CONTENTS / BLOG (20), Just World Campaign

• Gagged US whistleblower reports to London Sunday Times [Arming Pakistan with nuclear.]         

Gagged US whistleblower reports to London Sunday Times

   The Sunday Times (Britain), www.timesonline world/middle_ east/article 3137695.ece , January 6, 2008
   A WHISTLEBLOWER has made a series of extraordinary claims about how corrupt government officials allowed Pakistan and other states to steal nuclear weapons secrets.
   Sibel Edmonds, a 37-year-old former Turkish language translator for the FBI, listened into hundreds of sensitive intercepted conversations while based at the agency's Washington field office.
   She approached The Sunday Times last month after reading about an Al-Qaeda terrorist who had revealed his role in training some of the 9/11 hijackers while he was in Turkey.
   Edmonds described how foreign intelligence agents had enlisted the support of US officials to acquire a network of moles in sensitive military and nuclear institutions.
   Among the hours of covert tape recordings, she says she heard evidence that one well-known senior official in the US State Department was being paid by Turkish agents in Washington who were selling the information on to black market buyers, including Pakistan.
   The name of the official - who has held a series of top government posts - is known to The Sunday Times. He strongly denies the claims.
   However, Edmonds said: "He was aiding foreign operatives against US interests by passing them highly classified information, not only from the State Department but also from the Pentagon, in exchange for money, position and political objectives."
   She claims that the FBI was also gathering evidence against senior Pentagon officials - including household names - who were aiding foreign agents.
   "If you made public all the information that the FBI have on this case, you will see very high-level people going through criminal trials," she said.
   Her story shows just how much the West was infiltrated by foreign states seeking nuclear secrets. It illustrates how western government officials turned a blind eye to, or were even helping, countries such as Pakistan acquire bomb technology. [more]
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   The wider nuclear network has been monitored for many years by a joint Anglo-American intelligence effort. But rather than shut it down, investigations by law enforcement bodies such as the FBI and Britain's Revenue & Customs have been aborted to preserve diplomatic relations.
   Edmonds, a fluent speaker of Turkish and Farsi, was recruited by the FBI in the aftermath of the September 11 attacks. Her previous claims about incompetence inside the FBI have been well documented in America.
   She has given evidence to closed sessions of Congress and the 9/11 commission, but many of the key points of her testimony have remained secret. She has now decided to divulge some of that information after becoming disillusioned with the US authorities' failure to act.
   One of Edmonds's main roles in the FBI was to translate thousands of hours of conversations by Turkish diplomatic and political targets that had been covertly recorded by the agency.
   A backlog of tapes had built up, dating back to 1997, which were needed for an FBI investigation into links between the Turks and Pakistani, Israeli and US targets. Before she left the FBI in 2002 she heard evidence that pointed to money laundering, drug imports and attempts to acquire nuclear and conventional weapons technology.
   "What I found was damning," she said. "While the FBI was investigating, several arms of the government were shielding what was going on."
   The Turks and Israelis had planted "moles" in military and academic institutions which handled nuclear technology. Edmonds says there were several transactions of nuclear material every month, with the Pakistanis being among the eventual buyers. "The network appeared to be obtaining information from every nuclear agency in the United States," she said.
   They were helped, she says, by the high-ranking State Department official who provided some of their moles - mainly PhD students - with security clearance to work in sensitive nuclear research facilities. These included the Los Alamos nuclear laboratory in New Mexico, which is responsible for the security of the US nuclear deterrent.
   In one conversation Edmonds heard the official arranging to pick up a $15,000 cash bribe. The package was to be dropped off at an agreed location by someone in the Turkish diplomatic community who was working for the network.
   The Turks, she says, often acted as a conduit for the Inter-Services Intelligence (ISI), Pakistan's spy agency, because they were less likely to attract suspicion. Venues such as the American Turkish Council in Washington were used to drop off the cash, which was picked up by the official.
   Edmonds said: "I heard at least three transactions like this over a period of 2 years. There are almost certainly more."
   The Pakistani operation was led by General Mahmoud Ahmad, then the ISI chief.
   Intercepted communications showed Ahmad and his colleagues stationed in Washington were in constant contact with attachs in the Turkish embassy.
   Intelligence analysts say that members of the ISI were close to Al-Qaeda before and after 9/11. Indeed, Ahmad was accused of sanctioning a $100,000 wire payment to Mohammed Atta, one of the 9/11 hijackers, immediately before the attacks.
   The results of the espionage were almost certainly passed to Abdul Qadeer Khan, the Pakistani nuclear scientist.
   Khan was close to Ahmad and the ISI. While running Pakistan's nuclear programme, he became a millionaire by selling atomic secrets to Libya, Iran and North Korea. He also used a network of companies in America and Britain to obtain components for a nuclear programme.
   Khan caused an alert among western intelligence agencies when his aides met Osama Bin Laden. "We were aware of contact between A Q Khan's people and Al-Qaeda," a former CIA officer said last week. "There was absolute panic when we initially discovered this, but it kind of panned out in the end."
   It is likely that the nuclear secrets stolen from the United States would have been sold to a number of rogue states by Khan.
   Edmonds was later to see the scope of the Pakistani connections when it was revealed that one of her fellow translators at the FBI was the daughter of a Pakistani embassy official who worked for Ahmad. The translator was given top secret clearance despite protests from FBI investigators.
   Edmonds says packages containing nuclear secrets were delivered by Turkish operatives, using their cover as members of the diplomatic and military community, to contacts at the Pakistani embassy in Washington.
   Following 9/11, a number of the foreign operatives were taken in for questioning by the FBI on suspicion that they knew about or somehow aided the attacks.
   Edmonds said the State Department official once again proved useful. "A primary target would call the official and point to names on the list and say, 'We need to get them out of the US because we can't afford for them to spill the beans'," she said. "The official said that he would 'take care of it'."
   The four suspects on the list were released from interrogation and extradited.
   Edmonds also claims that a number of senior officials in the Pentagon had helped Israeli and Turkish agents.
   "The people provided lists of potential moles from Pentagon-related institutions who had access to databases concerning this information," she said.
   "The handlers, who were part of the diplomatic community, would then try to recruit those people to become moles for the network. The lists contained all their 'hooking points', which could be financial or sexual pressure points, their exact job in the Pentagon and what stuff they had access to."
   One of the Pentagon figures under investigation was Lawrence Franklin, a former Pentagon analyst, who was jailed in 2006 for passing US defence information to lobbyists and sharing classified information with an Israeli diplomat.
   "He was one of the top people providing information and packages during 2000 and 2001," she said.
   Once acquired, the nuclear secrets could have gone anywhere. The FBI monitored Turkish diplomats who were selling copies of the information to the highest bidder.
   Edmonds said: "Certain greedy Turkish operators would make copies of the material and look around for buyers. They had agents who would find potential buyers."
   In summer 2000, Edmonds says the FBI monitored one of the agents as he met two Saudi Arabian businessmen in Detroit to sell nuclear information that had been stolen from an air force base in Alabama. She overheard the agent saying: "We have a package and we're going to sell it for $250,000."
   Edmonds's employment with the FBI lasted for just six months. In March 2002 she was dismissed after accusing a colleague of covering up illicit activity involving Turkish nationals.
   She has always claimed that she was victimised for being outspoken and was vindicated by an Office of the Inspector General review of her case three years later. It found that one of the contributory reasons for her sacking was that she had made valid complaints.
   The US attorney-general has imposed a state secrets privilege order on her, which prevents her revealing more details of the FBI's methods and current investigations.
   Her allegations were heard in a closed session of Congress, but no action has been taken and she continues to campaign for a public hearing.
   She was able to discuss the case with The Sunday Times because, by the end of January 2002, the justice department had shut down the programme.
   The senior official in the State Department no longer works there. Last week he denied all of Edmonds's allegations: "If you are calling me to say somebody said that I took money, that's outrageous … I do not have anything to say about such stupid ridiculous things as this."
   In researching this article, The Sunday Times has talked to two FBI officers (one serving, one former) and two former CIA sources who worked on nuclear proliferation. While none was aware of specific allegations against officials she names, they did provide overlapping corroboration of Edmonds's story.
   One of the CIA sources confirmed that the Turks had acquired nuclear secrets from the United States and shared the information with Pakistan and Israel. "We have no indication that Turkey has its own nuclear ambitions. But the Turks are traders. To my knowledge they became big players in the late 1990s," the source said.

   How Pakistan got the bomb, then sold it to the highest bidders
   1965 Zulfikar Ali Bhutto, Pakistan's foreign minister, says: "If India builds the bomb we will eat grass … but we will get one of our own"
   1974 Nuclear programme becomes increased priority as India tests a nuclear device
   1976 Abdul Qadeer Khan, a scientist, steals secrets from Dutch uranium plant. Made head of his nation's nuclear programme by Bhutto, now prime minister
   1976 onwards Clandestine network established to obtain materials and technology for uranium enrichment from the West
   1985 Pakistan produces weapons-grade uranium for the first time
   1989-91 Khan's network sells Iran nuclear weapons information and technology
   1991-97 Khan sells weapons technology to North Korea and Libya
   1998 India tests nuclear bomb and Pakistan follows with a series of nuclear tests. Khan says: "I never had any doubts I was building a bomb. We had to do it"
   2001 CIA chief George Tenet gathers officials for crisis summit on the proliferation of nuclear technology from Pakistan to other countries
   2001 Weeks before 9/11, Khan's aides meet Osama Bin Laden to discuss an Al-Qaeda nuclear device
   2001 After 9/11 proliferation crisis becomes secondary as Pakistan is seen as important ally in war on terror
   2003 Libya abandons nuclear weapons programme and admits acquiring components through Pakistani nuclear scientists
   2004 Khan placed under house arrest and confesses to supplying Iran, Libya and North Korea with weapons technology. He is pardoned by President Pervez Musharraf
   2006 North Korea tests a nuclear bomb
   2007 Renewed fears that bomb may fall into hands of Islamic extremists as killing of Benazir Bhutto throws country into turmoil
   [COMMENT: Several previous atomic-bomb spies, including the Rosenbergs and Klaus Fuchs, were caught spying for the Soviet Union in the 1940s and 1950s.  Some elements of The Establishment and the Left pretend this did not happen, and that the Rosenbergs were executed unjustly.  The pressure on the greedy elements of Big Business was, also, seemingly irrestible, and has been documented. COMMENT ENDS.]
   [KORAN: 22:19 (or 22:20):- … But as for those who disbelieve, garments of fire will be cut out for them; boiling fluid will be poured down on their heads. < www.submission. org/ suras/ sura22.html #19 > DOCTRINE ENDS.]
   [ACKNOWLEDGEMENT: Michael P, e-mail of Jan 24, 08. ENDS.] [Jan 6, 08]

• Economic Democracy and a Guide to the 2008 U.S. Presidential Election.

Economic Democracy and a Guide to the 2008 Presidential Election

   Global Research (Canada), index.php? context=va& aid=7762 , by Richard C. Cook, January 10, 2008
   The United States is at a crossroads. In the midst of a stalling economy, a decline in the standard of living for a majority of the nation’s population, out-of-control societal debt, growing concentration of wealth among the upper income brackets, and a stampede toward totalitarian governance derived from the disastrous Mideast war policy of the Bush/Cheney administration, an unprecedented number of people are saying the nation is headed in the wrong direction. Poll numbers on the performance of both President George W. Bush and the Democratic-controlled Congress are at historic lows.
   2008 clearly represents an opportunity for the nation’s voters to seek a new direction. With a presidential election now less than a year away and the primaries having begun, an abundance of new ideas might be expected.
   First, Iowa.
   The winners in the Iowa caucuses were those candidates who have been arguing most forcefully for change. The Democratic winner was Barack Obama, for whom the word “change” is a mantra. John Edwards, who has made himself the voice of working class populism, was second. Hillary Clinton, the candidate of “experience,” finished third, though she is clearly the “safe” choice of the U.S. mainstream media and political establishment. Also sounding populist themes was Republican Mike Huckaby [? Huckabee] in an unexpected victory achieved perhaps in part by having at his side for photo ops the comforting presence of TV strongman/good-guy Chuck Norris.
   Moving on to New Hampshire. There Obama was enjoying a double-digit lead over Clinton in the polls the night before the primary. Somehow, Hillary not only erased that lead during the silence of night but forged ahead to win decisively the next day. Were the pollsters dead wrong or was the voting system rigged for the establishment favorite? The controversy has begun to rage, though we will likely never know. In any case, the Obama momentum has hit a wall.
   Meanwhile, on the Republican side, “Lazarus” John McCain saw his moribund candidacy revived in a victory over big-spending Mitt Romney. McCain pulled it out on the basis of no evident rhyme, reason, or principles. He just seemed to be the familiar Republican voice the voters felt most comfortable with. Huckaby [? Huckabee] was in the shadows, there being few fundamentalist Christian voters in the comfortable middle-class towns and shires of the Granite State.
   But amidst the hysteria, none of the leading candidates has put forward a program that will solve the huge problems the country now faces.
   In order to see where we are today, we must examine where we have come from. The reader is forewarned. This is a long article, with some diversions into the murky history of U.S. finance. So please be patient.
   What follows first is an overview and analysis of the economics of the modern industrial age. Such an overview is essential in understanding that economic issues do not occur in a vacuum, not do they come into being overnight. Rather what the U.S. faces today is a crisis rooted in history.
   But first, as to sources. With good reason economics is called the “dismal science.” Never has it been more dismal than today, with most economists bogged down in meaningless mathematical modeling of the free-market economy or in ideological justifications of the status quo.
   One of the exceptions was John Kenneth Galbraith (1908-2006), New Dealer, Harvard professor, and prolific historian. The following account draws in part on Galbraith’s A Journey Through Economic Time: A Firsthand View, published early during the first Clinton administration in 1994.
   Modern Economics and the Tragedy of Capitalism
   Modern economics deals with the industrial age, which began to emerge in Western nations by the late eighteenth century. The industrial age is that period of recent history defined by the application of mechanical energy–starting with steam power–to the processes of production, transportation, and communications.
   Politically, the century-and-a-half between the American Revolution (1775-1783) and World War I (1914-1918) saw a historic struggle between the new world of emerging capitalism as a method of organizing the application of industrial power, and the old one of entrenched feudalism, defined as the control of land by a hereditary aristocracy. As Galbraith made clear, the power of feudal society had been broken for good by the time World War I came to an end.
   By then, capitalism, defined as private ownership of the means of production, had advanced furthest in Great Britain, the U.S., Germany, and Japan. Close behind were France, Russia, and Italy. Ownership under this system was secured entirely by the possession of money. Living side-by-side with a relatively small number of industrial entrepreneurs and finance capitalists were the growing masses of landless workers who had relocated from farms to the cities. Agriculture was also becoming mechanized, but in this case capital gravitated toward the marketing and distribution of farm products and to financing of the planting-to-harvest cycle. But even in the production of food, money, as opposed to human and animal labor, came to dominate.
   But as Galbraith explained, “the tendency of capitalism [was] to grave instability,” with workers often losing their jobs during business “panics” or due to automation. In Great Britain and the U.S., this instability tended to be viewed as natural, the idea being that any attempt by the state to interfere in market dynamics would only make matters worse. As a corollary, the understanding of economics by the political world, which remained mired in medieval concepts natural to a landed aristocracy, remained shockingly primitive.
   The belief in the essential “rightness” of the free market was promoted most strongly by the town merchants and money-lenders who wanted to free themselves from the restrictions on commerce and capital by the policies of mercantilism. This was the system by which the kings and princes of Europe attempted to control commercial activity for the benefit of their hereditary regimes and the fixed class structure which they saw as fostering national wealth and social stability.
   The new capitalist economics, by contrast, was transnational in scope, since money as an abstract concept knew no boundaries. This epochal change was reflected in what came to be called “classical,” “liberal,” or “laissez-faire” economics. This set of ideas originated with the British writers Adam Smith (1723-1790) and David Ricardo (1772-1823), who saw the private sector and government as mutually antagonistic. Their theories became the umbrella under which capitalism began to flourish. In the U.S., this attitude was also in part a legacy of the American Revolution, whose leaders had deeply resented interference by the British government with colonial economic activity.
   Their attitude mirrored the fact that the prosperity of the American colonies depended in large part on the availability of paper money, or scrip, that was issued independently of the Crown or Parliament by the colonial legislatures. This currency fueled commerce even after new issues were outlawed by the Currency Acts enacted by Parliament in 1764. While existing scrip continued to circulate, the shortage of fresh paper money brought on a depression that led directly to action by the Continental Congress to break with Great Britain. Once this step was taken, issuance of continental currency followed as a matter of course.
   The Constitution of 1787 gave the new U.S. government substantial economic power by granting Congress the right to regulate interstate commerce, issue money, levy taxes, and borrow on credit. Still, more than any other nation, the U.S. became the stronghold of free-market ideology and remains so today. Government was viewed as the protector of capitalistic enterprise, which accounts for the radically anti-aristocratic tenor of the American system. But as with many other forces of history, while it may have started as a fresh new idea conceived in opposition to the highly regulated economies of the late medieval period, capitalism as described by classical theory eventually became the encrusted dogma we live under today.
   Classical theory was as much an ideology as a product of scientific analysis. It reflected the way things were supposed to work when the power of money was unleashed, rather than what actually took place day-in-and-day-out. For instance, a key argument made by its proponents as industry developed during the nineteenth century was that an economy has a natural tendency toward a full-employment equilibrium. Thus, it was claimed, because labor is a commodity and workers are natural competitors with each other in vying for jobs, they would accept wages low enough to ensure a living for all.
   Though workers during the nineteenth century often earned barely enough to avoid starvation, the system at least was viewed as tending toward stability. Social Darwinism–survival of the fittest–was a major factor in justifying miserable social conditions, even though this new theology replaced ideals of Christian charity with the harshness of supposed economic necessity. The beneficiaries, of course, were the rich financiers and industrialists, the Robber Barons of the era.
   Digging deeper, we find a central dogma in classical economics which persists today, even though British economist John Maynard Keynes, writing in the 1930s, effectively demolished it as a concept informed people believe in. This was that all business earnings deriving from the sale of goods or services can be defined as income, and so become available to the economy as purchasing power when products are brought to market. This mechanism, in classical theory, is the driving force which supposedly results in jobs for everyone.
   The concept is know as Say’s Law and is the bedrock belief of all classical economists who not only control orthodox economic education but who have carried their beliefs to the point of fanaticism in such extreme laissez-faire philosophies as Libertarianism, the Austrian School of Economics, and the supply-side theories that have driven the Republican Party ideologues of the Reagan and Bush I and II administrations who have tried to spur economic growth by cutting taxes on the upper income brackets.
   Jean-Baptiste Say (1767-1832) was a French businessman and economist who edited and promoted the ideas of Adam Smith. What became known as Say’s Law stated that the production of goods by an economy automatically produces the ability of society to purchase those goods, because earnings from their sale is immediately recycled as purchasing power. Thus prosperity should always result from any stimulation of production.
   In advancing his claims Say wrote: “It is worthwhile to remark that a product is no sooner created than it, from that instant, affords a market for other products to the full extent of its own value. When the producer has put the finishing hand to his product, he is most anxious to sell it immediately, lest its value should diminish in his hands. Nor is he less anxious to dispose of the money he may get for it; for the value of money is also perishable. But the only way of getting rid of money is in the purchase of some product or other. Thus the mere circumstance of creation of one product immediately opens a vent for other products. It is not the abundance of money but the abundance of other products in general that facilitates sales… Money performs no more than the role of a conduit in this double exchange. When the exchanges have been completed, it will be found that one has paid for products with products.” (A Treatise on Political Economy, 1803, p. 138-9)
   By assuming that producers immediately spend the money they receive as the price for goods and services, Say overlooked the key fact of capitalist microeconomics which was that of retained earnings. For an industrial firm in an age where continued technological innovation is a fact of life, a considerable amount of earnings must be retained in order to invest in future improvements. Even if the retained earnings are deposited in a bank they will not necessarily result in new spending. This is because, as modern economist Michael Hudson has demonstrated, bank deposits normally result in lending for asset purchase rather than capital investment. The latter, by contrast, is accomplished through capital markets which are a completely different source of funding than bank lending.
   Say’s law was actually more descriptive of the medieval village economy which still existed in much of Europe rather than modern heavy industry. But it took hold and persisted because it achieved a goal the apologists for capitalism strove mightily to accomplish: to keep government out of the capitalist marketplace except to provide police protection for the emerging monetary power.
   Although some astute observers began to suspect that Say’s Law was wrong and that an endemic “gap” between prices and purchasing power existed in the capitalist system, the causes of this gap at the microeconomic level did not appear until the 1918 publication of a book called Economic Democracy by British engineer Major C.H. Douglas. Douglas characterized the gap as being reflective of positive forces by stating that it really represented the appreciation of the nation’s productive capacity both through the accretion of human knowledge and the harnessing through mechanization of the bounteous energy of nature.
   In order to fill the gap between prices and purchasing power, Douglas proposed that a regular stipend be paid by the government to all citizens, without recourse to taxation or public borrowing, which he called a National Dividend. Douglas’s ideas became a political force in Great Britain and the Commonwealth nations of Canada, Australia, and New Zealand. It was called the Social Credit movement and continues today in those countries. But Douglas’s ideas were opposed by the financiers and their economic apologists because the shortage of purchasing power he identified by now was being filled after a fashion by huge amounts of money lent at interest. This economic fact is what accounts for the enormous economic and political power of the bankers who rule the world today.
   John Maynard Keynes, writing during the Great Depression of the 1930s, was the first major economist to reflect what Douglas had been saying for over a decade by pointing out that all earnings from the sale of goods and services did not find their way back into the economy. Keynes said this was because some of the earnings were saved–i.e., were withheld from immediate spending by producers and consumers alike. Thus there occurred a chronic shortage of income that Keynes said would lead to periodic depressions. As Galbraith–an early American Keynesian–pointed out, during a depression, a new–and this time deficient–equilibrium would settle out at a chronic level of under- or unemployment. It was to break this underperforming state of an economy that Keynes recommended the use of government deficit spending as an alternative to private sector bank lending.
   This solution–though imperfect–came into being during the Great Depression of the 1930s and has persisted. Until then, the notion prevailed that government would do best to stay out of economic matters altogether, even if the system produced a permanent division of society between the haves and have-nots, with the presence of permanent poverty and a permanent underclass prone to crime and dissolution. At that point, the discussion turned on whether the poor were naturally vicious or whether they were victims of their condition and therefore to be pitied, reformed, or “saved” by some social or religious do-gooder. Meanwhile, Douglas’s National Dividend solution was ignored, and Keynes‘s ideas, which led inevitably to the modern Welfare State, were grudgingly implemented as at least allowing capitalism to continue to exist by forestalling a socialist revolution in the Western nations.
   But the fact remained that capitalism produced a deeply conflicted society. As U.S. scholar Page Smith outlined in “The Rise of the Industrial America: A People’s History of the Post-Reconstruction Era,” the central problem of the industrial age was “the war between capital and labor.” This war in the U.S. and Britain was largely won by capital, though labor eventually got better conditions through trade unionism and government regulation of industry, as well as a greater share in the prosperity that science and technology wrought.
   Matters were different elsewhere in the world, particularly in Germany and Japan. Both of these countries tended to see government and business as essentially united in the interest of economic development. On continental Europe, ideas of socialism also had a greater impact than in the English-speaking world, as did the notion that the state had a basic responsibility for worker well-being.
   The economies of Germany and Japan were also unique in their toleration of industrial cartels which operated under state protection. In the U.S. and Britain, on the other hand, while there were tendencies toward cartelization through the toleration of business and financial trusts, the economic ideology was essentially anti-monopolistic in its view of perfectly functioning free markets.
   But there remained a major anomaly in the position of the U.S., in that it never gave up its adherence to a protectionist tariff policy in contrast to the free trade practiced of Britain. Historically, the purpose of tariffs in the U.S. was to protect the growing capitalist enterprises against goods produced in Europe by cheap labor. But even with this major early example of government-sponsored corporate welfare, laissez-faire remained the predominant dogma of U.S. business interests.
   Going back to World War I, it was a catastrophe for Europe, where neither the British nor the German models could protect those nations from bankruptcy. In Russia the result of the war was revolution leading to communism. But the United States, which bankrolled the war through lending, became the world’s financial center. The prosperity that resulted led to the relative bounty of the 1920s, once the country shook off the post-World War I inflation and depression. But this prosperity ended in the collapse of a vast bank-generated speculative bubble when the stock market crashed in 1929.
   The U.S. government was completely unprepared for the Great Depression. Upon election in 1932, President Franklin D. Roosevelt was as committed to laissez-faire economics as his Republican predecessors. But he and his aides could see that elsewhere in the world, particularly Italy, Germany, and the Soviet Union, governments were taking control and rebuilding their national economies, if necessary, by force.
   So the U.S., also of necessity, began to implement measures that could be and were criticized as socialistic but which were still an absolute requirement for the survival of a functioning nation. Both the United States and the other Western democracies, along with the emerging totalitarian states, finally acknowledged that, as a minimum, vulnerable segments of their populations, such as the unemployed and the elderly, had a right to at least a small degree of income security whether or not they had jobs.
   One method employed by the Roosevelt administration to pull the U.S. out of the Depression was a limited program of wage and price controls under the National Recovery Act. Job-creation programs were also used, such as the Public Works Administration, the Works Progress Administration, and the Civilian Conservation Corps. Social Security and unemployment compensation came into being, and infrastructure projects such as the Tennessee Valley Authority and the Boulder and Grand Coulee Dams provided both jobs and electrical power. The Reconstruction Finance Corporation provided low-interest loans to both the public and private sectors, and the Rural Electrification Administration brought electricity to the countryside.
   The face of modern America was molded by these and other New Deal government-sponsored programs. Classical economics, it seemed, had been thrown on the refuse pile of history. At last a full-employment economy was on its way to being achieved, erected on the ruins of the free-market economic system that had failed. The main sources of financing the new system were government borrowing and a stiff income tax, especially affecting the upper income brackets.
   By now the problem had been recognized among mainstream economists and politicians–the modern industrial state did not in fact generate enough purchasing power to support full employment. Keynes and his followers referred to purchasing power by the term “aggregate demand.” The creation of sufficient aggregate demand now became the central objective of governmental economic policy in the U.S. and other Western industrial nations.
   It was World War II that completed the task in the U.S. of creating a full-employment industrial economy. The war, with its rationing and shortage of consumer goods, resulted in so much unspent income for working people that savings rates soared. This savings provided the impetus for post-war prosperity all the way through the 1950s and into the 1960s. The prosperity was buttressed by a favorable trade balance with respect to the rest of the world which had not yet recovered from the war. Sale of U.S. goods abroad also benefited from purchases of American products, including foodstuffs, by other nations which borrowed from U.S. banks through the International Monetary Fund.
   But by the 1960s, profound changes were stirring. As the U.S. economy slowed, President John F. Kennedy responded, not by fiscal pump-priming, but by cuts in income tax rates. The idea was that money could be more effectively spent by individuals than by the government. While this may have been true, it was a fact that aggregate social demand had begun to decline, especially with the diversion of economic resources into expenditures for the Vietnam War.
   Still, by the end of the 1960s, the U.S. was prosperous enough for President Lyndon B. Johnson and, to some extent, President Richard M. Nixon, to contemplate the elimination of poverty once and for all. The War on Poverty came into being, but at a critical moment around 1970 the movement to utilize macroeconomics to solve the endemic problem within a capitalistic system of a permanent division between the haves and the have-nots ran out of steam. This came with the failure of the U.S. government to enact a basic income guarantee, also known at the time as the reverse income tax. The symbolic moment was the defeat, led by Southern conservatives in the Senate, of Nixon’s Family Assistance Act in 1970.
   Galbraith, virtually alone among economists, saw the failure to provide a real solution to poverty as a watershed event. He connected this failure to military spending by writing, “A highly effective design for avoiding succor to the poor is to put forward the higher claims of war, defense, the military.” He noted that in 1972, Senator George McGovern proposed a negative income tax “that would have provided a basic underpinning of income for all Americans.” McGovern was opposed within his own party, most notably by former Vice President Hubert Humphrey, and the idea never made it to the 1972 election campaign, where McGovern was soundly defeated by Nixon anyway.
   The idea of unconditional income security, says Galbraith, “was permanently buried.” It was perhaps the last, best chance for American capitalism to solve the basic problem of inequality and unfairness which had caused the ideologies of socialism and communism to appear so appealing to people around the world for so many decades. It was a broad-spectrum failure of the capitalistic ruling class to realize that the bounty of science and technology created the opportunity for an entire society to rise to a new level of security and culture, not just those with good jobs or plenty of assets.
   Above all, this can be seen as a spiritual failure, a failure “to love thy neighbor as thyself.” Instead, the rulers of society chose to embrace a consumer-based economy, where those with the best employment and who owned the businesses would luxuriate in “the good life,” while the rest of the people got along as best they could with limited opportunity and access to resources.
   The point to be made is that the basic income guarantee–negative income tax–was not just an “antipoverty” measure. It was a guarantee of income security to the entire nation. No person would ever have to fear permanent loss of income and the degeneration of status, humiliation, and ill health that go with it. No one would have to fear these things befalling relatives, parents, or children. Without income security, an entire nation–or world–becomes subject to an ever-present emotion of fear. Lack of income security in a capitalistic economy makes fear and other negative emotions the predominant coloring of individual and social life. Many people then pray to God for deliverance when the cause is economic and social institutions engendered by the wealthy controllers of society.
   The 1970s was a decade of economic disasters. As this author wrote in his recent article, “Crisis in the U.S.: Plan B?”: “The 1970s had seen catastrophic economic developments. It started with the removal of the gold-peg to the dollar in 1971 and continued with the explosion of U.S. currency on the international scene due to the petrodollar, soaring trade and fiscal deficits, action to permanently mortgage us to military-backed dependence on imported Middle Eastern oil, a permanent tilt in favor of Israel vs. the Islamic world, and, finally, the galloping 1970s inflation. These events led to the Fed-induced crash of 1979-1983 which left us with today’s travesty of a ‘service’ economy.”
   The 1970s were followed by the “Reagan Revolution” of 1980-1988, which continued through the Bush I administration until the election of Bill Clinton in 1992. In the words of Galbraith: “Tax reduction oriented to the affluent, unduly enhanced defense expenditure, and a large deficit in the federal budget were the prime manifestations of error. Related was a large and persistent deficit in the American balance-of-payments account, causing the United States to shift from being the world’s largest creditor to being, by a wide margin, its largest debtor. There was erosion of the nation’s competitive economic position, social tension in the big cities, financial speculation and manipulation extending on to widespread and unsubtle larceny and, in the end, the painful recession cum depression of the early 1990s.” (A Journey Through Economic Time: A Firsthand View, p. 210.)
   Galbraith acknowledged Reagan’s remarkable success in one particular area: “The striking achievement of the Reagan policies--was the improvement he made in the fortunes of the affluent and the rich while visiting neglect upon the poor. Here the results are beyond question. No one will ever have any reasonable doubt that Mr. Reagan did keep faith with his constituency.”
   What was called “Reaganomics” was a unique hybrid in combining the worst features of laissez-faire capitalism in turning the economy over to deregulated business interests–particularly financial institutions–with Keynesian-style deficit spending consisting largely of a massive windfall for the military-industrial complex. Note too that most of the profits from military spending–deriving in particular from development of the technology-rich military infrastructure characteristic of the U.S. with its emphasis on air and sea power–went to the affluent who provided the backbone of political support to the Republican Party. The military-industrial complex ever since has flourished due to corporate welfare at its very worst.
   Naturally a military establishment so endowed with borrowed dollars for which they are essentially never accountable would exercise itself on behalf of whatever the controlling parties sought to accomplish by way of foreign wars. First we had the “Reagan Doctrine” of proxy wars in El Salvador, Nicaragua, Angola, and Afghanistan, leading to the Bush I wars in Panama and Iraq, transitioning into Bill Clinton’s military excursions into the Balkans, then culminating in the explosion of military conflict in Afghanistan, Iraq, and perhaps now Iran under President George W. Bush.
   Again, it has all been paid for with borrowed money, even as the Reagan tax cuts for the rich were, under Bush II, renewed and extended. And, in the ultimate Keynesian insult to any lingering notion of fiscal prudence, the wars of George W. Bush haven’t even appeared in the federal budget. They have been paid for by “supplemental” appropriations enacted by a compliant Congress coerced into showing that they, like the president, “support the troops.”
   From Reagan’s first administration until today, the income and wealth gaps between rich and poor have deepened. Public and private industrial and service infrastructures, including public school systems, have crumbled, even as private consumer expenditure, led by the comfortable and well-off, has soared. Economic growth during the Reagan years was driven by luxury products for the rich and credit-card spending by the middle class.
   From all this, a personality type has emerged which defines those at the top of our culture. Immaculately-dressed, including the finest designer clothes; well-manicured and enjoying the best of health care–including plastic surgery and beautification spruce-ups; a sex-life buoyed by Viagra and Cialis; well-invested and occupying or retired from the best jobs in business, the professions, and the military; with personalities that are demanding, petulant, conceited, haughty, refined, sophisticated and knowledgeable in regard to utilizing the finest consumer products available; with their looming hysteria kept at bay by prescription anti-depressants; and mostly solidly Republican, though sometimes molded in pro-business Clintonesque tradition of the Democratic Leadership Council: these are the people in charge of the U.S. today.
   This class of privileged Americans embodies the abject failure of capitalism since it firmly and finally turned its back on any real intent of fairness, equality, or sharing of the bounty deriving from the industrial age. Again, the denial of responsibility began in earnest with the rejection of proposals for a basic income guarantee in the late 1960s and early 1970s. It continued with the Reagan Revolution and the Reagan tax cuts. It marched on through the Clinton years and has now achieved full flower in the proto-fascism of the Bush-Cheney administration. Each of these political phases has been floated by a financial bubble–the merger/acquisition buyout bubble during the Reagan/Bush I years, the bubble of the Clinton presidency; and the housing/equity/hedge fund bubble of the Bush II economy.
   The values of the privileged world which have subsisted inside these bubbles are based upon “ownership.” People define themselves not by what they are, but by what they possess. This extends into their social activities and affiliations, which are a type of possession.
   What house, what car, what clothes, what furnishings; where they vacation and how they travel; the gifts they give and the ones they get; the schools they went to and the ones their children attend; their music, their tastes, their celebrations: all are manufactured to suit the upscale image.
   This world is defined by a word: “consumerism.” It’s what keeps the wheels of the economy turning, because a constant “cash flow” must be generated to keep trade, jobs, and taxes in motion. There is never any rest, except with medication, never any introspection, unless in “yoga classes.” Individuals themselves are in a perpetual state of fantasy, frustration, and anger, as any service industry worker knows who has been on the receiving end of an angry consumer complaint.
   The nature of the consumer society was aptly defined by Mike O’Flaherty in a 1999 article in Baffler 12 entitled, “Rockerdämmerung.” Speaking of the music industry in terms that apply to all lines of consumerism he wrote: “Planned obsolescence, the promise of the new and improved, the sneer of willful cultural amnesia–these are the values of the marketplace, radical only in their destructiveness--All around the world, people are losing their ability to imagine anything outside the eternal present of a transnational corporate capitalism, the depth and breadth of which now seems virtually limitless. And they are beginning to forget that anyone ever imagined something beyond it.”
   With Reaganomics and what has followed, the takeover of the world by consumerist/capitalism has almost been completed. Within their world the affluent who oversee this culture reside in a bubble of vanity and denial. Above all, this class of Americans is convinced, from the bottom of their hearts, that war is a good thing if: a) if it can be rationalized as being caused by the alleged actions of foreign evildoers; and b) if the Americans who die in the war are the sons and daughters of poor people.
   But the poor people are the flies in the ointment. One of the biggest economic problems in the U.S. today is the shortage of minimum wage workers for the necessary service jobs. It’s why the rich welcome “undocumented workers.” Unfortunately, there is nowhere left in America where service industry workers can even afford to live. The ever-growing underclass upon which the affluent depend is increasingly in danger of poverty, incarceration, or even extermination due to the collapse of health and social services. And increasingly the underclass consists of former members of the middle class who can’t get decent jobs or jobs with benefits. This has engendered a level of fear and frustration which is doubtless a driving force in the populist politics of the 2008 presidential campaign.
   Much of the underclass is hidden from view. Many live with their parents or in group houses that used to be the homes of middle class families. Taking a broader view, the underclass now can be said to include literally hundreds of millions of people or more, because many are living in foreign nations which, on our shrinking globe, are actually the slums of the global system.
   The underclass includes the more than two million U.S. citizens in prison, almost a million homeless, millions more of illegal immigrants working at jobs below the minimum wage, plus millions abroad who work in sweatshops or slavery-like conditions assembling consumer products for American markets. Then there are the millions in nations whose labor services the debts their countries owe to the International Monetary Fund or foreign banks and investors.
   Again back at home there are millions more Americans in debt to financial institutions, including those who must work for years to pay off student loans, probably a million women who work in the sex industry just to survive, and millions of college graduates who can’t get decent jobs, so are employed in “food service” and the like.
   Finally, we should mention the million or more in the Middle East who have been killed or displaced by Bush/Cheney-initiated wars, plus the millions in underdeveloped nations who languish outside or on the fringes of the global system.
   Many of these human beings may be regarded as the throwaway refuse of capitalism. But worldwide a revolt is growing. The chief alternative to American-style capitalism can be found in Russia, which today is seeing a resurgence which the U.S. establishment loathes and fears. Russia’s success lies in its increasingly potent and effective combination of market economics combined with the socialist institutions left over from Soviet days.
   After all, communism had succeeded in mastering the intricacies of heavy industry. It was in the areas of consumer production and political freedom that brought communism to a halt. The new Russia has addressed those problems to a considerable degree. Contrary to the fulminations of the Washington Post, Russia is today a democracy with vastly improving living conditions. Similar conditions are being established in Venezuela by the government of Hugo Chavez and are starting to appear in other Latin American nations, such as Argentina, which have broken away from the “Washington consensus.”
   These reflections leave us with the inescapable conclusion that overall, the most salient fact of modern economics is that of the tragedy of capitalism. The system is tragic because it diverted the productivity of science and technology, which is neutral with respect to political ideology and which is capable of producing its material bounty under a diversity of systems of ownership, to a condition of terrible abuse by the property-owning class.
   It might have been a relatively simple matter for the capitalist class to share the good things of life which are so capable of easing the burden of human life. Instead, they have monopolized this bounty for themselves and their families and associates to the detriment of the majority of the people of the world. They have created for themselves a legal, ideological, and physical fortress and ringed it with police forces and armies. Rather than allowing the modern age to become increasingly democratic and altruistic, they have created a dictatorship of the financial elite. It is now a dictatorship that is hardening to protect itself.
   With the 2008 U.S. presidential election, it should be the task of the candidates to challenge this dictatorship and find a way for a peaceful transition to a new economic paradigm. But while they call for change, there is no indication the candidates know what to change.
   The U.S. Banking System
   A special word is in order for the U.S. banking system which has played such a dominant role in the economic events of recent decades. It is this system which forms the power base of the dictatorship of the financial elite.
   Of course banks have existed for millennia. Because the history of banking and finance have been treated in several other articles by this author that have appeared during the last several months on Global Research and other websites, that information will not be repeated here.
   It is important to note, however, that throughout history, banks have always operated under some kind of charter or license from the prevailing political authority–or have been owned by that authority–and that they have served a variety of purposes. Thus banking and politics have always gone hand-in-hand.
   Overall, banks have served four main purposes–one legitimate, one dubious, one puzzling, and one deeply flawed.
   The first purpose–a legitimate one–is to facilitate commerce. It is often cheaper for a business to borrow capital from a bank than to stockpile cash itself. This was the purpose of the state banking system in the U.S. prior to the Civil War. The state-chartered banks existed to provide working capital for commercial transactions, such as stocking inventory, or for business expansion. Use of banking for these purposes was tied to specific commercial activities–the “real bills” doctrine. Of course credit used for this purpose has a cost which is factored into prices. When these loans are repaid, they are canceled at the bank which thus removes purchasing power from the economy. This is another area, besides retained corporate earnings, that contributes to the gap between prices and purchasing power identified by C.H. Douglas. But lending for commerce itself remains a legitimate activity.
   The second use of banking–the dubious one–is for capital formation in the creation of new businesses, a function which overlaps with capital markets such as the stock exchanges. But this use very easily turns into lending for speculation by permitting investors to borrow money in order to buy stock on margin or to “leverage” investing by borrowing money in order to purchase whole companies. The costs of this borrowing also show up in consumer prices without introducing any new purchasing power into the system.
   This practice has mushroomed in recent decades starting with the buyout/merger/acquisition mania of the 1980s and has reached disastrous proportions through the creation and growth of equity and hedge funds. The use of bank borrowing for such speculative purposes is an obvious abuse that should not even be legal. It is actually a form of theft from the nation’s natural and normal store of credit that should be carefully administered by competent public authorities as a utility as critical to social health as the water supply.
   The third use of banking–the puzzling one–is for consumer credit. This includes borrowing for big purchases such as buying houses and automobiles, or small ones such as items bought with credit cards. Increasingly it includes purchasing even the necessities of life such groceries.
   Buying an object with a credit card often means that a person cannot afford to buy it at the present moment. So the person is gambling that he or she will be able to pay off this loan–including interest–at some point in the future. What is puzzling is that in the midst of what is claimed to be the most productive economy in the history of the world, why are most people so poor that they cannot buy what they need to live with the proceeds of their present earnings? This is the ultimate repudiation of Say’s Law and its derivatives–Libertarianism, supply-side economics, and the like.
   The fourth use of banking–the one that is deeply flawed–is the financing of government inflation through purchase of public debt instruments which allow deficit financing of public activities, most particularly the waging of war. Banking for the purpose of financing war has a long pedigree, going back to the medieval times where kings were perpetually in hock to the money-lenders. Today we have the national debt, which has been used primarily for war, as well as for the Keynesian pump-priming described previously. A classic case of the use of banking for deficit financing of war is the borrowing by the federal government under the Bush/Cheney administration to raise the trillion dollars already spent on the Iraq and Afghanistan wars. 
   The use and misuse of private sector banking within the U.S. for these purposes has never been greater. By the late 19th century, banks had begun to own significant amounts of the stock in other industries, so were becoming key players in economic growth and development. But much more money became available for bank lending once the Federal Reserve System came into existence in 1913 and the Sixteenth Amendment to the Constitution was enacted which allowed the government to raise huge amounts of money through the income tax. It was these tax proceeds which enabled the government to borrow. The government debt in turn collateralized the massive bank lending which became characteristic of much of twentieth century economic growth. What really drove this growth has been technological innovation. The wealth from this growth has been skimmed by the financial elite.
   The system allowed the U.S. to float the loans to the World War I combatants which effectively shifted world financial power to this country over the next decade. It allowed the explosion of speculative lending through the 1920s which led to the 1929 crash. At that point, banking took a back seat with respect to government policy, even though interest rates for bank borrowing were lowered. The trouble was that no one could afford to borrow any longer, so the cheap credit went unused. During the New Deal and continuing through World War II and beyond, the banks mainly played their traditional role as commercial lenders, because the government had taken over much of the issuance of credit for economic growth and investment.
   Then starting in the 1950s and the 1960s, the banks gradually expanded their speculative lending activities until the inflation of the 1970s made lending unprofitable. At this time, the Federal Reserve took it upon itself to put on the brakes by plunging the nation into the worst economic decline since the Great Depression.
   The recession of 1979-1983 was a totally lawless action by the banking industry. When Paul Volcker made his decision to act, he took President Jimmy Carter by surprise. As described in William Greider’s history of this era, Secrets of the Temple, even the conservative Reagan administration was nonplussed.
   But the banks by now had seized the upper hand, a milestone that was built into the structure of the economic system and made permanent by the banking deregulation of the 1980s. The banks now were free to inflate and deflate economic bubbles as much as they liked. As stated earlier, we had the buyout/merger/acquisition bubble of the 1980s, ending in the Bush I recession, the bubble of the Clinton years, ending in the stock market collapse of 2000, and the housing, equity, hedge fund, derivative, and stock market bubbles of the 2000s engineered by Alan Greenspan in order to support the wars of the Bush/Cheney administration.
   Thus a semblance of prosperity has been created by the banking system–accompanied by inflation, growing wealth disparities, consumerism, and the ultimate loss of assets by the middle class.
   Finally, these bubbles would have been impossible without modern methods of electronic processing and cash management, whereby nightly deposits by businesses through use of “repos”–repossession agreements–created a huge boost in banking reserves that allowed them to turn on the lending like tap water. It was the data processing revolution which facilitated the current catastrophe.
   The net results of the banking-based economy have been profits to the financial industry exceeding $500 billion a year, combined with total societal indebtedness–including personal, consumer, business, and government debt–approaching $50 trillion. No one in public or private life has any idea what to do about this debt except to keep borrowing to roll over the increasing payments until the dollar is blown away by inflation. Meanwhile, the amounts of money have been so great and the knowledge of how to manage it so small, the U.S. political system, traditionally ignorant of financial matters, has given up trying to cope.
   Instead, all eyes are constantly riveted on the Federal Reserve and its chairman, currently Ben Bernanke. The idea that the central bank should be the controlling factor in economic decision-making and for these policies to be carried out through manipulation of interest rates is what is called “monetarism.”
   Thus the Fed–an institution that calls itself “independent within the government” but whose branches are owned by the banks–has control over the entire economy. This control is, and should be, the most important function of national life. But the U.S. at its core can be called neither a democracy nor a republic, given any reasonable definition of those terms. The crash of 1979, for instance, was the most important economic event since World War II. But it was an extra-legal action by a revolutionary power. This revolutionary power was and is synonymous with the U.S. financial elite.
   A Deeper Look at Credit
   Where do the banks get the money–i.e., the credit–they lend? They do not get it from their depositors. Money held on deposit is part of a bank’s reserves, as is the federal debt instruments they hold in providing credit to the government. The money they lend is created, as John Maynard Keynes wrote, “out of thin air,” through the banks’ fractional reserve privileges.
   But as this author has made clear in previous articles, it is really the nation’s natural store of credit which the banks are using. Credit is actually the ability of the nation to engage in productive economic activity aided by the powers of nature–sunshine, rain, the fecundity of the earth. The banks are allowed to monopolize this natural store of credit by the laws of the land. It’s a form of privatization which is much worse, much more egregious and destructive, than any other form of corporate welfare in existence.
   The banks are granted by Congress and the state legislatures a monopoly on credit creation by which they control all of economic life. It’s a travesty which negates democracy at every step. In reality, this natural store of credit should belong to the public and be administered by the government in some equitable way. But the banks have stolen the privilege, and the politicians allow it to go on in the most negligent fashion. 
   Not only do the banks use this store of credit to lend as they please, they charge interest for its use. Again as noted in other articles, what we have in fact is a system of institutionalized usury, bringing up the age-old question of the morality of interest rates.
   It has long been accepted by reasonable people that any charging of interest should reflect a normal level of profit plus risk in order for the practice to be ethically acceptable. The idea that interest is an end in and of itself to be used for financial policy, as is done by the Federal Reserve, is a deeply flawed result of monetarism and has no basis in legitimate economic theory.
   What the Federal Reserve did in 1979 and continues to do today is simply to facilitate a system of loan-sharking–a form of racketeering. Particularly notable examples today are the high rates of interest charged for credit card use and exploitation of college students by lending money to them for higher education. Thus students are in thrall to the banks for much of their future with loans that may not even be liquidated through bankruptcy.
   Now, today, the banking system has become so overextended by its illegitimate activities that it is crashing. This is naturally to be expected. No one should be surprised, and no one should expect a different outcome. Rotten fruit stinks and is harmful for us to eat. Even mainstream writers such as Martin Wolf of the Financial Times recognize that the financial industry is totally out of control. In a November 27, 2007, article entitled, “Why Banking is an Accident Waiting to Happen,” Wolf wrote, “What seems increasingly clear is that the combination of generous government guarantees with rampant profit-making in inadequately capitalized institutions is an accident waiting to happen – again and again and again. Either the banking industry should be treated as a utility, with regulated returns, or it should be viewed as a profit-seeking industry that operates in accordance with the laws of the market, including, if necessary, mass bankruptcies. Since we cannot accept the latter, I suspect we will be forced to move towards the former.”
   But there is another reason the banks have become so powerful, one that few have recognized. There are underlying reasons for the present financial crisis that go well beyond a simplistic explanation based on the psychology of human greed or arguments pertaining to “the war between capital and labor.” The whole war may be unnecessary, just a red herring. Because in a system that creates abundance, why should people be fighting as though we are facing scarcity? There is something here that just doesn’t make sense. Modern industry produces abundance, not scarcity. Why then are so many people in the world poor and becoming poorer?
   We return to the issue of prices being liquidated by purchasing power, the central dogma of classical economics, the critique of that dogma by Keynes and his supposed solution, which has proved not to be a solution at all, just a postponement of the inevitable collapse.
   The issue pertains to facts referred to previously that were discovered by C.H. Douglas almost a century ago. As stated previously, Douglas was the founder of the British Social Credit movement. Returning to the error in classical economics and Say’s Law that prices charged for goods and services are completely self-liquidating by the generation of income, Douglas showed that for a variety of reasons, most notably the necessity of retained earnings and the inclusion in prices of the costs of borrowing, sufficient income is never returned to the producing economy in order for people to purchase what can be manufactured. 
   But again, Douglas did not say, as did Keynes, that the “gap” should be filled by government borrowing to increase aggregate demand. Instead, Douglas said that the gap should be viewed as a benefit accruing to all of society from having a highly-productive economy where everyone does not have to work all the time in order to prosper.
   Today, the “gap” is imperfectly filled by government borrowing and by consumer and business borrowing as well. In fact, the power and influence of the banking industry over society occurs because it is the banks, utilizing society’s store of credit, which fill the “gap” through lending, to their own profit.
   In other words, Douglas showed how the industrial economy can be made to work for the benefit of all. The “gap,” which all post-Keynesian economists know–or should know–exists, should be filled by direct payments to individuals by the government, either in the form of a National Dividend or price subsidies. This is the real solution to the central problem of modern economics. A form of this dividend already exists in the U.S. through the Alaska Permanent Fund.
   As stated earlier, the National Dividend solution has been known in the English-speaking world since Douglas published his epic work Economic Democracy in 1918. The Social Credit movement which eventually formed became a political force in Britain, Canada, Australia, and New Zealand and still exists.
   But Douglas’s ideas were largely suppressed in the mainstream media and by orthodox economic teaching. The Times of London made a decision in the 1920s, for instance, that Douglas would never be mentioned in its pages. Douglas visited the U.S. in the 1930s and was told to his face by representatives of the financial elite that he would not be allowed to present his ideas in this country. Today, at long last, Douglas and Social Credit are finally beginning to be known. See, for instance, the new article on “Economic Democracy” in Wikipedia.
   Following is an explanation of Social Credit by Wallace Klinck of Alberta, Canada, one of the world’s leading proponents of Douglas’s ideas. In his comments, Klinck explains the price-income mechanism that defines the National Dividend paradigm:
   “Consumer prices include all allocated capital charges as additions to price which are necessary from an accountancy standpoint but which do not distribute equivalent incomes within the same cycle of production.
   “Thus consumer prices include allocated charges which do not distribute incomes in respect of capital. That is, money is collected from consumers prematurely, and cancelled in repayment of bank debt incurred previously by loans issued to producers, as if to represent that our real capital is being consumed currently, whereas it is actually consumed or depreciated over a considerable period of time.  
   “The resultant disparity (i.e., the “gap”), growing increasingly as capital replaces labor as a factor of production, between final consumer prices and distributed effective consumer income, is currently ‘bridged’ by ever expanding issues of credit issued, or created, via repayable bank loans. Of course, this means that charges for financial costs in respect of one cycle of production are not fully liquidated within that cycle but merely passed on, or ‘carried over,’ as an inflationary charge to be recovered from future cycles of production. That is, one cannot liquidate, formally and finally, financial charges of today by issues of bank credit (i.e. debt) which become a further charge carried forward against future cycles of production. Such issues of credit may allow a large measure of consumer access to final consumer goods, at the expense of exponentially burgeoning debt and decreasing financial liquidity and progressive price inflation, but they do not cancel the financial costs of production as currently accounted–even though the real, i.e., physical, costs of production have been fully met when consumer goods take their finalized form and are ready for purchase.  
   “The essential problem is that the consumer is charged in prices, quite properly, with capital depreciation, but, quite wrongly, not credited with capital appreciation, which latter historically greatly exceeds the former. That is, realistically, we should have with passage of time a falling price-level with a growing source of income received independently of any incomes earned through paid work by participation in commerce or industry. The core mechanisms proposed by Douglas to rectify this revealed progressive error in national accountancy were the National Dividend and the Compensated Price (compensation of consumer prices at point of retail sale) financed by an issue of non- cost-creating consumer ‘credits’ issued, without being recorded as repayable debt, from outside the price-system to increase financial independence for the individual citizen and to effect a continuously falling price-level as the true physical cost of production falls over time.  
   “The true cost of production is the mean ratio, as measured in monetary units, of national consumption divided by that of production--always becoming increasingly less than a numerical value of one, as real efficiency increases with the use of new technology. Inflation of prices thus will be seen to be a fundamental violation of natural law. Money is essentially an information system. Inflation of prices is an indication of inefficiency or economic failure and is an abstract financial denial of the magnificent real advances which modern civilization has made in the realm of actual physical production efficiency.
   “These new Social Credit consumption credits advocated by C.H. Douglas would as always already have previous debt claims against them in retail prices and will be cancelled, just as is money issued via consumer bank loans at present is cancelled, when businesses receive them via retail sales and use them to repay their issuing banks in settlement of their earlier commercial loans contracted in the usual manner for the facilitation of business operations. Money recovered by industry via price and replaced to capital reserve has a similar effect to its use for repayment of existing bank loans inasmuch as it is no longer available as consumer income and can only become so by reissue for a whole new cycle of production which creates a complete new and additional set of financial costs.
   “Social Credit challenges the historic orthodox acceptance of Say’s Law which states axiomatically that for every financial cost of production incurred an equivalent amount of financial purchasing power is issued and no overall deficiency of income can exist. While it may be true that ‘at one time or another’ in the past an equivalent amount of financial payments may have been issued, this is of little help or consolation to consumers if an increasing proportion of such income has been permanently canceled as effective income and is no longer available for purchase of goods which are currently emanating from the production system.”
   To conclude this section, we return to the late 1960s and the failure by the U.S. government to enact a basic income guarantee or a negative income tax.
   We now see that what should have been proposed instead, and what would have introduced real economic democracy and given the capitalist system real human value was the National Dividend.
   But it was never embraced, because the banks were making so much money off the system’s failures and social conservatives were unwilling to “pay people for doing nothing.” The banks were the ones financing the gap between prices and income, and they wanted things to stay that way. The social conservatives, led by Southern conservatives, were motivated in part by racism. But they were also content to perpetuate a system where only the rich who live off their investments can be idle. Everyone else is condemned by Adam’s curse to labor from cradle to grave.
   And that leaves us where we are right now. We have a monetary system that is entirely debt-based. Money is lent at interest then must be repaid, with the issuance of credit being canceled and the banks skimming the cream through interest. This is why our economic system is such a rat-race and why economic “growth” is so imperative. People must constantly produce and sell more in order to pay off the debt and the interest on the debt. Corners are cut, corporations veer out of control, pollution is ignored, taxes are evaded, and the quality of life for most of society erodes.
   The situation is much worse with a mature, slow-growth economy like the U.S. than with developing economies such as those of China and India. The ill effects are multiplied whenever interest rates rise against real income. But even when rates are cut to a de facto level of zero, as Japan has done, the economy has become so saturated with debt that no more can be sustained. In the U.S. today, the economic ship is sinking, and the banks are running around on the deck offering to loan people a very limited number of life preservers, of course at considerable profit to themselves.
   Again, the root cause of the modern economic crisis is the debt-based monetary system which benefits the financial elite above all and which is founded in greed and fear. The crisis is ultimately spiritual, where those who covet the earth’s resources steadfastly refuse to observe the injunction of Jesus to “love their neighbors as themselves.” Some people wish to live by enslaving others. The slaves fight over the leftovers. That’s really all there is to it. But God is just, and such a system must sooner or later collapse into dust. It’s the law of cause-and-effect. Karma, some call it. 
   So are any of the presidential candidates truly trying to prevent the ship from sinking or are they just making rhetorical noise?
   The Presidential Candidates
   In order even to begin to redress the major problems caused by the Bush II presidency, the immediate requirement which rushes to the fore is that of reducing the disastrous federal deficit. At a minimum, any serious candidate who is elected president will have to enact a major increase in federal income tax rates, especially for the higher income brackets. The Bush II tax giveaways which turned the $300 billion Bill Clinton surplus into a $500 billion deficit must be reversed.
   Secondly, it will be impossible to continue the massive amount of borrowing which has financed the U.S. war machine in its military adventures in the Middle East and have a functioning economy at the same time. This borrowing, along with the supply-side tax cuts, has wrecked the federal budget and must be eliminated
   No matter what any of the candidates say, these are the only two financial measures within the framework of the existing system that can have any immediate impact.
   Next, a lot of money will be needed to finance the legitimate functions of government which the Bush/Cheney regime has neglected. More funding will be needed for Social Security and Medicare, though both programs could easily be replaced with real income security under a Social Credit/National Dividend system. How these entitlements will be funded through the existing system in the face of the sharp decline in the standard of living for the middle class is impossible to fathom. Additional tax revenues are simply not available from an electorate for whom an estimated forty percent of income currently is paid in taxes at the federal, state, and local levels. And with the weakening of the U.S. dollar, endless infusions of funds from foreign investors to float the U.S. trade and fiscal deficits are not likely to be available without a fire sale on U.S. real estate and other assets.
   Nevertheless, the 2008 election is one about “change.” In the polls, over 70 percent of Americans say the country needs to find a new direction. This is a staggering number. Of course it leaves 30 percent who think things are just fine. This 30 percent provides the core support for those Republican candidates who want to “stay the course” with the war and the economy, which they are characterizing as fundamentally strong. The status quo candidates include John McCain, Mitt Romney, and Rudy Giuliani. The differences among these three in substance are minuscule. All effectively are successors to Bush/Cheney in claiming to be strong in the War on Terror and satisfied that the economy has an acceptable future. None are worried about any of the inequities and concerns that are so obvious to a majority of Americans.
   The Republicans
   The Republican Party, from its foundation, was the political expression of American capitalism, laissez-faire economics, and private sector control of the economy. This does not mean that the entire U.S. financial elite is Republican. The elite uses both political parties in different ways. But the Republicans certainly provide the most convenient cover for keeping populist government at bay. One way it does this is to use the media to distract voters with debates over “social issues,” such as abortion or gay marriage, so they will ignore the real economic problems of income equity and wealth distribution.
   It was the Republican Party that was in power during the Roaring 20s which led up to the Great Depression. It was the Republican Party, under Nixon, that was in charge during the disasters of the early 1970s. It was the Republican Party that controlled the White House during the Reagan Revolution. Even during the Clinton years from 1992 to 2000, the federal government, with cutbacks in federal employment and expenditures, was largely out of the picture except for the strong dollar policies which brought in the foreign investment that financed the boom. Then from 2000 until today, the Republican Party has been the chief enabler of the Bush/Cheney catastrophe.
   All of the Republican candidates except Mike Huckabee and Ron Paul are essentially asserting that economic fundamentals are sound, that everything is going to be okay, and that they will resist any attempt by the Democrats to raise taxes. They are all attempting to tar the Democrats with the age-old brush of being tax-and-spend liberals. The big lie, of course, is the fact that Reagan and Bush II were the biggest deficit spenders in history.
   Of the Republican candidates, Mike Huckabee has won support by sounding themes that are vaguely populist. He has criticized the outrageously high levels of CEO compensation. He has endorsed the “Fair Tax”–a 30 percent sales tax to replace most other taxes. Of course sales taxes are regressive and take a larger proportion of income of the poor and middle class than of the wealthy. This essentially lets rich people who save or invest off scot-free from contributing to common social expenses.
   No doubt the Republican candidates find some comfort in the realization that it is extremely unlikely that any of them will actually be elected president so will ever have to deal with the economic problems their ideological purity allows them to deny. If they do have moments where they believe they may sometimes reside in the White House, they no doubt realize that as with Bush II, the Middle East wars give them plenty of excuses for fiscal profligacy and continued neglect of domestic issues. 
   Ron Paul
   Ron Paul represents an interesting political phenomenon. Identified with the Libertarian movement, Ron Paul is certainly to be commended for his steadfast opposition to the Iraq war and for calling for the abolishment of the Federal Reserve as an inflation-causing mechanism of the financial elite.
   But while Ron Paul favors limited government and the elimination of the federal income tax–both worthy objectives–he does not explain how the federal expenditures which form a majority of the budget–Social Security, Medicare, Medicaid–can be paid for.
   Nor does he explain how the jobs created by federal expenditures–including those within the military-industrial complex–will be replaced by the private sector.
   The number one economic issue of the modern industrial age is income security. Would Ron Paul’s Libertarian ideology of pure laissez-faire economics provide it, even if there were no Federal Reserve System to facilitate financial bubbles? The answer is clearly no, for the reasons which both Douglas and Keynes explained. Libertarian economics does not address, and has never even recognized, the price vs. purchasing power gap. It swallows Say’s Law in its entirety. The Libertarians do not understand and do not want to understand modern industrial economics. Their own brand of laissez-faire is as fundamentalist and ideological as the big-government paradigm they criticize.
   But the Libertarians do possess an important piece of the big picture. It would in fact be much better if government collectivism stayed out of private sector production and stopped robbing people of their substance through high levels of taxation. In fact, Social Credit and Libertarian economics could make a workable fit. But to achieve that fit, Ron Paul and his followers would have to abandon the flawed notion of a currency based on gold and silver. In insisting on such a currency, Paul resembles, more than any other political figure, Andrew Jackson, whose 1836 Specie Circular plunged the nation into a depression by requiring that individuals purchasing federal land pay for it with metallic currency. Such a currency today would so sharply reduce money and credit in circulation that the greatest economic depression in history would take place.
   The concepts of smaller government and lower taxes essentially belong to classical economics. But what we have gotten instead is a debt-based currency emanating from a central banking system that seeks to generate growth by blowing asset bubbles. Another factor the Libertarians ignore is the creation and management of public infrastructure which in a modern industrial economy accounts for up to fifty percent of economic activity. To finance this through taxes and borrowing, as is done today, is sheer lunacy. Infrastructure and heavy industry alike actually work best as a regulated cartel. If we had a well-run system, government infrastructure investment would be directly funded by grants of money to state and local governments based on debit entries in a national infrastructure account. Heavy industry would be financed through the capital markets and retained earnings, with price support assistance from a Social Credit program to allow consumers to purchase what they needed at reasonable cost. The most efficient system is not the dog-eat-dog capitalism of Ayn Rand’s Atlas Shrugged where business becomes a weapon reflecting Hobbes’s “war of each against all” or is played as a financial gambling chip like what Enron did to the energy industry. Laissez-faire or Libertarian capitalism applied to those elements of the economy that should be cartelized or regulated is a really bad idea.
   Nor would Ron Paul’s program [? challenge] the existence of the gigantic and growing national and international underclass. It would not address the failure of modern economics to deliver the leisure dividend which should have been the birthright of everyone in the world.
   The Democrats
   All the Democratic candidates are mouthing populist rhetoric, though the least populist and most pro-business is Hillary Clinton. The most populist of the top three is John Edwards. Barack Obama has spoken to his own vision of the American dream where equality of opportunity is a reality. But he has offered no viable prescription for getting there. The only candidate with a truly populist record is Dennis Kucinich, but his campaign appears over, if it ever really began. Biden and Dodd have dropped out, and Richardson does not appear to have anything new to offer.
   Hillary Clinton
   A November 19, 2007, story in Time written by Joe Klein outlined Hillary Clinton’s proposals. Klein cited “health care and energy” as the “big domestic-policy issues.” Clinton favors single-payer universal health care coverage, but this position is a no-brainer for a Democratic candidate in a nation whose health care system is a world-class disgrace.
   Clinton does have a modest energy-independence proposal based largely on conservation, but one which will have little effect on undoing the catastrophic consequences of the decisions made in the 1970s to tie America’s energy future to Mideast oil. Clinton has also telegraphed the necessity to raise taxes by proposing to make the rich pay more of their fair share, but she opposes Obama’s idea of extending the Social Security payroll tax to incomes exceeding $95,000.
   Also in November Clinton delivered a speech to the Economic Club of Chicago that invoked the need to “strengthen the middle class” by “incentivising” investment in research and manufacturing. The purpose would be to provide jobs, particularly in high-tech areas, a strategy identical to that of Gordon Brown who has succeeded Tony Blair as Britain’s Labour Party prime minister. Clinton tried to make this smattering of government interventionism palatable to political conservatives by stating that it would provide us “with strategic security.” She asked, “Do we really want the production of high-tech components of our satellites, our missiles, our planes to be completely out of our hands?”
   Clinton touched on the problem of the huge federal deficit being floated by foreign governments by saying, “I’m concerned that countries like China have so much control over our financial future.” She proposed resolving the crisis by stating, “I think a return to fiscal discipline, living within our means, is essential for our long-term health--It is also critical to whether or not we control our destiny as a nation.”
   In other words, Hillary Clinton’s platform is identical to that of her husband Bill’s governing ideology during the 1990s. Bill Clinton, with help from Vice President Al Gore’s “Reinventing Government” initiative, slashed the federal payroll and created job growth through the bubble which was engineered by Secretary of the Treasury Robert Rubin’s strong dollar policy that attracted massive foreign investment. Meanwhile the Clinton administration continued to oversee the loss of American manufacturing jobs through free trade programs like NAFTA, with much of the economic growth taking place in the financial industry. It all ended with the stock market crash of 2000 and the recession of 2000-2003 which the Federal Reserve under Alan Greenspan attacked by yet another bubble–the housing one.
   The Clintons belong to the element of the Democratic Party which believes government should provide a modest degree of security to ordinary citizens through a commitment to such social programs as the Earned Income Credit but that its primary purpose is to get out of the way so big business can flourish. Again the goal of the strategy is to create jobs. Thus the Clintons, along with that part of the Democratic Party allied with the Democratic Leadership Council, fully embrace the ideology of Reaganite trickle-down economics. They are in fact supply-siders and so are subject to the same misunderstandings and failings of all the other laissez-faire proponents of free-market capitalism who have believed in the fallacies of Say’s Law.
   All this was likely why in an October 5th interview conducted by Lloyd Grove of Portfolio magazine, Lynn Forester de Rothschild, the American wife of Britain’s Sir Evelyn Rothschild, said, when asked by Grove if Clinton will be “good for business,” replied, “First of all, Hillary will be good for America. And so if we care about our country –which all of my fellow capitalists do –we’ll be very pleased that she’s president.”
   The problem is that the Clinton program has no answer for the calamitous levels of public, private, and business debt that have grown exponentially in the last decade and are symptomatic of the larger tragedy of capitalism in the modern age.
   Barack Obama
   Obama has presented an upbeat message of hope and opportunity that focuses on broad-spectrum improvement in public education, health care, government ethics, economic growth, job creation, support for working families, and bringing the Iraq War to an end. He expressed these ideals most forcefully in his November 7, 2007, speech in Bettendorf, Iowa: “Reclaiming the American Dream”
   Obama has the benefit of extensive cash resources and the prestige of a Senate seat that have allowed him to pull together a staff of policy experts to research and present a smorgasbord of policy proposals. These do not take us back to the New Deal but are in the more recent liberal/activist tradition of the Democratic Party and its approach to the welfare state which seeks to preserve some semblance of the social safety net while leaving it to the private sector economy to create jobs. In other words, Obama’s approach is not all that different from Hillary Clinton’s.
   The following quotes from various experts taken from the internet characterize Obama’s proposals and the reactions to them among liberal commentators. Note that nowhere does Obama challenge financial system fundamentals or address the onrushing economic crisis which threatens to plunge the nation into deep recession in 2008. Rather he seems to assume a static-state economy that will continue to have the ability to fund the tinkering around the periphery that he is advocating.
   “Senator Obama has a deep understanding of what has gone wrong for working families in America. More importantly, he has fresh new ideas for how to put these families back on track and how to make government policies work for them.” (Elizabeth Warren, Leo Gottlieb Professor of Law, Harvard Law School; Author, The Two-Income Trap: Why Middle Class Mothers and Fathers are Going Broke)
   “‘The Agenda to Reclaim the American Dream’ shows that Barack Obama understands the pressures facing working families and that he has a bold but achievable vision to address them. Working women in particular – especially those juggling a job and family responsibilities – will welcome this plan to help with education, housing and health cost; paid sick and family leave, and retirement security. Senator Obama has not only put forth a remarkable blueprint for change, I am confident he has the consensus-building skills to get it enacted.” (Jan Schakowsky, Member of Congress, D-IL)
   “The Senator has highlighted the very real challenges that millions of middle class families confront every day. Real earnings for most Americans are stagnant, home foreclosures are soaring, millions are without health insurance, rising tuition is placing a college education for our children beyond many families’ reach and retirement security has become elusive. The proposals in this plan represent balanced and sensible steps toward restoring broadly shared prosperity for American workers and their families.” (Edward Montgomery, Dean, University of Maryland; former Acting Deputy Secretary and Deputy Secretary of United States Department of Labor; former Chief Economist, Department of Labor)
   “Many American workers, even those with good jobs, are saving little or nothing for retirement. Previous attempts by the federal government to encourage savings have led to tax incentives such as IRAs and 401(k)s, which have not been very successful at reaching the working class. For financial incentives to be effective they must be accompanied by structural changes that make it easier for the working poor to get started saving and simple to keep it up. By far the most effective way to save is to have a portion of every paycheck automatically deposited into a retirement savings plan. A simple way to achieve this is to automatically enroll workers into a savings plan from which they are free to opt out. Automatic enrollment dramatically increases participation rates, especially for lower income workers. The Obama plan utilizes this strategy, and would make the benefits of automatic enrollment available to nearly all American workers. The plan is smart and cost effective.” (Richard Thaler, Professor of Behavioral Science and Economics, University of Chicago Graduate School of Business; co-author, Nudge: The Gentle Power of Choice Architecture)
   “Barack Obama’s American Dream agenda reminds us that terrorism isn’t the only threat to America’s working families. Health care crises, foreclosures, bankruptcy, unaffordable college tuitions, and the competing demands of work and family pose significant risks to millions of workers’ economic security. The Obama plan will help to give every working family an opportunity to increase his or her family’s standard of living and, at a minimum, secure its place in the middle class. This is a plan that will make American workers more productive and provide working families the help they sorely need.” (Seth Harris, Professor and Director, Labor & Employment Law Programs, New York Law School; former Counselor and Senior Advisor to the Secretary of Labor and former Acting Assistant Secretary for Policy and Deputy Assistant Secretary for Policy, U.S. Department of Labor)
   “Barack Obama has put forth a plan that boldly addresses the economic insecurity that many Americans are experiencing. Specifically, it builds on our progressive tax code to provide incentives and financial support consistent with the aspirations that Americans hold. Further, it ensures that consumers have both access and the information they need to make smart financial choices about credit and don’t have the rug pulled out from underneath them by predatory financial firms.” (David Marzhal, Executive Director, Center for Economic Progress)
   “Because they are complex and poorly targeted, existing tax subsidies for higher education and retirement saving are failing to provide middle class families with the support they need. Sen. Obama’s bold proposal to simplify the financial aid application process and make education tax credits fully refundable will enable millions of additional youth to enroll in college and gain the skills that will lead to higher wage jobs. Obama’s proposals for automatic workplace pensions and an expanded Saver’s Credit will help tens of millions of middle class families begin to accumulate retirement wealth. For too long Democrats have been content to propose narrowly targeted tax credits that sound good in sound bites, but fall short of the comprehensive policy solutions that American families need. These two Obama proposals are the real deal.” (Jeffrey Liebman, Malcolm Wiener Professor of Public Policy, Harvard University; former Special Assistant to the President for Economic Policy)
   So could real change be expected under an Obama presidency? This is not a question that can easily be answered. There seems to be at least a possibility that when confronted with crisis Obama may have the personal qualities and ability to think independently needed to break away from conventional responses. Of course this may be one reason the political establishment may do everything it can to keep Obama from ever being elected.
   John Edwards
   Former Senator and 2004 vice-presidential candidate John Edwards is the only viable Democratic candidate for president who has taken a hard look at the economic system and pointed to how deeply flawed it really is. Edwards states that worldwide the system has created a global society of haves and have-nots which is reflected in intractable and growing poverty in the U.S. His rhetoric has become increasingly anti-big business. Part of his prescription is a massive jobs-creation program. He is unique in that he favors the creation of a trust fund for children similar to one that has begun in Great Britain that will help kids with educational expenses and to get a decent start on adult life.
   Even though Edwards has made a credible showing in the three-way race with Hillary Clinton and Barack Obama, he is receiving little attention from the mainstream media. It seems to be assumed that as the primaries continue he will fade then disappear. Of the three, he clearly poses the greatest potential threat to the hegemony of the financial elite.
   Edwards’ most complete explanation of his positions took place in a May 25, 2005, speech he gave at the London School of Economics.  Following are some quotations:
   “Today, with the new global challenges we face, we have storms gathering -- It is the job of our leaders – and it is job for all of us – to understand these challenges and to prepare for them.
   “For example, right now, we see new global players emerging. Some historians refer to the last century as the ‘American Century.’ The 21st century could very well belong to Asia. China and India aim to win a race to the top – not simply to take our low paying jobs.
   “Some believe that China's Gross National Product will soon surpass all other countries except America's. India's will grow at a similar pace.
   “China and India's rise on the global economy – and their emergence as more prominent diplomatic and military powers – will have a profound impact on America, Britain, the European Union, and Transatlantic relations.
   “I don't think that we have even begun to understand its consequences.
   “We also have not fully grasped the changes that come from the spread of information technologies. Thanks to new technology and the power of knowledge the world will keep shrinking.
   “But globalization also brings tremendous challenges.
   “For example, how do we ensure that the great divide between the ‘haves’ and the ‘have nots’ starts to close? How do we lead so that developing countries understand that education, market reforms, and just governments will bring hope to even the most desperate places?
   “And in our world of such wealth and promise, we cannot forget another great challenge: extreme poverty.
   “Close to half the world's population – more than three billion people live on less than $2 a day. How do we address this unthinkable human suffering? How do we win the hearts and minds of young people – the millions struggling in Africa, or those young orphans from the tsunami? How do we reach them so they know they can climb out of hopelessness and into a better life?
   “The time has come for all of us to fight global poverty --
   “In my country, we must reform our own education system. Rising tuitions are increasingly putting a college degree out of reach for many families. Fewer and fewer low-income students are attending our universities. We need to reform our student aid programs, cut subsidies flowing to banks, and ensure that every child who works hard can attend their first year of college for free. No one should be shut out in America from an education they need because they can't afford it.
   “Another great threat to our competitiveness is health care. America has some of the best health care in the world. But the 46 million uninsured people and the skyrocketing health care costs are putting our companies at a disadvantage.
   “Just look at how much health care adds to the cost of building an American car – $1,400 per car. In Japan, it's about $600. That's just one reason why it's time to make health care affordable and available to every American.
   “And it is imperative that our countries get our fiscal houses in order. Living in deficit isn't good for families, and it isn't good for governments.
   “It diminishes our independence and our economic security when we are dependent on other nations like China to buy our debt. Right now, China has purchased nearly $300 billion of America's debt. These low-interest loans have made the impact of our historic budget deficit minimal – for now.
   “When China changes its policies, it could have a devastating effect on our economy. Interest rates could rise. Consumer spending could drop. And those high interest rates could mean people can't afford their homes anymore--
   “Budget deficits make America less competitive. There's less money to invest in innovation and research and meet the challenges of education and health care. And there's more risk when we rely on another country for economic security.
   “So we must balance our budgets to compete--
   “America is widely known as the richest country in the world. But few realize that 25 percent of our people live in poverty or at the margins--the best evidence of America not living up to its ideals is the more than 36 million Americans who live in poverty every day.
   “There are children who have no real hope simply because of where they're growing up. There are people who are working two jobs and they still can't make the rent. And too many families will spend the night in homeless shelters across the country.
   “--That is why it is critical for us to ensure that our children have the education they need to compete and thrive in this new world. That our societies have the capability to help everyone – not just those at the top, but those who are struggling. That there is capital for our new inventors and dreamers, and they can access it.
   “In a nation of our wealth and our prosperity, to have millions working full time and living in poverty is not just bad economic policy. It's wrong. They are doing everything right and they're still struggling.
   “I am asking the American people to do a few things to help eradicate poverty in America. Many of them resemble steps that Tony Blair and Gordon Brown have pursued here.
   “First, let's shine a bright light on this problem. Let's talk about it again. Good people from all different backgrounds and beliefs care about this issue. And we need to put this back on the agenda.
   “Second, let's make work pay again.
   “What we know and understand in our soul is that hard work built our nations. Men and women who worked with their hands and their heads – who still do – they don't want a free ride; they want a fair chance.
   “That's why we're fighting to raise the minimum wage in our country. And we should expand the Earned Income Tax credit – much as your [i.e., the British] government has done with the Working Tax Credit--let's strengthen the foundation for families that work.  That means health care for everyone and child care for parents who need it – let's make sure that families aren't just getting by – but getting ahead. Let's provide them with the assets they need to build a better life.
   “Britain has led the way with the Child Trust Funds. We ought to consider the same thing in America – providing $500 to every child at birth, and perhaps an additional $500 for lower-income families.
   “If parents could contribute too, then the time a child turned 18 years old, they could have as much as $40,000 in the bank. Money to spend on college or a home, or money to store up for retirement.
   “Imagine what it would say to a poor boy growing up in my home state of North Carolina. If he knew that if he studied hard. He stayed in school. Then he would have $20 or $30 or $40 thousand dollars in the bank when he turned 18. Imagine what it would do to his sense of hope and possibility for the future. It could change whole communities.
   “So there are very real and fundamental ways in which we can prevent families from falling into poverty. And this is the work I am engaged in at the Center on Poverty, Work, and Opportunity at the University of North Carolina.
   “So far, my efforts through this Center have focused on fighting poverty in America. But I also believe that an essential part of all our efforts will be to carry this fight to end extreme poverty around the world.”
   What is the centerpiece of Edwards’ message? Columnist David Sirota wrote that Edwards “is offering a courageous, full-throated indictment of Big Money…. Edwards says that ‘powerful interests, particularly corporate interests, have literally taken over this government.’ And Edwards hasn't just been talking about it - he has made a crusade against this, the issue of our day, the centerpiece of his campaign. He has, in short, made it the very reason he is running.”
   Recently The Huffington Post asked a number of commentators: “Is John Edwards' presidential campaign the test of progressive populism that Democratic activists have long awaited?” The answers were equivocal, exposing doubts that the populist approach will succeed or even matters. Among the answers were:
   Bob Borosage, Campaign for America’s Future:
“Edwards' frustration is that he can't be a legitimate test, he hasn't been able to establish himself as the populist voice. Why? One reason is the simple historic nature of the Hillary, Obama campaigns - Hillary's growing gender gap is proof positive of that.
   “Second, perhaps more important, is simply to listen to Hillary's rhetoric. New energy resources and taking on the big oil companies. Health care and taking on the insurance companies. Economics and making this economy work for working people. The speech that most mirrored the AFL-CIO/EPI/CAF rhetoric on economy, ironically, was delivered by Hillary at Dartmouth….

