretend" policy requires heavy borrowing every year to prop up the status quo, pushing the Central State (or equivalent, i.e. the Eurozone) in an inescapable double-bind: either continue increasing public debt and cripple the economy with high taxes and high public-debt servicing costs, or let the financial status quo of "profits are private, losses are public" implode.

The first path leads to default, as the Tyranny of Debt cannot be masked for long, while the second path wipes out the Financial Power Elite which feeds the politicians.

Here are the charts. Note how the speculative economy created the illusion of rising wealth for the bottom 90%, an illusion stripped away by the Default Economy.

In essence, the Financial Power Elites profited immensely from creating this illusory wealth which gave the bottom 90% the false sensation that their declining earnings and purchasing power were being offset by the "magic" of asset bubbles.

Then, when the bubble popped, the Financial Power Elites transferred the impaired assets to the taxpayers, a process which is still underway. The politicos of both parties are complicit; behind the simulacra of toothless "reforms," this process proceeds in myriad ways (Bank of America transferring toxic debt to Fannie/Freddie, etc.) Behind the smokescreen of conjuring a "wealth effect" to foster more consumption, the Fed's purchase of Treasuries (QE2) serves this transfer-of-debt-to-the-public process.



This same process is playing out throughout the global economy: Greece, Ireland, the U.S., and eventually, in China when its monumental property bubble pops.

Read more:

Consumers Are Still Getting Crushed, And You Can't Just Blame The Snow

Consumers Are Still Getting Crushed, And You Can't Just Blame The Snow

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The somewhat disappointing December retail sales report was in the news today, with the Bloomberg headline giving the typical spin: December Retail Sales Damped by Snow as Estimates Missed. But the end-of-year pattern in the Consumer Metrics Index data suggests a frugality of consumption beyond the inconvenience of weather.



I regularly follow the Consumer Metrics Institute's Daily Growth Index in the series of charts posted below. Here is a link to the Institute's website. Their page of frequently asked questions is an excellent introduction to the service. See also the Institute's November 23rd commentary, First Revision to the Third Quarter GDP.

The charts below focus on the 'Trailing Quarter' Growth Index, which is computed as a 91-day moving average for the year-over-year growth/contraction of the Weighted Composite Index, an index that tracks near real-time consumer behavior in a wide range of consumption categories. The Growth Index is a calculated metric that smooths the volatility and gives a better sense of expansions and contractions in consumption.


The 91-day period is useful for comparison with key quarterly metrics such as GDP. Since the consumer accounts for over two-thirds of the US economy, one would expect that a well-crafted index of consumer behavior would serve as a leading indicator. As the chart suggests, during the five-year history of the index, it has generally lived up to that expectation. Actually, the chart understates the degree to which the Growth Index leads GDP. Why? Because the advance estimates for GDP are released a month after the end of the quarter in question, so the Growth Index lead time has been substantial.


Has the Growth Index also served as a leading indicator of the stock market? The next chart is an overlay of the index and the S&P 500. The Growth Index clearly peaked before the market in 2007 and bottomed in late August of 2008, over six months before the market low in March 2009.

The most recent peak in the Growth Index was around the first of September, 2009, almost eight months before the interim high in the S&P 500 on April 23rd. Since its peak, the Growth Index declined dramatically and remains deep in contraction territory although the contraction has become less severe.

It's important to remember that the Growth Index is a moving average of year-over-year expansion/contraction whereas the market is a continuous record of value. Even so, the pattern is remarkable. The question is whether the latest dip in the Growth Index is signaling a substantial market decline like in 2008-2009 or a buying opportunity like in June 2006. I've also highlighted the recession that officially began in December 2007 and ended in June 2009. As a leading indicator for GDP, the Growth Index also offers an early warning for possible recessions.


Perhaps the most astonishing chart is the one below, which compares the contraction that began in 2008 with the one that began in January of this year. I've reproduced a chart on the Institute's website and added annotations for the elapsed time and the relationship of the contractions to major market milestones.


Among other things, this chart illustrates the more subtle and pernicious nature of the current decline in consumption. The 2010 decline has exceeded both the length and depth of the complete 2008 contraction cycle — the combined contraction and recovery.

Privatizing Social Security Again?

Privatizing Social Security Again?

