Friday, May 17, 2013

US Dollar Collapse and Japan’s Sham Currency War: The Hidden Agenda Behind Japan’s Kamikaze Quantitative Easing

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US$ dollars have been flooding the financial markets ever since Bernanke launched quantitative easing allegedly to turnaround the US economy. These huge amounts of US$ toilet paper are mainly in financial markets (and in central banks) outside of the United States. A huge chunk is represented as reserves in central banks led by China and Japan.

If truth be told, the real value of the US$ would not be more than a dime and I am being really generous here, as even toilet paper has a value.

That the US dollar is still accepted in the financial markets (specifically by central banks) has nothing to do with it being a reserve currency, but rather that the US$ is backed/supported by the armed might and nuclear blackmail of the US Military-Industrial Complex. The nuclear blackmail of Iran is the best example following Iran’s decision to trade her crude in other currencies and gold instead of the US$ toilet paper.

If the United States were not a military threat and a global bully that can blackmail with impunity the oil exporting countries in the Middle East, the global financial system which hinges on the US$ toilet paper would have collapsed a long time ago.

The issue is why has the US$ not collapsed as it should have by now?

When we apply common sense and logic to the state of affairs, the answer is so simple and it is staring at you.

But, you have not been able to see the obvious because the global mass media, specifically the global financial mass media controlled mainly from London and New York, has created a smokescreen to hide the truth from you.

Let’s analyze the situation in a step by step manner, and apply common sense.

1. The US is the world’s biggest debtor. The biggest creditors are China and Japan, followed by the oil exporting countries in the Middle East. With each passing day, the value of the US$ toilet paper is worth less and less. Like I said earlier, even toilet paper has some intrinsic value. It reaches zero value when everyone has to carry a wheelbarrow of US$ to purchase anything.

2. For the US$ toilet paper creditors, they cannot admit the fact that they have been conned by the global Too Big To Fail Banks (TBTFs) acting in concert with the FED and the Bank of England to accept US$ toilet papers. The central bankers of these countries have a reputation to preserve (not that there is in fact any reputation, for their so-called financial credibility is also part of the scam) and the political leaders that relied on them is in a bigger bind. How can the political leaders be so very stupid to trust these central bankers (who have stashed away in foreign tax havens huge US$ toilet papers as a reward for their complicity). This is the current state of affairs in plain English. They are having sleepless nights worrying if and when the citizens would wise up to this biggest con in history i.e. the promotion and acceptance of fiat currencies, the US$ being the ultimate fiat currency.

3. The global financial elites led by the FED know that this state of affairs is to their advantage and they are exploiting it to the hilt! They also know that no country or organization has the military resources to threaten the US to stop this global ponzi scheme which has been going on since 1945 and intensified since 1971 when President Nixon de-coupled the US$ from gold. The pound sterling is another story but, it is not relevant for the purposes of this analysis.

4. Additionally, and as a result of the above-stated scam, countries were led to believe and to accept the false economic theory that export generated growth (GDP) should be the foundation of economic development, as the United States having limitless US$ toilet paper has the ability and the means to purchase the global exports, it being the largest consumer market in the world. In the result, the world’s factories and their workers, including those in the developed world such as France and Germany worked their butts off to be rewarded with US$ toilet paper whose value is less than the paper and ink that produce it! The financial frolic went on for more than forty years and came to an abrupt and foreseeable end in the 2008 global financial tsunami.

5. When the party ended, the United States was up to her eyeballs in debts as a result of reckless financial speculation in the global derivatives casino and the consumption binge financed by housing mortgages. Debts must be repaid. But, the US has no means to do so. They cannot produce enough goods to earn the revenue to pay the debts because US manufacturing has been outsourced to the developing world – China became the world’s number 1 factory. So, the financial elite appointed helicopter Bernanke to lead the charge for the US and the UK to use the printing press (digital or otherwise) to print more US$ toilet papers to pay off the debt. In economic jargon, this is “monetizing the debt”. It is outright fraud, but no one (i.e. central bankers) in his right mind would admit to this fraud as they would be hung from the lamp-posts if the truth is discovered as was the case when the Italian fascist leader Mussolini was hung by the Italian partisans.