“[In] this election, with Hillary presenting herself as a populist, willing to take on the big interests (and her rhetoric is the reason that she's relatively ‘teflon-ed’ against Edwards’ attacks on her) - I'd say Dems are getting a lot closer to where they should be - at least rhetorically….No doubt, money is buying into Democrats big time, and the party will have to decide whether its going back to the mid-70s compromise - socially liberal and economically Wall Street….So I'd argue that Edwards’ fate isn't a proper measure, because most candidates - Hillary certainly - have moved to co-opt [populist] rhetoric.”

   Al From, Democratic Leadership Council (DLC):
“The Clinton-New Democrat formula is the only formula with a track record of winning both the nomination and the general election. The track record in recent elections shows that the populist formula doesn't really deliver the very voters it's aimed at - white male, working-class voters - probably because they are the most skeptical of government delivering on its promises.

“Clinton economics brought a lot of those voters - including union members - back to the Democrats because it worked, grew the economy, created jobs, and increased incomes. But the three principal elements of Clintonomics - fiscal discipline (balancing the budget), investment in people and technology, and expanding markets overseas - were opposed by the leaders of organized labor and the populist forces in the party….”

   Paul Krugman, New York Times:
   “The candidates are all much more progressive/populist than anyone would have imagined a couple of years ago. Edwards tends to come up with the policy proposal first, but he's eventually emulated by the others -- and you have to be a serious political groupie to be in the business of inferring positions not from the policies, but by which month they're announced in. Basically, nobody is running on the pro-business, anti-class-warfare platform. We're all populists now.”
   Lawrence Mishel, Economic Policy Institute:
   “So, one problem Edwards has is that the whole debate has moved leftward.”
   Matt Yglesias, Atlantic Monthly:
   “Even though Edwards is running a more populist campaign than are HRC or Obama, HRC and Obama are both running more populist campaigns than we saw from Kerry in 2004 (or, for that matter, from Edwards or Dean) or for Gore in 2000. Whoever wins the nomination will be an advocate of universal health care and all three are running on platforms that at least ‘sound’ very different from the ‘free trade and balanced budgets’ mantra from back in the day. Hillary Clinton gave a speech about the evils of economic inequality back in May. So, arguably, no matter what the fate of the Edwards campaign, the populist side is winning the argument.”
   Despite the mixed reviews of Edwards’ campaign and the doubts about his ability to win the nomination, most commentators indicate that a populist message is defining the 2008 campaign on the Democratic side.
   Dennis Kucinich
   The Democratic candidate with the most far-reaching program of economic change has been Dennis Kucinich. He has spoken for a “New Deal for the 21st Century,” has argued for a program of federal job-creation similar to the New Deal Works Progress Administration, and has sponsored legislation on the creation of a new Federal Infrastructure Modernization Bank similar in principle to the New Deal Reconstruction Finance Corporation.
   Kucinich is familiar with concepts of monetary reform, has endorsed the reformist work of the American Monetary Institute, and has been the featured speaker at AMI conventions. His young British wife Elizabeth, a former AMI staffer, virtually grew up in the monetary reform movement which in Britain was steeped in Social Credit concepts. Kucinich has sought the advice of the leading voices in the monetary reform movement, including that of well-known monetary economist Michael Hudson. Tax reformer David Kelley, who argues forcefully for the restoration of a true progressive income tax where the rich pay their fair share, is the head of his economics team.
   Yet Kucinich’s 2008 presidential campaign has failed to make a ripple. In Iowa he transferred his meager support in the caucuses to Obama and won only two percent of the vote in New Hampshire. Part of the problem, of course, is that he has been ignored by the mainstream media or attacked as an eccentric or even a socialist. Many of his positions, including his steadfast opposition to the Iraq War, have been preempted by the other candidates with their own populist rhetoric mentioned so often in this article. But Kucinich himself has shown a puzzling reluctance to package his economic ideas into a coherent and comprehensive call for fundamental change.
   Yet Kucinich has played an important, if behind-the-scenes, role as a voice of conscience within a Democratic Party that has strayed far from its Jefferson-Jackson-Roosevelt roots. He may be the only true New Dealer in Congress. And in a future Democratic administration Kucinich could play a formidable role in a Cabinet-level position such as Secretary of Labor. Perhaps he may yet have a key role to play in the future prospects of economic reform in the U.S.
   In rejecting the damage done to the U.S. under the Bush-Cheney administration over the past seven years, the U.S. remains a nation in search of its soul. Much of the outcome will depend on the attitude people ultimately take toward the capitalist economic system. For people to make an idol out of unbridled capitalism is the height of madness, but this is what has happened in the last generation. Yet more people are realizing that capitalism as an all-inclusive system for financing a modern producing national economy may produce an abundance of material goods but by itself fails to meet the array of real human needs. Capitalism is a method of financing private sector production, mainly for consumer products, but really is nothing more than that.
   The financial elite have hidden behind the productivity of capitalism for their own self-serving purposes. The elite have taken advantage of a historical ideological proclivity toward a laissez-faire philosophy by asserting that bankers, along with industrialists, should be left alone to function in the marketplace. This is a gross error. Finance capitalism is taking what should be a public utility–credit–and usurping what really belongs to the body politic. It uses this utility to enrich itself to the determinant of everyone in society. As indicated earlier, Big Finance is in fact a protection and loan-sharking racket that has been stolen from “We the People” through the agency of weak, ignorant, and dishonest politicians.
   Private sector activity, moreover, should only be one leg of a functioning modern economy. The other leg should be public expenditures for infrastructure, income security, regulatory activities, etc. This may be called “socialism” for want of a better word. It should be clear to all that a truly functioning modern nation includes both capitalistic and socialistic elements. Capitalism operates in a marketplace. Banking, under the “real bills” doctrine should be limited to facilitating commercial operations.
   The system should function so as to benefit the entire nation and community of nations. While the private sector marketplace will naturally result in some disparity of income, that disparity should be balanced by the general welfare aspects of the public sector. And funding for the public sector should not take place by dependence on the private sector.
   Instead, other funding sources that draw on the natural credit of the nation should be used. This may include direct spending of money into circulation without recourse to borrowing or taxation, as was done with the Civil War greenbacks, or self-financing government lending and grants for infrastructure construction, operations, and maintenance.
   Finally, in a highly performing economy there should be direct payment of money to individuals in the form of a National Dividend. If the economy does not perform sufficiently to provide a National Dividend at a living wage, then there should be a basic income guarantee paid for by taxes. These measures will lead to a stable economy. There will be no more need for a war machine to exploit and dominate the rest of the world. It will also allow for public and private expenditure to mitigate pollution and ensure public safety in the face of natural disasters.
   The United States came out of World War II in a position to lead the world in so many ways. In the last generation, starting with Reagan administration policies as a mistaken response to the economic chaos of the 1970s, we have squandered that status. Is the 2008 election the nation’s last chance to regain what has been lost, or will this opportunity be squandered as well? Only time will tell.
   There is, however, a touchstone that can be used to evaluate the contenders for the presidency from this point onward until the November election.
   It has been argued in this article that the root cause of the nation’s economic woes is a debt-based monetary system. Therefore the first measure that should be taken after a new president is inaugurated is to introduce a new influx of purchasing power into the economy that is not tied to debt. In an earlier article in this series, the author stated that according to his calculations derived from publicly-available economic data for 2006, the government should have paid a $12,600 cash dividend that year, on average, to everyone in the U.S. This National Dividend should be paid out of a self-capitalized dividend account not tied to government taxation or borrowing.
   On January 21, 2009, during his or her first day in office, the new president should send emergency legislation to Congress that would direct the U.S. Treasury Department to make a $12,600 tax-free payment to or on behalf of each U.S. resident. Similar measures should be enacted in all other nations. This alone would break the back of the onrushing economic crisis by undercutting the crushing burden of unnecessary debt that is destroying the world. 
Richard C. Cook is a retired U.S. federal government analyst, whose career included service with the U.S. Civil Service Commission, the Food and Drug Administration, the Carter White House, and NASA, followed by twenty-one years with the U.S. Treasury Department. His articles on economics, politics, and space policy have appeared on numerous websites, and he is cited in the Wikipedia article on “Economic Democracy” as one of the world’s leading monetary reformers. His book on monetary reform entitled
We Hold These Truths is in preparation. He is also the author of Challenger Revealed: An Insider’s Account of How the Reagan Administration Caused the Greatest Tragedy of the Space Age, called by one reviewer, “the most important spaceflight book of the last twenty years.”  His website is at
Copyright 2008 by Richard C. Cook

Richard C. Cook is a frequent contributor to Global Research.  Global Research Articles by Richard C. Cook #
   [RECAPITULATION: Digging deeper, we find a central dogma in classical economics which persists today, even though British economist John Maynard Keynes, writing in the 1930s, effectively demolished it as a concept informed people believe in. This was that all business earnings deriving from the sale of goods or services can be defined as income, and so become available to the economy as purchasing power when products are brought to market. … The concept is know as Say‘s Law …
   Even if the retained earnings are deposited in a bank they will not necessarily result in new spending. This is because, as modern economist Michael Hudson has demonstrated, bank deposits normally result in lending for asset purchase rather than capital investment. ENDS.]
   [COMMENT: The United States poor and middle class are in a clear mess, but somehow it seems that about half the population does not go voting on election days.  Still, Australia's elite also institute anti-social policies, in spite of compulsory voting. COMMENT ENDS.]
   [LINKS: www.douglas socialcredit. com . ENDS.] [Jan 10, 2008]

• The banks supposedly short of money -- just like the Great Depression. 

The banks supposedly short of money - just like the Great Depression

   To various newspapers etc., from an Informed Source, Western Australia, Saturday, January 12, 2008
   My mind keeps going back to 1929 as I read current headlines like "US loan fallout deepens" (The Weekend Australian, Dec 12-13).  The people pulling the strings seem to be trying to cause another Great Depression.
   The current fairytales about the banks having to borrow from other banks before they can make loans would be funny if they weren't so tragic.  Every bank loan creates a deposit -- that was explained by McMillan [Error - it was Reginald McKenna] of the Midland Bank about 70 years ago.
   Just think what the US Federal Reserve Bank is doing right now, supposedly to save the situation.  They are LOWERING interest rates.  Contrast that with the Reserve Bank of Australia, and now most of the Australian banks, who are RAISING interest rates.  Both going in opposition directions, so both "cures" cannot be correct!
   And remember the period 1929 to 1941 -- during the Hungry Thirties all the powers-that-be told the peoples of the democracies that there was no money for public works, and that disarmament was essential.  There was a money shortage.  In Australia all wages were cut by 25 per cent. [Possible error: 10 per cent]
   Mussolini, Hitler and the Japanese, who had been the darlings of exporters and financiers, continued their warlike ways until in 1939 the British and French said No about Poland.
   After a year or so, the powers-that-be in Britain, with bombs falling on their assets, gave up their story that there was a money shortage, and started spending more money every month than they had allowed the government to spend every year.
   That's why, after World War II, the powers-that-be didn't dare have the usual "recession."  The returned soldiers KNEW there was no shortage of money, and some of them believed that high finance was dangerous. I still do. #
   [REFERENCE: Mr Reginald McKenna, chairman of the Midland Bank, England, in an address to shareholders said: "Every bank loan and the purchase of every security creates a deposit, and the repayment of every bank loan and the sale of a security destroys a deposit." (Quoted variously in books of 1931 and 1933.) ENDS.] [Jan 12, 08]

• Market fall wipes off another $40b.     

Market fall wipes off another $40b

   The West Australian, by KATE EMERY, Page One, Tuesday, January 22, 2008
   The Australian sharemarket's worst run in more than a quarter of a century cost investors another $40 billion yesterday as markets around the world plunged again on fears that the US is falling into recession.
   The market's key index, the S&P-ASX 200, lost 166 points, or 2.9 per cent, to 5580.4 – its biggest one-day fall in more than a month. It has now fallen for 11 trading days in a row in the biggest losing streak since 1982, the year Australia went into recession.
   The fall means the bourse has lost $186 billion in the past month and $286 billion since its November 1 high. It has fallen more than 18 per cent since its peak.
   Analysts define a technical correction as a fall of 10 per cent and a crash is said to be a fall of more than 20 per cent, though there is some dispute on how rapidly losses need to occur to constitute a crash.
   New figures from research group SuperRatings show the record losing run is punishing the superannuation sector and eating into gains racked up over the past five years.
   The tumbling market has already wiped 7 per cent off the value of balanced superannuation funds this month.
   Yesterday's sell-off came after the US market capped off its worst week in 16 months last Friday, with analysts dismissing President George Bush's $US 145 ($166) billion economic stimulation plan as too little, too late.
  [Picture] Teaming up: Lachlan Murdoch is set to return to the media world in a $3.3 billion deal with pal James Packer that joins the pair as business partners for the second time in 13 years. They will form a 50-50 venture to buy out Consolidated Media Holdings, which is valued at $2.6 billion. Report, P 11  
   The Australian market's woes were echoed on Asian markets, with Tokyo, 2 Hong Kong, Shanghai and Singapore also slumping on fears of the global repercussions of the faltering US economy.
   ABN AMRO head of equities Grahame Pratt said the Australian market was at the mercy of the US so long as the bad news kept coming.
   He said President Bush's plan was "underwhelming", particularly when compared with BHP Billiton's plans to spend $15 billion on its Pilbara operations alone. "How is $160 billion going to turn around the biggest economy in the world?" he said. "I don't think the bad news is going to stop coming out of the US yet."
   Financials led yesterday's freefall as investors deserted companies thought to be heavily reliant on debt on fears they would not be able to refinance their loans in an increasingly wary …
   Continued on page 11
   [RECAPITULATION: The fall means the bourse has lost $186 billion in the past month and $286 billion since its November 1 high.  It has fallen more than 18 per cent since its peak. ENDS.]
   [COMMENT: What a wonderful system!  A fall of nearly one-fifth!  Much of it propped up with funny money!
   Read the words "sell-off."  THINK!  Ah, somebody else is BUYING these shares at a cheaper price than previously available.  Who are the BUYERS?  Where do the buyers get their "margin loans" during a falling share market?  From the same sort of lending institutions that are CALLING IN "margin" loans, no doubt.  Dear Reader, can you see how the swindle -- oops, system -- works? COMMENT ENDS.] [Jan 22, 08]

• Mayhem squeezes punters; Lenders put hard word on margin borrowers as investments turn sour amid turmoil   
Lenders put hard word on margin borrowers as investments turn sour amid turmoil

Mayhem squeezes punters

   The West Australian, , (in Business section, edited by SEAN SMITH), Article by MARC MONCRIEF, p 55, Wednesday, January 23, 2008
   AUSTRALIA – The stockmarket plunge is already claiming victims, with a record numbers of investors being hit with margin calls as share values plummet.
   CommSec's executive manager of margin lending, Brian Phelps, said yesterday the online retail broker had made more than 2100 margin calls worth about $40 million.
   Last Wednesday, 500 margin calls was considered a record, with a typical day bringing about 30 such calls.
   Last night, more than 100 staff were processing the calls after a savage day which wiped a record 7 per cent off the Australian sharemarket.
   Mr Phelps stressed that only about 2 per cent of CommSec's clients were receiving margin calls, but that was a marked increase from the norm.
   In the three months to the end of September, one margin call was made for every 1000 loans, according to the most recent figures from the Reserve Bank of Australia. And September was already showing the effects of the US sub-prime stress, which began to hit global equity markets in August.
   The June quarter tallied one margin call for every 4000 loans.
   Margin calls are made when investors borrow money, called a "margin loan", to pay for their investment. [sic]   If the value of the investment falls below a certain level, the lender will call on the borrower to repay the debt.
   This can force the selling of the underlying investment, causing its value to fall even further.
  [Picture] World pressure: A dealer reacts to the German stock index display at the stock exchange in Frankfurt.  
   Margin calls and "short" selling by hedge funds – selling a stock one does not yet own with the expectation its price will fall – have been partly blamed for spiralling losses on global sharemarkets in recent weeks.
   However, Mr Phelps said only about 30 per cent of CommSec's margin loan clients receiving margin calls were selling stock to meet the margin and about half were paying their margin calls in cash.
   Adelaide Bank's margin lending subsidiary, Leveraged Equity, said it handled about 1000 margin calls yesterday after dealing with about 420 on Monday.
   For context, a spokesman said Adelaide Bank processed about 425 margin calls in the whole of November.
   The spokesman said the calls that had been made affected 0.5 per cent of Leveraged Equity's $4.6 billion book.
   Macquarie Bank and St George were also contacted, but declined to provide their figures.
   Dollars invested through margin loans have grown nearly eightfold since 1999, to $36 billion in the three months to September's end, according to the Reserve Bank.
   >PADLEY     56 #

Pessimism rules for managers

   The West Australian, by MARC MONCRIEF, p 55, Wednesday, January 23, 2008
   Pessimism has taken root in investment circles, with fund managers either scrambling for position or battening hatches.
   Smart money is shifting from shares to safe havens, with an eye to discovering good buys.
   "Before it's fallen this hard, we might have been thinking it was just a correction, but now I think it's a bear," said Argo Investments managing director Rob Patterson. "Given what happened in the UK last night, assuming there's follow-through in the US, you've really got to have your hard hat on."
   Mr Patterson said that, as long-term investors, Argo would not be selling out of its positions. New money coming into the fund, however, would be allocated to low-risk positions.
   "You want to be in the quality end in this environment," he said – that meant investing in the big miners and banks.
   JM Financial Group moved late last year to raise what investment director Julian Mitchell called "a reasonable amount of cash".
   "But hell," Mr Mitchell said. "I should have raised more." #
   [RECAPITULATION: If the value of the investment falls below a certain level, the lender will call on the borrower to repay the debt. This can force the selling of the underlying investment, causing its value to fall even further. […] Dollars invested through margin loans have grown nearly eightfold since 1999, to $36 billion in the three months to September's end, according to the Reserve Bank. ENDS.]
   [COMMENT: So, read a previous newsitem quoting economist John Maynard Keynes as writing that bank credit (i.e., "money" borrowed) is made out of thin air, and banker Reginald McKenna as stating that every bank loan or purchase of securities creates a deposit in the banks' books, and you will be able to work out how the stock exchanges of the world for most of the time buy and sell shares at prices MORE than the net worth of the companies' assets.  The human desire to get a living without working, and the bankers' desire to gain assets without having to do the work of managing them, come together nicely on the stock exchanges!  Dollars "invested" through loans were $36,000,000,000 in the September quarter, the Reserve Bank of Australia stated.  Will the great unwashed ever THINK about these things? 
   And when will the "commentariat" wake up that the shares and debt system are likely to spiral DOWNWARDS at any time, such as now when a rogue trader was able, undetected, to put a big French bank in peril of losing $80 billion, and only luck and sustained action kept the losses (they say) down to $8 billion. COMMENT ENDS.] [Jan 23, 08]

• See the buying opportunity; Time to get into the big, safe stuff and make short-term gains from long-term purchase.   

See the buying opportunity

Time to get into the big, safe stuff and make short-term gains from long-term purchase
   The West Australian, , By MARCUS PADLEY, p 56, Wednesday, January 23, 2008
   Having read a lot of the market commentary about the recent fall, … 24.3 per cent … since its November high … There are as many views as there are people to give one … […]
   I believe this is an opportunity to buy […] It is times like these that you should do the seemingly stupid and illogical, like taking out margin lending.
   Marcus Padley is a stockbroker and the author of the daily stockmarket newsletter Marcus Today. #
   [COMMENT: He suggested that people might consider going into debt to buy "the big, safe stuff" – would that be like AWB (grain sales) or HIH (insurance), both large Australian firms that turned out to be run by rogues and lawbreakers?  Or one of the overseas banks, like Barings, which was destroyed by the dishonesty of one rogue trader?  (By the way, he is now giving television interviews about how the regulatory regime ought to be upgraded to prevent more such -- a French bank having recently lost $8 billion from another rogue trader.  Evidently ruining one's employer does not bring shame to some people.)
   (The whole item, including headings and an illustration, was 115 column-centimetres in size.  Parts of it counselled more prudent behaviour.) COMMENT ENDS.] [Jan 23, 08]

• London 'Times' Story Says U.S. Complicit in Nuclear Proliferation --- Ellsberg Charges Media 'Coverup' Here.     

London ‘Times’ Story Says U.S. Complicit in Nuclear Proliferation

Ellsberg Charges Media ‘Coverup’ Here
   Media Info, (America's Oldest Journal Covering the Newspaper Industry), www.mediainfo. com/eandp/ news/article_ display.jsp? vnu_content_ id=1003699450 , By E&P Staff, Published: 1:50 PM ET, January 21, 2008, [CHECK which date of publication], Wednesday, January 23, 2008
   NEW YORK -- "For the second time in two weeks, the entire U.S. press has let itself be scooped by Rupert Murdoch's London Sunday Times on a dynamite story of criminal activities by corrupt U.S. officials promoting nuclear proliferation," declares Daniel Ellsberg, the man who leaked the Pentagon Papers some 35 years ago. "But there is a worse journalistic sin than being scooped, and that is participating in a cover-up of information that demands urgent attention from the public, the U.S. Congress and the courts."
   So begins a column by Ellsberg at Brad Friedman's "Brad Blog." Edmonds is the former FBI staffer, who translated wiretaps for the bureau, and whistleblower. Ellsberg repeated the "cover-up" charge in a phone call to E&P today., raising the possibility that some in the media have been asked by the U.S. government to refrain from pursuing the story due to national security concerns.
   In his column, Ellsberg continues: "For the last two weeks --- one could say, for years --- the major American media have been guilty of ignoring entirely the allegations of the courageous and highly credible source Sibel Edmonds, quoted in the London Times on January 6, 2008 in a front-page story that was front-page news in much of the rest of the world but was not reported in a single American newspaper or network. It is up to readers to demand that this culpable silent treatment end."
   The piece contains links to earlier stories. It is available in full at http://www.
   Edmonds has been under a five-year-long gag order by the U.S. Department of Justice. The Department of Justice has threatened Edmonds with prosecution under the so-called "State Secrets Privilege." #
   [ACKNOWLEDGEMENT: Michael P, e-mail of Jan 24, 08. ENDS.] [January 21, 2008, or January 23, 2008]

• Three Little Pigs 'too offensive'.   

Three Little Pigs ‘too offensive’

   British Broadcasting Corporation (BBC), http://news. 2/hi/uk_ news/ education/ 7204635.stm , By Sean Coughlan, BBC News, education, Last Updated 13:49 GMT, Wednesday, January 23, 2008
   BRITAIN – A story based on the Three Little Pigs fairy tale has been turned down by a government agency's awards panel as the subject matter could offend Muslims.
   The digital book, re-telling the classic story, was rejected by judges who warned that "the use of pigs raises cultural issues".
  [Picture] Three Digital Pigs   
   Becta, the government's educational technology agency, is a leading partner in the annual Bett Award for schools.
   The judges also attacked Three Little Cowboy Builders for offending builders.
   The book's creative director, Anne Curtis, said the idea that including pigs in a story could be interpreted as racism was "like a slap in the face".
   'Cultural issues'
   The CD-Rom digital version of the traditional story of the three little pigs, called Three Little Cowboy Builders, is aimed at primary school children.
   But judges at this year's Bett Award said that they had "concerns about the Asian community and the use of pigs raises cultural issues".
   The Three Little Cowboy Builders has already been a prize winner at the recent Education Resource Award - but its Newcastle-based publishers, Shoo-fly, were turned down by the Bett Award panel.
   The feedback from the judges explaining why they had rejected the CD-Rom highlighted that they "could not recommend this product to the Muslim community".
   They also warned that the story might "alienate parts of the workforce (building trade)".
   The judges criticised the stereotyping in the story of the unfortunate pigs: "Is it that all builders are cowboys, builders get their work blown down, and builders are like pigs?"
   Animal Farm?
   Ms Curtis said that rather than preventing the spread of racism, such an attitude was likely to inflame ill-feeling.  As another example, she says would that mean that secondary schools could not teach Animal Farm because it features pigs?
   Her company is committed to an ethical approach to business and its products promote a message of mutual respect, she says - and banning such traditional stories will "close minds rather than open them".
   Becta, the government funded agency responsible for technology in schools and colleges, says that it is standing by the judges' verdict.
   "Becta with its partners is responsible for the judging criteria against which the 70 independent judges, mostly practising teachers, comment. All the partners stick by the judging criteria," said a Becta spokesman.
   The reason that this product was not shortlisted was because "it failed to reach the required standard across a number of criteria", said the spokesman.
   Becta runs the awards with the Besa trade association and show organisers, Emap Education.
   Merlin John, author of an educational technology website which highlighted the story, warns that such rulings can undermine the credibility of the awards.
   "When benchmarks are undermined by pedestrian and pedantic tick lists, and by inflexible, unhelpful processes, it can tarnish the achievements of even the most worthy winners.
   "It's time for a rethink, and for Becta to listen to the criticisms that have been ignored for a number of years," said Mr John. #
   [RECAPITULATION: The feedback from the judges explaining why they had rejected the CD-Rom highlighted that they "could not recommend this product to the Muslim community". […]
   But judges at this year's Bett Award said that they had "concerns about the Asian community and the use of pigs raises cultural issues". […]
   Ms Curtis said that rather than preventing the spread of racism, such an attitude was likely to inflame ill-feeling.  As another example, she says would that mean that secondary schools could not teach Animal Farm because it features pigs? ENDS.]
   [COMMENT: Ms Anne Curtis is right about inflaming ill-feeling by the long-suffering natives of Britain, presumably.  The most likely group to be adverseley affected has globally issued death fatwas against Britain's Queen and an author under British protection, to name only two, and said that the House of Commons ought to be "dismantled."
   But just as seriously, political corruption, not "correctness," might mean that Animal Farm might not be taught in schools these days, and some of the teachers might not even know of the existence of the book!  In Western Australia, for example, books featuring coarse language, blasphemy, lurid murders, and sex acts, have been more likely to be set for study in both private and government schools, rather than books by decent and standard authors.  The State Government's Education Department has also set 42 per cent as being equivalent to an acceptable level! COMMENT ENDS.]
   [ACKNOWLEDGEMENT: Uncensored, p 33, March-June 2008; www.uncens .  Sold at newsagents.  PO Box 44-128, Pt Chevalier, Auckland 1246, New Zealand; E-mail editor@ uncensored. ENDS.] [Jan 23, 08]

• The worst market crisis in 60 years [precipitated by US housing 'bubble'.]   

The worst market crisis in 60 years

   The Financial Times, http://get response. com/t/1056 2327/571581/ 173479670/1/ , by George Soros, January 23, 2008
   The current financial crisis was precipitated by a bubble in the US housing market.  In some ways it resembles other crises that have occurred since the end of the second world war at intervals ranging from four to 10 years.
   However, there is a profound difference: the current crisis marks the end of an era of credit expansion based on the dollar as the international reserve currency. The periodic crises were part of a larger boom-bust process. The current crisis is the culmination of a super-boom that has lasted for more than 60 years.
   Boom-bust processes usually revolve around credit and always involve a bias or misconception. This is usually a failure to recognise a reflexive, circular connection between the willingness to lend and the value of the collateral. Ease of credit generates demand that pushes up the value of property, which in turn increases the amount of credit available. A bubble starts when people buy houses in the expectation that they can refinance their mortgages at a profit. The recent US housing boom is a case in point. The 60-year super-boom is a more complicated case.
   Every time the credit expansion ran into trouble the financial authorities intervened, injecting liquidity and finding other ways to stimulate the economy. That created a system of asymmetric incentives also known as moral hazard, which encouraged ever greater credit expansion. The system was so successful that people came to believe in what former US president Ronald Reagan called the magic of the marketplace and I call market fundamentalism. Fundamentalists believe that markets tend towards equilibrium and the common interest is best served by allowing participants to pursue their self-interest. It is an obvious misconception, because it was the intervention of the authorities that prevented financial markets from breaking down, not the markets themselves. Nevertheless, market fundamentalism emerged as the dominant ideology in the 1980s, when financial markets started to become globalised and the US started to run a current account deficit.
   Globalisation allowed the US to suck up the savings of the rest of the world and consume more than it produced. The US current account deficit reached 6.2 per cent of gross national product in 2006. The financial markets encouraged consumers to borrow by introducing ever more sophisticated instruments and more generous terms. The authorities aided and abetted the process by intervening whenever the global financial system was at risk. Since 1980, regulations have been progressively relaxed until they have practically disappeared.
   The super-boom got out of hand when the new products became so complicated that the authorities could no longer calculate the risks and started relying on the risk management methods of the banks themselves. Similarly, the rating agencies relied on the information provided by the originators of synthetic products. It was a shocking abdication of responsibility.
   Everything that could go wrong did. What started with subprime mortgages spread to all collateralised debt obligations, endangered municipal and mortgage insurance and reinsurance companies and threatened to unravel the multi-trillion-dollar credit default swap market. Investment banks' commitments to leveraged buyouts became liabilities. Market-neutral hedge funds turned out not to be market-neutral and had to be unwound. The asset-backed commercial paper market came to a standstill and the special investment vehicles set up by banks to get mortgages off their balance sheets could no longer get outside financing. The final blow came when interbank lending, which is at the heart of the financial system, was disrupted because banks had to husband their resources and could not trust their counterparties. The central banks had to inject an unprecedented amount of money and extend credit on an unprecedented range of securities to a broader range of institutions than ever before. That made the crisis more severe than any since the second world war.
   Credit expansion must now be followed by a period of contraction, because some of the new credit instruments and practices are unsound and unsustainable. The ability of the financial authorities to stimulate the economy is constrained by the unwillingness of the rest of the world to accumulate additional dollar reserves. Until recently, investors were hoping that the US Federal Reserve would do whatever it takes to avoid a recession, because that is what it did on previous occasions. Now they will have to realise that the Fed may no longer be in a position to do so. With oil, food and other commodities firm, and the renminbi appreciating somewhat faster, the Fed also has to worry about inflation. If federal funds were lowered beyond a certain point, the dollar would come under renewed pressure and long-term bonds would actually go up in yield. Where that point is, is impossible to determine. When it is reached, the ability of the Fed to stimulate the economy comes to an end.
   Although a recession in the developed world is now more or less inevitable, China, India and some of the oil-producing countries are in a very strong countertrend. So, the current financial crisis is less likely to cause a global recession than a radical realignment of the global economy, with a relative decline of the US and the rise of China and other countries in the developing world.
   The danger is that the resulting political tensions, including US protectionism, may disrupt the global economy and plunge the world into recession or worse.
   The writer is chairman of Soros Fund Management
   [RECAPITULATION: Globalisation allowed the US to suck up the savings of the rest of the world and consume more than it produced. […] The central banks had to inject an unprecedented amount of money and extend credit on an unprecedented range of securities to a broader range of institutions than ever before. ENDS.]
   [COMMENT: The central banks suddenly had all this "money" to save the banks.  Do you believe it? COMMENT ENDS.]
   [ACKNOWLEDGEMENT: David Spain (Australia), and Media for Your Mind, Inc. (199 Sudbury Road, Concord, Massachusetts, 01742, USA.) ENDS.] [Jan 23, 08]

• Bears back off in bourse recovery [as lenders force in-debt investors to sell good shares and bad.]    

Bears back off in bourse recovery

   The Weekend Australian, by Blair Speedy, pp 33-34, January 26-27, 2008
After the biggest rout in two decades, the share market ended the week higher
   A THIRD day of strong recovery lifted Australian shares out of official bear market territory yesterday, as investor optimism continued to grow in response to US interest rate cuts and fiscal stimulus measures.
   The benchmark S&P/ASX 200 index closed 5 per cent higher to close at 5860.3 points, bringing its gains since Tuesday's 14-month low to a formidable 13 per cent – the market's biggest three-day gain in 20 years.
   It also ended up overall for the week despite having two of its worst days ever on Monday and Tuesday.
   Although the index is still 14.5 per cent below November's record high, the market yesterday was no longer categorised as being in "bear" mode (a designation that applies to falls of 20 per cent and a zone that was breached, on Tuesday at the end of a 12-day slump).
   Citigroup Smith Barney financial adviser Fabiola Gibson said while the bear might have been subdued by the US Federal Reserve's decision to cut official interest rates by 0.75 percentage points on Tuesday, it was too soon to sound the all-clear.
   "I don't think anybody's prepared to call that at this point," she said.
   "It's been a fairly harrowing week for brokers, and for clients. There's a lot more confidence today than there was on Tuesday, but people still need to be cautious."
   Significantly, yesterday's close was also above the 5644.3 mark at which the index finished 2006, giving comfort to investors who had spent the past three weeks watching an entire year's worth of capital gains evaporate.
   The market was buoyed by "short-covering" among hedge funds and speculative investors, who had sold stocks they did not yet own in anticipation of prices falling further, but were then forced to buy shares to cap their losses once the market bounce gained momentum.
   They had been exploiting the situation in which investors subject to margin calls on borrowings were forced to sell good and bad stock at low prices earlier in the week.
   All sectors were touched by the improved mood.
   Technology stocks led the way with a 7.3 per cent rise, followed by energy companies, which added 6.6 per cent on average, while the financial sector was up 5.8 per cent.
   Ms Gibson said "badly beaten" financial stocks such as Allco, as well as infrastructure stocks, had rebounded strongly due to short-covering, while the resources sector was boosted by expectations of increases of up to 80 per cent in supply contract prices for thermal coal and more than 70 per cent for iron ore this year.
   Tricom Equities broker Marcus Padley said some of the turmoil of the past week might be attributable to the $8 billion rogue trading scandal at French bank Societe Generale, which on Monday began selling off massive losing long positions accumulated in secret by an employee acting without authorisation.
   Mr Padley said SG's selling activity contributed to downward pressure on European markets on Monday, which in turn dragged Australian prices lower on Tuesday, when $110 billion was wiped off the value of Australian stocks during the fourth-worst trading session in Australia's corporate history.
   Ms Gibson said attention was now turning back to the US, where the Fed was expected to deliver a further rate cut after its policy meeting on January 30, and news of the sub-prime debt market meltdown would be examined for implications for Australian companies seeking to borrow funds.
   Macquarie Private Wealth client adviser Marcus Droga said further US rate cuts could avert an equities market bloodbath.
   "This is by no means the end of volatility … this will take months if not years to work through, but if the central banks remain proactive and take substantially aggressive action, it's likely to be preventative of any doomsday scenario in the markets," he said.
   [RECAPITULATION: They had been exploiting the situation in which investors subject to margin calls on borrowings were forced to sell good and bad stock at low prices earlier in the week. […] Tricom Equities broker Marcus Padley said some of the turmoil of the past week might be attributable to the $8 billion rogue trading scandal at French bank Societe Generale, which on Monday began selling off massive losing long positions accumulated in secret by an employee acting without authorisation. ENDS.]
   [COMMENT: In-debt "investors" forced to sell good and bad stock – isn't that the point of having a credit squeeze?  Can't see it?  Who do you think BUYS the stock being sold at the low prices?  The Good Fairy?   And do you think the money to buy the stock came from the foot of the rainbow, or from a hefty "advance" to an Insider from the banking system? COMMENT ENDS.] [Jan 26-27, 2008]

• From Hillary's Whitewater Deal to Bill's Uranium Mine to Obama's Ba'athist Ties; Hot Democratic Properties.   
Hot Democratic Properties

From Hillary’s Whitewater Deal to Bill’s Uranium Mine to Obama’s Ba’athist Ties

   Information Clearing House (USA), , By Alexander Cockburn, February 02, 2008
   02/02/08 "Counterpunch" -- Back in 1992 it was the Whitewater real estate deal that plagued the Clintons, though fortunately for them, Jeff Gerth's initial expose in the New York Times on March 8, 1992, was incomprehensible.  Hillary Clinton and her lawyer Susan Thomases muddied the trail by maintaining falsely that Mrs Clinton's billing files--which would have disclosed her numerous conferences with Madison Guaranty --could not be located.
   If Hillary wins the nomination Republicans will once again plow through the vast acreage of questionable deals and evasive responses developed by the Clintons down the years, the latest ones, such as Bill's financial cavortings with the Canadian mining entrepreneur, still as fragrant as freshly turned manure.
   Barack Obama has already felt the hot breath of investigators for his property deal in 2005 on the south side of Chicago. This one will have legs as long as Obama is in the race for the Democratic nomination. If he wins that prize, the scrutiny will get more intense, as Republicans link him with an Iraqi millionaire who has been linked to Saddam Hussein from the earliest years of the Iraqi dictator's bloodstained rise to power.
   In 2005 Obama bought a Georgian mansion in Chicago's elite Kenwood neighborhood. He paid $1.65 million for it. The same day Rita Rezko, the wife of Chicago property operator Antoin "Tony" Rezko, bought the adjacent undeveloped lot, which had once been part of the mansion's garden. Rezko paid $650,000 for the parcel which at present can only be accessed from the Obama property and which Obama's garden crew has been keeping tidy. Obama got his house for $300,000 under the asking price. Rezko paid full asking price. Later, Obama bought a sixth of Rezko's parcel for $100,000.
   Obama has known Rezko ever since the latter contacted him as a possible associate in the real estate business after Obama got the top slot at the Harvard Law Review and was an obvious comer in Chicago politics. Rezko, like all major real estate players, has made a career of playing insider politics and forming political alliances advantageous for his dealings. He's contributed to Obama's campaigns down the years. Answering questions from the Chicago Sun-Times in 2005, specifically about the allegation that the newly elected US senator contacted Rezko when he first thought of buying the Kenwood mansion, Obama said very carefully, "I don't recall exactly what our conversations were or where I first learned, and I am not clear what the circumstances were where he made a decision that he was interested in the property. I may have mentioned to him the name of [a developer and] he may at that point have contacted that person. I'm not clear about that."
   At the time of the 2005 transaction Rezko's legal problems had already surfaced and Obama told the Sun-Times that involving Rezko "was a mistake". Rezko is now under indictment by US Attorney Patrick Fitzgerald (Scooter Libby's special prosecutor). He faces trial in federal court on February 25. On January 29 a federal judge, Amy J. St Eve, ordered Rezko held behind bars for violating the terms of his bail and for being a flight risk.
   Though, as part of his bail terms, Rezko was required by the court to disclose any changes in his financial status the FBI, using a "cooperating individual" identified only as "C14", claims to have established that Rezko did not reveal that in April, 2007, he appeared to have been the beneficiary of a $3.5 million wire transfer from General Mediterranean Holding S.A., a company run by a business associate of Rezko's, N. Auchi. General Mediterranean has been partner with Rezko in a 62-acre property deal in Chicago.
   Nadhmi Auchi lives in the U.K., is extremely rich and politically well connected. In November 2003 he was the subject of unsparing criticism by Nick Cohen in The Observer. Cohen claimed that:
   He was charged in the 1950s with being an accomplice of Saddam Hussein, when the future tyrant was acquiring his taste for blood … One reason why journalists have shied away from Auchi is that he has expensive lawyers. They have always denied that their client had met Saddam. No one has been able to contradict them, but we do know that Auchi was charged with being a plotter for the Baath Party as it prepared to seize power. In October 1959 he stood trial for conspiring to assassinate the Iraqi Prime Minister, Abdul Karim Qasim. The attempted murder became a revered part of Saddam's cult of personality … In 1959 Auchi admitted to playing a minor part in the drama. The conspirators had collected a machine gun from his house before the attack, he said, but he had not used the weapon and knew nothing of what was being planned.
   Auchi prospered when the Baath Party seized control of the state. When Saddam assumed total power he moved to Britain … the execution [of his brother] did not inhibit Auchi's business dealings with Iraq which, he says, didn't stop until the Gulf war of 1991. His first coup in the West was to broker a deal to sell Italian frigates to the Iraqi Defence Ministry, for which he received $17m in commission. Italian investigators claimed that a Panamanian company owned by Auchi was used to funnel allegedly illegal payments. Auchi denied he had done anything wrong.
   The Observer's website featuring Cohen's story also supplies a link to a statement in which Auchi's lawyers say their client "was never close to Saddam Hussein or his regime. He never met or even spoke to Saddam Hussein. Mr Auchi has never to his knowledge had any involvement in money stolen by Saddam Hussein and/or Colonel Gadaffi and he has never sheltered funds for Saddam Hussein. During the time when Iraq was considered to be a friend of the west, Mr Auchi conducted business with entities in Iraq. On sanctions being imposed against Saddam Hussein's regime, Mr Auchi ceased conducting such business."
   Cohen says that in the fall of 2003 Auchi "was convicted of illicit profiteering by the Paris Criminal Court and received a 15-month suspended sentence."
   Obama is certainly aware that Rezko is a political liability. Thus far the most tangible benefit from his association unearthed by reporters has been some $50-60,000 in campaign contributions from Rezco down the years (Obama's estimate) plus the adjacent-lot property deal in Kenwood which does smell. One inference back in 2005 might have been that Rezko would finally have conveyed the undeveloped lot to Obama in some manner advantageous to the senator. Apparently Obama scented peril as the spotlight came on his association with Rezko and had a substantial fence (which Rezko promised to pay for) erected between the two parcels. The Rezko parcel is supposedly scheduled for a house.
   In terms of political mudslinging, if Obama continues to prosper politically this year, we can expect ongoing probes for political favors he might have done for Rezko down the years. For the political hit squads the money shot, so to speak, is any headline that links Barack Hussein Obama with an Iraqi millionaire not only linked to the oil-for-food scandal but to the Baath Party and to Saddam Hussein. #
[Feb 02, 08]

• Rudd must not fiddle while China snaps up our miners.      

Rudd must not fiddle while China snaps up our miners

   The West Australian, , Opinion, [Editorial], p 20, Monday, February 4, 2008
Prime ministers and treasurers are understandably reluctant to do anything which might create a perception that they are intervening in the icon of the free world, the sharemarket.  Treasurers can move markets, Wayne Swan argues.  And indeed he is right.  In fact, they do almost every time they open their mouths.  If Mr Swan's goal is to have no influence on markets, then he is in the wrong job.  Of course, this is not the case.  Equally, there is a fine line MPs in such positions must walk between allowing markets to operate unencumbered and fulfilling their roles as the guardians of the national interest.
   China's landscape-altering, if not completely unexpected, decision to snap up 12 per cent of Rio Tinto on Friday night will test where Prime Minister Kevin Rudd and Mr Swan believe this line falls.  On one hand, Rio is a public company listed on stockmarkets in Australia and Britain, both countries which welcome foreign investment.  Government's don't exist to protect public companies from the real world.  But they do have as their first priority the best interest of their nation, which at times dictates that other honourable ideologies take second place.  This was the case when former treasurer Peter Costello blocked Shell's takeover of North-West Shelf operator Woodside Petroleum. 
   The Rio transaction has such potentially immense economic and social implications that Mr Rudd and Mr Swan do not have the luxury of being bystanders as this $150-billion plus battle plays out.  The inescapable fact is that that this is not just another sharemarket deal.  China is not buying Rio shares to make a profit.  It is seeking to stop BHP merging with Rio and thereby driving up iron ore prices.  It also wants to ensure that in a world where demand for iron ore from competing Asian steel mills exceeds supply, China can get its foot on as much of this increasingly valuable WA commodity as possible.  Quite simply, when it comes to iron ore, what is in China's best interests is more than likely going to be contrary to what best serves Australia. 
   And it is not just China's Rio stake which requires urgent attention from Canberra.  Last week's revelation that two obviously related Chinese businesses between them own 40 per cent of WA iron ore miner Mt Gibson should also be of major concern to Mr Swan, The Chinese argue the pair are not related, despite having common management and being joint venture partners.  Therefore, they say they are not in breach of Australian laws which state a company can buy only 19.9 per cent of another without making a full takeover bid.  The refusal by the corporate regulator to intervene in this is a disgrace in itself and should also be under Mr Swan's microscope. 
   As state-owned entities, Chinese investors can justify paying far more than other companies because their concern is cheap, reliable supplies of raw materials.  The financial parameters which govern western companies do not apply. 
   Alan Carpenter got it about as wrong as he could yesterday by saying some people were paranoid about China's plans.  Perhaps his complete lack of commercial experience – he has never worked in small business nor been an executive in a big one – explains his ignorance.  The Mandarin-speaking Mr Rudd must take an active interest in this thorny issue of Chinese ownership of Australian resources to protect our best interests.  This would not be paranoia, simply good governance. #
   [COMMENT: China has attacked its neighbours a few times since suffering for years from the Japanese attacks from the 1930s until 1945.  China persecutes religions and minorities, and its dictatorial leadership makes it one of several dangerous powers in the modern world. COMMENT ENDS.] [Feb 4, 08]

• Editorial hits the button!  [China must not control our mining companies.]

Editorial hits the button!

   Letter to The Editor of The West Australian from an Informed Source, Monday, February 4, 2008
   The Editorial in the February 4 issue about China buying out a huge mineral company is "right on the button."
   Privileges to mining companies were granted by short-sighted previous governments, backed by the people.
   But the whole idea was to use the money to set up processing industries, to employ our own people.  We were tricked.
   Unfortunately, the huge corporations, whether Chinese, British, American, or European, do not have the interests of Australians at heart.  Sometimes I wonder if they even know what they want -- they can't take their billions with them after death! #
   [COMMENT: This letter, except for the last sentence, was published in an edited form in the "In short" letters on p 22 of the Feb 7 issue. COMMENT ENDS.] [Feb 4, 08]

• 'Creative Destruction' -- The Madness Of The Global Economy  


   Media Lens Media Alerts, , 80/alerts/ 08/080205_ creative_ destruction_ the.php , 3:37 PM, February 5, 2008
   Watching the corporate media report the ‘financial crisis’ is instructive. From the perspective of power, it is important that a steadying hand is applied to the tiller of news and commentary on the crisis, and the global economy itself.
   And so columnist Martin Wolf took a ‘measured’ view in the Financial Times. There have been 100 “significant” banking crises in the past thirty years, he noted, making them almost routine. Authorities have had to intervene to “rescue” the US financial system from four crises over that period: the developing country debt and also the “savings and loan” crises of the 1980s; the commercial property crisis of the early 1990s; and now the subprime and credit crisis of 2007-08. As Wolf observed correctly of the banking sector: “No industry has a comparable talent for privatising gains and socialising losses.”
   Wolf’s big “fear”, though, is that the crumbling financial system will destroy “the political legitimacy of the market economy itself.” Why this “political legitimacy” should not be challenged is left hanging in the air.
   And what Wolf terms the “market economy” is an extreme variant of capitalism known as ‘neoliberalism’ which is massively subsidised and protected by powerful states. Again, all this is left unsaid. Wolf turns instead to bankers’ pay which, he asserts, lies at the root of the problem:
   “By paying huge bonuses on the basis of short-term performance […] banks create gigantic incentives to disguise risk-taking as value-creation.” Official intervention to regulate bankers’ remuneration is a “horrible” solution. But the alternative, an endless series of financial crises, is “even worse.” (Wolf, ‘Why regulators should intervene in bankers’ pay’, Financial Times, January 16, 2008)
   Wolf’s “solution”, however, is hugely impractical. Defining a link between bankers’ performance and remuneration would be immensely difficult, involve unlikely international regulation of global markets and require complex mechanisms to police. As this simply is not going to happen in the current political climate, given the certain massive resistance of financial interests, we can expect similar and maybe worse crises in the future.
   Over at the Times, another useful gauge of establishment thinking, the title of Anatole Kaletsky’s column summed up the required pacifying message: ‘Relax. Our economy isn't manic depressive.’ Happily, according to Kaletsky’s “hunch”, it will all turn out fine: “a combination of monetary and fiscal easing, along with some regulatory changes […] will lessen the credit crisis and prevent a world recession.” (Kaletsky, The Times, January 24, 2008). The message was buoyant, but it was also superficial.
   The Independent’s economics commentator, Hamish McRae, pinned blame for the crisis simply on “mistakes”:
   “Bankers, like the rest of us, make mistakes, but the scale of the mistakes, particularly in US banks, has been enormous. We won’t fully understand for some time quite how they could persuade themselves that bundles of housing loans to clearly uncreditworthy borrowers should be ranked as almost as good as government securities.”
   The “legitimate question” now, asserts McRae, is “whether the continuing banking weakness has become so serious as to transfer what is still a financial market problem into a more general economic problem.” His reassuring conclusion:
   “Banking troubles will be a drag on the world economy, slowing it down. But they won't stop it in its tracks.” (McRae, ‘The markets are bad, but don’t panic just yet’, Independent, January 23, 2008)
   This would be comforting news for the ‘masters of the universe’ who were meeting in Davos, many of them in sombre mood: 27 heads of state; 113 cabinet ministers; hundreds of chief executives, bankers, fund managers, economists and journalists: about 2,500 participants in all. Sean O’Grady, the Independent’s economics editor, was enthralled by the “concentrated, eclectic mix of the top slice of humanity” that “is part of the ‘magic’ of this mountain redoubt”; all twinkling under a “sprinkling of stardust” brought upon proceedings by the likes of Bono.
   The stardust was clearly affecting O’Grady’s vision as he proposed we should rely on western political and corporate leaders to “balance the needs and aspirations of the old economies of the West, the emerging economies of the east and the still poor billions in the south.” (O’Grady, ‘Davos. Wealth, power and a sprinkling of stardust’, The Independent, January 22, 2008)
   In the Guardian’s comment pages there was at least a glimmer of dissent from columnist Jonathan Freedland. “Turbo-capitalism is not just unfair,” he wrote, “it is dishonest and dangerous.” He pleaded: “surely this is the moment when Labour and the centre-left can dare to question the neoliberal dogma that has prevailed since the days of Thatcher.”
   Freedland’s dissection was limited, though, cautiously proposing that “you could argue” that “capitalism is always […] parasitical on the state.” What he sought was a kinder, gentler form of capitalism instead of the “turbo-capitalism” which is happy to rely “on us, the public, and our instrument, the state, when it gets in trouble.” Thin on details, he concluded weakly: “Now we should demand a say the rest of the time, too.” (Freedland, ‘The free-marketeers abhor the crutch of the state - until they start limping’, Guardian, January 23, 2008)
   The above sample indicates the narrow spectrum of corporate media opinion on the ‘financial crisis.’ Viewpoints are heavily biased towards the status quo, with only occasional fig leaves of mild dissent. This is a misleading picture, avoiding scrutiny of an economic system that is both fundamentally flawed and stacked against the majority of humanity.
   Financial and political elites are at pains to convince the public they can get things ‘back on track’ by tweaking interest rates, ‘stimulating’ the economy and only infrequently having to intervene to make a heroic “rescue”. Thus, although the occasional financial crisis cannot be prevented - just as a flu virus might afflict a healthy body - the economy itself is presumed to be “inherently strong.” (President George W. Bush, quoted, Democracy Now!, January 23, 2008;
   This is a vital illusion; the required view of wealthy investors and corporations. After all, a basic requirement for powerful authority to prevail is the mythical projection of a benign force in control of events. Western leaders and their faithful retinue in the media are deceptively reassuring about the global economic situation - because profits and power demand it. Otherwise they run the serious risk of a huge slump in public confidence in the current economic system and even in what passes for ‘democratic’ politics. Corporate reporting of the ‘financial crisis’, then, is yet another example of how reality is distorted in service to power and profit.
Boom And Bust
   Despite the huge scale of yet another financial crisis, and the threat of an impending severe global economic recession, the major political parties and elite media refuse to address the possibility of fundamental weaknesses and inequality at the very heart of modern ‘capitalism.’ In reality, the current system, driven by private profit far beyond environmental sanity, is incapable of meeting the needs and aspirations of humanity.
   The inherently unstable and destructive behaviour of capitalism derives from its inevitable cycles of “boom and bust.” We can see this in both theory and practice. Corporations operate for the primary benefit of their shareholders, as demanded by company law. The priority of shareholders is to maximise profits. The capital that they invest must increase in value to justify the risk undertaken. Demand for products and services thus needs to expand. The profits gained, or part thereof, can then be reinvested to generate further profit.
   But the process is unsustainable because markets become saturated as consumers reach the limit of their demand capacity. Intense competition impels producers to drive down costs, especially labour, to make a profit. As profits become squeezed, and dividend-hungry shareholders threaten to take their investment elsewhere, producers become desperate to push up total sales. They pump out ever greater volumes of commodities and spend billions on advertising to boost demand. Inevitably, the flood of commodities surpasses the capacity of the market to absorb products. Sales collapse, unemployment rises and a full-blown recession ensues: this is the ‘bust’ part of the cycle. Surplus productive capacity then has to be destroyed before a new ‘boom’ can begin.
   That is the theory, and it is borne out by historical experience. Since the industrial revolution, around 200 years ago in the West, boom-and-bust cycles have recurred with varying intensity. The most destructive bust occurred in the 1930s Great Depression, leading to World War Two and the deaths of over 60 million people.
   Historically, as Karl Marx recognised, capitalism can also be seen as the driver of technological revolutions and in boosting human powers of production. And, at least in the West, it has been associated with past increases in the living conditions of a sizeable fraction of the population. So perhaps we should accept that capitalism, with all its flaws, is the best we can do. Perhaps we should believe the official argument that governments have largely learnt to cope with boom-and-bust cycles through judicious planning.
   For example, a huge crisis was averted in the 1970s. However, this was only possible because, as British economist Harry Shutt explains: “the authorities were determined (as never before) to use the forces of the state - through fiscal and monetary manipulation (including massive but unsustainable government borrowing) - to try and keep the show on the road.” (Shutt, email, January 28, 2008)
   But these were only short-term ‘fixes’ at best. Gerry Gold and Paul Feldman sum up:
   “Attempts to resolve the simultaneous stagnation and inflation of the 1970s through high interest rates produced a recession in the US in the early 1980s. Parallel deflationary policies imposed by the UK’s Thatcher government from 1979 led quickly to a recession and a fullblown slump by 1985. Attempts to overcome this only led to a further recession in 1991-2.” (Gold and Feldman, ‘A House of Cards: From fantasy finance to global crash’, Lupus Books, London, 2007, p. 28)
   Moreover, Shutt exposes the “coping strategies” promoted over the past twenty years by government authorities in cahoots with Wall Street and the City. These have “all involved pumping up credit bubbles around various fantasies – ‘emerging’ markets,, housing - which had about as much substance as the original South Sea [Bubble] and could only be sustained even for a few years by a similar level of fraud and misinformation.” (Shutt, email, January 28, 2008)
   In 1997, a major financial crisis erupted, starting in East Asia. Currencies collapsed, businesses went bankrupt and millions of people lost their jobs. Many Asian enterprises were subsequently snapped up at rock-bottom prices by corporations and investors in the West. Soon after, in 2000, the speculative bubble of investment in internet-related companies burst spectacularly. This ‘dot-com’ bust saw a lengthy recession ensue in the developed world.
   Historical evidence shows, then, that governments have been largely powerless to combat capitalism’s inevitable and damaging ‘business cycles’. However, this should not be confused with the resiliency of capitalism; the system has demonstrated a repeated capacity to reform itself sufficiently to allow renewed growth and to survive further rounds of business cycles. So it would be wrong to assume that the whole capitalist system, unstable and unfair as it always will be, is on the verge of total collapse.
   Official Fraud And Propaganda
   An alarming symptom of what is wrong with current economics is the increasingly desperate and cynical measures taken by powerful states, corporations and investors to maintain faltering public confidence in global capitalism. Just as Enron, Worldcom and a host of other large corporations have committed accounting fraud, so governments have falsified figures on inflation, output and unemployment to present a false picture of a healthy economy. (See Shutt, ‘The Decline of Capitalism’, Zed Books, London, 2005, pp. 104-5)
   For example, the US government has deliberately exaggerated GDP growth rates in order to disguise the economy’s poor performance since the mid-1970s; in the developed world, growth rates have actually declined over the past three decades. As David Harvey reports, aggregate global growth rates stood at around 3.5 per cent in the 1960s. Even during the difficult 1970s, marked by energy shortages and industrial unrest, it fell only to 2.4 per cent. But the subsequent growth rates have languished at 1.4 per cent and 1.1 per cent in the 1980s and 1990s, respectively, and has struggled to reach even 1 per cent since 2000. (Harvey, ‘A Brief History of Neoliberalism’, Oxford University Press, 2005, p. 154)
   In terms of public perception, however, the authorities have largely succeeded. They have maintained the fiction that they can manage the economy effectively and that global capitalism is the only game in town. How has this been possible? Shutt points to a “media campaign of uncritical propaganda and pro-market hype.” This “sustained act of mass deception (in which the establishment has seemingly come to believe in its own propaganda) has had disastrous consequences.” (Shutt, op. cit., pp. 36-37)
   Those consequences include crushing levels of poverty and inequality; wars motivated by the desire for strategic control, hydrocarbon resources and economic markets; climate instability; and the most rapid loss of species in the planet’s history.
   The Neoliberal Nightmare
   To complement the above picture, and in contrast to corporate media coverage, we must also critically describe the political-economic process summed up by that innocuous-sounding word, ‘neoliberalisation’. This serious attack on democracy, the latest stage in advanced capitalism, took root in the Reagan-Thatcher era of the 1980s, and has accelerated ever since. Proponents of neoliberalism tell us that human well-being flourishes best within an institutional framework characterised by strong private property rights, ‘free’ markets and ‘free’ trade. But what has it meant in practice?
   First, recall that after the trauma of the Depression and WW2 in the 1930s and 1940s, Western governments used Keynesian fiscal and monetary policies (named after the British economist John Maynard Keynes) to try to dampen business cycles and to ensure reasonably full employment. There was significant state-led planning, and even state ownership, of key industrial sectors such as coal, steel and cars. Governments also made huge investments in health care, education and infrastructure. As David Harvey explains, this system of “embedded liberalism” involved “market processes and entrepreneurial and corporate activities [that] were surrounded by a web of social and political constraints and a regulatory environment.”(Harvey, op. cit., pp. 10-11)
   During the 1950s and 1960s, embedded liberalism delivered high rates of economic growth in the West. But in the 1970s, given the inevitability of boom-and-bust, a serious crisis of capital accumulation arose. Inflation and unemployment soared, and labour unrest threatened business interests. The free-market and monetarist financial centres, notably the City of London, had never been enamoured of the postwar welfare state and were increasingly antagonistic towards state Keynesian policies. As Harvey notes, “the nationalized industries were draining resources from the Treasury.” (op. cit., p. 57). With the oil shocks and economic stagnation of the 1970s, powerful business and political forces mobilised to set a course for the next stage of capitalism: to regain the elite class power that had been dissipated, to some extent, by postwar policies of wealth redistribution and social welfare. Neoliberalisation was born.
   A wave of deregulation of financial markets swept the world, and transnational mobility of capital rapidly rose. Corporate pressure intensified on governments to create a ‘good business climate’ and to adopt neoliberal ‘reforms’ that routinely squeezed state spending. Wall Street-IMF-Treasury policy measures came to dominate US economic policy and many developing countries were driven down the neoliberal road, creating social havoc and environmental disasters. Neoliberalism became the new economic orthodoxy, exerting a powerful ideological influence in the media and academia.
   The whole process has been a form of ‘creative destruction’, weakening or even breaking down existing institutions and state powers, social welfare, health care, education systems and culture – even modes of human interaction, behaviour and thought.
   In some countries, certainly, there have been ‘successes’ during the initial stages of neoliberalisation in lifting people out of poverty and in raising living standards for many – just as past capitalism generally did in the West. However, this has certainly not been the motivating intent of corporations and investors, despite much pious rhetoric about ‘solving poverty’. Any localised ‘success’ has typically been achieved at the expense of people elsewhere, in regions where neoliberal ‘development’ has not been as advanced. China’s achievements, for example, have been gained to the serious detriment of neighbouring economies.
   A persistent and deep-rooted characteristic of neoliberalisation has been its strong tendency to worsen social inequality, as we will see later. Social progress achieved during neoliberalisation of previously poor countries has not been sustained. Typically, state intervention has been required to maintain any semblance of a social welfare safety net – or the net has simply been left to fray in the chill winds of economic ‘progress’.
   At the other end of the social spectrum, neoliberalisation has generated spectacular concentrations of wealth and power that have not been seen since the 1920s. In China and Russia, new and powerful economic elites have been created. Harvey sums up:
   “The flows of tribute into the world’s major financial centres have been astonishing. What, however, is even more astonishing is the habit of treating all of this as a mere and in some instances even unfortunate byproduct of neoliberalization. The very idea that this might be - just might be - the fundamental core of what neoliberalization has been about all along appears unthinkable. It has been part of the genius of neoliberal theory to provide a benevolent mask full of wonderful-sounding words like freedom, liberty, choice, and rights, to hide the grim realities of the restoration or reconstitution of naked class power […].” (Harvey, op. cit., pp. 118-119)
   The above is but a hint of the stark reality underpinning the ‘flourishing’ of the global economic system; a reality that is shamefully missing from broadcast headlines and newspaper front pages. The current system of economics, particularly the latest stage of “turbo-capitalism”, known inoffensively as “neoliberalism”, is built upon painful boom-and-bust cycles fuelled by corporate greed and maintained by cynical deception of the public. The costs to the planet – in terms of human suffering and environmental collapse – are staggering.
   In Part Two, to follow shortly, we tackle the establishment myth that India and China are the latest #8216;success’ stories of global capitalism.
   The Media Lens book ‘Guardians of Power: The Myth Of The Liberal Media’ by David Edwards and David Cromwell (Pluto Books, London) was published in 2006. John Pilger described it as: “The most important book about journalism I can remember.” For further details, including reviews, interviews and extracts, please click here:
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Exchange With The Independent's Hamish McRae

   In Part One of this alert, we noted an observation made by Hamish McRae, economics columnist at the Independent:

   "Bankers, like the rest of us, make mistakes, but the scale of the mistakes, particularly in US banks, has been enormous." (McRae, 'The markets are bad, but don't panic just yet', The Independent, January 23, 2008)

   We asked him why he talked merely of "mistakes", adding:

   "Why are the terms of your analysis so narrow; so skewed towards the perspective of financial power?" (Email, January 23, 2008)

   As an alternative, we suggested a few observations made in Part One; in particular, that the current economic system is both innately unstable and destructive. We asked McRae why he appears to reject such a rational analysis. On the same day, he wrote back confusingly:

   "Thanks - I see your point. I suppose I feel I should deal with the world as it is, rather than as it might be. Is that narrow? Well, yes if you are seeking a discussion of the merits and demerits of the present global market economy, but no if you are trying to understand and calibrate what is actually happening. I think I am probably more use doing the latter."