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This year, 2011, marks the beginning of baby boomers receiving Social Security checks and they should be alerted of past perennial Republican attempts to partially privatize the program.

Heaven forbid that plans prevail to invest a certain amount of those checks in the stock market, as many pension plans have taken a bath in the current meltdown. While there have been past GOP plans to partially privatize the program, fortunately they have all failed. So far the Social Security trust fund remains tempting for the gamblers and other risk takers on the market.

As a Detroiter, I remember the Great Depression and the stock market crash of 1929 when some of the plutocrats on Wall Street jumped out of windows as a result of their great losses. Those were bleak days when some of the jobless workers also lost hope in the bitterly cold winter as they stood in long lines at the Ford Motor Company, many without overcoats, hoping for a job on the auto assembly lines.

The movements for socialism and communism were given some credence as a way out of their misery.

The difference between the Great Depression and the current Great Recession is "spirit" - during the 1930s Americans cared about each other. They flocked to Washington - teachers, social workers, doctors and nurses - selflessly offering their services.

Next door to us, a family with six children lived on a $13 (equivalent to $163 today) per week welfare check. Somehow they survived and kept their faith. Along came FDR who told the stricken people, "You have nothing to fear but fear itself." The power of hope restored confidence in the country and in its leadership.
We were happy to emerge from the depression, but many Americans at the time believed we rebounded economically because of the looming clouds of World War II. The world by this time was swept up by the "isms." The U.S. was divided between the interventionists in World War II (on the side of the allies) and the non-interventionists - they were the isolationists - who disappeared at the start of the war on Dec. 7, 1941.

President Roosevelt signed the Social Security Act into law in 1935 to cover the elderly, and eventually through amendments, widows, orphans and the disabled. Payments are split 50-50 by the employer and the worker. What has been missing in our current society is compassion and creativeness. Think of the bargains the President had to strike to renew the biggest (Bush) tax cut to the richest Americans, this in exchange for an extension of unemployment compensation for the millions who lost their jobs - some deal! That's the compassion part.

As for creativeness, where are the ideas to put people back to work? For Roosevelt, the caring advisors produced a bundle of alphabet agencies. Not the least was the Works Progress Administration which put people to work on rebuilding the broken infrastructure. The program put men on the streets - and even artists painting the walls of great buildings in the Nation's Capital. Ideas and ideals along with great imagination brought our country back. Where are the caring creators now?
Many believe it was World War II and the military needs that brought us back - but recovery was well underway by 1941 when the Japanese attacked Pearl Harbor.

According to the 2010 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance (OASDI) Trust Funds presented to Congress, 53 million Americans received benefits during 2009, including 36 million retired workers and dependents of retired workers, 6 million survivors of deceased workers, and 10 million disabled workers. During that same year, an estimated 156 million people paid social security taxes through payroll. Total expenditures in 2009 were $686 billion, while revenue totaled $807 billion - including $689 in tax revenue and $118 billion in interest earnings.

Many Republicans believe the Social Security Trust should be at least partly privatized - Bush failed to achieve this in 2005. There is fear as President Obama has claimed that the new Republican leadership will push again to partially privatize social security funds. With the ups and downs of the stock market - and considering the pension plans that were privatized went down the drain - who would lead us down that path again?

Let's not give the newly empowered Republicans - and their blindsided tea party allies - the ability to wipe out or even mitigate the only economic security deprived Americans can count on. Where is their heart?

Will the New Assaults on Public Employee Unions Undermine All Workers?

Will the New Assaults on Public Employee Unions Undermine All Workers?

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Years of demonizing public employee unions as part of a right-wing assault against the labor movement now seems about to pay off. That's due in part to state budgets that have been driven near bankruptcy largely by the Wall Street-led crash, and the political cover provided by otherwise liberal Democrats such as New York Governor Andrew Cuomo. He is seeking a reasonable-sounding one-year pay freeze that adds a bipartisan patina to the growing union-bashing.

As the New York Times reported on Tuesday, "Faced with growing budget deficits and restive taxpayers, elected officials from Maine to Alabama, Ohio to Arizona, are pushing new legislation to limit the power of labor unions, particularly those representing government workers, in collective bargaining and politics."

To some observers, this attack against public employee unions—abetted by right-wing misinformation campaigns that unions and their allies are just starting to counter—so profoundly threatens the labor movement that it poses a broader danger to the economy while strengthening the "Winner-Takes-All" politics that has dominated public policy for decades.