6. Initially, central bankers confronted with this situation and having to face a restless populace embarked on a regime of competitive easing/ devaluation of their currencies. But, the price was horrendous. Inflation spiked in all these countries. But, this scheme of things did not work out as planned for the simple reason, the US$ toilet paper continued to be lower as a result of more QE by Bernanke. China realized the danger and adopted other means to overcome this situation, one of which was to enter into bilateral arrangements with her trading partners to finance trade in their respective currencies. Such agreements were entered between China and Japan, members of BRIC, Malaysia etc. This counter-measure was perceived as a threat to the continued dominance of the US$ toilet paper regime. In the result, Obama declared at the urging of the financial elites (he does not have the grey cells to think) a foreign policy shift – the Asia Pivot to prevent a further deterioration of US$ dominance.

7. When Japan entered the agreement with China, her behaviour was deemed unacceptable since Japan was under the nuclear protection of the US. Japan was caught between a rock and a hard place. It was expected that sooner or later the US would apply the squeeze on Japan to behave in a proper manner. Applying geopolitical strategies, the US towing South Korea along provoked North Korea by launching a military exercise which included flying B-2 bombers which are capable of carrying nuclear weapons. North Korea responded in the manner that was expected. Japan was exposed and in like manner reacted by seeking US protection. To muddy the waters and complicate the situation, the US engineered a dispute between China and Japan over the sovereignty of the Diaoyu Islands. This was followed by the installation of a new regime in Japan by the election of the Prime Minister Shinzo Abe and the appointment of Haruhiko Kuroda as the Governor of the Bank of Japan (BOJ).

8. Now comes the mechanics of US counter-measures in shoring up the artificial dominance/value of the US$ toilet paper. Japan was ordered to do its part as a quid pro quo for being protected by the US’s nuclear umbrella. A new version of the Plaza Accord must be put in place – a “reverse Plaza Accord”.

9. Let me explain. In the 1985 Plaza Accord, the dollar was devalued to reduce the current account deficit and to help the US recover from the recession of the early 1980s. It was a managed devaluation and the exchange value of the Dollar versus the Yen declined by 51 per cent from 1985 to 1987 – reaching ¥151 per US$1 in March 1987. The dollar continued to slide till 1988. The effect of the strengthened Yen depressed Japan’s exports and brought about the expansionary monetary policies that resulted in the infamous asset bubbles of the late 1980s. The G-6 countries then gathered in 1987 in Paris to arrest the slide of the dollar and to manage and stabilize the international currency markets. The end result was the Louvre Accord. In the next 18 months the dollar strengthened to ¥160 per US$1.

10. However, in the current situation, the devaluation of the US$ toilet paper was the result of massive QEs so as to enable US to monetize her debts. However, for US to continue to monetize her debts and have the world’s central banks agreement to continue to hold dollar reserves, the value of the dollar must appreciate, failing which the dollar would collapse, the US defaulting on her debts, as creditors would no longer accept US$ as payment. The trick was to artificially inflate the value of the dollar without arousing any suspicions.

11. In the 1970s, following the de-coupling of the dollar from gold by President Nixon, the dollar would have collapsed in like manner as it was not backed by gold. It became pure fiat money! The trick then was to create an artificial demand for dollar which would in turn raise the value of the currency. This was effected by the proposal of Kissinger to the Arabs that if they would dollarize their oil exports, the US would guarantee their safety and survival even from the threats of Israel. When the Arabs agreed to this arrangement, every country in the world had to buy oil in US$. Countries have to exchange their currencies into US$ to buy oil. This demand for US$ strengthened the currency and prolonged the US fiat money monopoly.

12. However, this option is no longer available presently as oil is now being sold in other currencies besides the US$. The petro-dollar is no longer in dominance. In any event, the continued use of petro-dollars would spike the oil price and this would be inflationary and detrimental to the US economy as well as the world’s economy in the present economic climate – i.e. deep recession. Another means must be used.

13. This is the reason for the sudden “shock and awe” monetary policy of the new Japanese regime of Shinzo Abe and Haruhiko Kuroda. My detractors will accuse me of indulging in conspiracy theories. But, the facts speak for themselves. I had said earlier, that the G-7 countries have collectively attempted to devalue their currencies but, it did not stem the slide of the US$ because Bernanke was increasing the intensity of QE since 2008. And the EU was not willing and or able to adopt a suicide policy of massive QE as Germany was well aware of such a risk having suffered the negative effects of hyperinflation. China would not kow-tow to the US and in fact together with fellow members of BRIC was adopting counter-measures to confront Bernanke’s QE financial weapon. That left only one country who can be compelled to do the US bidding, to commit Hara-kiri to save and or prolong the US$ toilet paper regime – Japan!

14. And so, Japan launched its sudden massive QE and the desired effect is that now the US$ toilet paper has artificially appreciated in value vis-a-vis the Yen and less so with other currencies. This cannot be disputed by my detractors because:

On May 11, the financial elites of G-7 countries explicitly agreed with this kamikaze policy of Japan.

Koichi Hamada has also declared earlier that the target for this policy is to allow the dollar to rise to ¥110 per US$1 and this rise would be managed in a staggered fashion in small increments (step by step approach) thereby controlling the rate of inflation in Japan which would not be allowed to exceed the agreed target rate.

It is suggested that Japan can do this because it can utilise its huge dollar reserves of US$1.2 Trillion to manage the devaluation! According to Alan Ruskin, the global head of Group of 10 foreign-exchange strategy in New York at Deutsche Bank ASG, he said “I think we are opening up the door to look at 105 in the next few months and 110 by the end of the year ...” and this surely must be interpreted to mean that Koichi Hamada’s strategy is definitely in play.

In conclusion, it is my view that such “managed artificial appreciation” of the US$ toilet paper while effective in the short run would fail in the long run because the fundamental issues of the US economy have not been addressed and resolved. Only real economic growth can reverse the dollar’s demise.

Seriously, would Bernanke stop further QE when the yen exchange rate reaches ¥110 by the year end? Has not Bernanke declared that QE would continue till 2015? And since Japan has drawn the Red Line at ¥110, can Japan risk further damage to its economy and continue to back-stop US beyond ¥110?

The US$ quadrillion derivative casino is the millstone around the US and the global economy, and as long as this is not resolved, the crisis would only get worse. Like water, after sufficient heat, the boiling point would be reached.

While I cannot forecast the precise date of the implosion, I am of the view that the end is near, sparked by a black swan event and then snowballed to its final devastation.

The AP spying scandal and the crisis of American democracy

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The Obama administration’s secret seizure of the phone records of Associated Press reporters is the latest attack on core democratic rights in the United States.
Last week, the Justice Department acknowledged that it had obtained a subpoena in February of this year to require telecommunications companies to turn over two months of phone records on some 20 lines used by the AP. The subpoena was part of an investigation into an alleged leak of classified information that had occurred the year before.
It is likely that many more media outlets have been similarly targeted, and the administration has refused to respond to requests that it reveal what other records were seized. Anyone who speaks to the media about any matter has to assume that their phone numbers and contact information have been or could be made available to the government by secret court order.
There could hardly be a clearer violation of the First Amendment guarantee of the freedom of the press.
On Thursday, Obama made his first comments on the case in a press conference at the White House. His remarks exposed the fact that the president, who swore an oath to defend the Constitution, is utterly indifferent to and ignorant of the democratic principles that it upholds.
Obama proclaimed that the freedom of the press, a right enshrined in the First Amendment of the Constitution, must strike a “balance” with the prerogatives and interests of the military-intelligence apparatus. This argument essentially invalidates the unambiguous declaration of the First Amendment that no law shall be promulgated “abridging the freedom of speech or of the press…” But according to Obama, this constitutional guarantee of the people’s rights can be tossed aside when it interferes with operations and interests of state.
In another statement that exposed the president’s cynicism and indifference toward the democratic principles articulated in the Bill of Rights, Obama stated that, “free press, free expression and the open flow of information help hold me accountable… and help our democracy function.”
Thus, for Obama—who, according to his official curriculum vitae, taught constitutional law at the University of Chicago—freedom of the press and speech merely “help our democracy function.” With these words, Obama argued implicitly that freedom of the press and speech are somehow external to democracy, and that there can be a democracy without these rights! They may be useful as a matter of procedure, assisting “democracy.” But “democracy,” without these rights, is a meaningless phrase. When constitutional rights conflict with the operations conducted by the Pentagon and CIA, then, according to Obama, government can and should violate them.
This is the antithesis of democracy. Obama was also asked at the press conference what he felt about comparisons between the scandals plaguing the administration and those that occurred under Nixon. The president brushed aside the question, saying the reporter could “draw your own conclusions.” In fact, Obama has carried out operations that go far beyond the crimes and misdemeanors for which Nixon was forced out of office in 1974.
An urgent warning is necessary: The assault on democratic rights is far more advanced than the American people realize. Every basic democratic right included in the Bill of Rights—freedom of the press, freedom of association, free speech, the protection against warrantless searches and seizures, due process, the right to a trial by jury and public counsel, the ban on torture—has been systematically undermined.
The AP spying scandal is entirely in line with the policies and practice of the Obama administration, the most anti-democratic in US history. Obama has prosecuted six current or former government officials for leaking classified information, double the number prosecuted by all previous presidents combined.
The administration has declared the right to assassinate anyone, anywhere, including US citizens, without due process. Earlier this year, Attorney General Eric Holder declared that the president has the right to order the killing of a US citizen within the United States.
At the same time, the government is increasing its spying operations on the American people. The administration is preparing to push for a new law that will allow it to tap directly into Facebook, Google and other Internet companies, a major expansion of government efforts to gain access to every digital communication.
The AP revelations, moreover, come only a month after the Boston Marathon bombings, which was followed by the military-police lockdown of the entire city. The precedent was set to respond to any such event with what amounts to martial law and the abrogation of constitutional protections against warrantless searches.
Two basic factors underlie the destruction of American democracy: the unprecedented concentration of wealth in the hands of a tiny fraction of the population and the unending expansion of American imperialism abroad.
Both these factors are rooted in the crisis of American capitalism and the character of the American ruling class. Writing in 1916, Lenin noted, “Imperialism is the epoch of finance capital and of monopolies, which introduce everywhere the striving for domination, not for freedom. Whatever the political system, the result of these tendencies is everywhere reaction and an extreme intensification of antagonisms in this field.”
The American financial aristocracy “strives for domination,” in the United States and around the world. Headed by Obama, the ruling class has engaged in a ceaseless process of plunder, which has only escalated since the crash of 2008. Trillions of dollars have been handed over to the banks, while basic social services have been starved of resources and the working class has been driven deeper into poverty.
At the same time, there is not a part of the globe in which the American military and intelligence apparatus is not engaged in ceaseless intrigue, drone bombings or outright war and occupation. At the same press conference in which he defended the AP spying, Obama, standing beside Turkish Prime Minister Recep Tayyip Erdogan, issued new and more bellicose threats against Syria. The US and its European allies are preparing an escalation of the campaign against Syrian President Bashar Al-Assad, threatening to unleash a regional war with disastrous consequences.
The American corporate and financial elite, pursuing a deeply unpopular policy at home and abroad, stands in irreconcilable conflict with democratic forms of rule. The defense of democracy is, therefore, a fight against the ruling class and the capitalist system upon which it is based.

10 Amazing Charts That Demonstrate The Slow, Agonizing Death Of The American Worker

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The middle class American worker is in danger of becoming an endangered species.  The politicians are not telling you the truth, and the mainstream media is certainly not telling you the truth, but the reality is that there is nothing but bad news on the horizon for workers in the United States.  In the old days, when the big corporations that dominate our society did well, that also meant good things for American workers since those corporations would need more of us to work for them.  But in the emerging one world economic system that our economy is being merged into, those corporations have other choices now.  For instance, the big corporations can now choose to limit the number of "expensive" American workers that they employ by shipping millions of jobs to the other side of the world.  And from their perspective, it makes perfect sense.  They can make much bigger profits by hiring people on the other side of the planet to work for them for less than a dollar an hour.  If they can get good production out of those people, then why should they hire Americans for ten to twenty times as much, plus have to give those Americans health insurance and other benefits?  Another major factor in the slow, agonizing death of the American worker is technology.  We live during a period when technology is advancing at a pace that is almost unimaginable at the same time that it is steadily becoming cheaper and cheaper.  That means that it is going to become easier and easier for companies to replace workers with robots and computers.  As I have written about previously, it is being projected that our economy will lose millions of jobs to technology in the coming years.  Yes, some of us will still be needed to help build the robots and the computers, but not all of us will.  And of course the overall general weakness of the economy is not helping matters either.  The American people inherited the greatest economic machine in the history of the world, and we have wrecked it.  Decades of very foolish decisions have resulted in the period of steady economic decline that we are experiencing now.
America is simply not the economic powerhouse that it once was.  Back in 2001, the U.S. economy accounted for 31.8 percent of global GDP.  By 2011, the U.S. economy only accounted for 21.6 percent of global GDP.  That is a collapse any way that you want to look at it.
Today, American workers are living in an economy that is rapidly declining, and their jobs are steadily being stolen by robots, computers and foreign workers that live in countries where it is legal to pay slave labor wages.  Politicians from both political parties refuse to do anything to stop the bleeding because they think that the status quo is working just great.
So don't expect things to get better any time soon.
The following are 10 amazing charts that demonstrate the slow, agonizing death of the American worker...
#1 Wages And Salaries As A Percentage Of GDP
Wages And Salaries As A Percentage Of GDP
As you can see, wages as a percentage of GDP are hovering near an all-time record low.  That means that American workers are bringing home a smaller share of the economic pie than ever before.
#2 Average Annual Hours Worked Per Employed Person In The United States
Average Annual Hours Worked per Employed Person in the United States
We are an economy that is rapidly trading good paying full-time jobs for low paying part-time jobs.  The decline in average annual hours worked that we have witnessed represents the equivalent of losing millions of jobs.  There has been an explosion of "the working poor" in the United States, and this trend is probably only going to accelerate in the years to come.
#3 Manufacturing Employment
Manufacturing Employment
As you can see, there are less Americans working in manufacturing today than there was in 1950 even though the population of the country has more than doubled since then.  The United States has lost more than 56,000 manufacturing facilities since 2001, and yet our politicians stand around and do nothing about it.
#4 Employment-Population Ratio
Employment-Population Ratio 2013
This is one of my favorite charts.  It shows that there has been absolutely no employment recovery at all since the end of the last recession.  The percentage of working age Americans that have a job has stayed under 59 percent for 44 months in a row.  How much worse will things get when the next major economic downturn strikes?
#5 Labor Force Participation Rate
Labor Force Participation Rate
This is how the Obama administration is getting the "unemployment rate" to magically go down.  They are pretending that millions upon millions of Americans simply do not want to work anymore.  As you will notice, the decline of the labor force participation rate has accelerated greatly since Barack Obama entered the White House.
#6 Duration Of Unemployment
Duration Of Unemployment
The average amount of time that it takes an unemployed worker to find a new job has declined slightly, but it is still far above normal historical levels.  It is a crying shame that it takes the average unemployed worker two-thirds of a year to find a new job, but this is the new economic reality that we are all living in.
#7 Delinquency Rate On Residential Mortgages
Delinquency Rate On Residential Mortgages
Since there are not enough jobs for all of us, and since our wages are not rising as rapidly as the cost of living is, a whole bunch of us are falling behind on our mortgages.  As you can see, the mortgage delinquency rate has only dropped slightly and is still way, way above typical levels.
#8 New Homes Sold
New Homes Sold
American workers also don't have enough money to go out and buy new homes either.  Yes, new home sales have rebounded slightly this year, but we are nowhere near where we used to be.
#9 Consumer Credit
Consumer Credit
Millions of American families continue to resort to going into debt in a desperate attempt to make ends meet.  After a slight interruption during the last recession, consumer credit once again is growing at a frightening pace.
#10 Self-Employment At A Record Low
Self-Employed As A Share Of Non-Farm Employment
Since there aren't enough jobs for everyone, why aren't more Americans trying to start their own businesses?  Well, the reality of the matter is that the government has made it exceedingly difficult to start your own business today.  Taxes, rules, regulations and red tape are choking the life out of millions of small businesses in the United States.  As a result, the percentage of self-employed Americans is at a record low.
As all of these long-term trends continue, the middle class will continue to shrink, poverty in America will continue to explode and government dependence will continue to rise.
The numbers don't lie.  Today, the number of Americans on Social Security Disability now exceeds the entire population of Greece, and the number of Americans on food stamps now exceeds the entire population of Spain.
We are in the midst of a horrifying economic collapse, and the next major wave of that collapse is rapidly approaching.
Are you ready?