   We responded:

   "You say: 'I feel I should deal with the world as it is.' Perhaps it would be more accurate to rephrase this as: 'I feel I should deal with the world as I see it.'"

   His reply, sent as he was about to head for the World Economic Forum in Switzerland:

   "Not sure - let me think about it. But in all earnestness I do think that you should not discount the huge progress made in India and China in lifting people out of poverty. I visited both in recent months and am in awe. I shall have to stop this interchange as I have to pack for Davos now."

   But just how accurate is McRae's observation of the "huge progress made in India and China", a mantra that appears regularly in the corporate media?

India And China: The Latest 'Success Stories' Of Capitalism

   Cheerleaders for capitalism are keen to advertise the system's 'successes'. Earlier, model countries were said to include Japan, South Korea, Malaysia and Thailand. But that was before the East Asian financial crisis of 1997-98. India and China are today's poster states for capitalism.
   Some progress in these countries is real. However, as we noted before, any social progress under 'neoliberal reforms' has not been sustained and, moreover, has been to the detriment of people losing out elsewhere in the global economy (not to mention the damage to global ecosystems).
   Another important factor, glossed over in conventional reporting, is that massive state intervention and subsidies have been required to ameliorate the worst consequences of 'shock therapy' in following neoliberal doctrines of 'market reforms.' Political economist David Kotz notes that China's strategy of opening up its economy since 1978 "bears almost no resemblance to the neoliberal approach followed by Russia."
   For example, government price controls were lifted only gradually in China. Also, the large-scale privatisation of state-owned enterprises, upon which many people depended, did not begin until 1996, 18 years into the transition. The state continued to direct and support large state enterprises, only gradually loosening its regulation as experience grew of operating in a market environment.
   Public spending and public investment continued to grow, rather than shrink as in Russia. China did not privatise its banks, as Russia did, but retained a state-controlled financial system. And rather than rapidly eliminating barriers to trade and capital movements, China has retained significant controls over both. (Kotz, 'The Role of the State in Economic Transformation: Comparing the Transition Experiences of Russia and China', Political Economy Research Institute, University of Massachusetts at Amherst, October 1, 2004; working_papers/working_papers_51-100/WP95.pdf)
   By keeping strict control of key elements of the economy, China managed (at least initially) to avoid the disasters that assailed other countries. India, too, has long pursued interventionist economic strategies, with the government restricting the attempted access by foreign corporations to domestic markets and enterprises.
   Commentators in the corporate media seem reluctant to acknowledge all this when they talk of the supposed successes of 'market reforms' in China and India. Moreover, behind McRae's impression "of huge progress" in these countries, the reality is far more disturbing.
   Take India first. In 2007, the country's rank in the Human Development Index of the United Nations Development Programme (UNDP) fell two places to 128. That put India in the bottom 50 of the 177 nations examined. P. Sainath, rural affairs editor of The Hindu newspaper, points out the disturbing context of the statistics:

   "El Salvador, which saw a bloody civil war for over a decade from the 1980s, ranks 25 places ahead of us at 103. Bolivia, often called South America's poorest nation, is 11 steps above us at 117. Guatemala, nearly half of whose citizens are poor indigenous people, saw the longest civil war in Central America. One that lasted close to four decades and which saw 200,000 people killed or disappear. That too, in a nation of just 12 million. Guatemala ranks 10 places above us at 118." (Sainath, 'India 2007: High growth, low development', The Hindu, December 24, 2007)

   Sainath adds, with grim humour:

   "India rose in the dollar billionaire rankings, though. From rank 8 in 2006 to number 4 in the Forbes list this year […] In the billionaire stakes, we are ahead of most of the planet and might even close in on two of the three nations ahead of us (Germany and Russia)."

   As India's new billionaires snap up palatial homes and luxury yachts, desperate conditions for the nation's farmers have led to an epidemic of suicides. Vandana Shiva, director of the Research Foundation for Science, Technology and Ecology, refers to the appalling suicides of more than 40,000 Indian farmers since 1997 as "genocide":

   "This genocide is a result of deliberate policy imposed by the World Trade Organisation and implemented by the Government. It is designed to destroy small farmers and transform Indian agriculture into large-scale corporate industrial farming."

   Farmers are in despair over crippling debts from rising production costs and falling prices, both linked to the corporate-led imposition of 'free trade' in agriculture. Shiva warns of the growing forced dependence on hybrid and genetically modified seeds which are costly and cannot be saved. These consequences derive from the corporate policy of privatising seed supply and the drive towards multinational seed monopolies. (Special correspondent, 'Farmers' suicides nothing but genocide, says Vandana Shiva', The Hindu, May 9, 2006)

So India's 'success' has come at a huge social price. What about China?

   "A Large Statistical Glitch"

   A new World Bank study has revealed that China's economy is considerably smaller than had been thought, perhaps by as much as 40 per cent. "What happened was a large statistical glitch," reported the New York Times.  But it's a glitch that has huge repercussions:

   "Suddenly the number of Chinese who live below the World Bank's poverty line of a dollar a day jumped from about 100 million to 300 million." That is the same size as the entire population of the United States. The new figures mean that the size of India's economy, too, has probably been exaggerated until now. "And, by the way, global growth has very likely been slower than we thought." (Eduardo Porter, 'China shrinks', New York Times, December 9, 2007).

   Economist Martin Hart-Landsberg notes that China's alleged success is "at the expense of economic problems elsewhere":

   "[W]hile investment rates are very high in China, they are low and falling in most of the rest of East Asia. Their economies have become increasingly dependent on exporting to China and to succeed they have been forced to keep wages low." (Email, January 26, 2008)

   China has largely failed to generate new jobs: an endemic feature of neoliberalism. Indeed, a 2004 study by Alliance Capital Management reported that manufacturing jobs are being eliminated faster in China than in any other country. Between 1995 and 2002, China lost more than 15 million factory jobs: 15 per cent of its total manufacturing workforce. (Jeremy Rifkin, 'Return of a Conundrum', The Guardian, March 2, 2004)
   Even by the World Bank's own analysis, China's poor have been growing poorer as the country's economy 'booms.' The real income of the poorest 10 per cent of China's 1.3 billion people fell by 2.4 per cent in the two years to 2003. During this time the economy was growing by nearly 10 per cent a year. Over the same period, the income of China's richest 10 per cent rose by more than 16 per cent. (Richard McGregor, 'China's poorest worse off after boom,' Financial Times, November 21, 2006)
   Tragically, studies of China's health indicators show a slowdown or even reversal of trends. A report in 2005 "concluded that China's rates of improvement in life expectancy were lower than those of East Asia and the Pacific region as a whole in every decade other than the 1960s, and fell below the world average in the 1990s. They observed a similar trend for infant mortality, noting that China's advances were again outpaced by those of high income countries and other East Asian and Pacific states." (Sanjay Reddy, "Death in China, Market Reforms and Health," New Left Review, 45, May/June 2007, p. 62)
   Hart-Landsberg warns that "past health gains from immunizations, water and sewer infrastructure, education, etc. may now be exhausted. And as marketization continues, the social infrastructure is being destroyed, with the consequence that problems are emerging for most Chinese. Social support/public health care system is not there and health care is now a market process. Many cannot afford it as they have to pay for access to it." (Email, January 26, 2008)
   On top of this working class misery, inequality between China's rich and poor is appalling and is actually getting worse. The Asian Development Bank studied the degree of inequality, using the popular Gini coefficient, in 22 East Asian developing countries. It found that China had the second highest degree of inequality, trailing only Nepal (Asian Development Bank, 'Inequality in Asia, Key Indicators 2007, Special Chapter Highlights', p. 3;
   China's tragic transformation from one of the most equal, to one of the least equal, countries is even more striking if we switch our measure of inequality from the Gini coefficient to income ratios; in particular, the earnings of the top 20 per cent relative to the bottom 20 per cent of the population. Using this measure, China had by far the highest growth in inequality (Ibid., p. 7). Sadly, Hart-Landsberger warns that there is "every reason to believe that these [official] statistics strongly underestimate the degree of inequality." (Email, January 26, 2008)
   There are further 'hidden' costs to China's rapid growth: rising pollution, destruction of ecosystems and the heightened threat of climate chaos. Future generations will bear the brunt of these 'externalities.' The Worldwatch Institute reported at the end of 2006 that China had slid down the annual Climate Change Performance Index (CCPI), a measure of a country's climate protection efforts, due to its rising emissions of carbon dioxide. China ranked 29th out of 53 countries in 2006, dropping to 54th out of 56 in the 2007 update. (Hua Zhang, 'China's Climate Change Performance Worsening', Worldwatch Institute, November 23, 2006;
   The history of neoliberal 'reforms' suggests things can only get worse.

Concluding Remarks

   The dominant system of economics is unstable, inimical to social justice and lethally damaging to the environmental support systems on which we all depend. A major failure in professional journalism has been the refusal to analyse this; or even to report that real growth rates in the developed world have been declining since the 1970s. Instead, corporate-employed journalists and mainstream analysts frequently extol the alleged spectacular achievements of an 'unparalleled' rise in wealth.
   We referred in Part One to the desperate attempts by governments to manipulate official statistics to hype the 'success' of global capitalism. Do commentators in the media really believe that a civilised society should tolerate an economic system so dependent on deception to maintain public 'confidence' in 'free' and 'open' markets?
   The media's omission of rational perspectives on the global economy is particularly galling in the case of the publicly-funded BBC, which professes a "commitment to impartiality." This "commitment" supposedly means that "we strive to reflect a wide range of opinion and explore a range and conflict of views so that no significant strand of thought is knowingly unreflected or under represented." (BBC, Editorial Guidelines, editorialguidelines/edguide/impariality/; accessed January 23, 2008). As on so many other issues that we have examined in media alerts over the years, this is simply BBC rhetoric.
   Meanwhile the threat of global economic recession, the horrific divisions between rich and poor, and worldwide climate chaos, threaten to engulf us all.


   The goal of Media Lens is to promote rationality, compassion and respect for others. If you do write to journalists, we strongly urge you to maintain a polite, non-aggressive and non-abusive tone.
   Write to: Hamish McRae, Independent economics commentator
   Write to: Martin Wolf, Financial Times columnist
   Write to Helen Boaden, BBC news director
   Please send a copy of your emails to us
   Note: Part 1 of this alert can be found here
   [ACKNOWLEDGEMENT: Tony. ENDS.] [Feb 5, 08]

• Daniel Golden: Iraqi oil workers want people to own resource          

Daniel Golden: Iraqi oil workers want people to own resource , www.madison. com/tct/ opinion/ letters/ 273606 , by Daniel Golden, 8.18 am, February 21, 2008
   Letter to the editor – 2/21/2008 8:18 am
   Dear Editor: In 1987 Saddam Hussein effectively outlawed the Iraqi oil workers unions as inconvenient to his exercise of power.  After the 2002 [war broke out 2003, March 20] United States military occupation of Iraq, and the inclusion of the phrase "the state guarantees the right of forming unions" in the Iraq constitution, workers in the oil-rich south began doing precisely that – organizing unions.
   They, however, made one tactical mistake:  They took the position that Iraq citizens should control Iraq's oil.  In a statement last Nov. 29, they restated their position in opposition to the U.S.-sponsored "oil law," which has been pending before the Iraqi parliament for two years.
   The unions correctly pointed out that the U.S.-drafted oil law would give control of the development of Iraq's oil to "BP, Exxon and Mobil," not the people of Iraq.
   Five successive U.S.-imposed deadlines for passing the oil law have come and gone over the last 18 months because of enormous internal opposition.
   The oil workers of Italy and Great Britain have expressed support for the struggles of the Iraqi oil workers, and sympathy for the killing of one of their organizers, Talib Nija, on Sept. 20 by U.S. occupation forces.
   In an attempt to gain support, members of the unions will be giving a series of "pubic forums in various locations in England in late February."
   The oil thugs who are behind what John McCain suggests may be a "100-year war against terror" would prefer that U.S. citizens not be aware of these facts, and through a compliant corporate media, they have been largely successful. -- Daniel Golden, Madison #

   [COMMENT: Can't you just see the comfortable millionaire matrons chattering over their martinis, saying that it just goes to show that unions are all Bolsheviks and Communists !  Wanting the PEOPLE to own the oil, instead of the (US and UK etc) oil companies -- the very idea ! COMMENT ENDS.]
[Feb 21, 08]

!!!: Brisbane teacher jailed for possessing explosives  [pretending to be an Al-Qaeda operative.]    

Brisbane teacher jailed for possessing explosives

   Australian Broadcasting Corporation, au/news/ stories/ 2008/02/25/ 2172011.htm , February 25, 2008
   BRISBANE – A Brisbane school teacher has been jailed for six years after pleading guilty to possessing explosives, detonators and two incendiary devices.
   Forty-two-year-old John Howard Amundsen was arrested in 2006 on the day he sent a threatening email to the Queensland Police Service's counter-terrorism unit claiming to be an Al Qaeda operative.
   He also pleaded guilty to forgery and making threats.
   Today, the District Court in Brisbane heard Amundsen suffered from Autism Spectrum Disorder and was prone to retreating into a fantasy world.
   Prosecutor Glen Rice told the hearing Amundsen's activities were part of a strategy to win over his former girlfriend's parents, whom Amundsen blamed for the relationship's failure.
   Amundsen told the court he was sorry for his actions and felt humiliated.
   Judge Gilbert Trafford Walker ordered Amundsen would be eligible for parole after serving three years.
   That means he will be due for release in just over a year, given time already served in pre-sentence custody. #
   [COMMENT: Winning over the girlfriend's parents by making bombs and threats might not even work on the Pakistan North-west Frontier, Afghanistan, Iraq, the Gaza Strip, or in the Basque or Tamil Tiger country.  Suffering from Autism Spectrum Disorder, that man needs medical help! COMMENT ENDS.] [Feb 25, 08]

• Group of men attack woman in Turvey Park.   

Group of men attack woman in Turvey Park

   The Daily Advertiser http://www. dailyadvertiser. local/news/ general/ group-of- men-attack- woman-in- turvey-park/199554.aspx ; 9:52:15 AM, February 26, 2008
   Detective Inspector Rod Smith said the 26-year-old woman is suffering from serious bruising and has welts on the lower half of her body.
   She was with her 21-year-old female friend outside a house on Fernleigh Road at 10pm when they became involved in a verbal argument with two passing males.
   The men left the scene but returned about 40 minutes later with up to eight friends and were wielding bats and a tree branch.
   The woman was putting her children inside her car when she was set upon with a bat.
   "A 23-year-old male intervened and he too was assaulted with a tree branch. He was then set upon by several members of the group … he suffered a laceration to his right arm, bruising and grazing to his upper body," Det Insp Smith told the Advertiser.
   "Police spoke to a number of people on the night but are yet to identify who was involved. We are asking for the public's help."
   The attackers are described as black African and aged in their late teens or early 20s.
   The initial argument which appears to have sparked the attack was not of a sexual nature and police do not believe alcohol was involved.
   Information can be given to police by phoning 6921 0510. #

   [RECAPITULATION: … returned about 40 minutes later with up to eight friends and were wielding bats and a tree branch.  The woman was putting her children inside her car when she was set upon with a bat. … The attackers are described as black African and aged in their late teens or early 20s. … ENDS.]
   [COMMENT: I thought chivalry was dead!  I was right!  East is East, and West is West, … (Kipling) COMMENT ENDS.]
   [LOCATION: Turvey Park is a suburb of the city of Wagga Wagga - largest inland city in NSW - halfway between Sydney and Melbourne and rapidly becoming multicultified. END.]
   [A RIPOSTE is towards the end of a newsitem in Riverina Leader, March 19, 2008, http://www. riverinaleader. local/news/ general/ african-body- is-looking- to-future/ 286826.aspx . ENDS.]
[Feb 22, 08]

• The Trials of Abu Omar.                 

The Trials of Abu Omar

   FindLaw, writ.lp.findlaw. com/mariner/ 20080312. html , By JOANNE MARINER, Wednesday, Mar. 12, 2008
   Not only are Italian judges and prosecutors known for their independence, but the country's criminal justice system also allows trials in absentia. Because of these two factors--plus some helpful CIA bungling--a group of Americans, nearly all of them alleged CIA operatives, are now facing trial in Milan.
   The trial of 26 Americans officials accused of kidnapping an Egyptian imam known as Abu Omar is set to reconvene today. Nearly five years and one month after Abu Omar was abducted in Milan--snatched off the street, pushed into a white van, beaten, tied up, blindfolded, driven to an airport, and flown to Egypt--the trial of his alleged kidnappers is making slow progress.
   Delivered to Cairo as a suspected terrorist in February 2003, Abu Omar spent nearly four years in the custody of the Egyptian intelligence services. He was badly tortured, interrogated at length, sent home briefly and then rearrested, but never prosecuted in Egypt for any crime.
   Like the 26 Americans accused of kidnapping him, Abu Omar is now a free man; he was released from prison in February 2007. He lives with his wife and stepson in a small apartment in Alexandria, Egypt, where I visited him last December.
   "My life was turned upside down," recounted Abu Omar, whose full name is Hassan Mustafa Osama Nasr.
   "You cannot imagine," he said. "I was hung up like a slaughtered sheep and given electrical shocks."
   "I now have hearing problems--I have to use a hearing aid--I have heart problems; I have stomach problems; I have psychological problems. I'm depressed. I don't want to go out. I stay home most of the time. I take tranquilizers. I don't have a job; most of the day I sit at the computer."
   Abu Omar, who was a legal resident in Italy before he was abducted, believes that his physical and psychological problems stem from the terrible abuse he underwent in Egyptian custody. "I was brutally tortured, and I could hear the screams of others who were tortured too."
   While in one prison, Abu Omar wrote an 11-page letter [ www.chicago news/nation world/chi- cialetter- story,1,203 3270. story ] that was smuggled out and leaked to the press. "I record my testimony from within my tomb and gravesite," Abu Omar said in the letter. "All I care about with regards to my presence at the [state security prison] is death."
   Just after the September 11 terrorist attacks in the United States, President George W. Bush signed a classified presidential directive giving the CIA expanded authority to arrest, interrogate, detain, and render terrorist suspects arrested abroad. Since that time, the CIA is believed to have rendered terrorism suspects to a number of countries, including Egypt, Jordan, Morocco, Pakistan, Libya, and Syria.
   Secretary of State Condoleezza Rice, under pressure from European allies because of press revelations about CIA activities in Europe, offered a vigorous defense of U.S. rendition practices in December 2005. She asserted that rendition was a "vital tool in combating transnational terrorism," and that the United States "does not transport, and has not transported, detainees from one country to another for the purpose of interrogation using torture."
   Abu Omar cannot say what the purpose of his rendition was, but he can describe his torture in excruciating detail. Of course, torture is a routine practice for Egypt's intelligence services; while Abu Omar's treatment is shocking, it is not surprising.
   Armando Spataro is the Italian judge who led the investigation of Abu Omar's abduction. Meticulously piecing together hotel, cell phone, and credit card records--and aided by CIA carelessness--Spataro managed to track down the operatives who he believes carried out the kidnapping, as well as others who he believes helped orchestrate it.
   Spataro's efforts to prosecute the case have faced heavy-handed official obstruction. The Italian government--first under then-Prime Minister Silvio Berlusconi, now under Romano Prodi--has failed to forward his request for the extradition of the American defendants in the case. (There are also several Italian defendants.)
   While the Italian justice system offers the possibility of trials in absentia, allowing the case to go forward, the Prodi administration has continued to try to block or delay the trial. Last year, the government claimed that Spataro had broken state secrecy laws during his investigation, and took the case to Italy's constitutional court.
   In discussing the prosecution, Abu Omar reserves his anger for the American policy-makers who ordered his rendition, not the operatives who actually carried it out. Still, he awaits a verdict, hoping that the trial sends a strong message that rendition to torture is illegal and unacceptable.
   In the meantime, like so many others who spend their days at home in front of the computer, he has started a blog. [ http://abuomar ]
   Joanne Mariner, an attorney with Human Rights Watch, is the author of an upcoming report on the rendition of terrorism suspects to Jordan. #
   [RECAPITULATION: … the CIA is believed to have rendered terrorism suspects to a number of countries, including Egypt, Jordan, Morocco, Pakistan, Libya, and Syria. ENDS.]
   [COMMENT: Of the above countries, none are at the forefront of civil liberties!  Libya for years was actively involved in terrorism, such as causing the Lockerbie airline disaster in Scotland.  Syria is a one-party dictatorship, with a "hereditary" ruler of a supposed Islamic republic!  Pakistan has been a failed state, with a dreary succession of military dictatorships followed by elections and the installation of supposedly corrupt politicians, while the exploding population has no hope of raising its very low standard of living.  Morocco's rulers never know when the next Islamist attack will occur.  It is a sad list of undemocratic regimes helping "the land of the free" to torture people the CIA has illegally kidnapped and "rendered". ENDS.]
   [BACKGROUND by FindLaw: Secretary of State Condoleezza Rice, under pressure from European allies because of press revelations about CIA activities in Europe, offered a vigorous defense of U.S. rendition practices in December 2005. She asserted that rendition was a "vital tool in combating transnational terrorism," and that the United States "does not transport, and has not transported, detainees from one country to another for the purpose of interrogation using torture." ENDS.]
   [EXTRACTS OF HIS SMUGGLED STATEMENT: The interrogation with me lasted a complete 7 months, I entered on 18-02-03 and left on 14-09-03. I managed one time to see an Islamist leader at night as the bathroom was outside the cells and each of us would bang on the door for a guard to open and take us and the guard took this leader and I looked through a tiny hole in the cell door and saw him. […]
   … they left the hair on my head and beard without cutting it until they released me in April 2004 and returned me to my home and family … […]
   10. I was sexually abused and sodomized twice and this was the worst thing that I went through for signs of physical torture eventually go away and the pain goes away but the psychological repercussion and the bitterness and scandal of sexual violation remain. … ENDS.]
   [NAME: Osama Moustafa Hassan Nasr is his real name. ENDS.]
   [ACKNOWLEDGEMENT: Michael P. ENDS.] [Mar 12, 08]

• Hillary Clinton's Bosnia sniper story exposed.     

Hillary Clinton’s Bosnia sniper story exposed

   By courtesy of Nick Maine, [Original journal or website unknown], By Toby Harnden in Washington, Last Updated 6:46pm GMT March 26 2008
   Hillary Clinton has conceded that she "did misspeak" about landing in Bosnia under sniper fire, blaming tiredness for a dramatic description that was shown to have been significantly exaggerated.
• How Obama is related to Brad Pitt
• Tim Shipman: Barack Obama heads for a holiday
• Toby Harnden: Hillary's porky pie on Bosnia sniper fire

   The Democratic candidate is engaged in a frantic damage-limitation exercise amid widespread derision of her comments about a visit to Tuzla in 1996.
   Watch: Hillary Clinton 'misspeaking'
   "I remember landing under sniper fire," she said in Washington on Monday. "There was supposed to be some kind of a greeting ceremony at the airport, but instead we just ran with our heads down to get into the vehicles to get to our base."
   News footage of the event however showed her claims to have been wide of the mark, and reporters who accompanied her stated that there was no sniper fire. Her account was ridiculed by ABC News as "like a scene from Saving Private Ryan".
   After initially dismissing the controversy over her comments as a "minor blip", she told a Pittsburgh radio station: "You know I have written about this and described it in many different settings and I did misspeak the other day. This has been a very long campaign. Occasionally, I am a human being like everybody else."
   She insisted it was the "first time in 12 years" she had spoken inaccurately about the trip.
   But her Bosnia anecdote has been a regular feature of her stump speeches.
   On the trip, the then First Lady and her daughter Chelsea, then 16, emerged smiling from a C-17 transport plane to be met by Emina Bicakcic, eight, who told them: "There is peace now because Mr Clinton signed it. All this peace. I love it."
   On Feb 29 she stated that the greeting ceremony "had to be moved inside because of sniper fire" while on Dec 29 she said that she had "landed in one of those corkscrew landings and ran out because they said there might be sniper fire".
   Mrs Clinton told the Pittsburgh Tribune-Review that she had made the mistake about sniper fire because she had been "sleep-deprived". Her schedule showed she had no public engagements the day before her Washington speech and she spent the night in her Embassy Row home.
   The footage of the Tuzla visit juxtaposed with her recent comments played repeatedly on American television networks and was viewed hundreds of thousands of time on the video-sharing website YouTube.
   Mrs Clinton had cited the Bosnia trip, along with having been "instrumental" in bringing peace to Northern Ireland, as a central foreign policy qualification and a reason she would be "ready on day one" to be American commander-in-chief.
   Advisers to Mr Obama seized on the issue, which feeds into a existing perception of Mrs Clinton as lacks candour. A Gallup poll last week found that just 44 per cent of Americans considered her "honest and trustworthy", compared to 63 per cent for Mr Obama and 67 per cent for Mr McCain, the Republican nominee.
   The Clinton campaign initially tried to shut down debate about the Bosnia remarks, refusing to answer a reporter's question on a conference call saying that they would supply a transcript of the communications director's remarks from Monday.
   But Clinton advisers later changed tack, issuing a press release entitle "Just Embellished Words: Senator Obama's Record of Exaggerations & Misstatements" listing occasions on which Mr Obama had apparently misspoken.
   The last of the Clinton campaign's 10 examples was one from last autumn when a weary Mr Obama told a crowd that 10,000 instead of 10 people had been killed by a tornado in Kansas.
[Mar 26, 08]

• [Delete payroll tax, reduce stamp duties, tax UCV]   

[Delete payroll tax, reduce stamp duties, tax UCV]

   From Georgist Education Association (Inc), 2 Plain St, East Perth, Western Australia, President John C. Massam; To The Right Hon. the Prime Minister, Mr Kevin Rudd, Parliament House, Canberra, ACT, 2600; March 27, 2008
   EAST PERTH – For your pre-budget talks and meetings with State Treasurers, we believe it may be prudent to re-visit several State taxes which are archaic and not in the best interests of the residents of this wonderful country.
   1. Delete Payroll Tax: This tax is about as ridiculous as the window taxes during the Industrial Revolution in England. Payroll tax varies from State to State in both threshold and rate. It is ridiculous in this modern age to penalise companies for employing staff – i.e., for creating employment, and giving people the opportunity to make and gather wealth.
   2. Reduce Stamp Duties: A reduction of Stamp Duty on housing would improve the affordability of homes for purchasers, mortgagees, etc. The stamp duty on business transactions, insurances, vehicle purchases, etc., should also be re-visited.
   3. Revenue Increase: Revenue lost on the above could be recouped in a manner dear to the heart of the late Hon. Clyde Cameron, A.O. (Minister in the Whitlam Labor Government), by increasing the rate of taxation on the Unimproved Capital Value of land. This could be collected by Local Government on behalf of their respective State Governments.
   Enclosed are four articles by Dr Gavin Putland which appeared in the March-April issue of Progress, a Melbourne periodical. These provide ideas for changes to State taxes, which would be in the best interests of all taxpaying Australians, including first home buyers.
   Thanking you, Yours faithfully (etc.)
   Enc: Four Putland articles, Progress (Melbourne) Mar-Apr 2008, Good Government (Sydney) Oct 2007.

   [CONTACT: www.multiline. georgist . ENDS.]
   [LOOK FORWARD: Business organisation requests cuts to payroll tax and stamp duty, etc.  "Business calls for state tax relief," The Australian Financial Review, By Annabel Hepworth and Tracy Ong | Apr 07, 2008. ENDS.]
[Mar 27, 08]

• Tibet, the 'Great Game,' and the CIA. 

Tibet, the ‘Great Game,’ and the CIA

   Information Clearing House Newsletter, www.inform ationclearing , March 31, 2008
   A Third American War Crime in the Making
 By Paul Craig Roberts
The US Congress, the US media, the American people, and the United Nations, are looking the other way as Cheney prepares his attack on Iran.

   Al-Sadr's Clever "Retreat"

By Steve Soto

Al-Sadr knows that he and his forces cannot win a face-to-face battle with American forces and air power, and that attempting to engage in such a prolonged battle is a recipe for decimation and destruction of Iraqi cities. Continue

   Fact Or Fiction?

Iran Brokers Call for Ceasefire;

Bush reduced to Irrelevancy in Iraq; Fighting Continues

By Juan Cole

A parliamentary delegation from Prime Minister Nuri al-Maliki's own coalition (mainly now the Da'wa Party and the Islamic Supreme Council of Iraq) defied him by going off to the holy seminary city of Qom in Iran and negotiating directly with Sayyid Muqtada al-Sadr and with the leader of the Quds Brigades of the Iranian Revolutionary Guards, Brig. Gen. Qasim Sulaymani. Continue

   Iraq In The Balance
 "The Iranians Are Killing Americans" Senator Lindsey Graham
 By Scott Horton

   The U.S.-supported venture has probably actually increased Iranian government influence in Iraq, including inside the government. Tehran sees al-Maliki as a transitional figure, not likely to last long. It is intent on building a solid and broad base of support within the Iraqi Shi'a community, and it seems to be achieving its objectives. Continue

   U.S. Unsure About the Future of Iraq's 'Sons'

By Walter Pincus

While public attention has been focused on Shiite-vs.-Shiite fighting in Basra and Baghdad, U.S. military leaders are taking a cold second look at the future intentions of the roughly 90,000 "Sons of Iraq" -- the locally recruited and primarily Sunni security forces that are armed and supported by the United States at $300 per person each month. Continue

   No One is Leading

By Mark A. Goldman

The real issue is whether we are a nation of laws… i.e., do we believe in the rule of law… or have we simply given up on the American Experiment and the Constitution itself. If we acknowledge that the war was illegal -- that egregious crimes were committed in its execution -- then it will follow that we must end the war. But what follows is much more than that. Continue

   Toward a Humanist Foreign Policy

By Carl Coon

We need to lead by example, not threats. We need to listen to others, learn what their problems are, and exercise our talents and ingenuity toward finding solutions that help everyone to the extent possible. We need to take the dawning environmental crisis seriously and show that we're willing to make our share of needed sacrifices. Continue

   Tibet, The 'Great Game' And The CIA

By Richard M Bennett

The funding and overall control of the unrest has also been linked to Tibetan spiritual leader the Dalai Lama, and by inference to the US Central Intelligence Agency (CIA) because of his close cooperation with US intelligence for over 50 years. Continue

   The Decline And Coming Fall Of US Hegemony

By K Gajendra Singh

In its backyard Latin America, USA maintained its dominance under Monroe doctrine except for defiant Cuba under Fidel Castro .But Washington is losing its sway and total control, led against it by Hugo Chavez of Venezuela and other leaders who represent and implement aspirations of their people and not of the old elites in cahoots with corporate interests in USA and Europe. Continue

   Those Who Control Oil And Water Will Control The World

By John Gray

New superpowers are competing for diminishing resources as Britain becomes a bit-player. The outcome could be deadly. Continue

   Paulson's Fix for the Financial System

Less Regulation, More Power to the Fed

By Mike Whitney

It is being billed as a "massive shakeup of US financial market regulation", but don't be deceived. Treasury Secretary Henry Paulson's proposals for broad market reform are neither "timely" nor "thoughtful" (Reuters) In fact, its all just more of the same free market "we can police ourselves" mumbo jumbo that got us into this mess in the first place. Continue

   As Jobs Vanish and Prices Rise, Food Stamp Use Nears Record

By Erik Eckholm

Driven by a painful mix of layoffs and rising food and fuel prices, the number of Americans receiving food stamps is projected to reach 28 million in the coming year, the highest level since the aid program began in the 1960s. Continue

215, killed, 600 injured, 155 arrested in Basra onslaught: The Iraqi Interior istry announced on Monday that some 215 militants were killed during the past week in the attacks on the southern city of Basra within the framework of the "Charge of the Knights" operation supervised by Iraqi Prime Minister Nouri Al-Maliki.

US occupation force admits killing 40 Iraqis in one day : US troops killed more than 40 Iraqis in one day, including 25 'criminals' who had attacked US soldiers, the military reported Monday in Baghdad.

Sadr fighters vanish from Iraq's streets: "The militants have disappeared from Sadr City and its neighbouring areas and my information is that Sadr's order is being implemented everywhere," the Baghdad spokesman for Sadr's movement, Salman al-Fraiji, told AFP.
   Iraqi government vows to disarm Basra: . "Security forces will carry out orders of Prime Minister Nuri al-Maliki to take away all weapons in Basra by the April 8 deadline," interior ministry spokesman Brigadier-General Abdel-Karim Khalaf told the Voices of Iraq (VOI) news agency.
   Iraqi PM vows not to pursuit militants laying down arms : "In appreciation of the statement and initiative of Muqtada Al-Sadr, we have instructed a ban on legal questioning on whoever lays down arms and withdraws," Al-Maliki said in a statement.
   Fact or fiction? Iranians help reach Iraq cease-fire : Osama al-Nujaifi, a Sunni lawmaker who oversaw mediation in Baghdad, said representatives from al-Maliki's Dawa Party and another Shiite party traveled to Iran to finalize talks with al-Sadr.
   Poll: Americans call Iran, Iraq, China top enemies : Iran topped the list, with 25% naming it when asked which country is the greatest U.S. enemy, according to the Gallup Poll. Iraq came next at 22%, then China with 14%.
   Iran asked to quit UAE isles: The 20th Arab League Summit ended here yesterday with a renewed call on Iran to end its occupation of the UAE islands of Abu Moussa, Greater and Lesser Tunbs.
   Three NATO occupation force soldiers among 18 killed in Afghanistan: Three NATO occupation force soldiers, three Afghan security guards and 12 Taliban militants were killed in separate attacks in the volatile southern Afghanistan, officials said on Monday.
   Pakistan: Give up pro-US stance first': Taliban set terms for talks with govt: Tehreek-e-Taliban Pakistan vows to continue jihad against US: Warns tribal elders against meeting American officials
   Musharraf swears in Pakistan cabinet full of foes: There is strong speculation the new government will force U.S. ally Musharraf, who came to power as a general in a 1999 coup, to quit within weeks or months.
   Israeli occupation force attack on Gaza kills two militants: Palestinian medics said yesterday they had recovered the bodies of two Palestinian militants killed in an Israeli air attack in the northern Gaza Strip.
   Hamas chief invites Abbas for talks, says Israeli soldier alive: "We invite Mr Mahmud Abbas to come to Gaza to talk directly without any conditions… to work together to find a solution to the problems in Gaza and the West Bank," Meshaal said, speaking from an undisclosed location in Damascus.
   The Beginning of Legal Apartheid? : Palestinians Fear Two-Tier Road System : "They took our land to build this road, and now we can't even use it," Mr. Abu Safia says bitterly, pointing to the highway with one hand as he drives with the other. "Israel says it is because of security. But it's politics."
   NKorea Threatens South With Destruction: "Our military will not sit idle until warmongers launch a pre-emptive strike," said an unidentified KCNA military commentator. "Everything will be in ashes, not just a sea of fire, if our advanced pre-emptive strike once begins."
   Fact or fiction? China Publishes 'Evidence' Linking Dalai Lama To Unrest -AFP: The official Xinhua news agency released a nearly 2,000-word article it said proved the Tibetan spiritual leader and his government-in-exile were behind the protests against China's rule of the Himalayan region.
   Desperate Mugabe refusing to give in: ROBERT MUGABE was desperately clinging to power last night, despite his looming defeat in Zimbabwe's presidential election, by blocking the electoral commission from releasing results and threatening to treat an opposition claim of victory as a coup.
   Secret spying in U.S. caused fears at outset: NSA program upset the FBI and brought a flurry of tensions
   Police arrest anti-war protester, 80, at mall: An 80-year-old church deacon was removed from the Smith Haven Mall yesterday in a wheelchair and arrested by police for refusing to remove a T-shirt protesting the Iraq War.

   The Smart Way Out of a Foolish War

By Zbigniew Brzezinski

The "unipolar moment" that the Bush administration's zealots touted after the collapse of the Soviet Union has been squandered to generate a policy based on the unilateral use of force, military threats and occupation masquerading as democratization. Continue

   Survival Sex

"God Punish Those Who Stole Iraq's Dignity"

3 Minute Video Report

As a result of the Iraqi invasion many Iraqi girls have fled the violence to Syria. In order to survive and support their families many girls resort to prostitution. Continue

   Halliburton Poisoning US Occupation Forces in Iraq ?
    4 Minute Video
    This 4 minute video describes how Halliburton is poisoning the troops in Iraq through their water supply. Continue

   At least 39 killed as US occupation grinds on: A U.S. helicopter airstrike killed 12 suspects in clashes in northern Baghdad, the U.S. military said.
   35 killed, 113 wounded in Nassiriya clashes; "The security casualties hit seven deaths and 44 others wounded, while the civilian casualties reached 28 deaths and 60 wounded as a result of mortar shells and missiles fired by the gunmen,"
   U.S. Air Raids Kill 23 In Baghdad : At least 23 people were killed Sunday in U.S. air raids targeted at Shiite strongholds in Baghdad, an Iraqi Ministry official said.
   7 al-Qaeda fighters, 2 police killed in Mosul : "The raiding force engaged with people inside the house," Abdul-Sattar said, noting "seven corpses of gunmen were found inside."
   Sadr orders fighters to stand down : "We want the Iraqi people to stop this bloodshed and maintain Iraq's independence and stability," al-Sadr said in a statement released on Sunday. "For that we have decided to withdraw [al-Sadr's Mahdi Army] from the streets of Basra and all other provinces."
   Mahdi Army keeps the arms: Press conference on Iraqi TV right now by the Sadrists, they insist that Mahdi Army still keeps its arms and will not hand them over to the government.
   Iraqi gov't lifts curfew after 4 days : The office of Baghdad's chief military spokesman says the round-the-clock curfew will end at 6 a.m. A vehicle ban will stay in place in three Shiite militia strongholds in the capital.
   Iraq fighting underscores power struggle : The Sadrists believe the goal was to weaken their movement before provincial elections this fall. Al-Sadr's followers expect to make major gains in the regional voting at the expense of al-Maliki's Shiite partners in the government.
   CIA director says Iraq government may need U.S. help occupation for "years": The CIA director says it could be "years" before the Iraqi government might be able to function without the help of American forces.
   42 Killed in southern Afghanistan: Afghan and NATO forces killed more than 40 insurgents in a joint air and ground battle in southern Afghanistan, a security official said Sunday. Separately, two soldiers from the U.S.-led coalition died after hitting a roadside bomb.
   Eight Taliban killed in southern Afghanistan: police ; The rebels were killed late Saturday in a raid launched after militants had ambushed the trucks ferrying supplies to foreign military bases in Zabul province, a police official said.
   Farmers are being forced to sell their daughters. "I never imagined I'd have to pay for growing opium by giving up my daughter," says Shah.
   CIA: Afghanistan, Pakistan border region 'danger' to US: The situation in the border region between Afghanistan and Pakistan where al-Qaeda has established a safe haven presents a "clear and present danger" to the West, the CIA director said Sunday.
   Pakistani Taliban ready for talks with new government : The Pakistani Taliban welcomed on Sunday the new government's readiness to negotiate an end to a spreading conflict in Pakistan, but vowed to carry on fighting American forces in neighbouring Afghanistan
   CIA chief: Iran continues to develop nuclear weapons : CIA Chief Michael Hayden said he estimated that Iran was continuing in its efforts to develop nuclear weapons, but refused to disprove the recent US Intelligence report, which stated that the Islamic Republic suspended its nuclear program in 2003
   Dick Cheney has his sights set on Iran: Dick Cheney is making the same type of broad accusation that he made in the run-up to the Iraq war. This time, his target is Iran:
   Thousands march to mark Land Day, warn of fascist threat: On Land Day Israeli Arabs annually protest the seizure of their lands and the demolition of their homes.
   Study: 60% of Israel's poor are ultra-Orthodox and Arabs : The Israeli Arab sector has not experienced any significant economic improvement over the past decade. - The report also surmises that the likelihood of an Israeli Arab finding employment has dropped over the last decade
   Arab peace offer 'under review' : The Arab initiative of 2002 offers Israel peace and normal relations with all Arab countries in return for withdrawal from all territory captured in the 1967 war.
   In Case you missed it: The Arab Peace Initiative, 2002 : Official translation of the full text of a Saudi-inspired peace plan adopted by the Arab summit in Beirut, 2002.
   Syria ready for US military action: SYRIAN Foreign Minister Walid Muallem said overnight Damascus is prepared for all scenarios in its worsening relationship with Washington, including the use of US military force.

   Sadr Urges Support For 'Resistance'

By Al Jazeera

Muqtada al-Sadr, the Shia leader, has called on Arab countries to support his militia's battle against "US occupation" as clashes between Shia groups and Iraqi government troops entered their fifth day. Continue

   AlJazeera Exclusive Interview with Muqtada Al-Sadr:
   AlJazeera Video Report From Bastra

In one of the latest offensives, eight people died, including two women and a child, in an air raid.: Continue

   Five Things You Need to Know
   To Understand The Latest Violence in Iraq

By Joshua Holland and Raed Jarrar

The conflict is one that the U.S. media appears incapable of describing in a coherent way. Continue

   Russian Intelligence Sees U.S. Military Buildup on Iran Border

By RIA Novosti

"The latest military intelligence data point to heightened U.S. military preparations for both an air and ground operation against Iran," the official said, adding that the Pentagon has probably not yet made a final decision as to when an attack will be launched. Continue

   Murdering Iranians

By Lew Rockwell

Terrible rumors from Russia continue to swirl around the Middle East that the Cheney-Bush junta has decided to bomb Iran on April 4th or 6th, targeting not only nuclear-power research facilities but ships, planes, antiaircraft installations, and the Iranian pentagon. Continue

   'Your Turn Is Next,'

Gadhafi warns Arab leaders after US toppling of Saddam

By The Associated Press

Libyan leader Moammar Gadhafi poured contempt on fellow Arab leaders at a summit Saturday and warned that they might be overthrown like former Iraqi president Saddam Hussein. Continue

   Will Cheney Ever Sleep on a Concrete Bed?