Veteran labor activist Stewart Acuff, the chief of staff for the 50,000-member Utility Workers Union of America and co-author of Getting America Back to Work, says, "This is a very serious effort by the radical right wing to cripple the American labor movement and remove it as a serious force in American life. They want unfettered, unrestricted corporate power, and the only thing standing in the way of absolute corporate domination of our society and what's left of our democracy is the American labor movement."

Sound like hyperbole? Take a look at the far-reaching goals of some governors in mostly Republican-led states, as the Times reported:

In some cases — mostly in states with Republican governors and Republican statehouse majorities — officials are seeking more far-reaching, structural changes that would weaken the bargaining power and political influence of unions, including private sector ones.

For example, Republican lawmakers in Indiana, Maine, Missouri and seven other states plan to introduce legislation that would bar private sector unions from forcing workers they represent to pay dues or fees, reducing the flow of funds into union treasuries. In Ohio, the new Republican governor, following the precedent of many other states, wants to ban strikes by public school teachers.

Some new governors, most notably Scott Walker of Wisconsin, are even threatening to take away government workers’ right to form unions and bargain contracts...

Union leaders particularly dread the spread of right-to-work laws, which prevail in 22 states, almost all in the South or West. Under such laws, unions and employers cannot require workers to join a union or pay any dues or fees to unions to represent them.

With organized labor now having more public employee workers than private sector workers, taking away pension gains, cutting off funds, and weakening organizing rights for public employees—who are protected by state laws, not federal labor law—could lower wages and benefits across the economy and undermine the union movement itself, union advocates say.

The challenge is convincing the broader progressive movement—and the public—to stand up for public employee unions that have been caricatured and smeared as generally overpaid, inept and lazy. A start at making the case for public employees unions has begun with AFSCME's "Stop the Lies" campaign (see video below), but its credibility will only be enhanced when those outside the union movement echo these same concerns and challenge anti-union myths. (For instance, it's not widely known that public employee workers with the same level of education and experience as private sector workers earn about the same or less as those in the private workfororce.)

In a little-noticed fact sheet on union pensions, AFSCME also points out:

Nationally, the average AFSCME member earns less than $45,000 per year and receives a pension of approximately $19,000 per year after a career of public service. AFSCME members typically contribute towards the cost of their pension. While government employers have often failed to faithfully contribute to their employees’ plans, public workers have contributed year in and year out. In fact, taxpayers shouldered just 14.3% of all pension funding in the eleven year period ending in 2007.

Some confidential but preliminary union public opinion research shows that the broader public has heard relatively little positive news about public employee unions, but they are open to messages excoriating GOP leaders for engaging in political payback against unions and advancing a corporate agenda. Whether the public will actually get to hear those messages in an effective, highly visible way is still very much an open question.

At a AFSCME-sponsored meeting of union activists in mid-December, union leaders referred to successful campaigns to beat back the anti-tax measures in California, Colorado and Massachusetts on the ballot; those right-wing efforts were fueled in part by bashing public employees and their unions. These local leaders talked about taking their case to the media and, in some cases, forming broader coalitions.

Yet when 60 Minutes looked at the state budget crisis, how many people were exposed to AFSCME's press release rebuttal that quoted the union's president as saying:

Chris Christie is more interested in scoring political points than solving state and local budget challenges and getting the economy moving. The fact is, hundreds of thousands of public employees, just like private sector employees, have been laid off and taken pay and benefit cuts – even as Wall Street executives lined their pockets with taxpayer money and took home huge bonuses. And as Steve Kroft’s report noted, much of the pension problem stems from the fact that politicians did not contribute to their pension funds. ...

The challenge can be met if state and local governments, began contributing just 1.5 percent more of their budgets toward their pension funds in the years ahead.

The long term solution to state and local fiscal challenges is a robust economy – one that is creating jobs and replenishing tax revenue....

For now, union activists believe it's possible that the public will be exposed to a more positive perspective about public employees and the truth about their salaries and benefits, but, in reality, it's a steep uphill climb that's made even harder by hundreds of millions in corporate spending and the power of Fox News.

A potential starting place is a new AFSCME video that will have more power if its perspective is taken up by the broader progressive movement that must start understanding what's at stake if unions are crippled: