Monday, January 17, 2011

The Foreclosure Dump

The Foreclosure Dump

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It's coming, no question.

Today's report from RealtyTrac serves as a warning to big banks, Fannie, Freddie and local communities; The foreclosure glut is coming, and they'd better be ready to get rid of that glut in a big way.

2010 saw a record number of bank repossessions, over a million, even with a big drop in volume toward the end of the year, thanks to the robo-signing scandal and ensuing foreclosure freezes.

"Early indications in January were that this robo-signing related delay will be over by the end of first quarter if not sooner," says RealtyTrac's Rick Sharga. "I think we're going to see a significant spike in foreclosure activity early in 2011, and that will contribute in part to 2011 being a record year."

Sharga estimates as many as a quarter of a million foreclosures that should have happened in 2010 will now be pushed into the 2011 numbers, and added to an already huge supply of bank owned properties. The four biggest banks already have close to $7 billion worth of foreclosed properties (REO) on their books, and Fannie and Freddie have about $24 billion collectively. While REO sales make up about one third of all sales in the current market, there is an estimated 3 year supply.

There are obviously many incentives to buy REO's, number one being the price discount, as well as some other programs offered by the government; but there are a lot more downsides.

Just today I read an article in the Wall Street Journal of witches in Salem being hired to remove the negative spirits from foreclosed homes.

Other similar burgeoning businesses include Feng Shui experts, etc.

There's always somebody ready to profit from distress.

HousingWire today reports on a study by Field Asset Services that finds rehabbed REOs spend five fewer months on the market, 69 days compared to 222 days. Many investors buy foreclosures and do the rehab themselves, but for regular home buyers, clearly having the home renovated, with no sign of the preceding trouble, is a huge added value. Through its Neighborhood stabilization Program, the Department of Housing and Urban Development has provided $7 billion in grants to local governments and nonprofits; that money can be used to rehab foreclosed properties, or, to bulldoze them.

Mortgages

30 yr fixed 4.74% 4.88%
30 yr fixed jumbo 5.57% 5.69%
15 yr fixed 4.02% 4.35%
15 yr fixed jumbo 4.92% 5.11%
5/1 ARM 3.42% 3.22%
5/1 jumbo ARM 4.10% 3.66%

I also know there have been many discussions brewing within the government and at the banks with hedge funds looking to buy up bulk foreclosures. So far no big deals we know of, but they're coming for sure. The government may even be considering incentives to get more investors to buy foreclosures, which I blogged about last month.

As the numbers mount, the GSE's and the banks will have to put more resources into unloading these properties, especially as new Spring organic housing supply comes on the market. If they choose to slash prices even more, the dip in overall home prices may fall deeper than expected.

Home price drops exceed Great Depression

Home price drops exceed Great Depression

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NEW YORK (Reuters) - Home prices fell for the 53rd consecutive month in November, taking the decline past that of the Great Depression for the first time in the prolonged housing slump, according to Zillow.

Home prices have fallen 26 percent since their peak in 2006, exceeding the 25.9 percent drop registered in the five years between 1928 and 1933, the housing data company said in a report on Monday. Prices fell 0.8 percent over the month.

It is a dubious milestone for the U.S. housing market which has failed to gain much traction despite a host of government programs to reduce delinquencies and encourage demand with temporary tax credits and lower interest rates. Many economists expect further price drops, even if there are some anecdotal signs of growing demand, such as in pending home sales data.

"For the next six to nine months, the larger factors affecting the housing market that will produce more home price declines will be the excess inventory of homes, high negative equity and foreclosure rates, and weakened demand due to elevated employment, Stan Humphries, Zillow's chief economist, said in a blog post.

Declines are accelerating, and it will take a while before falling unemployment and other signs of economic improvement support the market, Zillow said.

Home prices fell at a 0.78 percent pace in November, the fastest since February 2009, the company said.

Decorated Disabled Veteran Faces Deportation to Pakistan

Decorated Disabled Veteran Faces Deportation to Pakistan

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Muhammad Zahid Chaudhry, a decorated disabled American veteran, is the victim of a witch hunt that has been ongoing since the 9/11 attacks. Chaudhry is being deported to Pakistan, where he will "inevitably be murdered by the Taliban for his service in the US Army," says Seth Manzel, executive director of G.I. Voice. Chaudhry came to the US legally over 13 years ago and has been married to a native-born citizen for nearly ten years. The suit Chaudhry and his wife filed against the Immigration and Naturalization Service (INS) in US district court to press for his citizenship was dismissed on October 26, 2010, on summary judgement, without any trial or opportunity to further present their circumstances.

Chaudhry qualifies for citizenship on multiple bases, and there are no legal grounds to deny him citizenship. He qualified for and filed an application to become a US citizen under the military naturalization program in 2003. INS claimed they lost the application, so he applied again in 2004. The military naturalization program requires the US government to provide expedited processing for citizenship applications for individuals in the armed forces. Chaudhry's military awards include a National Defense Service Medal, a Global War On Terrorism Service Medal, an Armed Forces Reserve Medal with "M" Device and the Army Service Ribbon.

Chaudhry has never broken any US laws. In addition to his military service, he qualifies for citizenship based on his marriage to a US citizen. Before the injuries he sustained in service to our nation left him in a wheelchair, he was an avid community volunteer. He served thousands of hours as a general volunteer and youth coordinator for the American Red Cross, as an unpaid volunteer for the fire department - carrying a pager twenty-four-seven and responding to fire emergencies - and contributed his time to Habitat for Humanity and many other community and civic organizations.

The Chaudhry's have two children and four grandchildren; they do not wish for their family and friends to be ripped apart by an uncaring, inefficient federal bureaucracy acting within repressive measures.

Chaudhry was scheduled for a deportation hearing at the immigration court in Seattle on January 12, 2011, and, at the time of this writing, he had no legal representation. The couple reports that Sen. Patty Murray's (D-Washington) staff, Lindsay Herbst, often sends them an email saying to "hang in there" and that they are "working on it" - a behavior characteristic of many of our top politicians for the last seven to eight years. The Chaudry's have spent tens of thousands of dollars in this struggle for justice, not to mention other costs to the couple in lost opportunity. "Our physical, spiritual, mental and financial capabilities have been torn asunder and ground to nothingness by this great nation we both love and have served so much and continue to serve," says Ann Chaudhry.

You can see a short video clip of Chaudhry's speech at the Interfaith Forum on Immigration in Washington, DC at www.justice4chaudhry.info. The Chaudry's are calling for the community to support them by making phone calls and writing emails and letters to Murray's offices in DC and Seattle.

Doom And Gloom

Doom And Gloom

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Have you noticed that most Americans seem to know far more about American Idol, Dancing with the Stars, Justin Bieber and their favorite sports teams than they do about world affairs? Most Americans cannot even find Tunisia and Algeria on a map, and if you told them that food riots are happening in those nations right now most of them would not even care anyway. We have become a very self-centered, self-involved and self-absorbed nation. Quite a few people have accused this column of being obsessed with "doom and gloom", but the truth is that the world really is falling apart out there. What are we supposed to do? Are we all supposed to stick our heads in the sand and pretend that everything is going to be okay? Should we all not try to warn others so that they can prepare for what is coming? Until people understand that we are facing absolutely massive problems they are not going to be motivated to take significant action, and hopefully those of us that are proclaiming "doom and gloom" are doing a good enough job of describing what is really going on out there that some people are starting to wake up and actually make changes.

Most Americans may not care, but the food riots that are starting to erupt around the globe are actually very serious.

Do you remember what happened back in the summer of 2008?

That summer, the price of oil spiked to an all-time high of $147 a barrel and that caused a substantial increase in the price of food all over the globe. Suddenly millions of poor people couldn't afford to feed themselves anymore and food riots erupted all over the world.

Well, here we are in 2011 and the price of oil hasn't even reached $100 a barrel, and yet the food riots are already beginning.

Violent food riots are being reported in Tunisia, in Algeria, in Chile and in Mozambique.

In Tunisia, the riots have been so intense that the President of Tunisia, Zine El Abidine Ben Ali, has been forced to step down and flee for his life.

Yes, that is how serious things are getting already.

Unfortunately, it looks like the global food situation is only going to get even worse.

Australia is a major food producer and right now they are experiencing flooding of Biblical proportions. In fact, it has been reported that at one point the flooding covered an area greater than France and Germany combined.

In Brazil, another major food producer, horrific flooding has killed more than 500 people so far. This flooding is being called the "worst-ever natural disaster" in the history of Brazil.

Meanwhile, record cold temperatures and record snowfalls are playing havoc with winter crops all over the Northern Hemisphere.

But even before all of these weather disasters struck the price of food had been going up significantly. The UN recently announced that the global price of food hit an all-time high during the month of December, and world leaders all over the globe are openly expressing concern about what 2011 is going to bring.

Sadly, the truth is that there has been a trend of rising food prices for quite some time. According to Forbes, corn is up 94% since June, soybeans are up 51% since June, and wheat is up 80% since last June.

As one of my readers recently pointed out to me, it usually takes about six months for the prices of agricultural futures to filter down into the supermarkets. So the very high prices for agricultural commodities that we are seeing right now should really start to be felt around the globe by the middle of 2011.

In addition to everything else, reports continue to come in of thousands of birds and millions of fish suddenly dying all over the globe, and nobody seems to really know what is causing it.

Do you want some more doom and gloom?

*There are reports of "panic buying" of silver and other precious metals right now.

*Investors are bailing out of municipal bonds at an absolutely staggering rate.

*S&P and Moody's have both warned once again that the United States is in danger of having its credit rating slashed if it does not get government debt under control.

*U.S. housing prices have now fallen further during this economic downturn than they did during the Great Depression of the 1930s.

Meanwhile, America's economic infrastructure continues to be taken apart piece by piece.

The United States is losing more jobs to China. In fact, the United States is losing more high technology "green jobs" to China.

Evergreen Solar, a company that manufactures solar panels, is closing their factory in Devon, Massachusetts and they are moving their production facilities to China. This is going to result in the loss of 800 good American jobs.

The following is what the company had to say in a statement about the move....

"Solar manufacturers in China have received considerable government and financial support and, together with their low manufacturing costs, have become price leaders within the industry."

Is it any wonder that a recent survey found that 47 percent of Americans now believe that China is the world's leading economic power while only 31 percent still believe that the United States is the world's leading economic power?

As America continues to lose good jobs, millions of Americans find themselves simply unable to pay the bills. In fact, at this point one out of every six Americans is now enrolled in at least one government-run anti-poverty program.

As things have fallen apart in the United States, many private citizens have tried to step forward and do what they can to help people, but now in many areas of the country the government is actually stepping in and shutting down these private avenues of assistance.

For example, in the city of Houston, Texas a couple named Bobby and Amanda Herring has been feeding homeless people for over a year. They never left behind any trash and no trouble was ever caused.

But now the city of Houston is shutting them down.

Why?

Because they don't have a permit.

So will they be able to get a permit? Well, it turns out that city officials are saying that this "Feed a Friend" effort most likely will be denied one.

Apparently the city "officials" believe that the homeless "are the most vulnerable to foodborne illness" and that therefore the warm meals that the Herrings were providing for them were potentially dangerous.

Can you believe this?

This is what happens when political correctness and bureaucracy get wildly out of control.

Now it is illegal to go out and feed homeless people?

What is American turning into?

As the economy continues to fall part, the iron grip of the government is likely only going to get tighter as it desperately tries to keep order.

But do we really need to be giving tickets to 6-year-olds?

Yes, you read that correctly.

According to one recent report, police in Texas have given "1,000 tickets to elementary school children in 10 school districts" over the past six years.

For more examples of how America is turning into a police state, please see my recent article entitled "Almost Everything Is A Crime In America Now: 14 Of The Most Ridiculous Things That Americans Are Being Arrested For".

America is rapidly becoming a very dark place.

The truth is that there is a reason why so many websites are now reporting so much "doom and gloom". Things really are getting bad out there.

Sadly, most Americans have only known tremendous prosperity all of their lives, so they can't even conceive of what it would be like to go through difficult times.

Most Americans have been conditioned to believe that while we may have brief "recessions" once in a while, in the end our economy will always get better and the good times will continue to roll.

But the good news is that an increasing number of Americans are waking up and are trying to warn their family and friends about what is coming.

Hunting the Ocean for BP's Missing Millions of Barrels of Oil

Hunting the Ocean for BP's Missing Millions of Barrels of Oil

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"Dolphins off the bow!"

I race to the front of the WeatherBird II, a research vessel owned by the University of South Florida. There they are, doing their sleek silvery thing, weaving between translucent waves, disappearing under the boat, reappearing in perfect formation on the other side.

After taking my fill of phone video (and very pleased not to have dropped the device into the Gulf of Mexico), I bump into Gregory Ellis, one of the junior scientists aboard.

"Did you see them?" I ask excitedly.

"You mean the charismatic megafauna?" he sneers. "I'll pass."

Ouch. Here I was thinking everyone loves dolphins, especially oceanographers. But it turns out that these particular marine scientists have issues with dolphins. And sea turtles. And pelicans. It's not that they don't like them (a few of the grad students took Flipper pictures of their own). It's just that the charismatic megafauna tend to upstage the decidedly less charismatic creatures under their microscopes. Like the bacteria and phytoplankton that live in the water column, for instance, or 500-year-old coral and the tube worms that burrow next to them, or impossibly small squid the size of a child's fingernail.

Normally these academics would be fine without our fascination. They weren't looking for glory when they decided to study organisms most people either can't see or wish they hadn't. But when the Deepwater Horizon exploded in April 2010, our collective bias toward cute big creatures started to matter a great deal. That's because the instant the spill-cam was switched off and it became clear that there would be no immediate mass die-offs among dolphins and pelicans, at least not on the scale of the Exxon Valdez spill deaths, most of us were pretty much on to the next telegenic disaster. (Chilean miners down a hole—and they've got video diaries? Tell us more!)

It didn't help that the government seemed determined to help move us along. Just three weeks after the wellhead was capped, the National Oceanic and Atmospheric Administration (NOAA) came out with its notorious "oil budget," which prompted White House energy czar Carol Browner to erroneously claim that "the vast majority of the oil is gone." The White House corrected the error (the fate of much of that oil is simply unknown), but the budget nonetheless inspired a flood of stories about how "doom-mongers" had exaggerated the spill's danger and, as the British Daily Mail tabloid indignantly put it, unfairly wronged "one of Britain's greatest companies."

More recently, in mid-December, Unified Area Command, the joint government-BP body formed to oversee the spill response, came out with a fat report that seemed expressly designed to close the book on the disaster. Mike Utsler, BP's Unified Area Commander, summed up its findings like this: "The beaches are safe, the water is safe, and the seafood is safe." Never mind that just four days earlier, more than 8,000 pounds of tar balls were collected on Florida's beaches—and that was an average day. Or that gulf residents and cleanup workers continue to report serious health problems that many scientists believe are linked to dispersant and crude oil exposure.

By the end of the year, investors were celebrating BP's stock rebound, and the company was feeling so emboldened that it revealed plans to challenge the official estimates of how much oil gushed out of its broken wellhead, claiming that the figures are as much as 50 percent too high. If BP succeeds, it could save the company as much as $10.5 billion in damages. The Obama administration, meanwhile, has just given the go-ahead for sixteen deepwater projects to resume in the gulf, well before the Oil Spill Commission's safety recommendations have a hope of being implemented.

For the scientists aboard the WeatherBird II, the recasting of the Deepwater Horizon spill as a good-news story about a disaster averted has not been easy to watch. Over the past seven months, they, along with a small group of similarly focused oceanographers from other universities, have logged dozens of weeks at sea in cramped research vessels, carefully measuring and monitoring the spill's impact on the delicate and little-understood ecology of the deep ocean. And these veteran scientists have seen things that they describe as unprecedented. Among their most striking findings are graveyards of recently deceased coral, oiled crab larvae, evidence of bizarre sickness in the phytoplankton and bacterial communities, and a mysterious brown liquid coating large swaths of the ocean floor, snuffing out life underneath. All are worrying signs that the toxins that invaded these waters are not finished wreaking havoc and could, in the months and years to come, lead to consequences as severe as commercial fishery collapses and even species extinction.

Perhaps not coincidentally, the most outspoken scientists doing this research come from Florida and Georgia, coastal states that have so far managed to avoid offshore drilling. Their universities are far less beholden to Big Oil than, say, Louisiana State University, which has received tens of millions from the oil giants. Again and again these scientists have used their independence to correct the official record about how much oil is actually out there, and what it is doing under the waves.

One of the most prominent scientists on the BP beat is David Hollander, a marine geochemist at the University of South Florida. Hollander's team was among the first to discover the underwater plumes in May and the first to trace the oil definitively to BP's well. In August, amid the claims that the oil had magically disappeared, Hollander and his colleagues came back from a cruise with samples proving that oil was still out there and still toxic to many marine organisms, just invisible to the human eye. This research, combined with his willingness to bluntly contradict federal agencies, has made Hollander something of a media darling. When he is not at sea, there is a good chance he is in front of a TV camera. In early December, he agreed to combine the two, allowing me and filmmaker Jacqueline Soohen to tag along on a research expedition in the northern Gulf of Mexico, east of the wellhead.

* * *

"Let's go fishing for oil," Hollander says with a broad smile as we get on the boat. A surfer and competitive bike racer in his youth, he is still something of a scrappy daredevil at 52. On the last cruise Hollander slipped and seriously injured his shoulder, and he has been ordered to take it easy this time. But within seconds of being on deck he is hauling equipment and lashing down gear. This is a particularly important task today because a distinctly un-Floridian cold front has descended and winds are whipping up ten-foot swells in the gulf. Getting to our first research station is supposed to take twenty-four hours, but it takes thirty instead. The entire time, the 115-foot WeatherBird II dips and heaves, and so do a few members of the eleven-person scientific team (and yeah, OK, me too).

Luckily, just as we arrive at our destination, about ninety nautical miles from the wellhead, the clouds part and the sea calms. A frenzy of floating science instantly erupts. First to be lowered overboard is the rosette, a cluster of four-foot-high metal canisters that collect water samples from different depths. When the rosette clangs back on deck, the crew swarms around its nozzles, filling up dozens of sample bottles. It looks like they are milking a metal cow. Carefully labeled bottles in tow, they are off to the makeshift laboratory to run the water through an assembly line of tests. Is it showing signs of hydrocarbons? Does it fluoresce under UV light? Does it carry the chemical signature of petroleum? Is it toxic to bacteria and phytoplankton?

A few hours later it's time for the multi-corer. When the instrument, twelve feet high and hoisted by a powerful winch, hits the ocean floor, eight clear cylinders shoot down into the sediment, filling up with sand and mud. The samples are examined under microscopes and UV lights, or spun with centrifugal force, then tested for signs of oil and dispersant. This routine will be repeated at nine more locations before the cruise is done. Each stop takes an average of ten hours, and the scientists are able to sneak in only a couple of hours of sleep between stations.

The WeatherBird II is returning to the precise coordinates where University of South Florida researchers found toxic water and sediment in May and August. At the second stop, Mary Abercrombie, who is testing the water under UV light in a device called a spectrofluorometer, sees something that looks like hydrocarbons from a sample collected seventy meters down—shallow enough to be worrying. But the other tests don't find much of anything. Hollander speculates that this may be because we are still in relatively shallow water and the recent storms have mixed everything up. "We'll probably see more when we go deeper."

* * *

Being out in the open gulf today, I find it is impossible not to be awed by nature's capacity to cleanse and renew itself. At the height of the disaster, I had looked down at these waters from a Coast Guard aircraft. What I saw changed me. I realized that I had always counted on the ocean to be a kind of outer space on earth, too mysterious and vast to be fundamentally altered by human activity, no matter how reckless. Now it was covered to the horizon in gassy puddles like the floor of an auto repair shop. Shouting over the roaring engines, a fresh-faced Coast Guard spokesman assured the journalists on board that within months, all the oil would be gone, broken down by dispersants into bite-size morsels for oil-eating microbes, which would, after their petroleum feast, promptly and efficiently disappear—no negative side effects foreseen.

At the time I couldn't believe he could feed us this line with a straight face. Yet here that body of water is, six months later: velvety smooth and, according to the tests conducted on the WeatherBird II, pretty clean, at least so far. Maybe the ocean really is the world's most powerful washing machine: throw in enough dispersant (the petrochemical industry's version of Tide), churn it around in the waves for long enough, and it can get even the toughest oil spills out.

"I despise that message—it's blindly simplified," says Ian MacDonald, a celebrated oceanographer at Florida State University. "The gulf is not all better now. We don't know what we've done to it."

MacDonald is arguably the scientist most responsible for pressuring the government to dramatically increase its estimates of how much oil was coming out of BP's well. He points to the massive quantity of toxins that gushed into these waters in a span of three months (by current estimates, at least 4.1 million barrels of oil and 1.8 million gallons of dispersants). It takes time for the ocean to break down that amount of poison, and before that could happen, those toxins came into direct contact with all kinds of life-forms. Most of the larger animals—adult fish, dolphins, whales—appear to have survived the encounter relatively unharmed. But there is mounting evidence that many smaller creatures—bacteria, phytoplankton, zooplankton, multiple species of larvae, as well as larger bottom dwellers—were not so lucky. These organisms form the base of the ocean's food chain, providing sustenance for the larger animals, and some grow up to be the commercial fishing stocks of tomorrow. One thing is certain: if there is trouble at the base, it won't stay there for long.

According to experiments performed by scientists at the University of South Florida, there is good reason for alarm. When it was out in the gulf in August, the WeatherBird II collected water samples from multiple locations. Back at the university lab, John Paul, a professor of biological oceanography, introduced healthy bacteria and phytoplankton to those water samples and watched what happened. What he found shocked him. In water from almost half of the locations, the responses of the organisms "were genotoxic or mutagenic"—which means the oil and dispersants were not only toxic to these organisms but caused changes to their genetic makeup. Changes like these could manifest in a number of ways: tumors and cancers, inability to reproduce, a general weakness that would make these organisms more susceptible to prey—or something way weirder.

Before we left on the cruise, I interviewed Paul in his lab; he explained that what was so "scary" about these results is that such genetic damage is "heritable," meaning the mutations can be passed on. "It's something that can stand around for a very long time in the Gulf of Mexico," Paul said. "You may be genetically altering populations of fish, or zooplankton, or shrimp, or commercially important organisms.... Is the turtle population going to have more tumors on them? We really don't know. And it'll take three to five years to actually get a handle on that."

The big fear is a recurrence of what happened in Prince William Sound after the Exxon Valdez spill. Some pink salmon, likely exposed to oil in their larval stage, started showing serious abnormalities, including "rare mutations that caused salmon to grow an extra fin or an enlarged heart sac," according to a report in Nature. And then there were the herring. For three years after the spill, herring stocks were robust. But in the fourth year, populations plummeted by almost two-thirds in Prince William Sound and many were "afflicted by a mysterious sickness, characterised by red lesions and superficial bleeding," as Reuters reported at the time. The next year, there were so few fish, and they were so sick, that the herring fishery in Prince William Sound was closed; stocks have yet to recover fully. Since Alaskan herring live for an average of eight years, many scientists were convinced that the crash of the herring stocks was the result of herring eggs and larvae being exposed to oil and toxins years earlier, with the full effects manifesting themselves only when those generations of herring matured (or failed to mature).

Could a similar time bomb be ticking in the gulf? Ian MacDonald at Florida State is convinced that the disturbances beginning to register at the bottom of the food chain are "almost certain to ripple up through other species."

Here is what we know so far. When researchers from Oregon State University tested the waters off Grand Isle, Louisiana, in June, they found that the presence of carcinogenic polycyclic aromatic hydrocarbons (PAHs) had increased fortyfold in just one month. Kim Anderson, the toxicologist leading the study, described the discovery as "the largest PAH change I've seen in over a decade of doing this." June is spawning season in the gulf—the period, beginning in April, when enormous quantities of eggs and larvae drift in nearly invisible clouds in the open waters: shrimp, crabs, grouper, bluefin tuna, snapper, mackerel, swordfish. For western Atlantic bluefin, which finish spawning in June and are fished as far away as Prince Edward Island, these are the primary spawning grounds.

John Lamkin, a fisheries biologist for NOAA, has admitted that "any larvae that came into contact with the oil doesn't have a chance." So, if a cloud of bluefin eggs passed through a cloud of contaminated water, that one silent encounter could well help snuff out a species already on the brink. And tuna is not the only species at risk. In July Harriet Perry, a biologist at the University of Southern Mississippi, found oil droplets in blue crab larvae, saying that "in my forty-two years of studying crabs I've never seen this." Tellingly, this vulnerability of egg and larvae to oil does not appear to have been considered when the Macondo well was approved for drilling. In the initial exploration plan that BP submitted to the government, the company goes on at length about how adult fish and shellfish will be able to survive a spill by swimming away or by "metaboliz[ing] hydrocarbons." The words "eggs" and "larvae" are never mentioned.

* * *

Already there is evidence of at least one significant underwater die-off. In November Penn State biologist Charles Fisher led a NOAA-sponsored expedition that found colonies of ancient sea fans and other coral coated in brown sludge, 1,400 meters down. Nearly all the coral in the area was "dead or in the process of dying," Fisher told me. And he echoed something I heard from many other scientists: in a career of studying these creatures, he has never seen anything like this. There were no underwater pools of oil nearby, but the working theory is that subsea oil and dispersants must have passed through the area like some kind of angel of death.