Justice and the Monsters of War

By Missy Compley Beattie

These monsters of war, whose catastrophic damage has caused the deaths of hundreds of thousands of Iraqis and more than 4,300 coalition troops, are the real proprietors of weapons of mass destruction. Continue

   Death toll in Iraq clashes tops 200: US forces today said they had killed 48 militants yesterday in gun battles and air strikes across Baghdad.
   At least 71 killed in another bloody day of US occupation: U.S. forces killed 48 militants in separate engagements in Baghdad
   Warplane kills 8 in Basra : "An MNF warplane opened fire at the al-Tak area in al-Hussein neighborhood, (8 km) western Basra, killing eight people and injuring seven others, mostly civilians," an eyewitness from al-Hussein told Aswat al-Iraq -- Voices of Iraq -- (VOI).
   Iraqi copter shot down by gunmen in Basra : "An Iraqi copter went down last night when Mahdi army gunmen fired at it near the Military Hospital in northern Basra," an eyewitness told Asawt al-Iraq- Voices of Iraq
   Sadr urges militiamen in Iraq to reject calls to disarm: Shiite cleric Muqtada Sadr sent a defiant signal to Iraq's government today, urging militiamen fighting Iraqi and U.S. forces to reject calls to disarm as American airstrikes continued.
   Iraqi police in Basra shed their uniforms, kept their rifles and switched sides: "I decided to take off my uniform and join my brothers and friends in the Mahdi Army. All these years, we were like a scream in the face of the dictator and the occupation." He said:
   Police refuse to support Iraqi PM's attacks on Mehdi Army: Mr Maliki retreated from his demand that militiamen hand over their weapons by yesterday and extended the deadline to 8 April. This is a tacit admission that the Iraqi army and police have failed to oust the Mehdi Army from any of its strongholds in the capital and in southern Iraq.
   Maliki says Sadrist foes "worse than al Qaeda": U.S. forces said they had killed 48 militants in air strikes and gun battles across the capital the previous day.
   Maliki's Basra crackdown poses risk for U.S.: There is little prospect of a swift victory. The fighting has spread through southern regions, drew the U.S. forces and led to protests in Baghdad by followers of Sadr, who say Maliki is using force to weaken his political rivals.
   Ensuring Permanence: The Bush Administration Is Negotiating a Long-Term Iraq Occupation
   Hersh: Don't trust Washington on Iraq : Prominent journalist Seymour Hersh says the US is 'in real trouble' because news coverage on Iraq is anything but balanced and unbiased.
   Turkish Army kills 15 "PKK members" northern Iraq : The army fired on the separatists with long-range weapons, killing 15, and then launched air strikes in the same area of northern Iraq on Friday
   Iran call for speedy end to clashes in Iraq : Iran Saturday called on Iraqi government forces and Shiite militias to stop ongoing fighting, saying it could offer "pretext" for the U.S. troops to stay in Iraq, the official IRNA news agency reported.
   Manufacturing Consent For War With Iran?: Iraqi troops find cache of Iranian-made rockets, other weapons south of Baghdad: The cache was found in one apartment and contained 17 bombs known as explosively formed penetrators, or EFPs, three Iranian-made 107 mm rockets and an assortment of rifles and Iraqi security force uniforms.
   Saudi Shura council to discuss plan for sudden radioactive hazards: The Saudi Shura council will secretly discuss national plans to deal with any sudden nuclear and radioactive hazards that may affect the kingdom following experts' warnings of possible attacks on Iran's Bushehr nuclear reactors, media reports said Saturday.
   2 killed as Taliban bomb Afghan power plant : "Two employees of the station were killed and six people were wounded in the explosion," said provincial police chief, Hussain Andiwal.
   'Reach out to the Taliban': British defence secretary : Britain should reach out to elements of the Taliban militia in Afghanistan who can be won over to the side of democracy, Defence Secretary Des Browne said in a newspaper interview published Saturday.
   Pakistani PM: war on terror top priority but will talk to militants; The U.S. is seeking reassurance that the new coalition government will keep the pressure on extremist groups using Pakistan's lawless northwest frontier as a springboard for attacks in Afghanistan and elsewhere.
   Highlights of Pakistan PM's speech ; Following are the highlights of Pakistan Prime Minister Yousaf Raza Gillani's speech after getting an unopposed vote of confidence from the National Assembly, the lower house of parliament.
   Pakistan PM wants army back in barracks in two weeks : The army should return to the barracks in two weeks, Pakistan's new Prime Minister Yousaf Raza Gillani said here Saturday, sending a strong message to the military to stay out of politics as ruling was 'the right of the people'.
   Pakistan against blows to Chinese sovereignty, says Musharraf: President Pervez Musharraf said on Friday that Pakistan was firmly opposed to any attempts to undermine China's sovereignty and territorial integrity.
   Chinese security forces seal off Tibet capital: Chinese security forces sealed off parts of Lhasa on Saturday and Tibet's government-in-exile said it was investigating reports of fresh protests, weeks after the city was shaken by an anti-government riot.
   Tibet: China's "cultural genocide": Tibet's spiritual leader, the Dalai Lama, has urged Beijing to give meaningful autonomy to Tibet and end China's "cultural genocide" in the region
   Israeli occupation forces shot dead Palestinian teenager in N Gaza : The body of 18-year-old Tamer Dawass was hardly recognized due to the numerous gunshots he received.
   Abbas: Arab nations must send troops to Gaza to defend Palestinians: Speaking at the Arab summit in Damascus Saturday, Palestinian President Mahmoud called on the international community, as well as on Arab nations, to send troops into Gaza in order to defend the Palestinians Authority against what he deemed Israeli aggression.
   Haniyeh: Hamas ready for cease fire with Israel: Hamas will seriously consider a cease fire with Israel in the context of an agreement that includes an end to the blockade on the Gaza Strip and an opening of the crossings, the group's Prime Minister Ismail Haniyeh said on Friday night.
   Hamas Urges Arab Leaders to Back Yemeni Initiative: It described the Yemeni initiative as a "good and important opportunity" for the restoration of the Palestinian national unity, adding that the Sanaa declaration could pave the way for genuine inter-Palestinian dialogue.
   Barak fears Hamas West Bank takeover: "We need to keep in mind the possibility that after all we have done, Hamas will take over the West Bank, not only by force but even in the upcoming general elections," Barak told Jones, according to defense officials. "This is certainly a possibility."
   Syrian president slams Israel for its military offensive in Gaza : "The Israeli understanding of security can never be achieved because the Israeli occupation of the Arab territories contradicts with peace and security," al-Assad said
   Syria, Saudi Arabia conciliatory on Lebanon : Syria promised Arab leaders at an annual summit on Saturday to cooperate in ending a political crisis in Lebanon, and regional power Saudi Arabia said it saw Damascus as part of the solution.
   Hariri probe blames 'crime network' : A "criminal network" was responsible for the assassination of Rafiq al-Hariri, the former Lebanese prime minister, killed in 2005, the new head of a UN inquiry panel has said, without naming any suspects.
   Ethiopian occupation troops shell Somali market, killing 11: Residents said Ethiopian soldiers guarding Yusuf then launched shells at Bakara Market in the city below, killing a number of people and wounding dozens more.
   US marine's Haditha murder case dropped : Military prosecutors have dropped all charges against a US marine accused of killing unarmed Iraqi women and children in the town of Haditha in 2005.
   High Rice Cost Creating Fears of Asia Unrest : Rising prices and a growing fear of scarcity have prompted some of the world's largest rice producers to announce drastic limits on the amount of rice they export.
   S.Korea pension fund says to shun US Treasuries: South Korea's National Pension Service (NPS), the world's fifth-biggest pension fund, said on Thursday it was shying away from U.S. Treasuries because of falling yields and the weakening dollar.
   US to propose sweeping new powers for Fed: report: Citing a summary of the plan provided by the administration, the newspaper said the Fed will gain the power to investigate any activities of financial institutions that threaten US economic stability, gather information and combat risks to the financial system as a whole.
   Home Price Decline Steepest in 21 Years : The Standard & Poor's/Case-Shiller index shows U.S. home prices fell 11.4 percent in January, its steepest drop since S&P started collecting data in 1987.

   Mahdi Army Stands Firm in its Basra Neighborhoods

By Juan Cole

The US faced a dilemma in Iraq. It needed to have new provincial elections in an attempt to mollify the Sunni Arabs, especially in Sunni-majority provinces like Diyala, which has nevertheless been ruled by the Shiite Islamic Supreme Council of Iraq. But if they have provincial elections, their chief ally, the Islamic Supreme Council, might well lose southern provinces to the Sadr Movement. Continue

   NPR News: National Pentagon Radio?

By Norman Solomon

While the Iraqi government continued its large-scale military assault in Basra, the NPR reporter's voice from Iraq was unequivocal on the morning of March 27: "There is no doubt that this operation needed to happen." Continue

   42 Democrats Vow a Drawdown in Iraq If They Win Seats

By Paul Kane
Washington Post Staff Writer

More than three dozen Democratic congressional candidates banded together yesterday to promise that, if elected, they will push for legislation calling for an immediate drawdown of troops in Iraq that would leave only a security force in place to guard the U.S. Embassy in Baghdad. Continue

   US Draws On Its Dominion To Wreak Havoc In Iran

By Hamish McDonald

The US may be getting ready to drop its financial atom bomb on the much bigger target of Iran. Continue

   Day of Infamy

The March 20, 2008 US Declaration of War on Iran

By John McGlynn

    On this date the US officially declared war on Iran. But it's not going to be the kind of war many have been expecting. Continue

   The Tibet Card

By Soraya Sepahpour-Ulrich

West is punishing China for its reluctance to impose sanctions on Iran. Continue

   Pakistan Beware, They Are Cornering China

Ahmed Quraishi

Next to her bad Collagen-injected facelift job, Nancy Pelosi has given us one of the worst lessons in deceitful diplomacy on behalf of the United States. Pelosi, who is third in line of power in Washington after George Bush and Dick Cheney, flew halfway around the world to our neighborhood last week. Her mission? To further stoke the fire in China's Tibet. Continue

   Was Polonium-210 Being Smuggled for a Dirty Bomb?

By Paul Craig Roberts

In the recently published thriller, The Shell Game, Steve Alten weaves a tale of a neoconservative plot to attack Iran. To overcome resistance, a black op group associated with a Republican administration arranges for nuclear devices to be exploded in two American cities, with planted evidence pointing to Iran. Recent developments make one wonder if fact is following fantasy.

   Gates Orders Inventory of US Nukes

By Lolita C. Baldor

In August an Air Force B-52 bomber was mistakenly armed with six nuclear-tipped cruise missiles and flown from Minot Air Force Base, N.D., to Barksdale Air Force Base, La. At the time, the pilot and crew were unaware they had nuclear arms aboard. Continue

   Reviving the R.T.C.
The Next Big Plan From The Bernanke Politburo

By Mike Whitney 

Bernanke should seriously consider the consequences of his next move before he acts. Once the dollar starts to free-fall, there's no telling where it will land. Continue

   The Swiftboating of Barack Obama

By David Michael Green

The point is to swiftboat Obama by injecting race into the campaign and frightening away closet racist voters. The point of doing that is to win power. And the point of that is to steal your money and your country. Continue

   From Worship To War

This Is A Must Watch Video

By Reverend Wright Sermon

" We want revenge, we want payback and we don't care who gets hurt " Continue

   428 casualties in Sadr City clashes -- medic : "The hospitals of al-Sadr and Imam Ali have received 39 corpses and 389 others wounded since the eruption of clashes on Tuesday," the medic, speaking on customary condition of anonymity out of security concerns, told Aswat al-Iraq -- Voices of Iraq -- (VOI).
   26 "gunmen" killed by U.S. forces in Baghdad : The U.S. army said on Friday that its forces killed 26 gunmen and detained a wanted man during operations in Baghdad.
   Seven US occupation force soldiers killed : Seven US soldiers were injured in two separate attacks by al-Mahdi Army militia men in the capital, Baghdad, on Thursday, the US Army said in statement on Friday.
   1 killed, 6 wounded in mortar attack on VP's office : One man was killed and six others wounded when mortar shells landed on Iraqi Vice President Tareq al-Hashimi's office on Friday, an official source in the office said.
   Speaker calls for extraordinary session to contain clashes : Iraqi Parliament Speaker Mahmoud al-Mashhadani called on lawmakers to hold an "extraordinary" session on Friday in a bid to contain the armed clashes in southern Iraq
   Government is the only authority and no negotiations with "the gangs"-PM : Premier Nouri al-Maliki said from Basra on Thursday that the government is the only authority, rebuffing to negotiate with what he described as "the gangs" responsible for killings and criminal acts in the southern Iraqi city.
   Stalled assault on Basra exposes the Iraqi government's shaky authority: Mr Maliki's surprise offensive against the Mehdi Army is likely to have repercussions far beyond Iraq. The Americans must have agreed to the attack though they had previously praised the six-month ceasefire declared by Mr Sadr on 29 August and renewed in February as being one of the main reasons why violence had fallen in Iraq.
   US Bombs Basra: U.S. forces intervened in the battle in the southern city of Basra by dropping two bombs on militia positions overnight.
   U.S. Troops Engage In Sadr City Offensive : The clashes Thursday indicate U.S. forces were drawn more deeply into a broad offensive Iraqi Prime Minister Nouri al-Maliki undertook in the southern city of Basra earlier against rouge [? rogue] militias, The Washington Post reported Friday.
   From his office in clouded cuckoo land: Bush: Iraq is returning to normal: President Bush, saying that "normalcy is returning back to Iraq," argued Thursday that last year's U.S. troop "surge" has improved Iraq's security to the point where political and economic progress are blossoming as well.
   Baghdad Trembles as Basra Bleeds: Against the dull thud-boom of rocket hits and ascending plumes of black smoke, Baghdad's fortified Green Zone rumbled with running soldiers and intermittent cries of "duck and take cover!"
   "Iraq Is Not a Suitable Place To Live as a Human": Five years after the invasion of Iraq, the U.S. and Iraqi governments claim the country is becoming a less dangerous place. For most Iraqi refugees in Syria, the upbeat assessments don't count for much.
[Mar 31, 08]

• Housing crunch blamed on immigration.   

Housing crunch blamed on immigration

   The Australian, www.the australian. au/story/ 0,25197, 23467987- 36418,00.html , By Peter Williams and Kate Corbett | April 01, 2008
   CANBERRA – AN uncontrolled increase in immigration in the past three years has fuelled the housing affordability crisis, home builders say.
   Housing Industry Association (HIA) managing director Ron Silberberg today blamed the shortage of private rental accommodation on net immigration he estimated at 250,000 people a year.
   "There has been an uncontrolled expansion of the immigration program," Dr Silberberg told a Senate committee in Canberra.
   "The pace in which it's increased has been massive over the last three years.
   "Do we need an explanation as to why there's pressure on private rental housing?"
   He described the immigration program as a Federal Government lever which could be used to address the housing crisis.
   Asked if he blamed the squeeze entirely on immigration, Dr Silberberg said its effect was substantial.
   "It's a very significant influence on the demand for housing and accommodation."
   Dr Silberberg was speaking at the Senate select committee on housing affordability's first day of public hearings.
   More than one million Australians are considered to be in housing stress by paying at least 30 per cent of their income on accommodation.
   The HIA chief also said the industry suffered from a skills shortage because only a tiny fraction of immigrants had training in residential construction.
   Only about 800 of the net figure of 250,000 arrivals had the necessary skills, he said.
   "I don't think the department of immigration has a proper understanding of labour market forecasting because that's done by another agency.
   "Demand for skilled people and professionals is so tight it's not even worth advertising."
   The Planning Institute of Australia (PIA) told the committee that the construction sector's ability to meet demand is just as important as releasing more land.
   "Addressing undersupply is a critical issue if we are to ensure that we are able to adequately and affordably house our communities as Australia continues to develop," PIA national president Neil Savery said.
   "We're not saying that addressing supply is the panacea to the problem and certainly that the equation in relation to supply isn't simply: 'Let's release as much land as we can possibly can on the urban fringe of the city'," he said.
   Institute chief executive Diane Jay said releasing more land sounded simpler than it was.
   "There's some evidence that even if there were more land immediately available we really don't have the capacity within the construction and development sector to go a lot further in terms of meeting supply," she said.
   The group welcomed the Federal Government's planned National Housing Supply Council but said it must produce nationally comparable data on land release as well as new housing statistics.
   The hearings will continue in Sydney tomorrow. #
   [RECAPITULATION: "There has been an uncontrolled expansion of the immigration program," Dr Silberberg told a Senate committee in Canberra. ENDS.]
   [COMMENT: Yes, 250,000 a year in the past few years, while Australia is suffering a 10-year drought which has not ended, is "uncontrolled".   The then-PM John HOW-ODD had an image, after the Tampa lies, of being strong against uncontrolled immigration.  He is still being criticised by opponents and others for alleged niggardly refugee and immigration policies.  Who said that the arguments of Sustainable Population Australia were wrong?  The three major political parties in Australia are beholden to Global Corporations, whose driving force is growth-greed, and the Politically Correct, who, like the major religions and some reform groups, believe that Planet Earth has near-infinite capacity, at all times and in all places. COMMENT ENDS.] [Apr 01, 08]

• 'Massive rise in immigrants is fuelling homes cost crisis'.   

‘Massive rise in immigrants is fuelling homes cost crisis’

   The West Australian, www.thewest. , p 10, Wednesday, April 2, 2008
   CANBERRA – A massive, uncontrolled increase in immigration over the past three years has fuelled the housing affordability crisis, home builders say.
   Housing Industry Association managing director Ron Silberberg yesterday blamed the shortage of private rental accommodation on immigration he estimated at 250,000 people a year.
   "There has been an uncontrolled expansion of the immigration program," Dr Silberberg told a Senate committee in Canberra. "The pace in which it's increased has been massive over the past three years. Do we need an explanation as to why there's pressure on private rental housing?"
   He said the Federal Government could tighten the immigration program to address the housing crisis.
   Asked if he blamed the squeeze entirely on immigration, Dr Silberberg, who was speaking at the first day of the Senate select committee on housing affordability's public hearings, said its effect was substantial.
   More than one million Australians are considered to be in housing stress by paying at least 30 per cent of their income on accommodation.
   The HIA chief also said the industry had a skills shortage because only a tiny fraction of immigrants had training in residential construction. Only about 800 of 250,000 arrivals had the necessary skills, he said.
   The Planning Institute of Australia [PIA] told the committee that the construction sector's ability to meet demand was just as important as releasing more land.
   "Addressing undersupply is a critical issue if we are to ensure that we are able to adequately and affordably house our communities," PIA national president Neil Savery said.
   The hearings continue today. #
[Apr 2, 08]

• Business calls for state tax relief   

Business calls for state tax relief

   The Australian Financial Review, < home/viewer. aspx?EDP:// 200804070 00020513339& magsection= News&title= Business+ calls+for+ state+tax+ relief&source=% 2f_xmlfeeds% 2fnews% 2ffeed.xml > ; By Annabel Hepworth and Tracy Ong | Apr 07, 2008
   AUSTRALIA – [The Business Coalition for Tax Reform is commissioning landmark research into business imposts, mainly state taxes. … ]
   "What is going on is most states are exceeding their business tax budget targets -- and it is getting worse, not better," the coalition's chairman, John Stanhope, said.
   Mr Stanhope is also Telstra's chief financial officer. […]
   Estimates of payroll tax are now $624 million higher at $15.77 billion, due to strong growth, particularly in the booming West Australian mining industry. […]
   Forecasts of stamp duties on property transfers are up by $2.39 billion tio $14.62 billion, a record take.  For land taxes the take is $331 million higher at $4.26 billion. […]

   [LOOK BACK: "[Delete payroll tax, reduce stamp duties, tax UCV]," March 27, 2008. ENDS.]
[Apr 7, 08]

• [Globalisation -- English brand Willow Pattern china from China … and Colombia, Malaysia]

Globalisation -- English brand china from China … and Colombia, Malaysia

   Letter to the Editor sent to The West Australian, and The Sunday Times (Perth, W. Australia), by John C. Massam, April 7, 2008
   PERTH, W. Australia – Anyone who doubts that globalisation is "screwy" ought to have been with me when I bought some replacement Willow Pattern crockery in a supermarket on March 27.
   Our original dinner set had been made in Staffordshire, England. The replacements I bought last month, side by side on display shelves, were:
Dinner plates, made in China;
bread and butter plates, China and Colombia;
big bowls, and small bowls, China;
cups and saucers, Malaysia;
and mug, Colombia..
   Just think of the effort by the Churchill Fine Earthenware company in licensing producers in three other countries, and the effort of shipping them to Perth.
   We know that huge supermarkets can squeeze the price downwards from each supplying country, just as is happening to our meat producers and vegetable growers under our duopoly.
   The workers in each country can be induced, by the unspoken threat of retrenchment, and by tricks such as the Hawke "Accord," to accept wages that get lower and lower.
   I assume that the Chinese and Malaysian workers will be gradually displaced by the Colombian ones, or vice-versa, as this process continues.
   But wouldn't it waste less ship oil if each of these countries made the crockery for its own people, and Perth still had its own china factory? #

   [FOLLOW-UP: This unpublished letter was "re-worked" for a leaflet, which was made available at the StopMAI Coalition's stall at the May Day rally, at Fremantle Esplanade, on Sunday, May 4, 2008.  According to some of the crockery, the English Churchill fine earthenware/tableware company was established in 1795. ENDS.]
[Apr 7, 2008]

• The Willow-Pattern plate.


   The Children’s Encyclopedia, The Educational Book Co Ltd, London; Edited by Arthur Mee, Volume 1, page 35, ? 1939-40.
A BEAUTIFUL Chinese girl named Koong-Shee fell in love with her father's secretary, Chang, who was poor.  But the father of Koong-Shee wanted her to marry a rich man, and because she could not give up Chang her father sent her away to a little house at the end of the garden. 
   Outside Koong-Shee's window was a willow tree, and just beyond a fruit tree, and Koong-Shee sat all day watching the fruit tree bloom.  She was very lonely and unhappy, until one day Chang asked her to fly with him.
   Chang dared not post the letter lest it should fall into the hands of Koong-Shee's father, but he found a coconut shell, fixed a sail to it, and, putting his letter inside the shell, dropped it into the lake, and watched it sail across.
  [Picture of a Willow-Pattern plate.]
  Two pigeons flying high,
  Chinese vessel sailing by,
  Weeping willow hanging o'er,
  Bridge with three men, if not four. [sic]  
   Koong-Shee read the letter, and sent back her answer.  She said she would go if her lover were brave enough to come and fetch her.  Chang went boldly up to the little house and took her away.  They had to cross the bridge to get out of the garden, and as they were half-way across Koong-Shee's father saw them, and hurried after them. 
   Koong-Shee went first with her distaff, Chang followed carrying her jewel-box, and behind them ran the father with a whip.  But the father did not catch them, and they escaped to a little house on the other side of the lake, where they lived happily.
   But the rich man who had wanted to marry Koong-Shee was so angry that he set fire to the pretty little house, and Koong-Shee and Chang were seen no more.
Cal Academy version
   Cal Academy version, Blue & White Crockery, sighted on the Internet at < www.calacademy. org/research/ anthropology/ tools/ crock.htm > (unfindable on May 15, 2008) on June 22, 2001

Originally derived from the Chinese, it is impossible to ascribe the early versions of the Willow pattern to any particular English potter because hallmarks were not used and the patterns are virtually identical.  First developed in the early 19th Century and popularized in the Victorian era, the standard pattern shows a willow tree shading a bridge.  Three figures cross the bridge, with a pagoda and garden wall to the right, a boat and another pagoda to the left, and a pair of doves overhead.  The scene is explained in the following legend:

“Li-Chi, a Chinese Mandarin, lived in a pagoda with his beautiful daughter, Koong-Shee, who was to marry an elderly merchant, Ta-Jim.  Koong-Shee, however, fell in love with her father's secretary, Chang, and when the father discovered that the two were meeting secretly, he dismissed Chang.  Undaunted, the young lovers elope, and with the gardener's assistance, they cross the bridge spanning the river.  After going to Chang's house by boat, the mandarin discovers them and pursues them.  They are nearly overtaken and beaten to death when the gods intervene and turn them into a pair of doves”

Blue Willow
by Churchill
The Legend of Blue Willow

Once in ancient China, there lived a rich mandarin, whose beautiful daughter was betrothed to a wealthy old merchant.  Her affections, however, lay elsewhere - on her father's poor but handsome secretary.  When their secret meetings were discovered the girl was imprisoned in her father's pagoda.  From there, she concealed messages in coconut shells, and floated them downstream to her lover.

The mandarin, sensing that something was going on, hastened the wedding arrangements, but the secretary and daughter promptly eloped and were chased by the angry mandarin.

In a small boat, right in the middle of the sea, the mandarin caught them.  In his parental wrath he was about to beat them to death, when divine intervention caused them to turn into a pair of turtle doves.

The mandarin, his plans foiled, returned to his pagoda, while the turtle doves flew freely overhead.

   AFTER-WORD: Beyond doubt, 'Blue Willow' is the most popular design that ever appeared on ceramic tableware.  Today, with the resurgence of demand for nostalgia in design, the appeal of 'Willow' is greater than ever before. -- Churchill © willow pattern teacup and saucer (made in Malaysia) box, bought March 27, 2008, in Perth, W. Australia.  Website: www.churchill .

   [DEFINITION: Distaff: Staff from which the thread was drawn in hand-spinning.]
   [TO VIEW a Willow-Pattern plate, visit: www. thepotteries. org/patterns/ willow.html  (Accessed May 3, 2008) ]
[? 1939-40, undated 2001, and undated 2008; these entries May 4 and 15, 2008, but list as Apr 7, 08]

• ABC Learning lowers forecast amid US talks.  [OR, How banks use credit creation to ramp up share prices, having already over-lent to the enterprise, and then ..]        

ABC Learning lowers forecast amid US talks

   The West Australian, www.thewest. , By CARRIE LaFRENZ, p 48, Wednesday, April 9, 2008
   AUSTRALIA – ABC Learning Centres has cut its forecasts for this financial year as talks over the sale of part of its US business continue.
   ABC said yesterday it now expected earnings per share (EPS) to be between 34¢ and 36¢ for fiscal 2008, down from its November forecast of more than 41¢.
   ABC company secretary Matthew Horton said the lower guidance [sic] followed a slowing in the pace of the company's child-care centre acquisition program in Australia, New Zealand and the US.
   Talks were continuing on the sale of a 60 per cent stake in ABC Learning's US business to Morgan Stanley Private Equity, despite the exclusivity agreement expiring on March 25.
   The rescue package puts a value of $US775 million ($837 million) on the entire US business.
   The transaction would result in cash proceeds of about $750 million, with an additional $US30 million payable after June 30, 2009.
   In spite of the slower acquisition program, ABC said it still expected to spend about $137 million on non-material child-care centre acquisitions, a figure previously stated in its first half results.
   It added that the delay in purchases meant earnings associated with these centres would be realised from full year 2009, and not during the second half as anticipated.
   ABC also said the process of selling its UK vouchers business as part of a broader program to reduce debt was continuing.
   It expects the transaction to be completed in the second half and generate a capital profit in excess of $100 million.
   The sale of $150 million of freehold property associated with its child-care centres planned for the second half had been deferred to 2009, due to "market conditions", it said.
   ABC founder Eddy Groves has only a handful of shares left in the child-care giant after a series of margin calls were triggered during successive waves of panic selling of the company's shares. Mr Groves, his wife Le Neve Groves and two other directors were forced to sell about $52 million in stock in February as a result of margin calls.
   ABC shares were down 4¢ to $1.60.
  [Drawing of teddy bear and alphabet blocks, A, B, C, in front of display board.] ABC Learning: US talks continue.  

   [COMMENT: The banking system was not content with creating a lot of credit so that the Groves couple who started with one Australian kindergarten gradually built themselves up to be leading a debt-ridden empire of kindergartens in Australia, New Zealand and the United States, and were running a voucher system in Britain.  No, the bankers also created credit so that Mr and Mrs Groves, and some colleagues, could go FURTHER INTO DEBT as individuals to purchase more shares in their own company.
   In February, the report states, the couple and two other directors were forced to sell about $52m worth of shares due to "margin calls," a euphemism for repayment demands.  And WHO bought these cheaper shares?  How many millions did these banker sharemarket manipulators make out of this?  (By the way, is it socially healthy for private corporations to have large numbers of kindergartens?) COMMENT ENDS.]
[Apr 9, 08]

• A Quiet US Confession; Weapons Were Not Made In Iran After All.       

A Quiet US Confession; Weapons Were Not Made In Iran After All

   Information Clearing House (USA), www. information clearingh article 19908.htm , By CASMII, e-mail dated May 12, 2008
   In a sharp reversal of its longstanding accusations against Iran arming militants in Iraq, the US military has made an unprecedented albeit quiet confession: the weapons they had recently found in Iraq were not made in Iran at all. #

   [COMMENT: Astronomical oil revenues flowing towards Muslim-ruled countries means that the Islamists can buy arms from anywhere in the world -- INCLUDING armaments made in the U.S.A., Britain, Russia, China, etc.  It might have fooled the unthinking public when the U.S. military in Iraq announced that some arms had been made in Iran, and were stamped with the dates of manufacture, which they gave.
   HOWEVER, some cynics thought that the Islamic Republic of Iran might not be using a Western calendar, but instead might use a Mohammedan calendar.  And some cynics might have thought that, with the illegal occupation having started in 2003, the Iranians, if they were covertly sending arms to the Iraqi Islamists, have had more than four years to have worked out ways to mark any arms they made and intended sending in such a way as to throw suspicion off Iran. 
   Made in USA: But the really evil thing is that the U.S. military have recently discovered that computer circuits made in the U.S.A. are being used to blow up U.S. troops -- and a newsitem showing how they were being exported through fake "front" businesses in the Gulf States was published in early April, but the trade goes on.
   As the arch-villain Lenin said, most businessmen are so stupid and greedy that if you put in an order for rope with which to hang them, they would sell it to you. COMMENT ENDS.]
   "U.S. fails to halt Emirates' dangerous trade," International Herald Tribune, www. articles/ 2008/04/01/ mideast/ uae.php , By Eric Lipton, Tuesday, April 1, 2008
   [Picture] A worker at Port Rashid in Dubai, where Iranian traders said evidence was scarce that a new export control law was being enforced. (Tamara Abdul Hadi for The New York Times)
   WASHINGTON: Roadside bombings of American troops in Iraq were occurring with bloody regularity when military investigators made a disturbing discovery:  American-made computer circuits sold to a trading company in the United Arab Emirates had turned up in the bomb detonators.
   That finding set off a clash with Washington last year when the Bush administration cited the diversion of the computer circuits to Iran, and eventually Iraq, as proof that the United Arab Emirates were failing to prevent American technology from slipping into the wrong hands.  Administration officials said other so-called dual-use goods - including aircraft parts, specialized metals and gas detectors that have a potential military use - had also moved through Dubai, one of the emirates, to Iran, Syria or Pakistan. […] ENDS.]
   [2nd COMMENT: The BLUSH Administration is one of a long line of American governments that have told so many lies that it is no wonder that the Iranian crowds can be whipped up to call the U.S. "The Great Satan."  The wickedness of the mullah dictatorship in Iran does not need any lies told about it -- the truth if stated over and over is evil enough. ENDS.]
[May 12, 08]

• On starvation train.
  [Agents push up prices by promoting getting rich through houses.]     

On starvation train

   The Examiner, editorialcanning |AT| examinernewspapers |DOT| com |DOT| au , 1 Gilwell Ave, or PO Box 425, Kelmscott, WA, 6991; Fax 08 9390 1577, Tel. 08 9390 1377; Letter to The Editor, p 5, May 15, 2008
   Thank you for publishing Crazy reports fuel rent hikes (Examiner, April 25).
   Ever[y] since the Real Estate Institute of WA began promoting homes as an investment on how to get rich, rental increases have devastated low-income folk.
   The gravy train for some is a starvation train for others.
   Stewart Derby of REIWA says rents aren't high enough, which shows that this industry is all about greed and doesn't give a damn about the consequences for the renter.
   At the end of the day, the investor owns a home paid for by rent. The renter is left holding nothing but a pile of rent receipts. If they can't afford the unconscionable rent increase - get out. The government should intervene with rental/price control and also build more affordable housing in competition with REIWA as a matter of extreme urgency.
   William Booth, Burswood #

   [RECAPITULATION: Stewart Derby of REIWA says rents aren't high enough .. ENDS.]
   [COMMENT: They aren't, from an investor's point of view.  But the landlords can later gain the unearned increment of the land price gradually going up over the years, which is why many borrowed and got income tax concessions for interest on borrowed debt (negative gearing).  Economic theorists like Adam Smith and Henry George wrestled with the problem in years past, but money-volume reformers like Clifford Douglas seemed to have a blind spot in that regard.  Higher returns than rent have been received from companies and bonds, propped up by bank credit – but this "house of cards" seems to be collapsing in mid-2008. COMMENT ENDS.]
   [ACKNOWLEDGEMENT: Mrs Ethel Birt, St James. ENDS.]
[May 15, 2008]

• [Dr Mal Washer to hear Sustainable's views.]

   Sustainable Population Australia Inc, Western Australian Branch, June 2008 edition.

Sustainable Population Australia Inc.

In the Meeting Room
Lottery House, 2 Delhi Street, Perth.

Sunday 6th July, 2008

All Welcome, please bring friends and relatives
Refreshments provided

Guest Speaker: Dr Mal
Washer MP.
  Vice Chair of the
Parliamentary Group on Population and
Development and MHR for Moore.

Title: Population - Issues today and for the future.

Mal will make a short presentation and hopes then to respond to questions from the floor. Mal stresses this session will reflect his personal views rather than espousing party policy.
This is your chance to provide major feedback to a prominent and influential player in the population movement in Australia.

Followed by;
After the meeting there will be a 'members forum' to enable you to air your views. Enquires phone (08) 9386 1890 or (08) 9339 2952. #

   Please make leaflets of the above, and photocopy them in batches of 20 for distribution to your contacts, etc.
   Sustainable Population Australia, WA branch, is at 89 Fairway, Nedlands, WA, 6009. Secretary Eric Pyatt's Telephone is 9339 2952
   SPA national address: PO Box 3851, Weston Creek, ACT, 2611, Australia.
[June 2008]

• [Big Money and Housing Unaffordability]       

[Big Money and Housing Unaffordability]

   Speakers' Forum, Melbourne, in front of the Melbourne Public Library, on You Tube, http://au. youtube. com/watch? v=g9 SnE_WuTe0 , June 1, 2008
   MELBOURNE – John Massam, of Perth, talks about the huge amounts of money being taken by the leaders of companies, and the unaffordability of housing.
[June 1, 2008]

• Who is responsible?
  [for numbers rising in a housing affordability crisis? And selling bargain gas?]     

Who is responsible?

   The Examiner, editorialcanning |AT| examinernewspapers |DOT| com |DOT| au , 1 Gilwell Ave, or PO Box 425, Kelmscott, Western Australia, 6991; Fax 08 9390 1577, Tel. 08 9390 1377; Letters to The Editor, p 5, June 6, 2008
   I welcome those African refugees to their new land and new life (Canning Examiner, May 30).
   The Federal Department for Immigration is responsible for their homelessness.
   Bringing in new Australians from any country without provision of a place to live is more than stupid - it is criminal.
   WA has no emergency housing for anyone, that is also criminal.
   And just who is responsible or so irresponsible?
   John Howard and company had 11 years to tackle the housing problem and the state Labor Government has had six-years and counting.
   All immigration to WA should; stop until affordable social housing is available for the 17,000 unfortunates on the Homeswest housing list.
   William Booth, Burswood
What's the real story?
   I was taught honesty is the best policy.
   Why are we paying 59.9 cents a litre for gas, when it is exported to Germany at eight cents a litre? Tell me how many oil wells are capped in Australia.
   Are we exporting Australian oil at $20 per barrel? So why are we importing oil at American prices of over $130 a barrel?
   And to top all this off, Homeswest have put my rent up. With the power and gas gone up, I'm trying to live on under $200 a week. An honest answer could make this pensioner happy.
   Alf Clark, Langford

   [COMMENT: With a housing unaffordability crisis lasting more than a year, and a 10-year drought, the various governments in Australia are bringing in more immigrants than ever.  That, and the "export and perish" mentality shown by the letter about gas exports, show that the major parties who keep talking about fiscal responsibility and conservative finance are throwing dust in the people's eyes.  And it is not "market forces" that undersells gas and keeps pretending there is a skills shortage!  And an unskilled labour shortage!  Add them together – there's a people shortage, according to the powers that be, who stand to gain more proft from underpaying people. ENDS.]
   [ACKNOWLEDGEMENT: Mrs Ethel Birt, St James. ENDS.]
[June 6, 2008]

• We'll all pay a high price for boom and bust.   

We’ll all pay a high price for boom and bust

   The Renegade Economist, http://www. renegade economist. com/default. asp?Display=8 , by Fred Harrison, in The Sunday Post, June 20, 2008
   BRITAIN had three years to prepare for the crisis now wrecking the financial markets. In April 2005 my article in The Sunday Post warned that the house price boom would continue until the bubble was pricked in the winter of 2007/08. In fact, my forecast of the present crisis was originally published in 1997, just as New Labour was taking over in Downing Street.
   Back then I offered that 10-year forecast to the new Chancellor of the Exchequer, Gordon Brown. And I spelt out how he could avoid leading Britain into another housing-led boom/bust. Brown turned a blind eye to it. Instead, we were treated to his magic mantra, uttered on Budget days - there would be no housing boom/bust under his stewardship. We now know I was right and he was wrong.
   I derive no satisfaction from this. My study of property cycles clearly showed a 300-year pattern that averaged 18 years between peaks. So in 1983 I published Power In The Land, which forecast the housing bubble that would lead to the recession of 1992. It didn't take a genius to work out the next crisis would be around 2008.
   I knew the speculative binge would fizzle out as investors once again found themselves trapped in negative equity, with mortgages larger than the resale value of their properties. The Prime Minister is now trying to shift responsibility on to American lenders who recklessly gave mortgages to low-income families.
   But while the credit crunch that has shaken the Western financial markets did originate in Wall Street, our housing crisis is home-grown. And that housing bubble was always going to be powerful enough to drive the economy into the ground.
   We cannot now escape the consequences of the property mania of the last decade. In my book Boom Bust I forecast a house price decline for the UK of 20 per cent. I now believe this to be an underestimate. On average, we can expect prices to drop by at least 30 per cent by 2010. Scotland won't escape the downturn. Already, in Edinburgh, price rises have moderated to their lowest levels since 1993. Like clockwork, the property cycle is rapidly unwinding.
   If the decline in Scotland's prices is not as great as they will be in southern England, that will be because the windfall gains have not been as great as the riches pocketed down South.
   But the tragedy of rising unemployment and housing repossessions will surface to divide communities in low-income neighbourhoods in Glasgow and Edinburgh. There are two reasons why Scotland can't escape the looming depression. First, we're facing a crisis of global proportions. The downturn will not be short-lived and the ripples will wash across the Scottish economy.
   Second, funds for public spending from London will be cut back. Scotland relies heavily on public sector services and recruitment will be curtailed as the Brown government struggles to balance its books as tax revenue declines.
   Am I being too pessimistic? In 2005 I was told it was foolish to claim Britain would be locked into a global depression. Economists were supposed to have learnt the lessons of the 1930s, so action would be taken to head off a financial crisis that would have to be extremely severe to create a depression.
   We've now seen how central bankers failed to anticipate the credit crisis. In Britain, the financial authorities have been exposed for failing to co-ordinate action in time to prevent the Northern Rock shambles.
   I'm now investigating who's responsible for the British end of the financial chaos because I fear the Bank of England and the so-called experts are exposing Britain to serious dangers that could have been avoided.
   Bankers who are seeking bail-outs for their reckless financial dealings are trying to fend off the call for greater regulation of investment banks. Once again, this shows economists have still not learnt the lessons of history.
   The Financial Services Authority and the other responsible agencies, between them, had all the regulatory powers they needed to identify what was going on in the money markets. But, in fact, they didn't have a clue toxic mortgages were polluting the streams of money circulating into the world's financial arteries.
   And yet I identified the sub-prime mortgages as a threat to the economy in my book in 2005. So we've had a failure of understanding - not of inadequate supervision of the mortgage lenders. That's why new powers of supervision will not prevent the next property boom/bust. Economists and politicians have been trained not to spot those!
   So what's behind those cycles that have repeated themselves for three centuries all over the world, in different cultures and under varying political regimes? The secret is contained in two words - land speculation.
   The outward appearances may change through time. In the 18th Century, the canal-building revolution drove the property boom/busts. In the 19th Century, the railways drove the land boom/busts. In the 20th Century, the automobile made possible the suburban house-building sprawl that ended up in the classic boom/bust.
   It's always the quest for fabulous riches from the exploitation of land that drives reckless investments that end in tears.
   And this is what economists and government agencies can't come to terms with. They've been schooled into thinking the capitalist economy is a rational beast that regulates itself to deliver the best possible results. Instead, I forecast that in the housing market alone Britain will suffer a wipe-out of wealth of at least £800 billion. This was my forecast in 2005 and I'm sticking with it.
   We'll all pay a high price for Gordon Brown's famous last words, which he uttered last year - "We will never return to the old boom and bust". #
[June 20, 08]

• Voters killed the Democrats.  [after national leaders and senators gave up being democratic.] AND "[Howard was honest about GST]"  

Voters killed the Democrats

   TheAustralian, http://blogs. theaustralian. letters/index. php/theaustralian/ comments/ voters_ killed_the_ democrats/# commentsmore , Letters to the on-line letters blog, Monday, June 30, 2008
   AFTER Don Chipp retired as leader in 1986, the mainstream media seemed reluctant to give credit to the Australian Democrats and the non-mainstream policies on which that party was founded.
   This observation obviously ignores the pop-culture adulation lavished on past leader Cheryl Kernot or the triumphal corporate applause when Meg Lees led John Howard into rethinking the GST.
   In fact, the big end of town must surely now be pleased at the demise of the Democrats which, until 1998, commanded more than 10per cent of the primary Senate vote.
   I remember that, in 1992-3, staff of a daily newspaper allied themselves with a failed business takeover of the party’s Western Australian division. The outcome was a disastrous 1994 internal coup and near-total attrition of the division’s office-bearers and membership.
   The Democrats’ subsequent national Senate voting performances, according to figures from the website of the Australian Electoral Commission, were (1996) 6.76 per cent, (1998) 8.45 per cent, (2001) 7.25 per cent, (2004) 2.09 per cent and (2007) 1.29 per cent.
   During the same period, the Greens, operating on a similar platform to the pre-1993 Democrats, have enjoyed spectacular success and will now have five senators, with good prospects of increasing this to eight at the next election.
   What, in addition to Kernot and the GST, really killed the Democrats? The answer has to be "the voters".
   However, the voters acted correctly in dismissing a party which, after the folly of ousting leader Janet Powell in 1991, fell under the control of an autocratic eastern-states clique and flunked out on Chipp’s goal of "keeping the b*st**ds honest".
   The rest is history. Two high-profile Senate leaders sacrificed themselves and their party to "the b*st**ds" -– Kernot to Labor during most of her career and Lees to Howard’s GST in 1998-99.
   The turning point actually came earlier, when those two led the conspiracy to depose Powell, the last Democrats leader who fully respected the party’s grassroot origins.
   Powell later joined the Greens, as have many first-generation Democrats. They must all now be smiling over the transition of their old ideals to a new vehicle. Brian Jenkins  (The writer was variously a WA party officer and national executive representative of the Australian Democrats from 1980-1993), Safety Bay, WA
   [NOTE: This Website has been told the above letter was also published in The Australian Financial Review.]

[Howard was honest about GST]

STEVE Forsyth (Letters, 27/6) seems to have forgotten that the second Howard government was elected on the issue of the GST. Those "b*st**ds" were completely honest about it. David Ward,  Ormond, Vic
[June 30, 2008]

• Why the Democrats declined.  [Democrats gave up member democracy]; AND, [No commitment to genuine solar homes.]

Why the Democrats declined

   The West Australian, Letters to The Editor, p 22, Monday, June 30, 2008
   Much is being said and written about the reasons for the demise of the Australian Democrats. I offer this summarised version.
  1. Progressively during the 1990s, the grass-roots membership were disregarded by some Democrat Senators, State MPs and the national executive of the party.
   2. Janet Powell's dismissal and Cheryl Kernel's defection were direct manifestations of this.
   3. The guaranteed introduction by Senators Meg Lees and Andrew Murray of John Howard's GST – a dishonest tax which was opposed by Democrat supporters.
   4. The sniping and undermining of leader Senator Natasha Stott-Despoja by Meg Lees and Andrew Murray just as the Democrat vote started to rise.
   The Democrats are rightly proud of their many achievements in the Senate and several State parliaments. We are fortunate that the Greens are well placed to continue in that work. Jean Jenkins, Safety Bay. [Former Australian Democrats senator for W.A.]

[No commitment to genuine solar homes]

   The current energy crisis in WA highlights the need for urgent measures to ensure all future homes are designed as energy efficient as possible.
   Most project homes are constructed with nothing more than the amount of square metres and rooms in mind, with no thought given to zoning, insulation, solar passive principles, or breezeways.
   The State Government is aware of what can be achieved yet still bows to pressure from the project home industry, which is simply after the highest possible amount of sales with minimal effort with little thought given to the general comfort of those who eventually have to occupy the homes.
   Victoria introduced a minimum five star requirement to all new housing some years ago and figures indicate the new houses built today are generally more than 30 per cent more efficient.
   WA currently has the "five star plus". However, our rating system is more of a marketing tool and would often achieve less than three stars in the Victorian system.
   Altering housing design to achieve these level [sic] of efficiency is usually simple and should cost no more than any standard, well-specified home. Alan Carpenter, you have the opportunity to halve the amount of gas used in all new homes. Don't waste it. Peter Lea, Margaret River.
[June 30, 2008]

• Ripper: WA is solid as a rock.     

Ripper: WA is solid as a rock

   Southern Gazette (southern suburban region of Perth, W. Australia), p 12, Tuesday, July 1, 2008
   PERTH (W. Australia) – IF the words of WA Treasurer Eric Ripper and Under Treasurer Tim Marney are anything to go by, the State is well-prepared for any economic slowdown.
   The State's top economic minds gathered to discuss the future of the WA economy as part of the Treasurer's Breakfast event at the Burswood Entertainment Complex last week.
   The event, hosted by Victoria Park MLA Ben Wyatt and local Chambers of Commerce, provided a post-budget overview of the State's economy in the lead-up to the new financial year.
   "The purpose of the breakfast is to create an opportunity for small business to get together with the State's most senior economic officers to discuss issues of importance to their businesses and the future of the State's economy," Mr Wyatt said.
   "The interest from my small business community is always impressive and provides me with a clear picture of issues of direct concern."
  [Picture] Treasurer Eric Ripper. d283728  
   Mr Ripper said international business confidence was strong and was reflected through exports. He said the economy was stable amid world economic pressures and attributed its ongoing success to record investment, better housing afford-ability packages and a strong investment in key services.
   "Our debt is manageable and we are still within our self-imposed debt-to-revenue cap, meaning we retain our triple-A credit rating," Mr Ripper said.
   "With housing affordability, we have cut stamp duty by 15 per cent on all purchases and that comes into effect in July. This will also remove the impediments experienced by those who want to refinance mortgages. We also have reformed land tax and this will impact upon bracket creep that is experienced."
   Mr Ripper conceded the Government's $450m boost to state housing was in response to growing housing infrastructure costs and would only maintain the existing need for state accommodation.
   He also said spending allotments distributed through the Commonwealth Grants Commission needed revisiting, as WA was often at a disadvantage to its state counterparts. #

   [RECAPITULATION: "Our debt is manageable and we are still within our self-imposed debt-to-revenue cap, meaning we retain our triple-A credit rating," Mr Ripper said. ENDS.]
   [COMMENT: Whatever is a "boom state", as others have told us, doing with a DEBT, manageable or not?  Eric Ripper is a "Labor" State Treasurer -- but modern Labor has no real criticism of the financialist-monopolist system, like pre-war Labor leaders had.
   Competent managers, whether private or public, ought to be debt-free.  The reality is, not only are the so-called "surplus budgets" of recent years dishonest hoaxes, the actual deficits are grossly under-stated. 
   If a government closes down maintenance workshops and sacks the workers, and restricts the number of engineers and others who are supposed to be monitoring the infrastructure such as electricity lines and buildings such as schools, the government can proudly claim they are in surplus.  The neglect is not put in the accounts.  And credit borrowed from overseas and Australian banks is neatly on the accounts, but the so-called "bottom line" just shows cash accounting.  If the juggling can show more cash and credit inflow than outgo, the budget is reported as "in surplus."  And superannuation just goes on accumulating (perhaps ?), without there being a sinking fund, in most jurisdictions. - jcm 22 Apr 09. COMMENT ENDS.]
   [2nd COMMENT: The cutting of land tax will only mean that large land-dealing corporations will enjoy an even greater unearned-profit margin than before.  The ordinary householder will be worse off. - jcm 22 Apr 09. ENDS.]
[Jul 1, 08]

• Journalist faces jail over leak.     