Sharp increase in US jobless benefit claims

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A string of negative economic figures released this week point to continuing stagnation in the US in the midst of a worsening slump internationally. The US Labor Department reported Thursday that new claims for unemployment benefits jumped by the highest amount in six months. The same day, the retail giant Walmart said its sales tumbled unexpectedly in the first quarter of the year.
Signs of growing economic and social distress in the US coincide with an accelerating downturn in Europe and slowing growth in China. On Wednesday, the European Union’s statistics agency said that the economy of the euro area contracted for the sixth consecutive quarter, after having posted record unemployment rates earlier in the month.
The number of people in the US who filed new claims for unemployment benefits grew by 32,000, hitting 360,000 in the week ending May 11—significantly higher than economists had predicted.
US industrial production fell last month, registering its sharpest decline in eight months, according to figures released Wednesday by the Federal Reserve. American factories, mines and utilities reduced their output by 0.5 percent in April, compared to a predicted drop of 0.2 percent.
On Thursday, the Federal Reserve Bank of Philadelphia said its economic index for the Mid-Atlantic region fell dramatically in May, to minus 5.2 from plus 1.3 in April, indicating an economic contraction.
Walmart announced that sales at its US stores fell by 1.4 percent in the first quarter, and visits to its stores fell by 1.8 percent. The drop in sales by the retailer, which sells primarily to working class people, reflects the impact of falling wages and continuing mass unemployment.
The negative figures prompted commentators to predict a slowdown in US growth in the second quarter of the year comparable to the last three months of 2012, when the economy slowed to a crawl. “Second-quarter growth is going to be slower than the first quarter,” Julia Coronado, an economist for BNP Paribas, told Bloomberg News.
The US economy added 138,000 jobs in March and 165,000 in April, barely enough to keep up with population growth.
The negative figures for the United States came the same week that Eurostat, the European Union’s statistics service, reported the euro area economy contracted by 0.2 percent in the first quarter, worse than the 0.1 percent contraction economists had expected. This made the current contraction the longest since the euro was introduced in 1999, longer even than the contraction in 2008-2009.
Earlier this month, Eurostat said that unemployment in the euro zone hit another record in March, climbing for the 23rd consecutive month. The official unemployment rate in the euro area hit 12.1 percent, up 1.1 percentage points from a year earlier.
Last week, Greece’s statistics service said the country’s youth unemployment rate reached a staggering 64.2 percent, up from 54.1 percent in March 2012.
Led by the Federal Reserve, central banks throughout the world have sought to stave off the effects of the global slump through massive infusions of cash into the world financial system. This has served to inflate stock values and corporate profits even as the ruling class intensified its assault on jobs, wages and social services, driving the world economy deeper into slump.
There are indications, however, that the effectiveness of these vast and unprecedented money-printing operations in staving off deflation is reaching its limit. The Labor Department said Thursday that consumer prices in the United States fell by 0.4 percent in May, the sharpest fall since late 2008. This marked the second consecutive month of falling prices, after a 0.2 percent decline in April.
Over the past twelve months, prices have grown by only 1.1 percent, about half the target rate set by the Federal Reserve. “Further falls in US core inflation in the coming months may make some Fed officials concerned about very low inflation, or even deflation,” Paul Dales, an economist with Capital Economics, told Reuters.
Nearly five years after the financial crash of September 2008, there is no recovery in sight. Depression-like conditions in the real economy combined with an unsustainable stock market bubble demonstrate that the crisis is not a temporary downturn that will pass and give way to pre-crisis conditions. Rather, it is a breakdown of the world capitalist system, with no prospect within the framework of that system of relief for the broad masses of working people.
No government anywhere in the world, whether of the official “left” or right, has any policies to offer to address mass unemployment, falling living standards and growing poverty. On the contrary, they all pursue the bankers’ agenda of deeper and more brutal cuts.
Following this week’s report that France had officially fallen into recession for the first time since 2008, the country’s Socialist Party president, Fran├žois Hollande, reaffirmed his commitment to austerity policies, saying, “We have engaged in reforms [to address] competitiveness and we will continue.”
In the United States, the Defense Department announced Wednesday that it would begin unpaid furloughs for hundreds of thousands of its civilian employees as part of the imposition of $85 billion in “sequester” budget cuts this fiscal year. And the Obama administration is preparing a sweeping attack on Social Security and Medicare, proposing to cut a combined total of more than $500 billion from the two programs over ten years and implement structural changes that will slash benefits for millions of retirees.
In Detroit, once the symbol of the industrial might of American capitalism, the governor of Michigan has imposed a bankers’ dictatorship in the form of an emergency manager, who this week announced a plan to slash city workers’ wages and pensions, sell off assets such as the water and sewerage department, and shut down services to whole sections of the city.
The worsening economic crisis and the predatory response of the ruling class will give rise to vast social struggles. Already the impact of the crisis and the transparent role of governments as agents of the financial elite are producing far-reaching changes in mass consciousness.
Millions all over the world are losing confidence in the capitalist system and coming to the conclusion that radical change is needed. But for the emerging struggles to succeed, they must be guided by a conscious understanding of the nature of the system and the need for an independent and revolutionary struggle by the working class for power. Society must be reorganized to satisfy social needs, not private profit. The critical issue is the building of a revolutionary leadership in the working class.