We may never know what other organisms were trapped in a similarly lethal cloud, and that points to a broader problem: now that we are beyond the oil-covered-birds phase, establishing definitive links between the spill and whatever biogenetic or ecological disturbances are in store is only going to get harder. For instance, we know the coral died because of all the bodies: ghostly coral corpses litter the ocean floor near the wellhead, and Fisher is running tests to see if he can find a definitive chemical link to BP's oil. But that sort of forensics simply won't be possible for the much smaller life forms that are even more vulnerable to BP's toxic cocktail. When larval tuna or squid die, even in huge numbers, they leave virtually no trace. Hollander uses the phrase "cryptic mortality" to describe these phantom die-offs.

All this uncertainty will work in BP's favor if the worst-case scenarios eventually do materialize. Indeed, concerns about a future collapse may go some way toward explaining why BP (with the help of Kenneth Feinberg's Gulf Coast Claims Facility) has been in a mad rush to settle out of court with fishermen, offering much-needed cash now in exchange for giving up the right to sue later. If a significant species of fish like bluefin does crash three or even ten years from now (bluefin live for fifteen to twenty years), the people who took these deals will have no legal recourse. Even if a case did end up in court, beating BP would be tricky. As part of the damage assessment efforts, NOAA scientists are conducting studies that monitor the development of eggs and larvae exposed to contaminated water. But as Exxon's lawyers argued in the Valdez case, wild fish stocks are under a lot of pressure these days—without a direct chemical link to BP's oil, who's to say what dealt the fatal blow?

In a way, the lawyers will have a point, if a disingenuous one. As Ian MacDonald explains, it is precisely the multiple stresses on marine life that continue to make the spill so dangerous. "We don't appreciate the extent to which most populations are right on the edge of survival. It's very easy for populations to go extinct." He points to the sperm whales—there are only about 1,600 of them in the northern Gulf of Mexico, a small enough population that the unnatural death of just a few whales (which breed infrequently and later in life) can endanger the community's survival. Acoustic research has found that some sperm whales responded to the spill by leaving the area, a development that oceanographers find extremely worrying.

One of the things I am learning aboard the WeatherBird II, watching these scientists test for the effects of invisible oil on invisible organisms, is not to trust my eyes. For a few months last year, when BP's oil formed patterns on the surface of these waters that looked eerily like blood, industrial society's impact on the ocean was easy for all to see. But when the oil sank, it didn't disappear; it just joined so much else that the waves are hiding, so many other secrets we count on the ocean to keep. Like the 27,000 abandoned oil and gas wells in the Gulf of Mexico, and the network of unmonitored underwater pipelines that routinely corrode and leak. Like the sewage that cruise ships are entirely free to dump, under federal law, so long as they are more than three miles from shore. Like a dead zone the size of New Jersey. Scientists at Dalhousie University in Halifax predict that if we continue our rates of overfishing, every commercial fish stock in the world could crash by midcentury. And a study published in Nature in July found that global populations of phytoplankton have declined about 40 percent since 1950, linked with "increasing sea surface temperatures"; coral is bleaching and dying for the same reason. And on and on. The ocean's capacity to heal itself from our injuries is not limitless. Yet the primary lesson being extracted from the BP disaster seems to be that "mother nature" can take just about anything we throw at her.

As the WeatherBird II speeds off to the third research station, I find myself thinking about something New Orleans civil rights attorney Tracie Washington told me the last time I was on the Gulf Coast. "Stop calling me resilient," she said. "I'm not resilient. Because every time you say, 'Oh, they're resilient,' you can do something else to me." Washington was talking about the serial disasters that have battered New Orleans. But if the poisoned and perforated gulf could talk, I think it might say the same thing.

* * *

On day three of the cruise, things start to get interesting. We are now in the DeSoto Canyon, about thirty nautical miles from the wellhead. The ocean floor is 1,000 meters down, our deepest station yet. Another storm is rolling in, and as the team pulls up the multi-corer, waves swamp the deck. It's clear as soon as we see the mud that something is wrong. Rather than the usual gray with subtle gradations, the cylinders are gray and then, just below the top layer, abruptly turn chocolaty brown. The consistency of the top brown layer is sort of fluffy, what the scientists refer to as "flocculent."

A grad student splits one of the cores lengthwise and lays it out on deck. That's when we see it clearly: separating the gray and brown layers—and looking remarkably like chocolate parfait—is a thick line of black gunk. "That's not normal," Hollander declares. He grabs the mud samples and flags Charles Kovach, a senior scientist with the Florida Department of Environmental Protection. They head to the darkest place on the boat—one of the tiny sleeping quarters crammed with bunk beds. In the pitch darkness they hold an ultraviolet light over the sample, and within seconds we are looking at silvery particles twinkling up from the mud. This is a good indication of oil traces. Hollander saw something similar on the August cruise and was able not only to identify hydrocarbons but to trace them to BP's Macondo well.

Sure enough, after the sediment is put through a battery of chemical tests, Hollander has his results. "Without question, it's petroleum hydrocarbons." The thick black layers are, he says, "rich in hydrocarbons," with the remains of plants and bacteria mixed in. The fluffy brown top layer has less oil and more plant particles, but the oil is definitely there. It will be weeks or even months before Hollander can trace the oil to BP's well, but since he has found BP's oil at this location in the DeSoto Canyon before, that confirmation is likely. If we are fishing for oil, as Hollander had joked, this is definitely a big one.

It strikes me that there is a satisfying irony in the fact that Hollander's cruise found oil that BP would have preferred to stay buried, given that the company indirectly financed the expedition. BP has pledged to spend $500 million on research as part of its spill response and made an early payout of $30 million. But in contrast to the company's much publicized attempts to buy off scientists with lucrative consulting contracts, BP agreed to hand this first tranche over to independent institutions in the gulf, like the Florida Institute of Oceanography, which could allocate it through a peer-review process—no strings attached. Hollander was one of the lucky recipients. This is a model for research in the gulf: paid for by the oil giants that profit so much from its oil and gas, but with no way for them to influence outcomes.

At several more research stations near the wellhead, the WeatherBird II finds the ocean floor coated in similar muck. The closer the boat gets to the wellhead, the more black matter there is in the sediment. And Hollander is disturbed. The abnormal layer of sediment is up to five times thicker than it was when he collected samples here in August. The oil's presence on the ocean floor didn't diminish with time; it grew. And, he points out, "the layer is distributed very widely," radiating far out from the wellhead.

But what concerns him even more are the thick black lines. "That black horizon doesn't happen," he says. "It's consistent with a snuff-out." Healthy sea-floor mud is porous and well oxygenated, with little critters constantly burrowing holes from the surface sand to the deeper mud, in the same way that worms are constantly turning over and oxygenating soil in our gardens. But the dark black lines in the sediment seemed to be acting as a sealant, preventing that flow of life. "Something caused an environmental and community change," Hollander explains. It could have been the sheer volume of matter falling to the bottom, triggering a suffocation effect, or perhaps it was "a toxic response" to oil and dispersants.

Whatever it was, Hollander isn't the only one observing the change. While we are at sea, Samantha Joye, an oceanographer at the University of Georgia, is leading a team of scientists on a monthlong cruise. When she gets back she reports seeing a remarkably similar puddinglike layer of sediment. And in trips to the ocean floor in a submersible, she saw dead crustaceans in the sediment and tube worms that had been "decimated." Ian MacDonald was one of the scientists on the trip. "There were miles of dead worms," he told me. "There was a zone of acute impact of at least eighty square miles. I saw dead sea fans, injured sea fans, brittle stars entangled in its branches. A very large area was severely impacted." More warning signs of a bottom-up disaster.

* * *

A week after Hollander returned from the cruise, Unified Area Command came out with its good news report on the state of the spill. Of thousands of water samples taken since August, the report stated, less than 1 percent met EPA definitions of toxicity. It also claimed that the deepwater sediment is largely free from BP's oil, except within about two miles of the wellhead. That certainly came as news to Hollander, who at that time was running tests of oiled sediment collected thirty nautical miles from the wellhead, in an area largely overlooked by the government scientists. Also, the government scientists measured only absolute concentrations of oil and dispersants in the water and sediment before declaring them healthy. The kinds of tests John Paul conducted on the toxicity of that water to microorganisms are simply absent.