Journalist faces jail over leak

   The West Australian, , By KATE CAMPBELL, p 9, Tuesday, July 8, 2008
  [Picture] Paul Lampathakis  
   PERTH (W. Australia) – A powerful parliamentary committee has threatened a Perth journalist with jail for refusing to reveal who leaked him the confidential Cabinet information which triggered a controversial police raid on the Sunday Times.
   Sunday Times journalist Paul Lampathakis resisted pressure to disclose his source yesterday when a select Upper House committee asked him three times to identify the whistle-blower who leaked him information about Government plans for a multi-million-dollar advertising blitz.
   The committee is investigating the circumstances surrounding the raid, in which 27 police officers searched the newspaper's premises in a bid to find the source of the leak.
   Lampathakis, who was advised by the newspaper's lawyer throughout his testimony, told the hearing from the outset that he would refuse to answer any questions that could identify his source or sources because he was bound by his code of ethics and believed those questions were irrelevant to the committee's terms of reference.
   Committee chairman and Liberal MLC George Cash said identifying the source was within the scope of the committee's inquiry and proceeded to grill Lampathakis about the source's identity.
   When he failed, Mr Cash told Lampathakis that the Legislative Council might order him to reveal his source and if he continued to refuse he could be found in contempt of Parliament or in violation of the Criminal Code, both of which carried a possible prison penalty.
   Lampathakis told the inquiry he felt the Government had waged a campaign of intimidation and harassment against him and other journalists in recent times, saying this was the second time police had investigated the origins of one of his reports at the "behest of the State Government".
   The move was the second controversial action by the committee which last month allowed a top Government bureaucrat to give evidence in secret.
   Department of Premier and Cabinet director-general Mal Wauchope, who made the initial complaint to police about a leaked Government document, requested that his testimony be suppressed. The committee granted his request.
   Media, Entertainment and Arts Alliance' WA secretary Michael Sinclair-Jones said the committee's actions were clearly an attempt to suppress free speech.
   "It's absolutely outrageous. It's an affront to free speech in a democratic society. It smacks of the tactics of a police state," he said. #
[July 8, 2008]

• Stop persecuting whistleblowers.     

Stop persecuting whistleblowers

   The Sunday Times (Perth, W. Australia), E-mailed July 8, 2008, Letter from John C. Massam, Greenwood, p 72, July 13, 2008
   COULD someone give a WA Legislative Council select committee a few lessons in history, so they will stop threatening journalist Paul Lampathakis with prison? [reported in The West Australian July 8]
   In the 21st century Western Australia is not the darkest corner of the Third World, nor a Red or Nazi regime, the Swan River Colony, the English Star Chamber, the Inquisition, nor ancient courts where prison, torture and horrible executions were used to suppress freedom and free speech.
   The taxpayers provide the funds for Parliament.  Especially in these hard times we the people are entitled to know if even more precious resources are to be diverted to huge news conglomerates in another advertising blitz.  So what if somebody told us?  Mr Lampathakis did his job and through his newspaper [ the Sunday Times (Perth)] got the news to the owners of the WA Government, that is us … ordinary people.
   Taxpayers do not want to know which brave whistleblower, if any, let the news out to us.  I say "if any," because we must not forget that the Royal Perth Hospital's patient details were found in computers put outside for recycling.
   The Upper House would be better employed trying to give a job to Mr Chris Read, another whistleblower who exposed computer mismanagement in the WA Ombudsman's office (reported in The West Australian June 20).  He was right, but a rotten system for five years pays him a salary but won't give him any work to do.  [All this reeks of a failure by the ministers, their minders, and top bureaucrats.]  The money wasted so far could have gone into conquering the housing crisis.
   With all the crime we hear of, the [27] police who raided The Sunday Times would be better employed patrolling the streets and public places, or catching up their backlog of work, or checking that there will be no more "framing" of people such as John Button, Darryl Beamish, and Andrew Mallard. #
[July 13, 2008]

• Your questions answered  [about investments.]  


   The Sunday Times (Perth, W. Australia), by Noel Whittaker, Portion of his regular column, p 76, Sunday, July 13, 2008
Q I have just finished reading your latest column and I'm curious that with an investment of $60,0000, earning an average 9 percent, you run out of money when you are spending only $40,000 of the $54,000. Is this due to not allowing for inflation?
A The example in the column was based on the withdrawals being increased each year in line with inflation.
Q My wife and I are self-funded retirees with money in super and have seriously been considering converting to cash until there is a clear uptrend. From what I read, most experts are anticipating further DOW and ASX falls in the forthcoming reporting season. These falls seem to equate, depending on the analyst, from a further 10 per cent to even 25 per cent. The tax component you write of, to my knowledge, doesn't apply to us because the cash would stay within the super fund. We've already watched our fund get slashed.
A Unfortunately, no one rings a bell at the top or bottom of the market and experience shows that the best time to buy shares is when the outlook is as gloomy as it can get. If you convert your shares to cash now you will be turning a paper loss into a real one and you take the risk of missing out on the upswing if it happens quickly. Of course, the market may fall more before it bounces back, but nobody knows when that will be. While there may be an argument for holding money in cash for the short to medium-term, I believe that quitting share-based investments in the present economic climate, when the stock market is clearly under valued, would be one of the worst strategies possible.
Q As super funds are on the decline until we don't know when, should I use the extra funds from my salary to pay off a non-deductible debt ($18,000) from the bank (rather than keep placing it into super where it seems to be disappearing into nowhere, and may be returning only 3 per cent at this time?
A This is the perfect time to be salary sacrificing into superannuation because the contributions are buying a lot more shares than they would be if the market was at its peak last year. This strategy is called dollar-cost averaging and guarantees good profits when the market inevitably comes back.
Noel Whittaker is a director of Whittaker Macnaught, a division of HBOS Australia. This advice is general in nature and readers should seek their own expert advice before making financial decisions. His email is .
   [RECAPITULATION: … I believe that quitting share-based investments in the present economic climate, when the stock market is clearly under valued, would be one of the worst strategies possible. ENDS.]
   [COMMENT: Quitters quit. COMMENT ENDS.]
[July 13, 08]

• The Real Estate Bubble drives Homebuyers into Debt Peonage   

The Real Estate Bubble drives Homebuyers into Debt Peonage

   By Michael Hudson, Copied from a PDF, July 2008
   [Search the World Wide Web to find all but one of the 24 charts in this article]
   Real estate’s role in the economy has changed radically over the past few hundred years. Down through medieval times landed aristocracies held most wealth and received the lion’s share of the surplus as rent. Land also provided the main source of taxes. But as countries industrialized, property owners used their control of Parliaments to shift the fiscal burden (mainly war debts) onto the rest of the economy. Bankers also have managed to avoid having their wealth taxed.
   Democratic reform sought to fully tax property once again or nationalize wealth outright so as to free markets from the burden of rent and interest. The imperatives of industrial competition were expected to un-tax labor and industry, making the land once again the basic source of public revenue. This became the thrust of classical and Progressive Era tax reform. But since the 1930s, real estate and financial interests have rolled back their tax obligations.
   Unfortunately, neither homeowners nor the economy at large has benefited from this tax reduction. The revenue formerly paid as taxes on real estate is now capitalized into mortgage credit and paid to bankers as interest. Property prices have soared as real estate has been un-taxed, forcing buyers to take on more and more debt to gain access to housing. It is natural for land prices to increase over time. Sites are in limited supply, after all, and governments invest in transportation and other infrastructure that make land sites more rentable as populations grow and become more prosperous. But what has turned out to be mainly responsible for the rising price of land is mortgage credit. Property prices today reflect the terms on which banks lend. And the volume of bank loans grows exponentially.
   Until recently, buying property was like buying a bond. Its value was calculated by discounting its flow of rental income (or equivalent value, for homeowners) at the going rate of interest: Price = rent/interest. In fact, the original meaning of rente (a French word) was an interest-bearing government bond, and only later was extended to include land receiving a regular periodic payment. Land was priced at “so many years purchase” of its rent. A lower interest rate in the denominator gave a higher multiple.
   What additionally is factored in today is the expected price rise. Buyers acquire property on credit, planning to pay off the debt by refinancing their mortgages (or “cashing out”) at higher levels as asset prices are inflated. Hyman Minsky described this phenomenon as culminating in the Ponzi stage of the financial cycle: Debts are carried by adding the interest onto the principal, creating a rising upsweep of indebtedness. 1
   A Bubble Economy is based on debt leveraging in search of “capital” gains. Inasmuch as real estate is the economy’s largest sector and site values are its largest component, these gains are headed by rising land prices. The annual rise in land prices has far outstripped growth in national income since the late 1960s, making land prices the driving force in today’s financialized mode of “wealth creation.”
Chart 1: Annual Land-Value Gains compared to Growth in National Income
Each Year's Growth and Land Value Far Exceeds the Growth in National Income

   While the bubble lasts, buying real estate, monopolies and financial securities on credit is the quickest and easiest path to wealth. Current income plays a declining role as property buyers aim at maximizing “total returns,” defined as income plus capital gains – especially the latter. Applying the maxim that “Rent is for paying interest,” real estate investors are willing to pledge the net rental income to mortgage bankers in order to get a chance to make a capital gain. Asset-price gains become the key, not saving out of earnings or direct investment and enterprise.
1. Hyman P. Minsky, The Financial Instability Hypothesis, Working Paper No. 74, May 1992 (The Jerome Levy Economics Institute of Bard College). Prepared for Handbook of Radical Political Economy, ed. Philip Arestis and Malcolm Sawyer (Edward Elgar: Aldershot, 1993).

   The Federal Reserve’s 2004 Survey of Consumer Finances found that “Changes in the values of assets such as stock, real estate, and businesses are a key determinant of changes in families’ net worth.” 2
   This creates a symbiosis between finance, insurance and real estate – the FIRE sector at the core of the Bubble Economy. The basic dynamic is a feedback between bank credit and asset prices.
   The quickest and easiest path to wealth is not to earn profits by investing in industry, but to go into debt to ride the wave of asset-price inflation. The result is a shift of wealth seeking away from industry to financial maneuvering on credit to ride the wave of asset-price inflation. Why invest money in an industrial factory or other company that takes years to organize production and mount a marketing program to develop sales on which to make a profit that is taxed at 30 percent, when you can buy land and simply sit back and make capital gains that exceed profit rates and are taxed at only half as much?
Chart 2: Annual Increase in Land Prices vs. Corporate Profits
Rising Land Value Now Yields More than Corporate Profits

   Yet the national income and product accounts (NIPA) do not count capital gains. These occasionally are surveyed by the Internal Revenue Service’s Statistics on Income, but the only regular estimate of such gains is the Federal Reserve’s flow-of-funds statistic for land prices.
2. “Recent Changes in U.S. Family Finances: Evidence from the 2001 and 2004 Survey of Consumer Finances,” Federal Reserve Bulletin, 2006, pp. A1-A38.

   The Fed estimates that price for the nation’s raw land rose by $2.5 trillion for 2007. (I find $3.5 to $4 trillion to be more realistic, for reasons discussed below.) At over 20 percent of U.S. national income, this land-price gain was four times than the amount by which national income grew in 2007, and two-thirds more than total U.S. corporate profit (much of which itself derived from mortgage financing and brokerage).

From asset-price inflation to debt deflation
   Inflated asset prices were making fortunes for investors, and also for many homeowners who saw the market value of their homes rise by more than they were able to earn in a year. Families who found that their wages and salaries were not enough to make ends meet were tempted to take out home-equity loans to sustain their living standards. Financial promoters hawked a dream that people could maintain their life styles and get rich by capital gains rather than by what they could earn and save. Banks appeared to have created a postindustrial mode of wealth creation by issuing enough credit to bid up property prices, and to keep the boom going by lending yet more against collateral rising in value. Not to play this game was to be left behind as the affordability of housing rose further and further beyond the means of most families to pay without cutting back their expenditure elsewhere.
   The problem with such bubbles is that once underway, asset-price inflation becomes the only way to sustain the debt burden. Debt-financed speculation must accelerate or else end in a wave of bankruptcy. This threatens to be inevitable in any case, because carrying charges on the debts that fuel asset-price gains divert income away from being spent on consumption and investment. That is the essence of debt deflation. Using debt leverage to bid up property prices loads the economy down with interest and amortization commitments to pay creditors. Prospective buyers must devote more and more of their working life to pay off the debts needed to buy a home, not to mention an automobile, an education or health care.
   Un-taxing real estate generally – along with tax favoritism for debt leveraging –frees hitherto taxable income to be paid as interest. The banking system gains what the tax code relinquishes, capitalizing the proceeds of property tax cuts into yet larger loans. This subsidizes speculation, by enabling more income to be spent on debt service. Interest is added onto a growing debt balance. The effect is to raise the carrying costs of real estate (and business) financed on credit, while forcing taxes to be levied elsewhere in order to stabilize the public budget. Public spending must be cut back in response to foregone tax receipts; otherwise the shortfall must be made up by public borrowing, by taxing sales and non-property income at a higher rate, or by selling off the public domain.
   This is not how matters were supposed to work out. The Progressive Era a century ago advocated that taxes should fall mainly on rent and other property returns. The aim was to free economies from rent and interest, so that prices would reflect only necessary costs of production – wages and profits for labor and capital. But governments have pursued just the opposite fiscal philosophy since World War I, and especially since 1980. They have lowered property taxes and refrained from imposing a resource-rent tax on minerals, fuels or the broadcasting spectrum. They also have deregulated monopoly prices rather than kept them in line with actual production costs. Meanwhile, capital-gains taxes have been cut to just half the rate levied on “earned” income (wages and profits). All this has increased the economic role of interest and rent while raising asset prices for rent-yielding properties and rent-extracting rights.
   On the logic that capital gains built up net worth just as saving did America’s original 1913 tax code treated them as regular income. Indeed, Treasury Secretary Andrew Mellon wrote:
The fairness of taxing more lightly income from wages, salaries or from investments is beyond question. In the first case, the income is uncertain and limited in duration; sickness or death destroys it and old age diminishes it; in the other, the source of income continues; the income may be disposed of during a man’s life and it descends to his heirs. Surely we can afford to make a distinction between the people whose only capital is their mental and physical energy and the people whose income is derived from investments. 3
   This logic is even more applicable to today’s Bubble Economy. After a real estate bubble bursts, “total returns” no longer drive balance sheets. What Alan Greenspan lauded as “wealth creation” in the form of rising property prices has just the opposite effect from tangible capital investment. Instead of lowering production costs by raising productivity, it builds interest charges into the cost of living and doing business. By diverting income to pay creditors instead of to spend on production and consumption, the debt hangover’s legacy of carrying charges slows recovery.
The financial sector’s symbiosis with real estate
   Ever since the United States enacted its first modern income tax in 1913 the vested interests have sought to shift the burden back onto labor and consumers. In a turnabout from David Ricardo’s day when finance backed repeal of Britain’s Corn Laws that protected high agricultural prices and land rents, today’s financial sector has thrown its weight behind real estate. Seeing that its largest market by far has turned out to be real estate, not industry and foreign trade, bankers have lobbied for tax favoritism for property income and capital gains. Their logic for shifting taxes off mortgage borrowers is that revenue freed from the tax collector is available to be paid out as interest and capitalized into higher property prices.
3. Andrew Mellon, Taxation: The People’s Business (1924).

   This tax favoritism for real estate obliges federal, state and local budgets to look elsewhere for financing – mainly to consumers, and to borrowing from the wealthy who are being un-taxed. A Bubble Economy thus weakens the national fiscal position as well as burdening industry and the nation’s overall competitive position. International equilibrium can be maintained only if all other economies are financialized in a symmetrical fashion. This proliferation of the debt burden has become a distinguishing characteristic of today’s globalization.
   The 19th and 20th centuries saw banking finance the spread of home ownership. In the early decades of the 19th century, residential mortgage lending was left mainly to local savings banks. Many of these banks were set up to help immigrants or workingmen save up small change each week, as reflected in the names for some of the largest New York savings banks: Seamans, Emigrant, the Bowery and Dime Savings Banks. By the 1930s, savings and loan associations (S&Ls) were formed to aim at middle-class depositors and homebuyers. After the return to peace after 1945 the construction boom and suburbanization created a thriving mortgage market. Today, most savings banks and S&Ls have been converted into commercial banks, and mortgage lending has become their largest department, accounting for 70 percent of all bank loans.
Chart 3: FRB Composition of Bank Loans
[This chart not in the PDF version on the Webmaster's computer]

   As this has occurred, interest payments have expanded to absorb most of the rental value of commercial properties and owner-occupied housing. And as property became more widely owned and democratized, it was fairly easy for the largest investors – and mortgage bankers – to stir up popular opposition to real estate taxation. But homeowners are not much better off. What formerly was paid to the tax collector is now paid to bankers as interest.
The magnitude of real estate revenue – and its increasing payout as interest
   The National Income and Product Accounts (NIPA) are designed to show what the economy would look like if every activity were organized as a business – even owner-occupied housing. The word “rent” appears in only one line of these accounts (Table 2.1, line 12). It is not a rent that actually is paid, but an imputed “as if” estimate of what homeowners would pay if they rented out their dwellings to themselves. This typically amounts to only 1 or 2 percent of national income.

Chart 4: Real estate ebitda in billions of dollars, 1930-2007
Composition of Bank Loans

Gross US Real Estate Income
("Earnings before interest, taxes, depreciation and amortization">ebitda)

   The NIPA treat income for commercial and residential rental property as “real estate earnings,” which in turn are divided into corporate and non-corporate business. Most property investment is organized as partnerships to take advantage of special tax breaks, so most rental revenue accrues to non-corporate real estate. And so closely intertwined are the real estate and financial sectors that for many years the NIPA were unable to separate their earnings.
   Owners pay some of these earnings in taxes, but pass on most to their bankers. The relevant cash-flow concept is ebitda: earnings before interest, taxes, depreciation and amortization. This can be compiled by adding real estate earnings (non-corporate and corporate, Tables 6.12 and 6.17), interest (Table 6.15) taxes paid at the state and local level (Table 3.3) plus federal taxes, capped by the most remarkable category in which ebitda is buried: depreciation (Tables 6.13 and 6.22 respectively for non-corporate and corporate real estate depreciation).

Chart 5: Real estate ebitda as a percentage of national income, 1930-2007
Gross Real Estate Income (ebitda)
as Percent of National Income

   Real estate ebitda (including the rental value of owner-occupied homes) topped 60 percent of national income when the U.S. economy entered the Great Depression in the 1930s. This ratio fell by half by the time World War II ended, to just 28 percent, reflecting the shrinkage in personal income available after defraying other living costs.
   Homeowners’ “rental equivalent” and commercial cash flow rose steadily from 1945 until 1960 as housing became more in demand. The wealthier the postwar economy grew, the more income was available to spend on homes and office space, whose location traditionally has been a major factor in defining social status. For the next twenty years, however, the rest of the economy grew more rapidly than real estate, whose cash flow fell back under 25 percent of national income through the mid-1980s. But the 1981 tax subsidy was a watershed that reversed matters. Real estate ebitda accelerated sharply after about 1985, recovering to nearly a third of national income by 2000.

Chart 6: Composition of real estate ebitda, 1930-2007
Real Estate % Composition

   As noted above, classical writers expected land prices to rise as population increased and economies grew more prosperous and urbanized. The intention was to tax real estate’s rising rental value, but two tax breaks have prevented this from happening. First is the tax deductibility of interest charges, which have absorbed most real estate cash flow since 1945. Nobody anticipated that so much interest would be paid out as to leave scarcely any income to be reported to the tax authorities. A second tax pretense [pretence] permits landlords to over-depreciate buildings as if they are losing book value even while their market price is rising. The result is that despite the real estate boom, property pays an ever-shrinking share of local and federal taxes.

Shifting state and local taxes off property onto consumers
   The well-known phrase of real estate agents to explain pricing – location, location and location – refers mainly to the proximity of transportation and good schools. The United States historically has financed schools, roads and public transport, sewer and water systems by taxing property. Localities could recapture the cost of this infrastructure spending by taxing the market value it adds to real estate sites. Instead, they tax general sales and incomes, so that property owners enjoy rising prices substantially in excess of what they pay in taxes. In fact, rising land prices much more than cover the taxes that are owed, providing the economy’s largest free lunch.

Chart 7: Annual rise in land prices, compared to property taxes
Rising Land Value Pays the Property Taxes Four-fold These Days

   Prior to the 1930s property taxes accounted for about two-thirds of state and local government receipts. But the Great Depression [1929-40] obliged localities to look to sales taxes as property values shrank – and to income taxes in recent decades. Despite the postwar rise in property prices, states and localities have shifted taxes off property owners onto wage earners and consumers almost steadily, so that property taxes now make up only about 20 percent of state and local revenues (Chart 8). This is less than a third of their proportion ninety years ago.
   Real estate downturns prompt property owners to campaign for their taxes to be reduced to save them from defaulting on their mortgages. At such points the tradeoff between taxes and debt service becomes quite clear. Today’s “negative equity” squeeze on mortgage debtors no doubt will increase political pressure for further tax shifts off property, avidly supported by bank lobbyists. The rhetoric is anti-government, but it mainly benefits bankers and large commercial owners. There is little discussion of alternatives such as taxing owner-occupied homes at a lower rate than absenteeowned properties, or restoring the state and local property tax base.
   The national tax shift off real estate has been even more regressive than the local tax shift. Finance and real estate have obtained such enormous “small print” tax breaks that only a modest proportion of their gains – which represents most of the economy’s wealth – is counted as taxable income. Lobbyists have persuaded lawmakers to define taxable income in ways that leave property owners with no earnings to declare after deducting interest and a basically fictitious bookkeeping charge for depreciation. The tax laws promote a Bubble Economy by making it most economic for investors to put as little of their own money down as possible, using debt to a maximum degree

Chart 8: Property taxes, as a percent of overall state and local revenues, 1930-2007.
State & Local Gov't Receipts
% Composition

   This fiscal favoritism for property is a major factor polarizing wealth ownership in the United States. The effect is to wage a war on the middle class, despite the political values and seeming self-interest of most Americans in a more progressive tax system. The tax code also encourages investors to sell their property every few years, after depreciating their buildings so that new buyers can start depreciating them all over again. Landlords are allowed to pretend that their property is losing money as buildings are “used up.”
Over-depreciation of buildings
   It took until the mid-19th century for economists to recognize depreciation as an element of value. Surprising as it may seem, it was Marx who first established it as a necessary charge in pricing commodities. In his critique of the French Physiocrats, he pointed out that when Francois Quesnay produced his national income account for France, the Tableau Économique, in 1759, he overlooked the need to replenish seed, inventory and capital stock. 4 In addition to covering their basic expenses, buying tools and raw materials and paying rent and taxes, cultivators need to set aside seed grain plant the next season’s crop. This seed is not available to be sold.
   Just as bondholders get paid back their principal as well as interest, investors are permitted to recoup their original capital outlay without it being taxed as income. The recoupment period is spread over the expected lifetime of machinery, patent rights or other assets. Failure to acknowledge the need for this replacement out of sales revenue would give an overly optimistic picture of how well the economy is operating. Not to renew seed and capital investment would result in asset stripping – paying out revenue without maintaining a viable capital stock.
   Economists recognize that depreciation results as much from technological obsolescence as from physical wearing out. Technology is continually improving, raising productivity and cutting costs. Rivals’ innovation forces factories to modernize or be priced out of the market, sometimes obliging machinery to be sold as scrap metal before it actually wears out. 5 But most depreciation statistically occurs where one might least expect it – in real estate.
   This seems strange, because landlords rarely let their buildings wear out. They typically spend 5 to 10 percent of their rental income on maintenance and repairs, and periodically replace their plumbing and heating systems, electric wiring and windows. Buildings constructed prior to World War II – already a few lifetimes in the Internal Revenue Service’s depreciation schedule – sell at a premium because they tend to occupy prime locations and are better built than their modern counterparts.
4. The Wall Street analyst Terence McCarthy observed that Marx’s analysis of the Economic Theory of Depreciation was so complete that, “if Capital has been called the bible of the working class, the History {he is referring to Theories of Surplus Value} might well be called the bible of the Society of Cost Accountants. … Over the whole society, failure to provide adequate depreciation reserves is, Marx implies, to negate economic progress and to begin consumption of that portion of the value of the product which Marx believes belongs neither to the laborers in industry, nor to their employers, but to the economy itself, as something which must be ‘restored’ to it if the economic process is to continue.” Marx, A History of Economic Doctrines (New York 1952:xv). This was the first English language translation of Marx’s Theories of Surplus Value.
5. I deal with this problem in “Obsolescent Factors in the International Economy,” Review of Social Economics, March 1972.

   Contractors have cut construction standards each decade, replacing 4” by 4” [4 inch by 4 in., ~ 10 centimetres x 10cm] beams and copper plumbing with cheaper materials such as 2-by-4s and plastic, and making walls of aluminum siding tacked onto soft insulation.
   The fact that most buildings are kept in good repair has led many countries not to permit landlords to depreciate them. It would be logical for landlords to depreciate their buildings only if they “bled” them by letting them run down. This is against the law for residential buildings in many cities, and would violate many commercial leases as well. But this has not prevented lobbyists in the United States from turning the depreciation allowance into an accounting stratagem to shelter rental income from taxation. Most properties are sold again and again, and the new landlord can start depreciating buildings anew with each sale – at the higher sales price. Instead of depreciating in the way that industrial capital does, real estate accrues capital gains as land prices tend to rise far in excess of the rate at which buildings “wear out.”

Chart 9: land-price gains compared to depreciation write-offs
Land Price Gains More Than Offset Depreciation Write-offs

   Land is not depreciable. Being supplied by nature, it has no cost of production. It is not used up in production, nor does it become technologically obsolete. Yet most property assessors pro-rate each sales price so that the value of buildings appears to rise proportionally to the overall gain. After they have been depreciated once, buildings can be resold and depreciation write-offs can start all over again, without limit – at so high a rate as to offset a large portion of the new landlord’s erstwhile taxable income.
   This poses a logical problem: How can buildings gain in assessed valuation if they are supposed to be depreciating? Indeed, how can the economy’s most sustained capital gain – that of real estate – reasonably be depicted as operating at a loss for years on end?
   The explanation is to be found in the ability of lobbyists to find lawmakers willing to distort the tax code’s “small print” in a way that makes owning real estate much like owning an oil well in the heady days of the oil-depletion allowance. No profit appears in this “Hollywood accounting.”
   From the 1954 tax act through its sequels in 1972, 1979 and the Economic Recovery Tax Act of 1981, the depreciation treatment became increasingly generous to real estate investors. The 1981 tax code assumed a short 15-year lifetime for buildings – and let property owners write off the assessed value of their buildings at twice this rate by using a convoluted “double declining balance” method. Owners could deduct twice the permitted 1/15th of the purchase price of a building in the first year (that is, 14 percent as a “non-cash” expense), as if it would last just 7½ years. The accounting schedule stretched out the remaining depreciation period by one year in each successive year – to 16 years in year two, 17 years in year three, and so forth. This meant that in the second year the owner could write off twice 1/16th (or another 12½ percent) on the remaining balance, and recover 55 percent of the building’s valuation in just five years.
   The 1986 tax reform stretched out the depreciation rate on residential buildings to 27½ years (and nonresidential buildings to 31½ years), but grandfathered in new buildings if they had obtained a certificate of occupancy for rental. The resulting depreciation write-offs for the real estate sector as a whole were large enough to leave no net taxable income to declare during the 1989-92 downturn. This pretense [pretence] enables investors to keep on earning rental income free of taxation, as if nothing “really” is being earned. Economic fiction becomes a fiscal reality, even to the point of being confirmed by seemingly empirical national accounting data.
   When one finds a statistical distortion at work, a special interest is almost sure to be involved. Misrepresentation and a false empiricism becomes a highly professionalized part of the economics of deception. The result is junk statistics. Replacement-cost accounting assumes a higher value for buildings, and hence a higher write-off each time a new buyer plays the game. But unlike investment in machinery, property tends to rise in price, thanks to the land’s rising site value. The deception that buildings are depreciating results in a fictitiously high ratio of ostensible building valuation to land. Precisely because the land site ostensibly cannot be depreciated, the tax privilege of depreciating buildings provides a motive for maximizing their valuation.
   Despite the reported net $5.1 billion pretax loss, $5.9 billion after-tax loss and $1.2 billion negative cash flow in 1990, real estate corporations paid $3.9 billion in dividends and were the largest source of interest for banks, maintaining the almost steady rise during the postwar period. Yet the NIPA show it often not to be earning any income and paying almost no income tax.
   The effect is to encourage commercial property to change ownership every few years, keeping it in perpetual motion to minimize its income-tax liability. Owners typically sell property when a building has been largely depreciated, and the new landlord can start depreciating it anew. In this way a building that already has been depreciated by its former owner achieves a new life. Like cats, a building seemingly has nine lives and can be written off again and again, turning real estate and its depreciation allowance into the economy’s largest tax shelter. This explains why a sector that seems chronically to be losing money enjoys soaring investment and dividend payouts. While real estate investors pretend that their property is losing value as their buildings wear out, the site’s locational value rises to more than compensate.
   In many years (especially 1981-95 for corporate real estate, and 1985-90 for real estate partnerships) the depreciation write-off was so large as to produce fictitious accounting losses for tax purposes, freeing commercial real estate from taxation. By buying real estate, investors acquire so large a tax deduction that they often have been able to use it as a charge against other sources of income. From 1981 through 1995 real estate investment trusts (REITs) and other corporate real estate reported net tax write-offs despite their rising cash flow and dividend payouts.

Chart 10: Non-Corporate Real Estate Cash Flow
Non-Corporate Real Estate Cash Flow

   Most commercial investment is organized as partnerships to obtain the legal and financial benefits of incorporation while taking “book losses” as credits against the personal income of property investors. Like corporate real estate, these partnerships enjoyed freedom from income taxation during the second half of the 1980s, although the explosive take-off in rents rendered more income taxable over the two decades stretching from the mid-1980s through 2005 (Chart 11). Property prices soared as buyers were able to earn income in excess of carrying charges and come out with a capital gain – and a tax write-off to boot.

Chart 11: Corporate Real Estate Cash Flow
Corporate Real Estate Cash Flow

   Homeowners are not able to make this depreciation pretense, only absentee owners. But even without being able to take a depreciation write-off against their wages and salaries, they have ridden the wave of asset-price inflation to build up their net worth. Applauded as ushering in an era of postindustrial prosperity, tax-subsidized debt pyramiding became a new mode of wealth creation – a permanent capital-gains economy.
How the Fed’s appraisal philosophy attributes land values to buildings
   Assessors in most U.S. cities estimate land at 40 to 60 percent of real estate value, tending toward the higher ratio. Federal Reserve statistics also show that land represents the largest element of real estate’s market price, despite the fact that their methodology substantially undervalues land relative to buildings. Fed statisticians treat land as a residual left over after valuing buildings at their reproduction cost, including capital gains that reflecting rising construction costs.
   The problem with this land-residual methodology is that it leaves an unrealistically low residual for land – so low that earlier Federal Reserve estimates produced a negative $4 billion number for corporately owned land in 1994. (The Fed has since reorganized its categories to moderate this irrationally low calculation, but continues to defend its methodology. 6)
6 See Kennikal, [the rest of the reference is missing.]

Chart 12: Land residual cost of structures. (Source: FRB, Flow of Funds)
Land Residual of Cost of Structures - FRB

Corporate sector; H = Household Sector; NC = Non-corp.

   Treating land sites as a residual (after over-estimating the value of buildings at replacement cost) makes land prices appear more volatile than overall real estate. The seeming fallback after 1990 in the land’s residual value as a proportion of national income (Chart 13) is largely a statistical illusion as the pace of construction-price inflation increased the Federal Reserve’s calculation for the replacement cost of buildings, leaving less residual for land, where the real market value lies. The steep rise in land valuation from 1995 to 2007 reflects the reduction of interest rates engineered by the Federal Reserve flooding the economy with liquidity to promote “wealth creation.”
   The inflation of land prices has been the driving force in real estate’s dominant role in the U.S. economy. The Fed helped inflate real estate prices by lowering interest rates (enabling bankers to capitalize rental income at a higher multiple) and flooding the banking system with enough credit to enable prospective buyers to bid up prices. Fed Chairman Greenspan lauded the “wealth effect” for raising consumption levels on the way up, especially as homeowners took out home equity loans to sustain their living standards, while refraining from regulating lending to keep it honest.
   It should be clear from the foregoing analysis that real estate is doing much better than appears at first statistical glance. Buildings are not really deteriorating, thanks to their ongoing repair and maintenance. Although the NIPA depict real estate as operating at a loss, investors actually are getting rich through asset-price inflation creating capital gains.

Chart 13: Land-Residual Valuation, as Percentage of National Income
Land Value as % of NI

   So this poses an important policy question: Is it socially useful to increase real estate prices by providing tax breaks for running up mortgage debt and for absentee building owners? This might be argued if the reason why property owners are going deeper and deeper into debt is that rising construction costs increase the cost of buildings and other capital improvements. But if higher prices (and hence, larger mortgage loans necessary to buy real estate) simply reflect higher prices for land sites that have no cost of production, then to actively support property prices merely makes new buyers pay more – and specifically, pay more debt service to mortgage bankers. Higher land prices simply increase the cost of providing homes, office buildings and industrial plant. Taxing the land’s rising rental value would not reduce its supply (nor would taxing the rising reproduction cost of buildings already in place lead to their removal from the market) but taxing the construction of new buildings would do so.
   The more real estate growth consists of investing in capital improvements, the more it can be argued that rising property prices elicit more investment in the form of construction activity. But this argument cannot be made if what is being bid up is simply the land’s access price. Higher site prices do not induce more land to be supplied, because it is provided freely by nature. The only way to increase site values is to provide more transportation access. It has long been argued that the public sector should recover the cost of this infrastructure by taxing the increase in rental and site values along the route.

Chart 14: Land-price gains compared to mortgage interest.
Over Time, Interest is Paid Out of Land Price Gains

Tax favoritism for capital gains
   When owners sell their real estate, they are supposed to report the recovery of past depreciation write-offs as a capital gain – the sales price minus the depreciated book value. But capital gains are taxed at a much lower rate than “earned” income – if at all! The tax code permits investors to avoid paying a tax at the point of sale if they build up of wealth by reinvesting their sales proceeds to buy new property of equal or greater cost.
   The hypocrisy behind this tax logic is revealed by the Federal Reserve’s own statistical treatment that estimates building values as rising. Using a construction price index that assigns an annual cost increase to buildings, the Fed subtracts their hypothetical replacement cost from its overall property valuation based on Census Department figures. The residual is assigned to the land. The faster building costs rise, the slower land sites seem to appreciate – sometimes not much at all.
   Owners argue that they deserve to have their investment “keep up with inflation” – the rising cost of a new building to replace the one they are selling (after having sheltered its income by depreciating it). The Fed’s logic serves to justify this claim – and hence, the land-price gains that John Stuart Mill described as a passive, unearned increment that should be taxed away. But if the driving force behind real estate prices is really that buildings are growing in value, why are landlords allowed to write off their cost as if their investment is being eaten away?
   No other part of the economy is inflation-indexed. Wage earners do not receive higher paychecks to reflect inflation. Landlords can avoid paying an income tax on their cash flow while industrial companies and their employees are obliged to save out of the income left after paying taxes.
   Real estate investors thus are given a tax break based on a concept of economic fairness that they alone are permitted to enjoy in claiming merely to be “breaking even” with inflation as construction costs rise – while at the same time pretending that depreciation is consuming their capital. This helps explain why most people no longer try to save by putting earnings in the bank. The way to build up wealth has been buy homes and other assets whose price is expected to rise.

Chart 15: Comparison of capital-gains tax rate with normal income-tax rates, 1913-present
                       	Maximum Capital Gains
                             Tax Rate (%)                Top Marginal Income Tax Rate
                       Individuals     Corporations       Individuals      Corporations
1942-43                25%             25%                88%              40%
1944-45                25              25                 94               40
1946-50                25              25                 91               38
1951                   25              25                 87.2             50.8
1952-53                26              26                 88               52
1954                   26              26                 87               52
1955-63                25              25                 87               52
1964                   25              25                 77               50
1965-67                25              25                 70               48
1968-69                25              27.5               70               48
1970                   29.5            28                 70               48
1971                   32.5            30                 70               48
1972-78 (Oct)          35              30                 70               48
1978 (Nov)-June '81    28              28                 70               46
June '81-86            20              28                 50               46
1987                   28              34                 38.5             40
1988-89                33              34                 33               34
1990-92                28              34                 31               34
1993-95                28              35                 39.6             35
Source: Joint Committee on Taxation (1995), “Tax Treatment of Capital Gains and Losses,” JCS- 4-95, February 13, 1995, and Office of the Secretary of the Treasury, Office of Tax Analysis (1985), “Report to Congress on the Capital Gains Tax Reductions of 1978.”

   Most families – and businesses – now seek to build up their net worth mainly via capital gains. Much net personal saving takes the form of paying down debts taken on to buy property. Missing the logic that guides Bubble Economy investors and homeowners, the NIPA do not take account of soaring land prices or other asset-price gains. Like the tax filings on which they are based, these national accounts look much more pessimistic than how investors view matters. They report merely that real estate often goes many years on end without earning an income.
   Investors are just as happy to see these gains left out of the public accounts, because there is less pressure to tax them, in contrast to the late 19th century when the classical reformers focused attention on them. The less political pressure is brought to bear to tax or even take note of capital gains, the larger loans borrowers will take on, making mortgage lenders the ultimate beneficiaries of the fiscal giveaway.
Paying out real estate rental income as interest
   By far the most interest in the U.S. economy is paid on mortgage debt (Charts 16, 17 and 18). Real estate is the largest asset, and its rising cost obliges new buyers turn over most of the property’s rental cash flow or value to their mortgage lender. Indeed, as long as the Bubble Economy is creating land-price (“capital”) gains, real estate owners are quite willing to pay out current income to their bankers as debt service. The arrangement works as long as property prices rise by enough to cover the debts and their interest payments. But this dynamic cannot last, because adding the interest onto the debt balance year after year entails more and more charges. That is the “magic of compound interest,” after all. On an economy-wide level it can never work for long periods of time.

Chart 16: Interest in the U.S. Economy
Interest in the U.S. Economy

   As interest rates rose after 1945 to their high of about 15% in 1980, the volume of interest payments increased from just 1% of national income to 12% in the mid-1980s. As mortgage interest rates receded, the ratio of interest payments to national income fell below 8% in 2001, but then resumed its upward trend as new debt markets were developed, headed by subprime lending and the derivatives trade. Falling interest rates since 2000 offset the rising debt burden as the Federal Reserve flooded the U.S. economy with credit, but carrying charges now threaten to skyrocket if interest rates rise back to “normal” levels.

Chart 17: Interest Payments as a Percentage of U.S. National Income
Interest Payments
as % of NI

   The composition of interest on the economy-wide level has remained basically stable. By far most interest is paid on mortgage debt, whose growth is subsidized by making interest payments tax deductible. The higher the degree of subsidy, the more debt can be afforded. And conversely, ending tax deductibility would reduce the amount of debt that a homebuyer can afford to take on. This would lower the equilibrium price that could be afforded. What seems at first glance to be an economic benefit to homebuyers – making their interest payments tax deductible – thus turns out to be largely illusory. The subsidy ends up being passed on to the banks. Giving homeowners and property investors a tax subsidy, while maintaining the rule of thumb that mortgage payments should equal 25 percent or some such ratio of personal income, merely replaces the cost of tax payment with an interest payment to bankers.

Chart 18: U.S. Interest: Percentage Composition
U.S. Interest
% Composition

   Adam Smith suggested as a rule of thumb that interest rates tend to be about half the profit rate. For a commercial or industrial enterprise financed entirely on credit, interest would absorb half the gross profit. But since the 1980s the ratio has risen as debt leveraging has spread throughout the economy. “Shareholder activists” (the euphemistic neologism for corporate raiders) are financializing industry along much the same lines as real estate with its high debt/equity leveraging turning profits and cash flow into interest via leveraged buyouts financed with highinterest “junk” bonds.
   For commercial investors the choice of whether to buy a rent-yielding property on credit or to use one’s own money is a business decision shaped by prospects for after-tax returns. Debt financing is a business choice by investors to buy property with loans instead of using their own money, not a necessary operating cost. Investors pay interest charges out of their earnings. The government alters their investment equation by making such payments tax-deductible as if they were a necessary cost of doing business. The effect is that interest payments expand to absorb the revenue hitherto paid out as taxes, absorbing whatever income is un-taxed. That is what today’s business school graduates are taught to do in designing debt-financed takeovers and leveraged buy-outs. Making interest tax-deductible encourages debt pyramiding. This in turn leads to political pressure for tax cuts when investors suffer the inevitable debt squeeze as the economy shrinks in response to debt deflation.
From asset-price inflation to debt peonage
   The indebtedness and financialization of real estate is a distinctly 20th-century phenomenon, going hand in hand with the democratization of property ownership. Long after the end of feudalism, landlords remained the wealthiest and most liquid class. But today, banks and other mortgage holders have become the major parties in U.S. real estate. Overall U.S. homeowners’ equity has fallen from 70 to under 50 percent of property values as the United States shifts from an ownership to a debtor economy.

Chart 19: Homeowners’ equity as percentage of household real estate. (Source: FRB)
Home owners equity as percentage of houshold real estate

   In contrast to industrial capitalism, financialization squeezes out an economic surplus not by employing labor to produce commodities for sale at a markup but by getting labor and industry into debt. It extracts a financial surplus in the form of interest, not profits on production and sales. And finance capitalism uses this surplus to extend yet new interest-bearing loans, not to invest in tangible capital formation. When income is insufficient to pay bondholders, financial managers extract revenue by carving up and selling off assets. Such zero-sum (or even negative-sum) transfer payments do not promote growth but polarize the distribution of wealth in ways that dry up the domestic market for consumer goods and investment goods.
   Financialization also acquires wealth from governments by appropriating the public domain or monopoly rights in settlement of debt. In the United States the railroad barons became land barons with a stroke of the privatization pen – along with the emerging mining and timber oligarchy. By this time real estate, mining and forestry were becoming part of the FIRE sector, dominated by finance. In America this meant Wall Street; in England, the City of London.
   It often is overlooked that inequality of wealth far exceeds that of income. This is because the wealthiest 10 percent of families prefer to take their returns not as income but in the form of the much less highly taxed capital gains. And while the population’s bottom 90 percent hope to catch up by going into debt to buy homes and other property, the insatiable growth in debt needed to keep a real estate and finance bubble expanding imposes financial charges that polarize wealth ownership. These debt charges grow so heavy that debtors are able to pay only by borrowing the interest. They do this increasingly by pledging real estate or other assets whose prices are being inflated by a combination of central bank policy and Treasury tax concessions. The problem is that in addition to going further into debt, the policy of un-taxing property and financial wealth forces labor and tangible industrial capital to pick up the fiscal slack.
   Here is how an economy’s distribution of income would look if wealth were equally distributed. Each quintile (that is, each 20 percent of the population) would receive an equal portion.

[Pie Chart]
Income Categories

[Pie Chart]
[In 1979, the top 1% of U.S. people received 37.80% of national income]

[Pie Chart]
[By 2003, the top 1% received 57.50% of national income]
   This is just the opposite of what the classical economists recommended. In fact, nobody a century ago expected land rent to be paid out in the form of mortgage interest to such a high degree – or that heavily mortgaged real estate would become the backing for the banking system. Banks were supposed to finance new industrial capital formation, not create credit merely to bid up prices for land sites supplied by nature, rent-extracting monopoly and property rights and to buy companies already in place.
   Debt expansion for such purposes seems self-justifying as long as asset prices are rising steadily. This price run-up is euphemized as “wealth creation” by focusing on the inflation of financial and property prices, even as disposable personal income and living and working conditions are eroded. The problem is that rising price/rent and price/earnings ratios for debt-financed properties, stocks and bonds oblige wage earners to go deeper and deeper into debt, devoting more and more years of their working life to pay for housing and to buy income-yielding stocks and bonds for their retirement. Homeowners thus do not gain by this higher market “equilibrium” price for housing. Higher prices simply mean more debt overhead.
   A simple example should make the problem clear. Suppose Mary Smith owns a $100,000 home free and clear of any debt. Suppose Jane Doe later buys the same exact home, but the property market now prices it at $250,000 because a bubble has arisen to “progress” the market. To buy it, Jane must take out a $100,000 mortgage.
   Who is in a better financial position? On paper, Jane has a $50,000 equity advantage ($150,000, as compared to Mary’s $100,000). But she only owns 60% of the home’s value, and must pay her bank $600 a month – payments that Mary does not have to make.
   Prior to the real estate bubble Mary’s house has $100,000 equity with low taxes and no interest charges. By the time Jane buys the house, she must go into debt to outbid other potential buyers. The land area hasn’t grown (nature is not making any more), and buildings slowly depreciate, but the debt overhead rises in keeping with the supply of credit, leaving less income available for consumption or saving.
   For a while, mortgage credit inflates property prices. But is such “paper wealth” worth the carrying charge? Families a century ago dreamed of owning their home free and clear. They saved for the future, and stayed out of debt so as to avoid having to worry about losing the homestead. But these days the only way for many families to get a home is to borrow enough to pay prices set by buyers who are willing to pay the property’s entire rental value to the bank for a loan to buy it in the hope of selling out later for a capital gain. Matters are aggravated if Jane tries to make ends meet by borrowing against the higher market price of her home. If real estate prices fall back, her debts and their carrying charges will remain in place, threatening to leave her with negative equity.
   The problem is short-term thinking. Investors are tempted to believe they are better off as long as asset prices rise faster than debt, improving their balance sheet. But by absorbing rents, business profits and disposable personal income, the debt overhead entails future clean-up costs. The credit that bid up prices to “create wealth” during the Bubble Economy’s run-up leaves “debt pollution” in its wake after asset prices collapse. Living standards, business investment and new construction must be cut back to pay the bill for pumping up asset prices that have receded.
   Real estate bubbles are a symptom of debt creation, shaped and sponsored by the governments cutting property taxes and thus leaving more revenue to be pledged to bankers as debt service. As has been the case throughout history, creditors end up with the surplus. In antiquity, debt bondage was a means of obtaining labor by turning debtors (or their wives, daughters or slave girls) into bondservants to “work off” their debts. Modern debt peonage obliges families to take on a lifetime of debt to gain access to housing, an education and health care. The class war takes on a decidedly financial dimension, as Alan Greenspan explained to Congress: Rising mortgage debt has made employees afraid to go on strike or even to complain about working conditions. Employees become more docile in a world where they are only one paycheck or so away from homelessness or, what threatens to become almost the same thing, missing a mortgage payment. This is the point at which they find themselves hooked on debt dependency.
   This logic provides a framework to distinguish wealth that stems from increasing production and consumption, from merely inflationary balance-sheet gains. Higher real estate and other asset prices provide no more economic benefit than do higher consumer prices. One party’s income or gain is another party’s expense.
   What has been lost along the way is the economy’s traditional set of proportions. From 1945 to 2000, for example, the value of U.S. real estate remained a fairly stable (about 250%) proportion of national income. The bubble of the 1990s inflated stock market prices, but real estate resumed its dominant role as the Federal Reserve flooded financial markets with credit after the market downturn of 2000. Fueled by rising debt ratios, real estate prices soared to the unprecedented levels of 325% of national income.
   Debt pyramiding was encouraged by looser terms for bank lending – low, zero or even negative down payments, while unprecedented fraud by mortgage brokers and local banks exaggerated the income and hence debt-carrying power of homebuyers, making soaring mortgage loans appear to be affordable. However, adjustable-rate mortgages (ARMs) guaranteed that loans affordable at low “teaser” rates of interest would become unaffordable when their carrying charges re-set at higher rates, forcing homebuyers into the “Ponzi” stage of having to borrow the interest. Defaults that initially were thought to be a known risk turned out to be an inevitability.