Food Stamp Cuts Pursued By GOP, Despite Shrinking Deficit

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Congressional Republicans are seeking deeper cuts to nutrition programs this year even as the federal budget deficit is shrinking faster than expected.
The deficit-obsessed House GOP wanted a $16 billion cut to food assistance last year, when the deficit topped $1 trillion, and now wants a $20 billion cut this year, when the deficit is expected to be $642 billion. What gives?
"As long as we're six or seven hundred billion dollars out of balance, all parts of government have to do their part to restore fiscal integrity to the system," Rep. Frank Lucas (R-Okla.), chairman of the House Agriculture Committee, said on Wednesday.
Lucas is the co-author of a new farm bill that will trim both agriculture subsidies and the Supplemental Nutrition Assistance Program, often known as food stamps. His measure would save $20 billion over 10 years by increasing the program's eligibility standards, resulting in nearly 2 million fewer Americans receiving benefits.
"That doesn't mean taking food away from people who qualify, it just means everybody has to qualify, to demonstrate their eligibility through their income and their assets," Lucas said.
Thanks to a terrible economy, average monthly food stamp enrollment rose significantly from 26 million in 2007 to nearly 47 million last year at an $80 billion cost, according to the Congressional Budget Office. Three-quarters of households receiving nutrition assistance included a child, a disabled person or an elderly person, and 85 percent had incomes below the federal poverty line. Monthly benefits averaged $133 per person last year.
Those benefits are already set to decline this year, as a stimulus boost to the program will expire at the end of October.
As many as three-quarters of SNAP enrollees qualify based on their participation in another means-tested safety net program, CBO says. This so-called categorical eligibility allows states to reduce paperwork by not having to collect the same information multiple times. Most people who qualify for food assistance because they already receive other benefits would still meet SNAP's federal standards, but not all would.
Lucas's farm bill, co-authored with Rep. Collin Peterson (D-Minn.), would require more SNAP recipients to pass asset and income tests to prove they're poor. It would also stop states from sending nominal heating assistance checks, some as small as $1, to instantly qualify people for food stamps, instead requiring such checks to be at least $20.
Last year's House draft farm bill saved less money because it required these "Heat and Eat" checks to be only $10. Lucas has said he went for deeper cuts this year because he wanted to match the $37.8 billion worth of agriculture savings in President Barack Obama's latest budget blueprint. (Obama's budget achieved its savings by eliminating direct farm payments and reducing crop subsidies, not by cutting food stamps.)
Most Democrats on the agriculture committee Wednesday supported an unsuccessful amendment by Rep. Jim McGovern (D-Mass.) to undo the food stamp cuts, which McGovern said will "increase hunger and exacerbate nutrition problems in this country." Lucas said he expects the committee to approve the bill sometime late on Wednesday. If it is approved by the full House in coming months, it would then need to be reconciled with a Senate-passed farm bill that proposes much more modest cuts.
The latest news of deficit reduction comes as even some conservative economists have suggested there is no further need for budget cutting. But other House Republicans on the agriculture committee seemed unimpressed by the notion that a shrinking deficit might be cause to lay off the austerity.
"It needs to go away," said Rep. Mike Rogers (R-Ala.) of the budget gap. "We can't start paying down that $17 trillion in debt till we get rid of the deficit."