Coast Guard Rear Adm. Paul Zukunft, whose name is on the cover of the report, told me of the omission, "That really is a limitation under the Clean Water Act and my authorities as the federal on-scene coordinator." When it comes to oil, "it's my job to remove it"—not to assess its impact on the broader ecosystem. He pointed me to the NOAA-led National Resource Damage Assessment (NRDA) process, which is gathering much more sensitive scientific data to help it put a dollar amount on the overall impact of the spill and seek damages from BP and other responsible parties.

Unlike the individual and class-action lawsuits BP is rushing to settle, it will be years before a settlement is reached. That means more time to wait and see how fish stocks are affected by egg and larvae exposure. And according to Robert Haddad, who heads the NRDA process for NOAA, any settlement will have "reopener clauses" that allow the government to reopen the case should new impacts manifest themselves.

Still, it's not at all clear that NRDA is capable of addressing the dangers being exposed by Hollander and the other independent scientists. The federal damage assessment process is built on the concept of "ecosystem services," which measures the value of nature according to how it serves us. How many fish were fishermen unable to catch because of the disaster? And how many tourism dollars were lost when the oil hit the beaches? Yet when it comes to the place where most of the spill damage was done—the deep ocean—we are in no position to answer such questions. The deep ocean is so understudied that we simply don't know what "service" those dead tube worms and corals would have provided to us. All we know, says MacDonald, is that "the ecosystem depends on these kinds of organisms, and if you start wiping them out, you don't know what happens." He also points out, as many ecologists do, that the entire service model is flawed. Even if it turns out that those tube worms and brittle stars do nothing for us, "they have their own intrinsic value—it matters that these organisms are healthy or not healthy." The spill "is an opportunity for us to find a new way to look at ecological health."

It is more likely, however, that we will continue to assign value only to those parts of nature from which we directly profit. Anything that slips beyond the reach of those crude calculations, either because it is too mysterious or seemingly too trivial, will be considered of no value, its existence left out of environmental risk assessment reports, its death left out of damage assessment lawsuits. And this is what is most disturbing about the latest rush to declare the gulf healthy: we seem to be once again taking refuge in our ignorance, the same kind of willful blindness that caused the disaster in the first place. First came the fateful decision to drill in parts of the earth we do not understand, taking on risks that are beyond our ability to comprehend. Next, when disaster struck, came the decision to use dispersants to sink the oil rather than let it rise to the surface, saving what we do know (the coasts) by potentially sacrificing what we don't know (the depths). And now here we are, squeezing our eyes shut before the results are in, hoping, once again, that what we don't know can't hurt us.

Only about 5 percent of the deep ocean has been explored. The existence of the deep scattering layer—the huge sector of marine life that dwells in the deep but migrates every night toward the surface—was only confirmed by marine biologists in the 1940s. And the revelations are ongoing. Mysterious and otherworldly new species are being discovered all the time.

On board the WeatherBird II, I was constantly struck by the strange simultaneity of discovery and destruction, watching young scientists experiment on fouled sediment drawn up from places science had barely mapped. It's always distressing to witness a beautiful place destroyed by pollution. But there is something particularly harrowing about the realization that we are contaminating places we have never even seen in their natural state. As drilling pushes farther and farther into deep water, risking more disasters in the name of jobs and growth, marine scientists trained to discover the thrillingly unknown will once again be reduced to coroners of the deep, boldly discovering that which we have just destroyed.

Naomi Klein is an award-winning journalist and syndicated columnist and the author of the international and New York Times bestseller The Shock Doctrine: The Rise of Disaster Capitalism (September 2007); an earlier international best-seller, No Logo: Taking Aim at the Brand Bullies; and the collection Fences and Windows: Dispatches from the Front Lines of the Globalization Debate (2002). Read more at Naomiklein.org. You can follow her on Twitter @naomiaklein.

Jobless claims hit a 10-week high

Economy facing headwinds, but Bernanke hopeful

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WASHINGTON (Reuters) - Jobless claims hit a 10-week high last week while producer prices shot up in December, pointing to headwinds for an economy that Federal Reserve Chairman Ben Bernanke said was showing fresh vigor.

However, a surge in exports to their highest level in two years, which included record sales to China, helped narrow the U.S. trade deficit in November, an encouraging sign for fourth-quarter economic growth.

The data on Thursday marked one step forward and two steps back for an economy that appeared to gain a bit more momentum toward the end of last year.

Bernanke said he was hopeful about the recent improvement in the outlook, saying he expects the economy to expand between 3 percent and 4 percent this year.

"That's not going to reduce unemployment at the pace we'd like it to, but certainly it would be good to see the economy growing," Bernanke said at a conference on small business sponsored by the Federal Deposit Insurance Corporation.

In November, the Fed's estimates for 2011 were in a range of 3 percent to 3.6 percent.

"I think deflation risk has receded considerably and so we're moving in the right direction," Bernanke said.

Still, Thursday's data showed just how torturous the economy's path to recovery would be.

The number of Americans filing for first-time unemployment benefits rose unexpectedly to 445,000 from 410,000 in the prior week, a Labor Department report showed. It was the biggest one-week jump in about six months and confounded analyst forecasts for a small drop to 405,000.

The jobs figures weighed on U.S. stocks and boosted government bonds, which were also benefiting from concerns about Europe's debt struggles.

"The jobless number highlights the patchy recovery we've seen in the job market and reinforces that it will be a slow process bringing down the jobless rate," said Omer Esiner, market analyst at Commonwealth Foreign Exchange in Washington.

The rebound in benefit claims came in the wake of the holidays, which may have hindered new applications and created a backlog. Claims, which peaked around 650,000 in April of 2009, had been on a downward trajectory, dipping below 400,000 for the first time in two years during the week of Christmas.

The four-week moving average of new claims, which strips out short-term volatility, rose by 5,500 last week to 416,500.

A separate report from the Philadelphia Federal Reserve Bank showed factory activity in the U.S. Mid-Atlantic region accelerated less in December than originally reported.

WHOLESALE STICKER SHOCK

Though underlying inflation trends remain tame in the United States, food and energy costs were rising briskly at the wholesale level as 2010 drew to a close.

U.S. producer prices climbed 1.1 percent in December after a 0.8 percent rise in November, according to another Labor Department report. Economists had been looking for a repeat of that 0.8 percent advance in December. For the year as a whole, the PPI index was up 4 percent.

Inflation excluding food and energy, however, rose just 0.2 percent, in line with forecasts. That left the year-on-year gain in core producer prices at 1.3 percent, just below analyst estimates, helping tame inflation fears.

The rising prices producers receive ultimately could put upward pressure on retail prices, acting like a tax on consumers that could slow growth. Up to now, companies have not been able to pass increasing costs onto consumers because of weak demand, but that too has consequences.

"Eventually this means corporate profits could be squeezed," said Robert Dye, senior economist at PNC Financial Services in Pittsburgh.

A recent spike in global food costs has raised fears of a crisis in the poorer corners of the developing world.

World food prices hit a record high last month, outstripping the levels that sparked riots in several countries in 2008, and key grains could rise further, the United Nations' food agency said recently.

TOUGH SELL

On a more positive note, the U.S. trade gap narrowed to $38.3 billion in November from $38.4 billion in October, the Commerce Department reported. Analysts had expected it to widen to $40.5 billion.

November's deficit was the slimmest since January 2010. Exports totaled $159.6 billion, the highest since August 2008 -- just weeks before the bankruptcy of Lehman Brothers touched off a trade-crushing global panic.

Exports to China in November totaled a record $9.5 billion. Still, they were swamped by rising imports that pushed the politically touchy U.S. shortfall with China to $25.63 billion.

Chinese President Hu Jintao meets with President Barack Obama in Washington next week, and trade issues -- and what the United States calls China's "substantially undervalued" exchange rate -- will be high on the agenda.

The split between weak underlying inflation and high food and energy prices makes it harder for Federal Reserve officials to argue publicly that inflation is not a threat. A fear of inflation being too low has underpinned the Fed's efforts to support the economy by purchasing government bonds.

Another key factor is the bleak jobs picture, not helped by the Labor Department data.

The number of Americans who continued to claim benefits after an initial week of aid retreated sharply to 3.88 million from 4.13 million, offering some reason for hope.

Still, the total number of Americans on benefit rolls, including those receiving extended benefits under emergency government programs, jumped to 9.19 million from 8.77 million.

Foreclosure Filings in U.S. May Jump 20% From Record 2010 as Crisis Peaks

Foreclosure Filings in U.S. May Jump 20% From Record 2010 as Crisis Peaks

The number of U.S. homes receiving a foreclosure filing will climb about 20 percent in 2011, reaching a peak for the housing crisis, as unemployment remains high and banks resume seizures after a slowdown, RealtyTrac Inc. said.