Chart 22: Market Value of U.S. Real Estate as Percent of National Income
Real Estate as % of NI

   The government became the property bubble’s ultimate enabler. Ostensibly created simply to give liquidity to mortgages (which traditionally were held by the banks that originated them), the semi-public Federal Home Administration (FHA), Federal National Mortgage Association (FNMA) and Freddie Mac became the largest buyers, packagers and ultimate guarantors of U.S. mortgages, buying them up as fast as banks and mortgage brokers could issue them – some two-thirds of all U.S. home mortgages. These government-sponsored agencies then sold bonds backed by these mortgage holdings to institutional buyers who trusted that the government would stand behind them regardless of how poor the underlying quality of mortgages were. This was analogous to the Federal S&L Insurance Corp. (FSLIC) bailing out risk-taking institutional depositors in S&Ls two decades earlier, in the 1980s. FNMA and Freddie Mac bonds amounted to $5 trillion, as much as the entire publicly held U.S. Government debt.
   Accounting fraud by FNMA managers helped create a false sense of confidence by buyers unfamiliar with how crooked the U.S. financial sector was becoming as deregulation let banks run wild. When the collateral value backing their mortgage-backed securities plunged, the FHA, FNMA and Freddie Mac duly reported losses and called for public bailouts – of themselves and their institutional clients, not for defaulting homeowners. But by July 2008 it was reported that under “fair value” accounting rules the mortgages failed to cover obligations by over $5 billion, share prices for the two semi-public agencies had fallen by 90 percent from 2007 to 2008. A Wall Street Journal editorial commented that: “The double irony amid the current credit crunch is that our politicians have been promoting Fannie and Freddie as mortgage saviors even as their risk of insolvency has grown. Chuck Schumer, Chris Dodd and many others have encouraged the duo to take on even greater mortgage risk as the housing slump has unfolded. They’re the arsonists posing as firemen while putting more dry tinder around the blaze.” 7 Rather than letting bad debts go under, Congress set about trying to re-inflate the home mortgage market so as to enable homeowners suffering negative equity to raise the money to pay their debts – debts owed almost entirely to large institutional investors and ultimately to the population’s wealthiest 10%.

Chart 23: FNMA and Freddie Mac have become the largest Mortgage Holders
Mortage Assets by Holder

Real estate in a debt-leveraged economy
   The fact that land-price gains have long overshadowed real estate cash flow (ebitda) has made property investors willing to pledge their rental income to bankers as interest. Rather than seeking current income (or for homeowners, rental value) the aim is to ride the wave of asset-price inflation.
7. James Politi and Ben White, “Freddie and Fannie in turmoil,” Financial Times, July 11, 2008, and “The Price of Fannie Mae,” Wall Street Journal editorial, July 10, 2008.

   So the fact that overall real estate net cash flow (ebitda) is about a third of national income, this was by no means the whole story. In terms of total returns – cash flow plus asset-price gains – real estate generated an amount that rose as high as half of reported U.S. national income in 2005. That year’s $2.5 trillion in higher land prices amounted to about 20 percent of reported national income, while real estate cash flow (ebitda) added even more ($3 trillion). And this still leaves another trillion dollars or so for the Fed’s calculation of capital gains for buildings’ “replacement cost” which actually should be treated as site value.

Chart 24: Adding land-price gains to National Income provides a measure of Total Return
Total Returns to Real Estate
as Percent of National Income

Conclusion: The larger the tax giveaway, the more the mortgage debt grows
   Tax favoritism for real estate, corporate raiders and ultimately for bankers has freed income to be pledged to carry more and more debt, which has been used to fuel asset-price inflation that raises the price of home ownership, corporate stocks and bonds – but not to increase production and output. The right to over-depreciate property and deduct interest paid on debt leveraging “frees” income to be pledged for larger bank loans. The rental income hitherto paid as taxes is now paid as interest on credit extended to new buyers. Families get off the rent treadmill only to get onto the debt treadmill.
   Mortgage lenders consider this to be a “virtuous circle.” But shifting taxes off property and finance is more a distortion than a virtue, unless debt leveraging is deemed virtuous. Shaping the marketplace to favor finance and property over industry and labor does not create a “free market.” It favors the debt-leveraged buying and selling of real estate, stocks and bonds, distorting markets in ways that de-industrialize the economy.
   This is the tragedy of our economy today. Credit creation, saving and investment are not being mobilized to increase new direct investment or raise living standards, but to bid up prices for real estate and other assets already in place and for financial securities (stocks and bonds) already issued. This loads down the economy with debt without putting in place the means to pay it off, except by further and even more rapid asset-price inflation.
   This is largely the result of relinquishing planning and the structuring of markets to large banks and other financial institutions, political lobbyists have rewritten most of today’s tax laws and sponsored general public deregulation of the checks and balances that were being put in place by the late 19th century. At that time, just over a hundred years ago, it seemed that wealth – and banking – were being industrialized, while landed wealth and monopolies would become more socialized and their rents fully taxed. Instead of real estate prices rising, the rental “free lunch” would provide the basic source of public finance. Technology and productivity would increase industrial capital formation and raise labor’s living standards. These policies would free markets from rent extraction and also from taxes as the fiscal burden was shifted back onto property.
   But this is not what has occurred. The financial system has used its power to extract fiscal favors for real estate and to press for deregulation of monopolies as the major source of its interest and collateral for its loans.
   The classical policy of basing tax policy on the land’s rising rental value was intended to have two positive effects. First, it would free labor and industry from the tax burden. If the revenue currently used for interest and depreciation were paid property taxes, this would free an equivalent sum from having to be raised in the form of income and sales taxes. This was the classical idea of free markets. But as matters stand today, the tax subsidy for real estate and finance leaves more net rental income to be capitalized into bank loans. This is a travesty of the “free markets” that lobbyists for the banks and the wealthy in general claim to advocate.
   Paying this rental value to the government would make it unavailable to pledge to mortgage lenders as interest and capitalized into larger bank loans to bid up real estate prices. These prices would be free to decline, holding down the major dynamic increasing the economy’s debt overhead and cost of doing business.
   Financial and real estate lobbyists encourage the popular misconception that higher property taxes squeeze homeowners and wage earners. The reality is that taxing the land’s rental value would reduce interest charges by an amount equal to the tax. Real estate prices would become more affordable as the interest now paid to banks to support a high debt overhead would go to lowering the income- and sales-tax burden. This would reduce the cost of production and living proportionally, by about 16 percent of national income. Reducing the economy’s tax and debt burden would make it more competitive internationally.
   Prices and rents for housing and office space are set by the market place. Interest and taxes are paid out of this rental value. This means that homeowners and renters would pay the same amount as they now do, but the public sector would recapture the expense of building transportation and other basic infrastructure out of the higher rental value this spending creates. The tax system would be based on user fees for property, falling on owners in a way that collects the rising value of their property resulting from the rent of location, enhanced by public transportation and other infrastructure, and from the general level of prosperity, for which landlords are not responsible but merely are the passive beneficiaries under current practice.
   In sum, fiscal policy would aim at recapturing the land’s site value created by public infrastructure spending, schooling and the general level of prosperity. The economy’s debt pyramid would be much lower, as savings took the form of equity investment once again, rather than a minority position in a debt pyramiding operation. Slower growth of debt, housing and office prices, and lower taxes on income and sales would make the economy more competitive internationally. #

   [RECAPITULATION: Tax favoritism for real estate, corporate raiders and ultimately for bankers has freed income to be pledged to carry more and more debt, which has been used to fuel asset-price inflation that raises the price of home ownership, corporate stocks and bonds – but not to increase production and output. …
   The reality is that taxing the land’s rental value would reduce interest charges by an amount equal to the tax. …
   The economy’s debt pyramid would be much lower, as savings took the form of equity investment once again, rather than a minority position in a debt pyramiding operation. ENDS.]
   [THE MEANING of "ebitda" is "Earnings before interest, taxes, depreciation and amortization." ENDS.]
[To this webpage Sep 29, '09 (he will be speaking in Australia around October 2009); List as if July 15, 2008; July 2008]

• Andrews wanted Christian migrants.   

Andrews wanted Christian migrants

   The Weekend Australian, by Richard Kerbaj, pp 1 and 2, July 19-20, 2008
   AUSTRALIA – FORMER immigration minister Kevin Andrews instructed his department to lift the intake of Christian refugees from the Middle East in response to what he saw as a pro-Muslim bias created by corrupt local case officers.
   Mr Andrews was so concerned about the extent of corruption in Middle Eastern posts – despite the allegations being investigated and dismissed by his own department – that he wrote to then prime minister John Howard advocating a $200 million plan to replace local employees with Australian staff in 10 "sensitive" countries, including Jordan, Iran and Egypt.
   Opposition immigration spokesman Chris Ellison said yesterday this remained Coalition policy.
   "We do not want discrimination or bias occurring … and that's why I believe it is appropriate that our sensitive overseas posts, such as those in the Middle East, are staffed by Australians," Senator Ellison said.
  [Picture] Andrews  
   A Department of Immigration spokesman said there were no substantiated cases of anti-Christian discrimination in Australian embassies and no plans to replace "Islamic locally engaged staff" with Australian officials.
   An investigation by The Weekend Australian has discovered Mr Andrews was petitioned by the Australian Christian Lobby to address alleged religious discrimination against Iraqis.  Before losing office in the November 2007 election, he ordered the number of Christian Iraqi refugees to be increased by 1400 for 2007-08, almost doubling the previous year's Iraqi total of 1639.
   "Put it this way, it was made very clear to the immigration department that more Christian refugees were wanted," a Howard government source said.
   In his letter to Mr Howard in August last year, Mr Andrews, a devout Catholic, proposed significant changes to the refugee selection process.
   In the letter, seen by The Weekend Australian, Mr Andrews accused the case workers in Australian embassies of fraud and bribery when processing migration applications.  Such posts are predominantly staffed by local workers.
   He said this raised "considerable security risks".
   "The other significant reason for changing the staffing composition of overseas posts is to prevent discrimination at the 'front office' of the posts," Mr Andrews wrote.
   "Since becoming Minister, I have received a large number of representations from people alleging systematic and coordinated discrimination against particular persons based on race and religion at certain sensitive posts.  In particular, this allegedly involves the active blocking and impediment of the lodgement of applications at the front office.
   "At worst, potential applicants are simply being told not to lodge an application. The majority of such claims have been made in respect to posts in the Middle East and Central Asia.  For these reasons, I think it would be timely to revise the staffing arrangements for immigration posts that can be classified as 'sensitive' and to staff these posts exclusively with Australian departmental officers."
   Mr Andrews names 10 countries – Pakistan, India, United Arab Emirates, China, Iran, Lebanon, Jordan, Kenya, Russia and Egypt – in which the posts should be staffed exclusively with Australian departmental officers.
   The non-Muslim countries named by Mr Andrews are understood to be less riddled by religious discrimination and more so by corruption, a source told The Weekend Australian.
   "Conflicts of interest, regardless of whether they're religious-based or corruption-based, are one package," the source said.
   "And if you deal with it like that, that takes you beyond Muslim countries."
   It is understood that Mr Howard told Mr Andrews his proposal would be considered for the next budget if the Coalition were to be re-elected into power in November 2007.  The proposal was estimated to cost $204 million to implement.
   There is no provision within Australian immigration laws to select refugees on the basis of religion.  A former Howard government source said Mr Andrews wanted to save Christian Iraqis from persecution by Shia and Sunni Muslims throughout the Middle East.
   "With the intake from the Middle East the department was told that we want to focus on Iraqi Christians," the source said. "The department basically said they couldn't do that because that would be discriminating on race and religion."
   The official explanation given last August by Mr Andrews for boosting Iraqi refugees numbers was that the altered intake was in response to an international conference run by the United Nations High Commissioner for Refugees four months earlier seeking to help Iraqis forced out of their country.
   Mr Andrews strongly pursued Catholic causes throughout his parliamentary career.  He successfully campaigned to abolish the Northern Territory's euthanasia law in 1996 and voiced his opposition to therapeutic cloning and abortion drug RU486.
   In the lead-up to last year's election, he was accused of "dog whistle" politics after cutting back the African refugee intake from 50 per cent to 30 per cent of the total 13,000 places under the refugee program on the grounds they were not integrating well into Australian society.
   At the same time, Mr Andrews increased the refugee intake from Middle East and Asian countries to 70 per cent of the total quota.
   Australian Christian Lobby national chief of staff Lyle Shelton said his organisation was regularly in discussions with Mr Andrews about the religious discrimination against Christian Iraqi refugees.
   "We made representations to the previous minister about this," he said "We are concerned about persecution of minority groups regardless of their religion, but in the Iraqi situation they happen to be Christian."
   Gamil Helmy, a spokesman for the Australian Coptic Association, a Christian group, said religious discrimination against Iraqi refugees in Middle East-based immigration posts was forcing some families to relocate to other host countries to reapply for visas.  "It should be investigated," he said.
   Assyrian Federation of Australia co-ordinator Emmanuel Michael said he first raised the issue of religious discrimination against Iraqi refugees in the late 1990s with then immigration minister Philip Ruddock.
   He praised Mr Andrews's proposal for replacing local staff with Australians at some overseas immigration posts.
   "We should have our own Australian people and not locals from there so that they don't discriminate," he said. "This would help solve problems." #

   [RECAPITULATION: A Department of Immigration spokesman said there were no substantiated cases of anti-Christian discrimination in Australian embassies. ENDS.]
   [COMMENT: Hello, hello, is anyone awake?  Does anyone in the Immigration Department or the major parties know that the Australian 10-year drought would indicate that no immigration would be the best policy?
   Secondly, it is politically incorrect to be loyal to one's own culture group.  Multiculturalism is the new god.  And being an RC is interpreted by the above article as being "a devout Catholic."  Someone who wants the right to have several wives to beat, or to burn widows on funeral pyres, and to attack people and holy places of other religions, would, presumably, be a better sort of minister, or would make an excellent refugee immigrant. ENDS.]
[July 19-20,2008]

• How rowdy pupils are forcing our new teachers to quit classrooms.   

How rowdy pupils are forcing our new teachers to quit classrooms

   The International Express (Britain), West Australian edition, p 18, July 22, 2008
   BRITAIN – VIOLENT and rowdy pupils are forcing one in five teachers to quit after less than a year, a major schools survey reveals.
   Disillusioned staff said they could not cope with badly-behaved youngsters and heavy workloads.
   They left the classroom within 12 months of getting their first job to take up posts offering better pay and less work.
   In all, some 40 per cent of new teachers were found to be not working in schools the following year.
   The General Teaching Council survey of 2,000 staff was revealed ahead of new Government proposals for tackling difficult pupils and aggressive parents.
   The council, which regulates the teaching profession, wants Ministers to persuade trained teachers not to leave rather than recruit new ones. Its chief executive Keith Bartley said: "I don't want anyone to leave because they are burnt out or demoralised.
   "What is important to us is that every teacher who leaves the profession feels positive about teaching and sees returning in the future as a possibility."
   Dr Pamela Robinson, a Buckingham University "senior education researcher, said pupil behaviour was driving out teachers at an unprecedented rate.
   She said: "Schools are merely reflecting what is going on in the streets outside."
   One ex-teacher, who became an air stewardess, claimed she found it easier "dealing with drunks" than schoolchildren.
   Brigit Stevens, 31, left her job in Camden, North London, after three years. She said: "I wasn't used to 11-year-olds still throwing tantrums. They could kill you with body language, they're so aggressive."
   Ms Stevens said teamwork was better on her airline than in the classroom. She said: "If you are unable to deal with a person because they are drunk or offensive, you've got a strong team to back you."
   The council commissioned the report five years ago and interviewees were tracked for several years after joining the profession.
   Only 60 per cent of the 34,499 teachers who qualified in 2006 were registered and working in a school the following year.
   Of those who left, 19 per cent blamed pupil behaviour and ill-discipline. Other disappointments included poor job prospects and the excessive workload.
   Officials believe the Government spends up to £68million each year training teachers who do not want to stay in the job.
   Schools Secretary Ed Balls is set to publish advice from former headmaster Sir Alan Steer on how to tackle the discipline problem.
   Schools Minister Jim Knight said there had never been a better time to become a teacher. He said: "Teaching is a challenging but deeply rewarding role, though we recognise that more needs to be done." #
[July 22, 2008]

• Time for a Genuine Migration Debate.   

  Time for a Genuine Migration Debate  

   SPA Newsletter No. 81 (Printed on 100% recycled paper), Official organ of Sustainable Population Australia Inc., , by John Sutton, (orig. June 11, 2008), p 4, August 2008
   AUSTRALIA – It is time for a serious and informed debate on immigration policy.
   Big business is successfully applying pressure for substantial increases in immigration (both for temporary and permanent migrants). At the same time, the Rudd Labor Government is about to commit to a temporary unskilled program for Pacific Islanders to work in seasonal agriculture. And business is already calling for it to be extended even before it is announced. Yet all of the focus is solely on economic considerations - particularly the much talked about (but rarely analysed) skills and labour shortages.
   The trouble is that we currently have a one dimensional neo-liberal discussion heavily influenced by economic rationalists and the corporate world. But there is much more to this policy area than simply the supply and demand for labour.
   Population policy has a direct bearing on many of our key social and environmental issues. The new government is grappling with the problem of climate change, carbon trading schemes and how we best limit CO2 emissions. We also have huge challenges in how we manage our water usage.
   At the same time, our cities are bursting at the seams. Urban congestion is a large and growing problem. There is a crisis in housing with the twin problems of fewer dwellings than we need and a major issue with housing affordability across the country. Social inclusion is also a key consideration. Our multicultural society is still experiencing some xenophobic fraying at the edges - and the lop-sided emphasis on skilled workers (frequently single males) at the expense of a strong family reunion compone"nt is not assisting with social outcomes. There are also other issues to consider in the immigration debate but everything is getting lost in the white noise from employer groups.
   The CFMEU is not anti immigration and never has been. Australia needs immigration. We favour permanent immigration over temporary work visas because it allows communities to grow with certainty and lessen rates of exploitation that you so often find around contingent workers. But we do believe that it is time for a proper discussion and sound policy outcomes.
   The Rudd Labor Government needs to broaden the scope of the discussion to take into account demographic changes, environmental factors, housing and social considerations. Naturally the broader economy must be considered but the Rudd Government should take the steering wheel off the big business lobby and ensure Australia's environment, community and workers' interests are all taken into account.
   In short a serious debate about Australia's population policy must be initiated by Rudd Labor now!
   CFMEU Website at #
   John Sutton is the National Secretary of the CFMEU, a union of construction and similar workers.
[August, 2008]

• Does Immigration aggravate labour shortages?   

  Does Immigration aggravate labour shortages?  

   SPA Newsletter No. 81, Official organ of Sustainable Population Australia Inc., , editor AT population DOT org DOT au , by Dr Paddy Weaver, pp 4-5, August 2008
   AUSTRALIA – The over-riding focus of the Rudd/Swan budget is the economy, maintaining the resources boom and satisfying the clamorous demands of business for increased access to labour sources overseas.
   Now is the time to question if government has considered that raising immigration may aggravate rather than relieve the labour shortage.
   Treasurer Swan commented shortly after the election that immigration was an effective solution to labour shortages when the community has the capacity to absorb the immigrants. Does Australia have this capacity today?
   Bob Birrell, Director of Population and Urban Research at Monash University, speaking on ABC Opinion, commented that migrants are said to curb inflationary pressures because they fill vacancies in the workforce. He added, "This is a doubtful proposition because the research literature indicates that migrants create as many jobs as they fill. They do this in part because migration is currently providing most of the additional households in Australia's metropolises and is thus the main source of demand for additional housing and associated urban infrastructure."
   Logic suggests that the size of this inflationary and demand effect depends on the numbers of people arriving. With low numbers and excess capacity in community infrastructure, migrants may well curb inflationary pressure. Increase the numbers and thus reduce "spare" community infrastructure and the effect is likely to flip from counter inflationary to driving inflation and demand.
   There are few of us who would not recognise today's Australia as the 'no spare infrastructure' scenario. Housing shortages and escalating rents, increasing numbers of homeless, hospital queues, overcrowded and understaffed schools and traffic gridlock are just a few of the telltale signs.
   We may even recognise the process that gave us today's chaotic social and environmental mess. A resources boom that initially required specialist petroleum and mining engineers, a past decade of neglect of education and training, governments eager to grasp the financial benefits flowing to their coffers, transfer of infrastructure costs to the taxpayer with the introduction of fly in/fly out staffing and inflated housing costs and rental charges.
   There is no environmental issue that is likely to be improved by population growth.
   The old argument that strong economies provide the wealth for environmental care is proving a red herring with Australia's mounting burden of social deficits. And let's face it, people have votes. The environment and other species don't.
   Minister Evan's message that the skills shortage has become a labour shortage is surely evidence of an aggravated problem. Almost every occupation conceivable is now claiming labour shortages. And community infrastructure is being neglected as the needs of resource projects are met.
   The Treasurer in Parliament (26th May) pointed out that the participation rate for sections of the Australian workforce was around the middle of the OECD range, lower than UK, USA and Scandinavia. Increasing workforce participation does not increase demand on community infrastructure and may avoid a catalytic effect from increasing immigration.
   Surely, this approach is preferable to increasing immigration? #

   [RECAPITULATION: Almost every occupation conceivable is now claiming labour shortages. And community infrastructure is being neglected as the needs of resource projects are met. ENDS.]
   [COMMENT: Yes, and these concocted shortages, if filled by immigration, will only create more need for more housing, hospitals, police stations, schools, AND workers for these needs!  As an example of the short-sighted approach of previous politicians, about 15 years ago those in charge thought there was an over-supply of doctors, so they cut back on medical school intakes.  (They also paid out money to close down the smaller pharmacies.)   Then they gaily let in migrants under various headings -- refugees, spouses, family reunions (why not rejoin overseas?), investors with funds, skills in short supply, etc.  None of the "leaders" stopped to think that all these extra people would require doctors and nurses, or their spouses and children would, sooner or later! COMMENT ENDS.]
[August, 2008]

• Sovereign Wealth Funds threaten Australia's independence: FOREIGN INVESTMENT [~ Internet heading]     

SWFs threaten Australia’s independence

  [Print heading]
   News Weekly, (Melbourne, Vic., Australia), http://www. newsweekly. articles/ 2008aug02_ i.html , by Patrick J. Byrne, pp 9-10, August 2, 2008
   Australians are yet to realise that this nation faces, not a military, but an economic threat to its independence, writes Patrick J. Byrne.
G iven Australia's $616 billion net foreign debt, the huge foreign investment drive into Australia by some sovereign wealth funds is now posing a serious threat to Australia's sovereignty.
   The federal Treasurer Wayne Swan recently ordered a 90-day review of the proposed takeover of Murchison Metals by a Chinese state-owned company, Sinosteel, despite putting new rules in place for investment by sovereign wealth funds (SWFs) only six months ago and despite telling Chinese officials earlier this year that Australia welcomed foreign investment.
   Australia is finding itself caught between its long history of welcoming foreign investment and the relatively new and rapidly growing investments by SWFs operated by the dictatorial governments of emerging economies.
   Clearly, Australia's addiction to debt is making it hard to say "no" to potentially compromising forms of investments from countries like China.
   For 200 years after British settlement, foreign investment played a vital role in building the nation's infrastructure and industries.
Western alliance
   Following World War II, foreign investment flowed in as part of a wider package that tied Australia into the Western alliance with its Cold War strategy of containing Soviet and Chinese communism.
   The US ran huge trade surpluses and the US dollar became the world's reserve currency. From this position of economic and military strength, the US offered its allies in the Western alliance preferential trade deals. The US, and key international economic agencies under its aegis, like the International Monetary Fund and the World Bank, were able to underwrite the economies of the developed world.
   It was largely from friendly democracies in this alliance that relatively benign foreign investment, driven by market forces, flowed into Australia.
   Today, this situation is fundamentally changing. The US is now the biggest debtor nation in history. It is continually running huge trade deficits. Its financial system has been seriously weakened by the disbanding of the very economic safeguards that were put in place after the financial collapse that led to the 1930s Great Depression.
   The US can no longer underwrite the Western economic system, let alone the world economy.
   Instead, the emerging nations - led by China, India and Russia - are now the main drivers of world economic growth, not the US. According to Albert Keidel of the Carnegie Endowment for International Peace, at its current rate of growth, China's economy will pass that of the US by 2030, and by 2050 will be twice its size, although income per person will still be well below that of the US (Australian Financial Review, July 10, 2008).
   Resource-hungry China has become a major foreign investor, pursuing a mercantilist approach to investment. Its aim is to buy ownership and control of foreign resources as its own private sources of supply, and then to control the trade routes supplying its resources.
   This scramble for control of resources stands in stark contrast to how the Western world handled the 1973 oil shock. Western nations found that this sort of zero-sum scramble for oil supplies during a crisis only worsened the problem by reducing market flexibility and efficiency and by intensifying national rivalries over supplies.
   This led to the creation of the International Energy Agency to avoid the risk of national competition for supplies. Western policy has focused on promoting diversified sources of oil supplying the world market, letting the market determine the most efficient allocation of supplies.
   Instead of relying on market forces, however, China's geopolitical policies are creating a race among the major Asian states - China, India, South Korea, Japan and, increasingly, some other South East Asian nations - for ownership and control of energy and other resources and the transit routes.
   Mikkal E. Herberg, of the National Bureau of Asian Research, in his submission to a US Committee on Foreign Relations hearing in 2005, discussed some of the strategic and economic implications of the rise of China.
   He said that, for the leadership of China, and consequently other emerging economies, energy policy is "high politics".
   China regards energy as being too important to be left to the markets and to be increasingly exposed to the risks of global supply disruptions, chronic instability in energy-exporting regions, and the vagaries of global energy geopolitics.
   In communist China, "there is a visceral and profound connection in the minds of the leadership between reliable energy supplies, political and economic stability, and continued Party control".
   Herberg told the hearing that China will be:
  • 80 per cent dependent on Persian Gulf oil by 2030;
  • a net importer of coal by 2015; and
  • importing 40 per cent of its natural gas by 2025.
       While economic growth and supplies of resources have been its top priorities, the next priority of China's political leaders is to develop strategic defences of the sea-lanes of communications supplying China.
       Currently, the US is still the world's only superpower, and its navy dominates in three key strategic areas of concern to China - the Persian Gulf, the Straits of Malacca and the South China Sea.
       In response, China is seeking to expand diplomatic relations and gain port facilities among nations along the sea route from the Persian Gulf to China.
       Invariably, as economic power shifts from the US and Europe to the Asian region, US domination of various international institutions and its strategic hegemony will be challenged.
       How China and other emerging nations regard foreign investment in their own economies also reflects their attitude towards their foreign investment in other nations.
       Originally, China encouraged foreign investment and technology transfer into industry sectors where Chinese firms could obtain the know-how to gain a competitive advantage over their foreign rivals.
       China now restricts or prohibits investment in industries China has mastered (like toys, furniture, shoes and clothing) or in industries with high usage of resources or energy (like steel, aluminium, paper, cement and other basic industries).
       Beijing also maintains substantial restrictions on publishing, media, market and social research, and an absolute prohibition of investment in real estate and real estate brokerage firms.
       Russia, with its new-found oil wealth, recently declared 42 "strategic" sectors - including the nuclear industry, aerospace, armaments industries, oil, gas, fishing and the mass media - in which foreign companies cannot own more than 50 per cent and foreign companies owned by governments (i.e., SWFs) cannot own more than a 25 per cent stake.
       Investors now have to seek authorisation from a commission made up of economic and security advisors.
       Meanwhile, the international community is visibly concerned at the direction being taken by emerging nation SWFs. Currently, the International Monetary Fund is attempting to persuade SWFs to adopt an investment code of conduct.
       However, it is encountering strong resistance and, if the code is adopted, it will almost certainly be voluntary.
       Given Australia's changing strategic environment, the magnitude and changing nature of foreign investment now make foreign investment a potential threat to Australia's future independence.
       More than three years ago, Access Economics - a major free-market think-tank close to the Liberal Party - warned that the foreign debt was now putting Australia in the "banana republic range" (News Weekly, February 12, 2005).
       Similarly, Warren E. Buffett, the famous American investor and economic commentator, prophetically predicted in Fortune magazine that a country that goes down the road of excessively depending on foreign investment would become a nation of wage-earners rather than capitalists.  He warned that such a nation risks losing its sovereignty, being "colonised by purchase rather than conquest". (Fortune, October 26, 2003).
       After two centuries of depending on the UK and the US for its strategic protection and foreign investment, Australians are yet to realise that this nation faces, not a military, but an economic threat to its independence.
       The end of the commodities boom could precipitate a flight of capital from Australia and a collapse of the currency. Neither the UK nor the US, on whom this country has historically depended, could bail us out.
       However, China, with its rapidly growing SWF, could come to our rescue. The price may be a demand for Australia to hand Beijing control of our resources and other key sectors.
       Australia borders the world's busiest sea-lanes between Darwin and Singapore. China would find drawing Australia strategically into its orbit, and away from the US, utterly irresistible.
       Yet Australia has the means within its reach to avert a major crisis. It could mobilise its $1 trillion in superannuation funds and its own SWFs to bring down the nation's dependence on foreign borrowings and to develop its own resource sector, supplying resource-hungry China, India and Japan on our terms, not theirs.
       In the meantime, foreign investment in strategic industries should be limited, with special limits from investment by SWFs.
       The big question is: do our leaders have the political will to say "no" to certain future foreign investments and to direct the nation's savings in the national interest?
    - Patrick J. Byrne is national vice-president of the National Civic Council. #

  •    [RECAPITULATION: Beijing also maintains substantial restrictions on publishing, media, market and social research, and an absolute prohibition of investment in real estate and real estate brokerage firms. Russia, with its new-found oil wealth, recently declared 42 "strategic" sectors - including the nuclear industry, aerospace, armaments industries, oil, gas, fishing and the mass media - in which foreign companies cannot own more than 50 per cent and foreign companies owned by governments (i.e., SWFs) cannot own more than a 25 per cent stake. ENDS.]
       [LINK/S: Another outlook on economics and investments is provided by Economic Indicator Services, at: http://www. business . ENDS.]
    [Aug 2, 2008]

    • [$35b of $62b of Australia's Future Fund used to avoid total meltdown as world teeters.]

    [$35b of $62b of Australia’s Future Fund used to avoid total meltdown as world teeters.]

       Numurkah Leader (northern Victoria, Australia), editorial |AT| leader |DOT| net |DOT| au , Letter to The Editor, from Jeff Davy, Katunga (Victoria, Australia), p 13, August 6, 2008
       THE Swiss based Bank for International Settlements is the central bank for central banks.
       In its latest annual report chief economist Bill White argues that the consensus view underestimates the problems and the world economy may be at a tipping point, facing an economic catastrophe.
       "The facts suggest that the magnitude of problems to be faced could be much greater than many now perceive," he states.
       Global Banks with loans of $US37 trillion in 2007, or 70% of world gross domestic product are still in the eye of the storm.  Dr White said the US sub-prime crisis was the "trigger", not the cause of the disaster.
       Associate Professor of Economics at the University of Sydney Dick Bryan said:  "It is quite an extraordinary message; I think it's a big statement saying that the world economy could potentially be facing one of the biggest crises for the last 150 years.  It's telling central banks that they got it wrong.  They shouldn't have let us get into the precarious position.  They should have been constraining credit earlier and they have put us in a position now where there are just not clear policy options."
       Satyajit Das, a risk analyst who tipped the global credit crisis in the same interview said:  "It is an extraordinary statement of how close the world is to a total financial melt-down."
       On December 20, 2007, USA President George W. Bush said:  "My view is that the fundamentals are strong."
       Fannie Mae and Freddie Mac, which own or guarantee around 40% of the total value of US home loans, which is approximately five times the size of the Australian economy, are insolvent.  Runs on the banks have occurred, sparked by the bankruptcy of IndyMac Bank (the third largest bankruptcy in US history). Home repossessions in the US are now running at four times the level of the Great Depression, with 110,000 home seizures and another 250,000 foreclosures declared in June alone.
       In Australia, ABN Amro economists Kieran Davies and Felicity Emmett have revealed to The Age (14/7/08) that the scale of direct taxpayer bail-out of Australia's banks, via the Future Fund, is much greater than the $2 billion previously disclosed.  An incredible $35 billion of the Future Fund's total pool of $62 billion was parked in Australia's banks as deposits in April, which accounts for a total of one third of all the growth in deposits in banks in the past year. #

       [COMMENT: The U.S. fundamentals are NOT strong, due to acute mismanagement by big financiers, businesspeople, and the BLUSH Administration.  No bail-out of Australian banks ought to be required.  If banks are prudent, the inward flow of deposits is always enough, unless there is a "run" on them.  In that case, the government only has to provide lots of legal tender, and after the scare is over, the legal tender finds its way back into the banking system, from whence it can be repaid to the government.  The whole system depends on a kind of faith.
       However, the Western powers, from the near-criminal BLUSH Administration through to the BLIAR and HOWODD governments and many others, have been acting in a spendthrift way.  Mr Davy's letter gives some excellent facets of some of the near-lunacy. COMMENT ENDS.]
       [LOOK BACK: September 29, 2004. ENDS.]
       [ACKNOWLEDGEMENT: Joan M. Massam. ENDS.]$35b_of_$62b
    [Aug 6, 2008]

    • US Mortgage Crisis: Fannie and Freddie. Give Away the Farm.   

    US Mortgage Crisis: Fannie and Freddie. Give Away the Farm

       Global Research, www. globalresearch. ca/index.php? context=va& aid=9764 , By Dr. Ellen Hodgson Brown, and, August 7, 2008
       Last week, Congress passed a housing bill that gave the Treasury Department a blank check to inject billions of U.S. taxpayer dollars into mortgage giants Fannie Mae and Freddie Mac, snatching them from insolvency. To accommodate this blank check, Congress obligingly raised its debt ceiling by $800 billion. Ouch! That’s nearly a trillion dollars. Why was it necessary to incur this potentially crippling public debt to bail out two completely private, for-profit behemoths, which have run themselves into bankruptcy with their own risky investment schemes? Policymakers said it was essential to maintain the country’s creditworthiness with foreign lenders, which today hold about one-fifth of Fannie and Freddie securities. According to a July 21 report by Heather Timmons in The New York Times:
    One out of 10 American mortgages is, in effect, in the hands of institutions and governments outside the United States. 1
       Ten percent of American mortgages are now owned by foreigners?  Doesn’t that defeat the whole purpose of Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Mortgage Corporation)? They were supposedly set up to fund "the American dream" – home ownership by Americans. Today, American homes are owned by anonymous pools of private investors, many of whom are foreign governments and foreign central banks. How did we manage to give away the farm? And why are we bowing to the interests of foreign investors to the point of driving our own government into bankruptcy? The federal debt is already nearly ten trillion dollars, more than the government can ever possibly repay with taxes.
       According to analysts, the bailout of the two mortgage giants is necessary "because America’s relations with a host of countries are intricately tied to Fannie and Freddie," and because we need to assure "Americans’ future ability to gain access to credit. If foreign companies and governments abandon United States investments, home, auto and credit card loans will be much more difficult to come by." 2
       The same sort of argument was once made by U.S. banks to get Third World countries to pay up on their foreign loans. The U.S., it seems, has finally achieved Third World debtor-nation status. For the last half century, the push for "free trade" has been all about preserving profitable opportunities for investment, finding ways to "make money" without actually making anything, exploiting the work of others by buying up corporations around the world and drawing profits off the top. But now the tables have turned. We have gone from being the world’s largest creditor to the world’s largest debtor. We spent our dollars abroad and now they are coming back to shop for our own real estate and corporate assets.  Timmons observes:
    Asian institutions and investors hold some $800 billion in securities issued by Fannie and Freddie, the bulk of that in China and Japan. China held $376 billion and Japan $228 billion as of June 2007 … . Russian buyers hold $75 billion. Sovereign wealth funds in the Middle East are also believed to be big investors in Fannie and Freddie debt.
       Sovereign wealth funds (investment funds of sovereign nations and their central banks) are now busily buying up U.S. assets, in what Bill Bonner has called "the biggest transfer of wealth in history." Writing in The Daily Reckoning on July 11, he observed:
    [T]he balance sheet of the U.S. Fed shows $2.3 trillion of US treasury debt held in custody for foreign central banks. The harder the Fed fights the [economic] correction … the more money and credit it puts out. This monetary inflation causes prices for oil and imports to rise … and more money goes into foreign reserves and Sovereign Wealth Funds in the East, to be used to buy more assets in the West. Thanks to America’s mad monetary policy, these private assets are being taken into public ownership. Some of America’s most important properties are being nationalized … but by other nations. 3
       The ultimate irony is that these other nations may be buying our federal bonds and mortgage-backed securities with money they simply created on a printing press. John Succo is a hedge fund manager who writes on the Internet as "Mr. Practical." He estimates that as much as 90 percent of foreign money used to buy U.S. securities comes from foreign central banks, which print their own local currencies, buy U.S. dollars with them, and then use the dollars to buy U.S. securities. 4  These nations are doing what Congress itself has declined to do: exercising the sovereign right of governments to print their own money.
       Unlike the U.S. Federal Reserve, which is wholly owned by a consortium of private banks, the People’s Bank of China (PBoC) is actually owned by the Chinese government. When Chinese merchants, awash with U.S. dollars, cash them in for local currency to pay their workers, the PBoC obliges by swapping dollars for government-issued renminbi. The workers get paid in local currency, and the PBoC gets the dollars for the cost of printing the renminbi. The PBoC then uses the dollars to buy either U.S. interest-bearing bonds or Fannie and Freddie securities, which have conveniently opened up U.S. real estate to foreign investment. In effect, American citizens are paying a foreign government to turn U.S. debt into money, using currency the foreign government issued by fiat (Latin for "let it be" or "so be it" – money simply ordered into existence by the sovereign).
       Why doesn’t the U.S. government just issue its own fiat money? That solution may seem radical now, but it could start to look better if Congress has to do what President Roosevelt did in 1933 – declare national bankruptcy and call for a plan of reorganization. There is simply not enough money in the public till to bail out Bear Stearns, IndyMac, and now the private mortgage giants Fannie Mae and Freddie Mac, as well as pay $500 billion annually to service a gargantuan federal debt, and still have enough money left over to repair our failing infrastructure, develop sustainable energy systems, and generally provide for the Common Wealth. The cookie jar is empty, and it is empty because private profiteers have been helping themselves to the cookies.
       If the Federal Reserve were made a truly "federal" agency, Federal Reserve Notes (dollar bills) could simply be issued by the U.S. government, instead of being borrowed from a private banking system that creates them with accounting entries and charges interest for the privilege. (See E. Brown, "Putting the ‘Federal’ Back in the Federal Reserve," , July 26, 2008.)  Rather than scrambling to find foreign investors to roll over a $10 trillion debt, Congress could just pay off the debt as the bonds came due, using the same sort of money that foreign central banks used to purchase the bonds in the first place – government-issued national currency. Congress would just be giving them their fiat money back.
       As for Fannie and Freddie, they are too big to fail; but they aren’t too big to be nationalized. If we the people are paying the bills, we should get the stock. Fannie Mae began in the 1930s as a truly federal agency, funded by a wholly government-owned bank. The Reconstruction Finance Corporation (RFC) advanced its own federal credit, which was used to fund not only the New Deal but the rapid industrialization that led to victory in World War II. 5  The result was to make America the world leader in industry and productivity for most of the rest of the century. It may be time to try that experiment again. The RFC had some flaws, but they could be worked out.
       That is another subject, to be covered in another article. The bottom line here is that the deed to the farm needs to remain on these shores, and so does the sovereign power to issue money and credit. The existing system of banking and credit creation is teetering on the brink of a collapse brought about by its own internal contradictions and corruption. The system has long since failed in its primary mission of channeling this country’s resources towards investment in a sustainable future. As it stumbles from crisis to crisis, we have neither the time nor the resources to give it yet another chance to do the job. The time has come to clear the boards and begin a new game with new rules.
    1. Heather Timmons, "Trouble at Fannie Mae and Freddie Mac Stirs Concern Abroad," The New York Times (July 21, 2008) (emphasis added).
    2. Ibid.
    3. Bill Bonner, "The Biggest Transfer of Wealth in History," The Daily Reckoning (July 11, 2008) (emphasis added).
    4. Mike Shedlock, "Global Savings Glut Revisited," Mish’s Global Economic Trend Analysis (December 26, 2006).
    5. Richard Freeman, "How Roosevelt’s RFC Revived Economic Growth, 1933-45," Economic Intelligence Review (March 17, 2006).
    Ellen Brown, J.D., developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, the latest of eleven books, she turns those skills to an analysis of the Federal Reserve and "the money trust." She shows how this private cartel has usurped the power to create money from the people themselves and how we the people can get it back. …
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       © Copyright Ellen Hodgson Brown,, 2008.  © Copyright 2005-2007
       [RECAPITULATION: For the last half century, the push for "free trade" has been all about preserving profitable opportunities for investment, finding ways to "make money" without actually making anything, exploiting the work of others by buying up corporations around the world and drawing profits off the top. ENDS.]
       [COMMENT: What?!  "Globalism" isn't really what the politicians tell us!  Read that sentence again, and the next few sentences. Ouch! COMMENT ENDS.]
       [2nd RECAPITULATION:  And why are we bowing to the interests of foreign investors to the point of driving our own government into bankruptcy? ENDS.]
       [2nd COMMENT: Stupid overseas wars and self-defeating propping up of foreign dictators and dysfunctional countries are other factors driving the U.S.A. further into insolvency. ENDS.]
       [3rd COMMENT: The author is right in her exposure of "the money trust."  The U.S.A. must reverse the many policies that have led to its losses of tens of thousands of manufacturing and service jobs, stop the indecent subsidies to farmers and others, and then gradually buy back the securities and other assets that have been bought by overseas interests.
       The people of the U.S. must first realise that politics does matter, and get their voluntary voting percentages up towards 95 per cent, instead of the present lamentably low turnout.  Why should politicians, financed by people who live on their wits and other people's sweat, respect the general public if it is too lazy to vote now and then? ENDS.]
    [August 7, 2008]

    • Chinese given green light for raid on Rio.     

    Chinese given green light for raid on Rio

       The West Australian, , By ANDREW PROBYN, FEDERAL POLITICAL EDITOR, pp 1 & 11, Monday, August 25, 2008
       AUSTRALIA – The Rudd Government has given the go-ahead for Chinese Government-owned company Chinalco to take a $16 billion stake in mining giant Rio Tinto, opening the door to further Chinese investment in the State's lucrative mining and energy industries.
       In the first real test of the Government's attitude to foreign investment in the Australian resources industry, Treasurer Wayne Swan announced he had given approval for Chinalco to buy up to 11 per cent of Rio Tinto.
       This would not be enough to block BHP Billiton's $160 billion bid for Rio, which requires approval from only 50.1 per cent of Rio shareholders. But it would given Chinalco and its US partner Alcoa more leverage to prevent BHP from acquiring the whole company.
       Walking a tightrope between preventing foreign buyers from getting a stranglehold on Australian resources but not appearing xenophobic, Mr Swan decided not to raise objections on national interest grounds but imposed conditions to limit Chinalco's influence.
       In return for the approval, Chinalco will be banned from raising its shareholding in Rio without first notifying and seeking fresh approval from the Federal Government under foreign investment review arrangements.
       Secondly, Chinalco has undertaken not to seek appointment of a director to Rio's board for as long as its shareholding stays below 15 per cent.
       It has been nearly seven months since Chinalco launched its surprise raid on the London-listed stock of Rio, securing a stake in the Anglo-Australian dual-listed company that controls vast swaths of the State's iron ore reserves.
       "While Australia welcomes foreign investment in our economy, we will carefully examine national interest issues where these arise in relation to foreign sovereign ownership," the Treasurer said.
       Analysts have interpreted ChinalCO's move on Rio – the biggest offshore investment by a Chinese company – as a way of either blocking BHP Billiton's takeover or positioning itself alongside BHP for any break-up of Rio Tinto.
       China is believed to be concerned that a Rio-BHP Billiton merger would reduce international competition and cause the price of iron ore exports to rise.
       While the Australian Competition and Consumer Commission approved Chinalco's investment in February, the competition watchdog said on Friday that a merged BHP-Rio "may have the ability and incentive to influence global supply and global prices for iron ore".
       BHP Billiton is offering 3.4 of its shares for each Rio share.
       Opposition resources spokesman David Johnston said Mr Swan's decision seemed reasonable given the long-standing Japanese and other foreign investment in Australia. But Senator Johnston said he wanted to see the details.
       "The Treasurer must explain the principle upon which he made his decision, whether it is a one-off and whether the market can take this as the way future applications will be handled," he said.
       "The public must be kept fully informed as to foreign and particularly Chinese ownership of those companies that control Australian resources, the problem being that very often Australian shareholders cannot take similar equity positions in China."
       Premier Alan Carpenter said Mr Swan's decision and the strict conditions placed on Chinalco by the Federal Government appeared to be a fair outcome that balanced the issue of foreign investment against the national interest.
       WA Liberal leader Colin Barnett said he had no objection to the Chinalco deal but said that where a foreign interest bought part of an Australian resource company that foreign interest should remain a minority shareholding. #

       [COMMENT: So a big government-owned conglomerate will be selling iron-ore to itself, thus having plenty of scope for "profit-shifting" so that the Australian Treasury does not get its full "bite."  As the Mikado said at the end of that operetta, it all seems very satisfactory!  Not!
       Note that the Western Australian leaders evidently are satisfied with overseas governments buying the mines, plus constant calls for more overseas workers to come into the country -- it was a "shortage" of skilled workers, but the emboldened elites are now calling for Pacific Islanders to be brought in to pick fruit!  Presumably they will have the letters CF after their names -- Certified Fruitologists!!! ENDS.]
       [INFORMED COMMENT: See "Sovereign Wealth Funds threaten Australia's independence" by Patrick J. Byrne, of August 2, 2008, and an editorial of February 4, 2008.  Also read "Inscrutable Rudd speaks in Chinese whispers to deceive" by Paul Murray on April 26, 2008. ENDS.]
    [August 25, 2008]

    • Share price distortions, credit fakery, help Chinese take resources. 