“We will peak in foreclosures and probably bottom out in pricing, and that’s what we need to do in order to begin the recovery,” Rick Sharga, RealtyTrac’s senior vice president, said in an interview at Bloomberg headquarters in New York. “But it’s probably not going to feel good in the process.”

A record 2.87 million properties got notices of default, auction or repossession in 2010, a 2 percent gain from a year earlier, the Irvine, California-based data seller said today in a report. The number climbed even after a plunge in filings in the last part of the year -- including a 26 percent drop in December -- as lenders came under scrutiny for their practices.

Foreclosures have weighed down U.S. housing prices as the nation’s unemployment rate is stuck at more than 9 percent. Home values may rise 0.6 percent for the year, the first annual jump since 2006, according to Fannie Mae, the largest U.S. mortgage buyer. They have fallen as much as 33 percent since peaking in 2006, based on the S&P/Case-Shiller Index of 20 cities.

Banks seized more than 1 million homes in 2010, according to RealtyTrac. That was up 14 percent from a year earlier and the most since the company began reports in 2005.

About 3 million homes have been repossessed since the housing boom ended in 2006, Sharga said. That number could balloon to about 6 million by 2013, when the housing market may “absorb the bulk of distressed properties,” he said.

Foreclosure Pipeline

“What makes this almost inevitable is the fact there are 5 million seriously delinquent loans not yet in foreclosure,” Sharga said. “They’ve got to eventually get in the pipeline unless the homeowners cure the defaults.”

The foreclosure crisis is the biggest threat to U.S. economic growth, according to Mark Zandi, chief economist for Moody’s Analytics Inc. in West Chester, Pennsylvania. Lender delays in processing defaults may prolong a decline in home prices, he said in an interview this week.

As many as 250,000 foreclosure filings that would have occurred at the end of 2010 were delayed by the ongoing probe into lender practices, according to RealtyTrac. Those proceedings will be pushed into this year, resulting in an “ugly” first quarter, Sharga said.

Attorney General Probe

Attorneys general in all 50 states are investigating whether banks and loan servicers used faulty documents and signatures on loan documents, a process that has come to be known as robo-signing. Companies including JPMorgan Chase & Co., Bank of America Corp. and Ally Financial Inc. halted some repossessions as they reviewed their procedures.

Foreclosure filings in December totaled 257,747, the lowest monthly tally since June 2008. The number fell 2 percent from November and 26 percent from a year earlier, the biggest annual decline in RealtyTrac records.

In Florida, among the states most affected by delays because the courts oversee foreclosures, filings plunged 54 percent from a year earlier to the lowest level since July 2007.

Total U.S. filings in the fourth quarter fell 8 percent from a year earlier to 799,064. The tally for the three-month period was the lowest since the fourth quarter of 2008.

Nevada had the highest U.S. foreclosure rate in 2010 for the fourth consecutive year, with more than 9 percent of the state’s households receiving a filing. Arizona was second at 5.7 percent and Florida third at 5.5 percent.

California’s rate was 4.1 percent, Utah’s was 3.4 percent and Georgia’s was 3.3 percent. Michigan, Idaho, Illinois and Colorado rounded out the top 10.

Five States

Five states accounted for 51 percent of the U.S. filing total, with almost 1.5 million. California led with 546,669, down almost 14 percent; Florida was second at 485,286, down 6 percent; and Arizona was third at 155,878, down 4 percent.

Illinois ranked fourth at 151,304 and Michigan was fifth at 135,874, both down about 15 percent from 2009.

Georgia, Texas, Ohio, Nevada and New Jersey also ranked among the top 10, said RealtyTrac, which sells data from counties representing 90 percent of the U.S. population.

Global food chain stretched to the limit

Activists from India's main opposition B

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Activists from India's main opposition Bharatiya Janata Party (BJP) women's wing shout slogans against the Congress-led government during a protest against an increase in milk, vegetables and food prices in New Delhi on April 1, 2010. The BJP activists protested against the price hikes of essential commodities. Food inflation is still at 17 percent according to official figures.

Strained by rising demand and battered by bad weather, the global food supply chain is stretched to the limit, sending prices soaring and sparking concerns about a repeat of food riots last seen three years ago.

Signs of the strain can be found from Australia to Argentina, Canada to Russia.

On Friday, Tunisia's president fled the country after trying to quell deadly riots in the North African country by slashing prices on food staples.

"We are entering a danger territory," Abdolreza Abbassian, chief economist at the U.N.'s Food and Agriculture Organization (FAO), said last week.

The U.N.'s fear is that the latest run-up in food prices could spark a repeat of the deadly food riots that broke out in 2008 in Haiti, Kenya and Somalia. That price spike was relatively short-lived. But Abbassian said the latest surge in food stuffs may be more sustained.

"Situations have changed. The supply/demand structures have changed,” Abbassian told the Australian Broadcasting Corp. last week. "Certainly the kind of weather developments we have seen makes us worry a little bit more that it may last much, much longer. Are we prepared for it? Really this is the question."

Price for grains and other farm products began rising last fall after poor harvests in Canada, Russia and Ukraine tightened global supplies. More recently, hot, dry weather in South America has cut production in Argentina, a major soybean exporter. This month's flooding in Australia wiped out much of that country's wheat crop.

As supplies tighten, prices surge. Earlier this month, the FAO said its food price index jumped 32 percent in the second half of 2010, soaring past the previous record set in 2008.

Prices rose again this week after the U.S. Department of Agriculture cut back its already-tight estimate of grain inventories. Estimated reserves of corn were cut to about half the level in storage at the start of the 2010 harvest; soybean reserves are at the lowest levels in three decades, the USDA estimates, in part because of heavy buying by China. The ratio of stocks to demand is expected to fall later this year to "levels unseen since the mid-1970s," the agency said.

"I haven't seen numbers this low that I can remember in the last 20 or 30 years," said Dennis Conley, an agricultural economist at the University of Nebraska. "We are at record low stocks. So if there any kind of glitch at all in the U.S. weather, supplies are going to remain tighter and we might see even higher prices."

Higher oil prices are also pushing up the cost of food — in two ways. First, the added shipping cost raises the delivered price of agricultural products. Higher oil prices also divert more crops like corn and soybeans to biofuel production, further tightening supplies for livestock feed and human consumption. Conley estimates that more than a third of the corn produced in the U.S is now used to make ethanol.

Despite tightening supplies, the rise in food prices has been much tamer in the developed world. On Friday, the U.S. Bureau of Labor Statistics reported that food prices at the consumer level rose just one-tenth of one percent. On Thursday, the government reported that the food component of the Producer Price Index rose just 0.8 percent in December. For all of 2010, food prices at the producer level rose 3.5 percent.

The reason for the modest price rise in the U.S.? People living in developed countries eat more processed foods, so raw materials make up a much smaller portion of the total retail cost.

"In this country, a much higher proportion of your food dollar is spent on processing, advertising and promotion and marketing," said Tom Jackson, a senior economist with Global Insight. "There’s not really that margin built in between the farmer and the consumer in the developing countries."

Food price spikes hit less-developed countries much harder because a greater share of per capita income — half or more — goes to pay for food. U.S. consumers, on the other hand, spend an average of about 13 percent of disposable income on food.

The impact of higher prices is blunted somewhat in countries that subsidize food to stabilize costs, but the trend in prices may make those subsidies unsustainable. Last month, Iran deployed squads of riot police to maintain order after slashing subsidies for food and gasoline. In September, 13 people were killed in street fighting in Mozambique after the government cut subsidies it could no longer afford, sparking a 30 percent rise in bread prices.

Though strong global demand and tight supplies are bringing misery to some poor countries, the price surge is a sign of improving conditions in emerging economies. That’s because increased demand is caused in part to rapidly rising standards of living, according to David Malpass, president of economic research firm Encima Global.

"Some of the gains in prices in Brazil and India are because people are better off," he said "So we have to expect some inflation in those countries as people earn more and more per year."

Congress Quietly Prepares to Renew Patriot Act

Congress quietly prepares to renew Patriot Act

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Rep. Mike Rogers
(R-MI) has introduced a little-noticed bill that intends to once again renew controversial provisions of the Bush administration's USA Patriot Act that are due to expire this year.

When the act was first signed into law, Congress put in some "sunset" provisions to quiet the concerns of civil libertarians, but they were ignored by successive extensions. Unfortunately, those concerns proved to be well founded, and a 2008 Justice Department report confirmed that the FBI regularly abused their ability to obtain personal records of Americans without a warrant.

The only real sign of strong opposition to the act was in 2005, when a Democratic threat to filibuster its first renewal was overcome by Senate Republicans.

Since the bill introduced by Rogers on Jan. 5 was virtually identical to the extension passed last year, its passage was seen as likely.

"Given the very limited number of days Congress has in session before the current deadline, and the fact that the bill’s Republican sponsor is only seeking another year, I think it’s safe to read this as signaling an agreement across the aisle to put the issue off yet again," the libertarian Cato Institute's Julian Sanchez wrote.

"In the absence of a major scandal, though, it’s hard to see why we should expect the incentives facing legislators to be vastly different a year from now," he added. "I’d love to be proven wrong, but I suspect this is how reining in the growth of the surveillance state becomes an item perpetually on next year’s agenda."

As senator, Obama promised to support reforming the Patriot Act, but voted in favor of extending it in 2005 and 2008. Similarly, he signed last year's extension into law with little fanfare. FBI and Department of Justice officials had consistently argued that restricting their blanket authority to conduct warrantless searches would harm national security.

Candidate Obama said in 2007 that if he were elected president there would be "no more National Security Letters [NSL's] to spy on citizens who are not suspected of a crime" because "that is not who we are, and it is not what is necessary to defeat the terrorists."

Much like Obama's vow to close the Guantanamo Bay military prison, the use of NSL's has also continued. Most recently, Obama's Department of Justice sent an NSL to micro-blogging site Twitter, seeking information on all 635,561 users who followed secrets outlet WikiLeaks -- a list that included Raw Story.

Obama's campaign website insisted that he has consistently said he would support a Patriot Act extension that strengthens civil liberties.

Action on his campaign pledge had yet to emerge by the start of 2011, and no significant reforms were reflected in Rep. Rogers' proposed extension.

Former Sen. Russ Feingold (D-WI), perhaps the Senate's strongest opponent of the Patriot Act, was defeated by Sen. Ron Johnson (R-WI) in the 2010 mid-term elections.

Sanders warns Obama not to agree with GOP on Social Security benefit cuts

Sanders warns Obama not to agree with GOP on Social Security benefit cuts

Sen. Bernie Sanders, the Independent from Vermont, is pressing President Obama to keep his campaign promise not to cut Social Security benefits in a possible deal with Republicans.

Sanders has joined a lobbying campaign by more than 200 labor unions and liberal groups pressing Obama to make a strong statement against cutting Social Security benefits in his State of the Union address, scheduled for Jan. 25.

These groups fear that Obama may agree to cuts to Social Security in exchange for Republican support for raising the debt ceiling later this winter or as part of a broad agreement to reduce the deficit.

Obama campaigned against raising the retirement age and cutting Social Security benefits when he ran for president in 2008. In recent weeks, however, he has stayed largely silent on the proposal to cut benefits put forth by the fiscal-responsibility commission he appointed.

“I urge you to once again make clear to the American people that under your watch we will not cut Social Security benefits, raise the retirement age or privatize this critical program,” Sanders wrote in a letter to Obama. “Social Security is a promise that we cannot and must not break.”

Sanders, who caucuses with Senate Democrats, and other liberals are worried about whether they can trust Obama after he struck a deal with Senate Republican Leader Mitch McConnell (Ky.) last year to pass an $858 billion tax package.

The package extended Bush-era tax cuts for the nation’s wealthiest families and set the estate tax at 35 percent for individual inheritances above $5 million, exempting inheritances below that threshold.

Especially alarming for Sanders and other Senate Democrats, the tax deal included a one-year reduction in the Social Security payroll tax from 6.2 percent to 4.2. The administration has promised to replenish the $120 billion in lost revenue to the Social Security trust fund from the general treasury at a future date, but Sanders and his liberal allies are skeptical.

“The danger of doing that is that this precedent becomes extended,” Sanders said in an interview. “I know as surely as I’m sitting here that a year from now, when President Obama says this is only a one-year program, what are Republicans going to say? They’re going to say no.”

Liberal Democrats are worried about Obama's appointment of former Sen. Alan Simpson (R-Wyo.) to the fiscal commission. They view him as a longtime antagonist of the program.

They say Obama could have picked other former Republican lawmakers or GOP economists with greater sympathy for Social Security to serve atop the panel.

Obama’s selection of former Clinton White House Chief of Staff Erskine Bowles and Simpson to serve as co-chairmen of the National Commission on Fiscal Responsibility and Reform has been viewed as evidence the president may be open to cutting Social Security benefits.

Sanders said Obama should have expected Bowles and Simpson would recommend raising the retirement age.

“That wasn’t an accident,” he said. “When you appoint people, you know what you’re going to get.”

The commission issued a final proposal in December that called for increasing the retirement age to 68 by 2050 and to 69 by 2075. It also suggested using a different basis for calculating cost-of-living adjustments, which liberal critics contend would further cut benefits.

Two Senate Democrats, Senate Democratic Whip Dick Durbin (Ill.) and Senate Budget Committee Chairman Kent Conrad (N.D.), voted for the proposal, which garnered the support of 11 of 18 commissioners.

Eric Kingson, a professor at Syracuse University’s Center for Policy Research and co-chairman of the Strengthen Social Security Campaign, estimates increasing the retirement age by one year amounts to a 6 to 7 percent cut in benefits.

“Social Security has nothing to do with the deficit," Sanders said.

If Obama agrees to cut Social Security benefits as part of a deficit-reduction deal, “you’re conceding to Republican right-wing ideology, which doesn’t like Social Security because it’s a successful federal program.”

The Social Security trust fund has a $2.6 trillion surplus and is estimated to stay solvent for at least another 26 years.

“Mr. President, as I’m sure you are aware, our Republican colleagues have long opposed Social Security not because it hasn’t worked, but because of ideological reasons,” Sanders wrote in his letter to Obama.

Sanders contends Republicans don’t believe the government should provide retirement benefits to seniors and the disabled and would prefer Wall Street and the private sector take a larger role.

US pressure triggers collapse of Lebanese government

US pressure triggers collapse of Lebanese government

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Lebanon’s misnamed “national unity” government fell Wednesday after the political bloc led by Hezbollah withdrew over the failure to reach an agreement on policy toward a United Nations probe into the 2005 assassination of former prime minister Rafiq al-Hariri.

Underlying the government’s collapse are the growing social and political tensions in Lebanon, which have been stoked by outside intervention, most powerfully from Washington. The opening up of a new period of political turmoil in the country carries with it the threat of renewed internal sectarian strife and even war in the region.

Prime Minister Saad al-Hariri, the assassinated leader’s son, was in Washington consulting with President Barack Obama and the US State Department when the bloc of 10 ministers in the opposition, known as the March 8 Alliance, announced their resignation from the coalition government.

The ministers from March 8, which includes the Hezbollah Shi’ite party and militia, Amal, also a Shiite party led by speaker of the parliament Nabih Berri, and the Free Patriotic Movement of the Maronite former general Michel Aoun, were soon followed by an 11th minister loyal to Lebanon’s President Michel Sleiman. Under the Lebanese constitution, the withdrawal of one-third plus one of the cabinet ministers requires the formation of a new government.

The confrontation pits the Hezbollah-led opposition against the forces loyal to Hariri, the so-called March 14 coalition, composed of Sunni Muslim parties, the Druze Party of Walid Jumblatt and the Phalangist Christian groups.

The two camps were named for rival demonstrations held on March 8 and March 14, 2005, the first supporting Syria’s role in the country and the second demanding an end to Syrian influence.

The immediate trigger for the government’s breakup was an announcement that efforts by Syria and Saudi Arabia, which are aligned, respectively, with the March 8 Alliance and the March 14 bloc, to reach a negotiated settlement on the UN-backed Special Tribunal for Lebanon (STL) had reached a dead end.

The STL is expected to indict “rogue” members of Hezbollah in connection with the 2005 assassination of Rafiq al-Hariri. Hezbollah has denied any involvement in the killing of the billionaire former prime minister and has charged that the tribunal is acting as an instrument of Washington and Israel’s intervention in Lebanon.

The Hezbollah bloc had repeatedly demanded that Prime Minister Saad al-Hariri convene a cabinet meeting to discuss a common attitude toward the Tribunal. Hezbollah called for the government to repudiate its actions, withdraw Lebanese judges from the Tribunal and cut off the Lebanese government’s share of its funding,

The opposition also demanded a discussion of the so-called “false witnesses” controversy concerning fabricated testimony given to the tribunal in an effort to implicate Syria and a group of four pro-Syrian Lebanese generals in the assassination.

One of the recently released WikiLeaks cables from the US Embassy in Beirut from May 2008 quotes the STL’s senior judge, Daniel Bellemare, as admitting that he “had no case” against Syria.

After first pursuing the theory of Syrian sponsorship of the killing, the Tribunal concluded the testimony of the witnesses was unsubstantiated and released the four Lebanese generals, who had been imprisoned for four years without charges. One of the generals began a legal case in Syria over his false detention, leading to the indictment of some 30 politicians, officials and journalists in Lebanon and elsewhere.

Walid Jumblatt, the Druze leader, told the AFP news agency, “Saad Hariri was on the brink of making a major concession as concerns the tribunal, but occult forces prevented him from doing so.”

While Jumblatt failed to spell out the identity of these “forces,” it is apparent that the principal pressure to scuttle the Saudi-Syrian mediation of the dispute came from Washington and Paris.

This view was put forward more explicitly by Energy Minister Jibran Bassil, one of the first 10 to resign. He told Lebanon’s Daily Star, “The other side bowed to external, especially American pressure, ignoring the advice and wishes of the Saudi and Syrian sides.”

Similarly, State Minister for Administrative Development Mohamad Fneish said, “There was an Arab effort which we dealt with positively. We even bargained on it. However, as a result of US interference and the inability of the other side to deal with it, this effort reached a deadlock.”

After hastily leaving Washington following the dissolution of his cabinet, Saad al-Hariri made a stop-off in Paris to meet with French President Nicolas Sarkozy.

The Obama administration has viewed the tribunal as a means of pursuing its own interests in Lebanon, particularly that of weakening Hezbollah and striking a blow against its principal international ally, Iran.

This was made clear in a statement by Secretary of State Hillary Clinton in reaction to the cabinet resignations.

“We view what happened today as a transparent effort by those forces inside Lebanon, as well as outside Lebanon, to subvert justice and undermine Lebanon’s stability and progress,” she told a news conference in Doha, Qatar.

“Lebanon needs now to rally behind its own interests,” she continued. “The Lebanese people need to get beyond political party. It’s not political parties that would be put on trial, it’s individuals.”

She called Hezbollah’s action an “abdication of responsibility.”

The utterly hypocritical character of her remarks is apparent in the context of Washington’s official attitude toward Hezbollah, which it has designated as a foreign terrorist organization because of its armed resistance to Israeli aggression in southern Lebanon.

The coalition government formed by Saad al-Hariri following the June 2009 election has been unstable from the outset, with Hezbollah exercising an effective veto.

Al-Hariri’s coalition won a narrow majority in the parliament, while Hezbollah and its allies won the largest share of the popular vote. Under Lebanon’s undemocratic confessional power-sharing arrangement, parliamentary seats are divided equally between Christians and Muslims, even though the former make up barely a third of the country’s 4 million people. Shiites, who now make up 40 percent of the population and are the largest confessional group, have historically been the most poorly represented in government.

Now, however, the Daily Star reports that sources within the March 8 Alliance are claiming a majority in the 128-member parliament and indicate that the bloc may name its own candidate for prime minister.

Such a majority notwithstanding, Washington has repeatedly made it clear that it would view a Hezbollah-led coalition assuming power in Lebanon as a direct threat to its strategic interests in the region and would likely respond with a concerted destabilization campaign, if not outright military aggression.

It appears that the US administration is banking on Al-Hariri being able to maintain himself in power indefinitely as an acting prime minister in a “caretaker” government.

The Israeli military, meanwhile, announced that it has placed its forces on the Lebanese border on a state of high alert.

“A senior officer in Israel’s northern command said commanders were following events in Lebanon very closely for any sign Hezbollah might try to heat up the already jittery northern border to deflect attention from political turmoil,” the Israeli daily Haaretz reported Thursday.

Israel waged a savage 2006 war that devastated southern Lebanon and the southern suburbs of Beirut, leaving some 1,200 Lebanese dead and nearly 5,000 more wounded, the overwhelming majority of them civilians.

‎20 Shocking New Economic Records That Were Set In 2010

20 Shocking New Economic Records That Were Set In 2010

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2010 was quite a year, wasn't it? 2010 will be remembered for a lot of things, but for those living in the United States, one of the main things that last year will be remembered for is economic decline. The number of foreclosure filings set a new record, the number of home repossessions set a new record, the number of bankruptcies went up again, the number of Americans that became so discouraged that they simply quit looking for work reached a new all-time high and the number of Americans on food stamps kept setting a brand new record every single month. Meanwhile, U.S. government debt reached record highs, state government debt reached record highs and local government debt reached record highs. What a mess! In fact, even many of the "good" economic records that were set during 2010 were indications of underlying economic weakness. For example, the price of gold set an all-time record during 2010, but one of the primary reasons for the increase in the price of gold was that the U.S. dollar was rapidly losing value. Most Americans had been hoping that 2010 would be the beginning of better times, but unfortunately economic conditions just kept getting worse.

So will things improve in 2011? That would be nice, but at this point there are not a whole lot of reasons to be optimistic about the economy. The truth is that we are trapped in a period of long-term economic decline and we are now paying the price for decades of horrible decisions.

Amazingly, many of our politicians and many in the mainstream media have declared that "the recession is over" and that the U.S. economy is steadily improving now.

Well, if anyone tries to tell you that the economy got better in 2010, just show them the statistics below. That should shut them up for a while.

The following are 20 new economic records that were set during 2010....

#1 An all-time record of 2.87 million U.S. households received a foreclosure filing in 2010.

#2 The number of homes that were actually repossessed reached the 1 million mark for the first time ever during 2010.

#3 The price of gold moved above $1400 an ounce for the first time ever during 2010.

#4 According to the American Bankruptcy Institute, approximately 1.53 million consumer bankruptcy petitions were filed in 2010, which was up 9 percent from 1.41 million in 2009. This was the highest number of personal bankruptcies we have seen since the U.S. Congress substantially tightened U.S. bankruptcy law several years ago.

#5 At one point during 2010, the average time needed to find a job in the United States had risen to an all-time record of 35.2 weeks.

#6 Back in 1970, 25 percent of all jobs in the United States were manufacturing jobs. Today, only 9 percent of the jobs in the United States are manufacturing jobs, which is believed to be a new record low.

#7 The number of Americans working part-time jobs "for economic reasons" was the highest it has been in at least five decades during 2010.

#8 The number of American workers that are so discouraged that they have given up searching for work reached an all-time high near the end of 2010.

#9 Government spending continues to set new all-time records. In fact, at the moment the U.S. government is spending approximately 6.85 million dollars every single minute.

#10 The number of Americans on food stamps surpassed 43 million by the end of 2010. This was a new all-time record, and government officials fully expect the number of Americans enrolled in the program to continue to increase throughout 2011.

#11 The number of Americans on Medicaid surpassed 50 million for the first time ever in 2010.

#12 The U.S. Census Bureau originally announced that 43.6 million Americans are now living in poverty and according to them that was the highest number of Americans living in poverty that they had ever recorded in 51 years of record-keeping. But now the Census Bureau says that they miscalculated and that the real number of poor Americans is actually 47.8 million.

#13 According to the FDIC, 157 banks failed during 2010. That was the highest number of bank failures that the United States has experienced in any single year during the past decade.

#14 The Federal Reserve brought in a record $80.9 billion in profits during 2010. They returned $78.4 billion of that to the U.S. Treasury, but the real story is that thanks to the Federal Reserve's continual debasement of our currency, the U.S. dollar was worth less in 2010 than it ever had been before.

#15 It is projected that the major financial firms on Wall Street will pay out an all-time record of $144 billion in compensation for 2010.

#16 Americans now owe more than $881 billion on student loans, which is a new all-time record.

#17 In July, sales of new homes in the United States declined to the lowest level ever recorded.

#18 According to Zillow, U.S. housing prices have now declined a whopping 26 percent since their peak in June 2006. Amazingly, this is even farther than house prices fell during the Great Depression. From 1928 to 1933, U.S. housing prices only fell 25.9 percent.

#19 State and local government debt reached at an all-time record of 22 percent of U.S. GDP during 2010.

#20 The U.S. national debt has surpassed the 14 trillion dollar mark for the first time ever and it is being projected that it will soar well past 15 trillion during 2011.

There are some people that have a hard time really grasping what statistics actually mean. For people like that, often pictures and charts are much more effective. Well, that is one reason I like to include pictures and graphs in many of my articles, and below I have posted my favorite chart from this past year. It shows the growth of the U.S. national debt from 1940 until today. I honestly don't know how anyone can look at this chart and still be convinced that our nation is not headed for a complete financial meltdown....