    Share price distortions, credit fakery, help Chinese take resources

       Informed source, Letter to Editors of various news media, Monday, August 25, 2008
       PM Rudd and Swan are giving the green light for the Chinese Government to start taking over WA's mining and energy industries (reported 25/8).
       Shareholders being forced to sell, because of the artificial down-turn in credit and share prices, might have something to do with this betrayal.
       Bad as the Whitlam Government was, at least their minister F.X.Connor wanted to "buy back the farm."
       To make matters worse, neither Liberals nor Nationals would be able to understand that once we have WA mine owners selling to themselves, the baloney about competition, free markets, and independence is all bulldust. #
    [Aug 25, 08]

    • 1,650 new migrants invade UK every day     
    Revealed: The changing face of Britain


       The International Express (Britain), West Australian edition, pp 1 and 4, August 26 to September 1, 2008
       IMMIGRATION has hit record levels with 1,650 people moving to the UK every day.
       The number of foreigners living here has risen by 1.1 million in three years – enough to fill a city the size of Birmingham.
       More than one person in 10 now living in the UK is foreign born.  The number of people leaving the country has also reached unprecedented levels and nearly half of them are native Britons.
    Immigrants swell population to 61m
       Statisticians had expected net immigration to have fallen by now but the influx is so huge that, instead, it is continuing to rise.
       Soaring numbers of births to foreign mothers are adding to the population explosion.
       Figures also show there are now more pensioners in the UK than children for the first time.  The startling statistics led to fresh calls last week for an annual limit on immigrant numbers.
       Sir Andrew Green, chairman of pressure group Migrationwatch UK, said: "Our society is being fundamentally changed against the clearly expressed wishes of the public."
       MEP Godfrey Bloom, of the United Kingdom Independence Party, called for stricter border controls.
       And Shadow Home Secretary Dominic Grieve said: "Immigration can benefit the country, but only if it is properly controlled."
       Thursday's figures, released by the Office for National Statistics, show the UK population had risen to a new high of 6l million in mid-2007 - an increase of 388,000 on the previous year.  Fifty-two per cent of that increase was due to immigration.
       In 2006/7, a record 605,000 people moved here with plans to stay for a year or more - the equivalent of 1,650 a day.
       At the same time, some 406,000 left the UK - a net annual immigration of 198,000, up from 187,000 in 2001.
       The population increases are disproportionately due to foreign migrants. Of those arriving, just 75,000 were Britons returning, while some 202,000 Britons left the country - almost half the total out-flpw. The Annual Population Survey shows the number of foreign-born residents stands at 6.3million, more than a tenth of the total population.
    That is up from 5.2million in 2004.
       Guy Goodwin, director of population analysis for ONS, admitted that after the initial influx from the expansion of the European Union in 2004, officials had expected outward migration to have increased by now and inward migration to be stable.
       "I would have anticipated a slight fall in net migration but in fact what we are seeing is it rising," he said.
       Other figures released last week show National Insurance numbers handed out to foreign workers increased by four per cent last year to 733,000.
       The influx of east Europeans has led to a leap in the benefits bill.
       A total of 888,000 Poles and Slovakians have come here to work since the expansion of the European Union in 2004.  But 185,573 of them are in receipt of or in line for state handouts costing taxpayers more than £211 million a year.
       The bill includes child benefit and tax credits as well as job seekers allowance, income support and housing benefit.
       The number who arrived in the second quarter of 2008 was the lowest since 2004.
       There has also been a year-on-year fall in the number of those entering the UK from Bulgaria and Romania, which joined the EU in January 2007. #

       [RECAPITULATION: A total of 888,000 Poles and Slovakians have come here to work since the expansion of the European Union in 2004.  But 185,573 of them are in receipt of or in line for state handouts costing taxpayers more than £211 million a year. ENDS.]
       [KORAN (said to be the Angel Gabriel's message from Allah):  4:3:- … marry but two, or three, or four … or the slaves whom ye have acquired. DOCTRINE ENDS.]
       [HADITH:  3, 34:283:- Narrated Qatada: Anas went to the Prophet with barley bread having some dissolved fat on it.  The Prophet had mortgaged his armour to a Jew in Medina and took from him some barley for his family.  Anas heard him saying, "The household of Muhammad did not possess even a single Sa of wheat or food grains for the evening meal, although he has nine wives to look after." (See Hadith No. 685) TRADITION ENDS.]
    [August 26, 2008]

    • One in 4 new babies has a foreign mother.   

    One in 4 new babies has a foreign mother

       The International Express (Britain), West Australian edition, By Tom Whitehead, Home Affairs Correspondent, p 4, August 26 to September 1, 2008
       BRITAIN – BIRTHS to foreign mothers have almost doubled since Labour came to power and are set to become the main cause of population growth.
       Foreign-born mothers have accounted for two thirds of the increase in births over the past six years.
       Last year they were responsible for almost a quarter of all births.

    The changing face of Britain

      [Picture] Woman in full burka showing only eyes and hands pushing child in pusher, while two elderly women dressed like Europeans head the other way.  
    605,000 people enter Britain as migrants every year
    406,000 leave Britain every year, nearly half of whom were born here
    Britain's population is now a record 61m, with foreigners making up 6.3m
    The number of foreigners has risen by 1.1m in three years - equivalent to the population of Birmingham
    Pensioners outnumber children for the first time
    The majority (54%) of births in London are to foreign mothers
    Applications for asylum are up 15%

       The soaring rate means more than half of births in London last year were to foreigners.  In one borough they accounted for three quarters of all births.
       It is all the more significant as the so-called "natural change" - the difference between births and deaths -is set to become the biggest driver of population growth from next year, overtaking net migration.
       It means migrants continue to have the single largest impact on our population, either as new arrivals or through settled immigrants having children.
       Guy Goodwin, director of population analysis for the Office for National Statistics, said: "Two thirds of the growth in the number of births (between 2001 and 2007) were to non-UK born mothers.
       "The basic message there is, in terms of population growth, yesterday's migrants as well as today's
    migrants are contributing to the net population growth we are seeing."
       Up to now, net migration has been the largest factor in population growth but Mr Goodwin expects natural change to overtake that with two to three years, and possibly as early as next year.
       Shadow Home Secretary Dominic Grieve said: "With births to foreign mothers becoming such a large driver of population growth, it is vital that immigration levels are set, taking into account the ability of our schools, hospitals and other local services to cope."
       The ONS figures showed the number of babies with foreign-born mothers almost doubled over the past decade, from 84,497 in 1997 to 160,340 in 2007 - 23 per cent of all 689,771 live births in England and Wales.
       Between 2001 and 2007, they rose from 97,900 to 160,340 - an increase of 64 per cent.
       Mothers born overseas accounted for more than half of babies born last year in London (54 per cent), Slough (56 per cent) and Luton (51 per cent).
       Foreign-born mothers were in the majority in 25 of the 35" London boroughs, and, in Newham, accounted for 75 per cent of births.
       The number of children born in the UK has increased from 674,000 in 2000/01 to 758,000 in 2006/07. #

       [RECAPITULATION: Shadow Home Secretary Dominic Grieve said: "With births to foreign mothers becoming such a large driver of population growth, it is vital that immigration levels are set, taking into account the ability of our schools, hospitals and other local services to cope." ENDS.]
       [COMMENT: Labour changed the laws and even handed itself over totally recently to the European Union, so bleating about schools etc. is just for the consumption of the sheeple. COMMENT ENDS.]
    [August 26, 2008]

    • UK growing older; Asylum bids soar. 

    UK growing older, AND, Asylum bids soar

       The International Express (Britain), West Australian edition, p 4, August 26 to September 1, 2008
       PENSIONERS outnumber children for the first time, sparking fears about growing pressure on the public purse.
       The country now has about 11.6 million men and women of pensionable age - making up almost 20 per cent of the population.
       It means there are now 50,000 more pensioners than under-16s.
       The oldest group - those aged 80 and over - has rocketed from 1.2 million in 1981 to 2.7 million.
       Christchurch in Dorset has the highest proportion of pensioners.  They make up 34 per cent of the population.
       Blackburn and Darwen has the largest ratio of children at 24 per cent.
       Mervyn Kohler, special adviser at Help the Aged, said: "The key task for policy makers is to ensure that older people can increasingly play an active role in our ageing society.  The days of assuming older people are dependants must now come to an end."
       Mr Kohler said an older population meant that there needed to be improved housing for the elderly, social care reform and the scrapping of "arbitrary" retirement ages.
       He added: "An ageing society is a fact of life which should be welcomed and embraced, not treated with concern."
       THE number of asylum seekers heading for Britain has shot up, Home Office figures revealed on Thursday.
       The Government also failed once again to hit its asylum removal target throughout 2007.  Officials admitted the focus was on kicking out foreign criminals.
       The official figures showed the number of people applying for asylum in the second quarter of this year stood at 5,720 - up 15 per cent.
       Across the 12 months up to June this year there were 25,070 applications for asylum, an increase of 12 per cent.
    [Aug 26, 08]

    • Kandhamal Massacres in Orissa - Where is the State and National Human Rights Commission?   

    Kandhamal Massacres in Orissa

    - Where is the State and National Human Rights Commission?
       Asian Centre for Human Rights, http://www. , ? Sep 4, 2008
       INDIA – Over 50 persons, mainly Christians, have been killed since the Hindu fundamentalists launched an attack on the Christians following the murder of four members of the VHP including 90 year old Laxmananda Saraswati by unidentified gunmen on 23 August 2008 in Kandhamal district of Orissa.
       Thousands of Christians have fled their villages and some 30,000 people have been displaced out of which about 15,000 reportedly sought shelter.
       As the entry to the effected areas were blocked with logs, both the State and National Human Rights Commission were missing.

       [ALSO SEE: http://www. telegraph 1080901/ jsp/nation/ story_ 9770626. jsp of Sep 1, 2008 . ENDS.]
       [ACKNOWLEDGEMENT:    The West Australian, "Christians hide after Hindu swami kllled," p 44, Fri., Sep. 5, 2008. ENDS.]
    [? Sep 4, 2008]

    • Banks Crashing Worldwide -- Only LaRouche Knows What to Do!     

    Banks Crashing Worldwide – Only LaRouche Knows What to Do!

       Citizens Electoral Council of Australia, by Craig Isherwood (National Secretary), Media Release, September 16, 2008
    "The world financial system is actually now, currently, in the process of disintegrating … There is no possibility of a non-collapse of the present financial system – none! It’s finished, now!" – American statesman and physical economist Lyndon H. LaRouche, Jr., July 25, 2007 international Webcast.
       As of this weekend, Wall Street investment banks and brokerage giants Lehman Brothers and Merrill Lynch have both collapsed, Lehman Brothers into actual bankruptcy and Merrill Lynch into a takeover by Bank of America. Insurance giant AIG is also headed for bankruptcy, and a host of others are set to follow, including Goldman Sachs, Morgan Stanley, and Washington Mutual.
       Australia is directly exposed:  More than 150 Australian clients of Lehman Brothers, including dozens of local councils, charities, churches and hospitals, have around $2 billion invested in Lehman Brothers’ derivatives, all or most of which they have now lost; more importantly, all of Australia’s major banks are heavily exposed to the $700 trillion global over-the-counter derivatives bubble (click here), which could now go into a chain-reaction collapse detonated by Lehman Brothers’ bankruptcy.
       LaRouche has specified three urgent measures to bring the crisis under control:
  • The U.S. Congress (and the Australian Parliament) must immediately enact the LaRouche-drafted Homeowners and Bank Protection Bill to stop mass home foreclosures, and to save the vital features of the banking system by putting it through government-supervised bankruptcy reorganisation, freezing or writing off trillions in speculative paper,
  • The U.S. Government (and the Australian Government) must enact a two-tier credit system, to provide preferential, cheap credit for actual physical production, in particular to create huge infrastructure projects (including in water and transport) to create millions of jobs, and
  • The U.S. must initiate a Four Power Alliance between itself, U.S., Russia, China and India to anchor the construction of a new international monetary system, a "New Bretton Woods" system of sovereign nation states centred on national banking and protective tariffs, to replace the disastrous City of London/Wall St. globalist system.
       For more information, and to help save this country from disaster, call the CEC at 1800-636-432.
       For LaRouche’s analysis of the insane bailout of Fannie and Freddie, click here to read the pamphlet "Tantamount to Treason".  For a complimentary copy of 1932, the documentary which shows the historical reasons for the global financial crisis, click here.

  •    [CONTACT: PO Box 376, COBURG, VIC 3058 Phone: 03 9354 0544 Fax: 03 9354 0166 Email: Website: ENDS.]
    [Sep 16, 08]

    • The U.S. Financial System in Serious Trouble   

    The U.S. Financial System in Serious Trouble

       Global Research (Montreal, Canada), index.php? context= va&aid= 10232 , By Prof. Rodrigue Tremblay, September 16, 2008
       " a bailout of GSE (Fannie and Freddie) bondholders would be perhaps the greatest taxpayer rip-off in American history. It is bad economics and you can be sure it is terrible politics."  Matt Kibbe, President of Freedom Works
       "The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists."  Ernest Hemingway (1899-1961), (September 1932)
       [After the Bear Stearns bailout] "As more firms lost access to funding, the vicious circle of forced selling, increased volatility, … and margin calls that was already well advanced at the time would likely have intensified. The broader economy could hardly have remained immune from such severe financial disruptions."  Ben Bernanke, Fed Chairman (March 2008)
       NORTH AMERICA – In August 2007, at the very beginning of the subprime financial crisis in the U.S., and referring to the alchemy-like practice of creating artificial financial instruments, such as mortgage-backed securities (MBSs), here is what I wrote:
       "Like all 'Ponzi schemes', such pyramidings of debts with no liquid assets behind them are bound to implode sooner or later." I also wrote about the Fed's intervention in such cases, that "it alleviates the 'liquidity crisis', for sure, but this does nothing to cure the underlying 'solvency crisis' of institutions holding large chunks of non-performing mortgage-based assets. Sooner or later, such low-valued derivatives will have to be written off, and this will necessarily lead to an erosion of these institutions' capital base. Bankruptcies of the most leveraged and imprudent institutions are to be expected."
       In fact, such bankruptcies of over-leveraged financial institutions become unavoidable. For a while, forced mergers between banks, initiated by the Fed or the Treasury, can soften the blow. But after a while, outright bankruptcies cannot be avoided and balance sheets have to be balanced.
       What is the cause of this financial mess?
       Last month, I provided a short answer:
    "At the center of current financial problems is the failure to adapt standard financial regulation to new financial institutions, such as broker-investment banks, off-shore based hedge funds and large derivatives markets that remain, for the most part, outside of the traditional authority of regulators. However, when things go wrong, as they did with Bear Stearns last March, their demise threatens to destabilize the entire financial system and handy government bailouts are quickly called in."
       Today I say that this major crisis has to be placed at the very feet of the Washington establishment. This is a politico-financial establishment that has pushed to the limits its ideology of deregulation of financial markets and stretched the working of unregulated corporate market capitalism to the breaking point. Now, the system is imploding under our very eyes and financial institutions are falling like dominos. As I wrote last August, and repeated in April of this year, the U.S. financial problem is not one of liquidity, (there is plenty of liquidity provided by the Fed when banks and brokers can borrow at will newly printed dollars from the Fed’s discount window) but one of solvency, weak balance sheets, risky assets and debt liquidation. That's a horse of a different color.
       Over the last twenty-five years, beginning with the Reagan administration and culminating with the current Bush-Cheney administration, the Washington establishment dismantled piece by piece the system of protection that had been built since the 1930's economic depression and removed nearly all government regulations that could stand in the way of greed and gouging on the part of unscrupulous market operators.
       And that's where the rubber hits the road. Short of bankruptcies is the nationalization of the over-leveraged banks by the government. And the Bush-Cheney administration took a big step in that direction when it came to the rescue of the two largest mortgage financing institutions, Fannie Mae (Federal National Mortgage Association: FNM) and Freddie Mac, (Federal Home Loan Mortgage Corporation: FRE) which were close to being insolvent. This step was initiated after foreign central banks (in China, Japan, Europe, the Middle East and Russia) threatened to stop buying U.S. bonds and debentures issued by the two shaky financial institutions.
       But the Bush-Cheney administration, while providing public money to keep the two lenders in operation, stopped short of nationalizing them. Indeed, the U.S. government committed to invest as much as $200 billion in preferred stock and extend credit through 2009, to keep the two mortgage lenders solvent and operating.
       But instead of taking them over by placing them into administrative receivership, in order to change their business model, as they should have done since the government is now guaranteeing their outstanding debts, (more than $5 trillion US) the U.S. government chose rather to keep the appearance that these were still two privately run banks and only appointed a legal conservator for Fannie Mae and Freddie Mac. Even when they bail out what can be called two Government sponsored enterprises (GSEs), their market ideology prevents them from doing the right thing.
       After years of irresponsible public deregulation and private mismanagement and irresponsible, pyramiding risk taking, the American financial system is now in serious trouble, and it may draw the U.S. economy further down with it in the months and years to come.
       In the coming weeks, however, as other American financial institutions teeter on the brink of bankruptcy, the U.S. government will have to consider creating a Bank Resolution Trust under the model of the 1989 Resolution Trust Corp. which took over the savings and loans banks that were then in financial difficulties. For example, as recently as February 16 of this year, the British government did not hesitate to nationalize the Northern Rock bank and rescued this large British bank with about £55 billion ($107 billion) in public loans and guarantees. Sooner or later, the American government will have to do the same, in order to stabilize the financial system, because the financial problems in the U.S. are systemic and much more serious than elsewhere.
       By the same token, maybe the U.S. government should correct an anomaly of the 20th Century, that is the semi-private status of its central bank. Indeed, the American Federal Reserve, is a semi-public and semi-private central bank organization that is as much responsible to large private banks as it is to the U.S. government and the population. This creates an unhealthy conflict of interests that is not fair to the American public. Indeed, the American practice of privatizing profits and socializing losses would be considered unacceptable in most other democracies.
       What we are witnessing these days in the U.S. is a massive wealth transfer from taxpayers, savers and retirees to banks, their creditors and their managers. On the one hand, the Fed has pushed real interest rates deep into negative territory to help troubled banks, and, on the other hand, the American taxpayers have foot the bill for bailing out very large financial institutions.
       I wonder what the two presidential camps, the Obama and the McCain camps, have to say about that! They both want to increase the federal deficit and add significantly to the already high national debt.

       Rodrigue Tremblay is professor emeritus of economics at the University of Montreal and can be reached at rodrigue DOT tremblay AT yahoo DOT com
       He is the author of the book The New American Empire
       Visit his blog site at: www.the new american empire. com/blog .
       Check Dr. Tremblay's forthcoming book "The Code for Global Ethics" at:
       En français:
       Please support Global Research.  Global Research relies on the financial support of its readers.
    [September 16, 2008]

    • Hedge Funds Savage Australian Dollar; Recent Australian Economic Trends.     


       Recent Australian Economic Trends, by David Keane, keane \at\ nw \.\ com \.\ au , Perth, W. Australia, October 10, 2008
       On Monday 29/September, US Congress voted against a bill to bail out the US banks for the tune of US$700 billion. This unexpected vote caused immediate panic in global stock markets, and within a day the Dow Jones Industrial Average fell from 11,143 on 26/Sept to 10,365 on 29/Sept. This was the biggest ever one-day fall of the Dow Jones. After emergency meetings by both Republicans and Democrats, a week later the bill was passed, but the Dow Jones has remained jittery and has consistently lost ground, heading the US into almost certain recession, and probably bringing most global economies into recession with it.
       What is of equal concern, is that Black Monday 29/September/2008, represents also the moment when the hedge funds began to focus upon the Australian dollar. The Australian dollar has been savaged on the global markets ever since. When the hedge funds choose to focus upon a specific economy, then the classic signs that we must look for are the synchronicity of a collapse of the global stock markets with the collapse of the national currency that the hedge funds are focussing upon.
       Let us compare statistics for the fall in the Dow Jones, the global leading stock market indicator, together with the fall on the Australian dollar. Let us begin our statistics from 26/Sept, the Friday before the great collapse.
    Date	Dow Jones	DJ % fall since 26/Sept	AUD$/US$ exchange	AUD$ % fall since 26/Sept	   
    26/Sep/08	11,143		.8289		   
    27/Sep/08			.8291		 
    28/Sep/08			.8291		   
    29/Sep/08	10,365	93.0%	.8124	98.0%	   
    30/Sep/08	10,850	97.4%	.7903	95.3%	   
    1/Oct/08	10,831	97.2%	.7933	95.7%	   
    2/Oct/08	10,482	94.1%	.7766	93.7%	   
    3/Oct/08	10,325	92.7%	.7724	93.2%	   
    4/Oct/08			.7773	93.8%	   
    5/Oct/08			.7736	93.3%	   
    6/Oct/08	9,955	89.3%	.7138	86.1%	   
    7/Oct/08	9,447	84.8%	.7209	87.0%	   
    8/Oct/08	9,258	83.1%	.6683	80.6%	   
    9/Oct/08			.6860	82.8%	 
       In the above chart, the exchange rate represents the value in US dollars we get in exchange for AUD$1.00. I have taken % comparisons with the Dow Jones and exchange rate figures for 26/September, just before the momentous global collapse.
       Let us now look at these figures in a longer term perspective.
       The Dow Jones Industrial Average had steadily been rising since the High Tech crash of 2001, peaking for an all time high of 14,164 on 9/October/2007, about a year ago. Ever since then, there has been serious concern about the strength of the US economy. The sub-prime mortgage bubble in the US was starting to become exposed, with the steady lack of confidence in the US economy, and steady depletion of the Dow Jones over the year. In the months Jul/08 to Sept/08, the Dow Jones had fallen below 12,000, hovering up and down between 11,000 and 12,000. That all changed on Black Monday, 29/September, and the Dow Jones has been in sharp fall ever since.
       For the past several years, the Australian dollar has been gradually rising against the US dollar, reaching its highest exchange value against the US dollar on 15/July/2008, when an Australian dollar bought 98.0 US cents. Ever since 15/July/08, the Australian dollar has been in steady decline against the US dollar. Let us draw up a chart of recent exchange rates to examine the pattern of that steady decline.
    	US$	Euro	Japanese Yen	   
    1/7/08	.9533	.6041	100.81	   
    15/7/08	.9800	.6154	102.69	   
    1/8/08	.9314	.5984	100.23	   
    15/8/08	.8674	.5904	95.83	   
    1/9/08	.8489	.5813	91.83	   
    15/9/08	.8079	.5698	85.36	   
    1/10/08	.7933	.5644	84.14	   
    9/10/08	.6860	.5048	68.34	 
       The above chart shows how much an Australian dollar buys in terms of US $, Euro or yen. You will notice that during this period, both the US dollar and the Japanese yen have been very strong. The Euro is falling in value, about half the fall of the Australian dollar. It seems the hedge funds are also cutting down the Euro, but only half as savagely as they are cutting the Australian dollar. It is a surprise to me that the US dollar has remained so strong against international currencies, when the US stock market is collapsing.
       It seems that since Black Monday 29/September/2008, a new and dangerous trend has become established in that the hedge funds are using the opportunity of the global stock market crash to savage the Australian dollar.
       We recall the most recent high tech boom that crashed around the year 2000. Before then, all the economies of S E Asia had enjoyed the brand of tiger economies. But with the high tech crash, the hedge funds began to focus upon the S E Asian economies, causing them all to suffer severe meltdown. At that time Indonesia and the Philippines followed the advice of the IMF, with the result that the value of their national currencies crashed appallingly. Malaysia however, despite early following the same trend, decided to defy IMF recommendations and developed its own independent economic policy. As soon as that independent economic stance was adopted, the Malaysian economy stabilised, and has weathered the difficult period of the S E Asian economic meltdown.
       Australia now has choices very similar to those faced by Malaysia on 2000. Do we proclaim as Kevin Rudd insists that Australia’s economy is based upon very firm foundations, and blindly follow the international recommendations led by the IMF?
       I am concerned that in denying the gravity of the hedge fund crisis facing Australia, Kevin Rudd is blind to the opportunity to steer Australia in a new direction. Kevin Rudd affirms that Australia’s economic fundamentals are very sound. I dispute that statement. Australia’s economic fundamentals are rotten to the core. That core is the massive foreign debt facing Australia. From the Reserve Bank statistics published to June/08, Gross Foreign Debt for Australia has just recently matched the equivalent of the GNP of Australia.
       But most of that Australian Foreign Debt is contracted in US dollars. In June 2008, the Australian dollar was still strong. It is only since after 15/July/08, that the Australian dollar started to fall. The publication of the Reserve Bank figures is always at least 3 months late. So we will not witness the effect of the fall of the Australian dollar in Reserve Bank figures until it is too late. At present the Australian dollar buys 68.6 US cents. This is a 30 cents fall from 15/July. As most foreign debts are contracted in US dollars, the actual Gross Foreign Debt for Australia is therefore likely to be about 130% of GNP. This compares with the most recently published Reserve Bank figures for June/2008 which shows the Gross National Debt as about 100% of GNP.
       This is precisely the crisis that had impacted the previously very prosperous economies of Argentina and Indonesia. Within six months, the hedge funds had so savaged these national economies that the national Foreign Debt shifted from about 100% on the GNP to over 200% of GNP. The Foreign Debt became as a millstone around the necks of these countries. Because the countries could not service the interest of these colossal Foreign Debts, the national currencies of Argentina and Indonesia collapsed, and then they were reduced from First World status to Third World status, and placed under control of the IMF.
       Some who have been predicting the US sub-prime mortgage crisis for many years, predict that as yet, only about one third of the sub-prime bad debts have yet been exposed. Following this logic along, the global stock market crash has only one third run its course. If this is true, then the recent hedge fund glut on the Australian economy is just at it beginning stage. Where will it end? Will Australia become humbled in similar manner to Argentina? #

       [CONTACT: PO Box 582, Gosnells 6110, WA E-mail: keane \at\ nw \.\ com \.\au . ENDS.]
    [Oct 10, 08]

    • Who is Behind the Financial Meltdown? Market Manipulation and the Institutional Speculator     

    Who is Behind the Financial Meltdown?
    Market Manipulation and the Institutional Speculator

       Global Research, http://www. global research. ca/index. php?context= va&aid= 10529 , by Michel Chossudovsky, October 11, 2008
       The market is heavily manipulated. The driving force behind the meltdown is speculative trade. The system of "private regulation" serves the interests of the speculators.
       While most individual investors lose when the market falls, the institutional speculator makes money when there is a financial collapse.
       In fact, triggering market collapse can be a very profitable undertaking.
       There are indications that the Security Exchange Commission (SEC) regulators have created an environment which supports speculative transactions.
       There are several instruments including futures, options, index funds, derivative securities, etc. used to make money when the stock market crumbles.
       The more it falls, the greater the gains.
       Those who make it fall are also speculating on its decline.
       With foreknowledge and inside information, a collapse in market values constitutes a lucrative and money-spinning opportunity, for a select category of powerful speculators who have the ability to manipulate the market in the appropriate direction at the appropriate time.
    Short Selling
       One important instrument used by speculators to make money out of a financial meltdown is "short selling".
       "Short selling" consists in selling large amounts of stocks which you do not possess and then buying them in the spot market once the price has collapsed, with a view to completing the transaction and cashing in on the profits.
       The role of short selling in bringing down companies is well documented. The collapse of Lehman, Merrill Lynch and Bear Stearns was in part due to short selling.
       Short selling has also been used extensively in currency markets. It was one of the main instruments used by speculators during the 1997 Asian Crisis to bring down the Thai baht, the Korean won and Indonesian rupiah.
       Speculation in major currency markets also characterizes the ongoing financial crisis. There have been major swings in currency values with the Canadian dollar, for instance, loosing 10% of its value in the course of a few trading days.
    Temporary Ban on Short Selling
       Following the stock market meltdown on Black Monday September 15, the Security Exchange Commission (SEC) introduced a temporary ban on short selling. In a bitter irony, the SEC listed a number of companies which were "protected by regulators from short sellers". The SEC September 18 ban on short selling pertained largely to banks, insurance companies and other financial services companies.
       The effect of being on a "protected list" was to no avail. It was tantamount to putting those listed companies on a "hit list". If the SEC had implemented a complete and permanent ban on short selling coupled with a freeze on all forms of speculative trade, including index funds and options, this would have contributed to reducing market volatility and dampening the meltdown.
       The ban on short selling was applied with a view to establishing the protected list. It expired on Wednesday October 8 at midnight.
       The following morning, Thursday 9th of October, when the market opened up, those companies on the "protected list" became "unprotected" and were the first target of the speculative onslaught, leading to a dramatic collapse on of the Dow Jones on Thursday 9th and Friday 10th.
       The course of events was entirely predictable. The lifting of the ban on short selling contributed to accentuating the downfall in stock market values. The companies which were on the hit list were the first victims of the speculative onslaught.
       The shares of Morgan Stanley dropped 26 percent on October 9th, upon the expiry of the short-selling ban and a further 25 percent the following day.
    Financial warfare
       There are indications that the downfall of Morgan Stanley was engineered by financial rivals. A day prior to the September 18th ban on short selling, Morgan Stanley was the object of rival speculative attacks:
    John Mack, chief executive of Morgan Stanley, told employees in an internal memo Wednesday [September 17]: "What’s happening out there? It’s very clear to me – we’re in the midst of a market controlled by fear and rumours, and short sellers are driving our stock down." (Financial Times, September 17, 2008)
       Morgan Stanley was also the object of doubts expressed by the ratings agency Moody's, which contributed to investors dumping Morgan Stanley stock.
    Moody's cited an expectation that "an expected downturn in global capital market activity will reduce Morgan Stanley's revenue and profit potential in 2009, and perhaps beyond this period".
      [Graph] Morgan Stanley Dean Whittier as of 10 Oct 2008    ©  
       In contrast JP Morgan Chase, controlled by the Rockefeller family climbed by almost 12%.
      [Graphs] J P Morgan Chase, Chase Manhattan Corp, and Bank of America Corp, as of 10 Oct 2008     ©  
       The winners of financial warfare are JP Morgan Chase and Bank America. Both banking institutions have consolidated their control over the US banking landscape. They have used the financial crisis to displace and/or take over rival financial institutions.
       The concentration of wealth and the centralization of financial power resulting from market manipulation is unprecedented.
    Regulators Serve the Interests of Speculators
       The SEC was fully aware that the ban on short selling would serve to exacerbate the downfall.
       Why did they carry it out? How did they justify their decision? Who's interests are they serving?
       In a twisted logic, the SEC, which largely serves the interests of institutional speculators, contends, quoting the results of an academic research paper, that short selling contributes to reducing market instability, thereby justifying the repeal of the September 18 short selling ban. #

       [AUTHOR: Michel Chossudovsky is Professor of Economics at the University of Ottawa, and Director of the Centre for Research on Globalization (CRG), which hosts the critically acclaimed website .  He is a contributor to the Encyclopedia Britannica. His writings have been translated into more than 20 languages.  He wrote The Globalization of Poverty and the New World Order (~ 2003). ENDS.]
    [Oct 11, 08]

    • Anatomy of the American Financial Crisis:  How It is Turning into a Worldwide Crisis   

    Anatomy of the American Financial Crisis:  How It is Turning into a Worldwide Crisis

       Global Research, http://www. globalresearch. ca/index. php?context= va&aid=10537 , by Prof. Rodrigue Tremblay, October 12, 2008
       "The basis for optimism is sheer terror." Oscar Wilde
       [After the March 2008 Bear Stearns bailout] "As more firms lost access to funding, the vicious circle of forced selling, increased volatility, and higher haircuts and margin calls that was already well advanced at the time would likely have intensified. The broader economy could hardly have remained immune from such severe financial disruptions." Ben Bernanke, Fed Chairman (March 2008)
       "In accounting 101 we learn that high yields equal high risk. We know the CEOs had an incentive to disregard this because they were getting huge bonuses." David Hartzell, dean of the University of Delaware's business college and a former vice-president of Salomon Brothers
    "Intensifying solvency concerns about a number of the largest U.S.-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown." Dominique Strauss-Kahn, Head of the IMF (October 11, 2008)
       The Bush administration's way of dealing with the ongoing financial crisis has been frantic, but probably less than adequate. In fact, tragic errors may have been made that must be remedied as quickly as possible.
       The most damaging error may have been to let the global investment bank Lehman Brothers fail ($691 billion of assets at the end of 2007), on Monday September 15. This fateful date may have to be remembered in the future. This was the largest failure of an investment bank since the collapse of Drexel Burnham Lambert in 1990. In contrast, the Fed and the U.S. Treasury moved quickly in mid-March (2008) to save a similar global investment bank in distress (but half the size of Lehman), Bear Stearns, by quickly lending and guaranteeing $29 billion to the large universal J. P. Morgan Chase bank in order to absorb it. – (N.B.: Let us keep in mind that it was the collapse in June 2007 of two internal Bear Stearns hedge funds that had been heavily invested in mortgage securities that kicked off the full-fledged market panic that unfolded in August 2007, and which today has turned into a full-fledged international financial crisis).
       Why was the same treatment not offered to Lehman? Possibly because of a personal lack of empathy between Treasury Secretary Henry M. Paulson Jr. (a former chief executive of rival investment bank Goldman Sachs) and Lehman's CEO Mr. Richard S. Fuld Jr., or possibly because the Bush administration wanted to make an example that all investment banks, no matter how large, could not count on being rescued by the government. The Bush administration did not even bother to appoint a trustee to supervise Lehman’s liquidation in order to make it orderly.
       Such a liquidation of a large international bank, known for its worldwide interconnections and unsound banking practices, was nearly a repeat of the mistake made in letting the large Vienna-based Creditanstalt bank fail, on May 13, 1931. This was a bank that had borrowed large amounts of money in London and in New York to finance its activities. Its failure created a domino effect among other international banks that had lent to each other in the international credit chain. So much so that the failure of the Creditanstalt forced them to severely tighten their lending to absorb their sudden losses.
       Seventy-seven years later, in 2008, the Bush administration's decision to let the Lehman Brothers bank fail has produced a similar ripple effect throughout the international financial system. And, perhaps more important politically, it signaled to the markets that the Bush administration was willing to let a dangerous debt deflation and an ominous credit crunch proceed. This may turn out to have been a most tragic mistake.
       Indeed, Lehman's bankruptcy forced the global investment bank to quickly write down its huge portfolio of debt, a fair amount of it in derivative products. But since banks are creditors of each other, especially Lehman which dealt with large institutions, this had the consequence of spreading the American financial disease all over the world, and especially in Europe. Why? Because Lehman's London office was a huge center of sale and distribution for its more or less toxic derivative products all over Europe. Indeed, many European banks had invested in Lehman's securitized paper, and when it failed, they were left with large losses. As a consequence, they had to curtail their domestic lending and that's the reason the credit crunch is now moving to Europe.
       The second mistake was to address the "liquidity problem" of American investment and mortgage banks without tackling at the same time their underlying "solvency problem".
       As we wrote right at the very beginning, on August 24, 2007, the financial crisis in the U.S. is not only a classic "liquidity problem", when banks find themselves short of cash to pay immediate redemptions and withdrawals while their longer term loans are secure, but also and above all a "solvency problem", because the huge losses that banks had to absorb when they wrote down the value of their toxic assets-backed securitized paper, eroded their capital base to an extent that they became de facto insolvent. Market operators saw that and they sold the banks' shares short and the price of these shares plummeted.
       With many banks' solvency now in doubt, inter-bank lending has nearly stopped, and because of a 'flight to safety', the Ted spread [the difference between three-month U.S. Treasury bills yields and yields on three month eurodollar contracts, as represented by the London Inter Bank Offered Rate, called Libor] exploded, and banks cut down their lending. Credit became tight and scarce. Because banks as a whole ordinarily lend between 10 and 12 times their capital base, the most liquid money supply (M1) began to contract in real terms. Even money market funds suffered heavy losses, and a run on them was in full swing when the Treasury stepped in a month ago to offer an emergency $50 billion guarantee.
       The U.S. economy may be approaching what can be called a classic "liquidity trap" situation, wherein the Fed is lowering interest rates while lending through its discount window and printing money on a high scale, however the liquid money supply figures, in real terms, are not increasing, but are rather falling. Thus, there is no immediate inflation, but the money supply is contracting as banks reduce their lending and make a rush to T-bills (their yields nearly fell to zero). The short-term result is a net deflationary effect for the overall economy and on the stock market (although the long term bond market sees inflation ahead, and long term rates are rising). –The result is stock market crashes in repetition.
       In fact, this is precisely what has happened over the last few weeks, not only in the United States, but also in the U.K and in other European countries. This is a very dangerous development for the real economy, because money data in real terms are a leading indicator of the future course of the economy. Six or nine months down the road, the consequences of the credit crunch will appear in production and employment declines, because the credit crunch has the effect of placing a serious squeeze on most companies. Since the credit contraction really began in June (2008), the early part of 2009 is bound to show severe economic weakness.
       On Friday, September 19 (2008), the Bush administration announced its solution to the growing banking crisis. It made public the $700 billion Paulson plan (US Emergency Economic Stabilisation Act, EESA) that primarily focused on creating a government market for some of the bad mortgage-backed securities on the banks' books. –But this was only half of the problem. The other half of the problem was the need to stop the money supply from declining, by restoring bank credit lending and allowing companies to have access to working capital financing. The goal here is to prevent banking problems from morphing into a general contraction of consumption and capital investment plans, thus slowing down production and raising unemployement in the coming months.
       For this to happen, however, banks must be allowed to find badly needed new capital. But in a time of crisis, with stock markets declining, it is doubtful that much private capital can be found. The recent association of Warren Buffett with Goldman Sachs may be more of an exception than a rule.
       When private capital is not available, the government has no other choice but to inject equity (by buying the banks' preferred shares) into the national banking system, while taking steps to safeguard the public interest by obtaining common share warrants that can be resold profitably later, when the situation stabilizes.
       In conclusion, we may ask if it is possible to avoid a repetition of the U.S. Great Depression of the 1930s or the more recent Japan's protracted recession of the 1990s, both the result of a similar severe banking crisis? The answer is yes, if the vicious cycle of asset price decline, banking credit crunch and money supply contraction can be avoided, or, at the very least, stopped and reversed. –In economics, as in medicine, it is never too late to do the right thing.
       Rodrigue Tremblay is professor emeritus of economics at the University of Montreal and can be reached at: rodrigue.tremblay@
       He is the author of the book 'The New American Empire'.
       Visit his blog site at .
       Author's Website:
       Check Dr. Tremblay's coming book "The Code for Global Ethics" at:
       Rodrigue Tremblay is a frequent contributor to Global Research. …

       [RECAPITULATION: … banks as a whole ordinarily lend between 10 and 12 times their capital base … ENDS.]
       [COMMENT: Repeat that again! ENDS.]
    [Oct 12, 08]

    • Cop admits his lies sent 150 to jail.   

    Cop admits his lies sent 150 to jail

       The West Australian, , p 26, Monday, October 13, 2008
       WELLINGTON – A former undercover New Zealand policeman has confessed to lying in court testimony that sent at least 150 people to jail, a newspaper reported yesterday.
       Patrick O'Brien, 59, had written to Chief Justice Dame Sian Elias saying he was wracked with guilt after carrying a "dreadful secret" for more than 30 years, the Herald on Sunday reported.
       Mr O'Brien was an undercover agent in covert drug operations for three years in the 1970s and the star prosecution witness in the resulting court trials, but said he had lied under oath every time, the paper said.
       It said it had obtained his confession letter under freedom of information legislation.
       All but one of the juries he gave false evidence to returned guilty verdicts, the report said.
       His letter said: "Telling lies was easy – policemen don't tell lies – and my targets never stood a chance."
       Police have appointed a senior lawyer to investigate Mr O'Brien's claims that he often presented exhibits to the juries that were not the drugs he claimed he had bought from defendants accused of drug dealing.  They have refused to comment until the investigation has been completed. #

       [COMMENT: In Western Australia in years past, the police sent a few people to prison on false evidence of murder.  (The Mallard case is currently receiving more headlines.)  In the United States, dozens have been released from Death Row after investigations by university undergraduates.  One of the reprieved ex-prisoners visited W.A. on a lecture tour a few years ago.  The jury in a southern U.S. state had found him (a Negro) guilty of rape, even though the victim had kept saying in her evidence that a white man had raped her ! COMMENT ENDS.]
    [Oct 13, 08]

    • Please explain this unusual move.

    Please explain this unusual move

       The West Australian, Various Letters to The Editor, p 22, Tuesday, October 14, 2008
       Kevin Rudd is "guaranteeing" Australians' deposits estimated at $700 billion (Rudd guarantees bank savings worth $700b, 13/10).  The report places no additional estimate on banks' foreign indebtedness, which is also "guaranteed".  We are told that this is about restoring trust and that the Government and Opposition are in accord with this.
       Here are my first hesitant questions about this extraordinary proposal.  What is the realistic basis of assessment for the massive (and presumably dynamic) total liability to be underwritten?  Are movements of funds during, say, the past fortnight allowed for, as well as all future movements?
      [Picture] Kevin Rudd  
       When the potential liability can be quantified, will the Australian Government have the capacity to underwrite it?  We have been conditioned to relatively puny Budget surpluses in the order of a mere $10-20 billion.
       If the banking institutions are to pay insurance premiums for the protection, as is reported, how will those presumably huge costs impact on citizens' bank accounts and who will be the final underwriter?
       Have the major political parties both renounced their former untrammelled faith in "market forces"?  If so, when will they publish their rationale for so doing?
       If dramatic re-regulation is necessary to restore economic health, can we expect complementary legislation to ensure that the causative mistakes of deregulation and "privatisation" will be explicitly denounced and excluded from any future repetition?
       Since Australia's big international trade deficit is effectively guaranteed by our banks, will the Government and Opposition also agree to underwrite that corporate debt? Brian Jenkins, Safety Bay.

    Another chance

       The Government's move to guarantee savings is a step in the right direction.  It also shows just how quickly the Government can act when self-preservation is its motivation.
       The current financial mess now gives this Labor Government the opportunity to right some of the obscene inequalities that exist in salary levels between workers and senior management – if it has the balls.
       It is time that management salaries were pegged to a combination of a multiple of their industry's base wage and a percentage related to the share dividends in their company.
       Nobody denies that the fat cats should get more rewards than the workers, but the excesses of the past few years have worked to everyone's disadvantage.
       In turn, the morale of the workers has suffered from the disparity between their worth and the huge salaries and obscene bonuses received by their "betters".
       Our current financial situation is showing just how overpriced and overrated some of these companies have been.  Perhaps past bonuses should be returned to reflect the true financial positions and the level of bad judgment and mismanagement that is becoming apparent.
       While the politicians are at it they should think about linking their lucrative superannuation benefits to the age pension and the performance of the super funds that are held by mere mortals.  Surely a more level playing field should be the goal of a Labor Government.  Terry Stanner, Bunbury.

    Two standards

       There have been a number of letters to the editor suggesting the causes of the international financial crisis are the Wall Street and international financial gurus who have lent money to fuel the increases in share and real estate values worldwide – which some of the letter writers enjoyed.
       I wonder what would have been their reaction if governments worldwide had stepped in 12 months ago and curbed lending in all areas which would have reduced demand internationally, along with growth and consequently the prices of real estate and shares.  There would have been cries of interference in the free-market economy and their ability to make profits.
       Bill Gates said: "Success is a lousy teacher. It seduces people into thinking they can't lose."  The reality is there is always a downturn after a boom but very few people are prepared for it; prices have to keep increasing for the investors' good times to continue and there comes a point where the prices asked are greater than people are prepared to pay.
       Some call it a crash, others call it a return to reality. Brian Kasten, Busselton.

    My solution

       In times like these, when it appears that our very own Mother Earth has finally had enough of our hedonism and wilful ways, I always remember this wise formula: Happiness = satisfaction over desire.  In other words, the more appreciative and thankful we are for the small mercies in life, the happier we will feel.
       I can only hope that we wake up in time to ride out the double whammy that sees both environment and empire collapsing under the weight of our insatiable desire and shrivelling satisfaction.
       May I go so far as to offer these five simple suggestions?
       1. Live in the moment and focus on what you need rather than what you want. Plan ahead, but not just to get things you really don't need.
       2. Grow your own food – the oldest and most satisfying hobby that also saves money.
       3. Treasure your family and friends. Spend more time with them than in front of screens.
       4. Seek out cheap thrills – the oceans, rivers, forests and wide-open spaces are still free.
       5. Live simply so that others may simply live. Michael Armstrong, Balingup.

    [A quarter of Defence's 'mislaid' trillions]

       The cost of the financial rescue associated with the "carnage" (report, 11/10) for the US taxpayer is estimated at $US800 billion.
       However, that is only about one quarter of the $US3.4 trillion in unaccounted for payments (missing money) by the US Defence Department in 1999-2000. Geoff Taylor, Riverton

    [Sky-the-limit cards]

       Jon Bishop (Letters 10/10) is right that years ago credit cards were not easily obtainable and limits were commensurate with the holders' capacity to repay the debt.
       As a bank manager in the mid 1970s I was asked to assess all of my customers for issue of a credit card – for amounts up to a maximum of $400.
       Today the sky is the limit and I now humbly apologise to those customers who were granted a credit card. Brice Roberts, Kingsley.
    [Oct 14, 08]

    • 1929 vs 2008: Similar forces at work eight decades apart.     

     1929 vs 2008:
     Similar forces at work 
     eight decades apart 

       The Record (R.C. Perth, W. Australia, weekly), ■ By Dennis Sadowski, Vista supplement p 1, October 15, 2008
    Historians, financial experts and economists are split on the significance of the current financial crisis
    H istorian Douglas Astolfi points to three periods of "incredible greed" on the part of wealthy corporations in American history.
       The first occurred in the 1870s during a speculative boom following the Civil War. He identifies the Roaring '20s as the second as investors leveraged stocks to secure loans from banks to buy more stocks while the stock market took off in the post-World War I period.
       And the third?
       We're living through it right now, said Astolfi, professor of history at St Leo University in St Leo, Florida.
       Astolfi told Catholic News Service the latest period has been fueled by three decades of financial deregulation and a banking industry that encouraged people to buy on credit because there was plenty of money to be made off a housing bubble which no one thought would ever burst.
       When the first two periods collapsed - marked by the panic of 1873 and the failure of the banking system that led to the Great Depression, respectively - the country faced tremendous hardship, especially among poor and working-class people.
       It's a bit different today, Astolfi explained, because the US government instituted protections under President Franklin Roosevelt's New Deal in the 1930s. Steps such as federally insuring bank deposits, and establishing the Securities and Exchange Commission, were meant to protect the broad population from bearing the brunt of the excesses of others.
     "Still, the question looms today: Is another Depression on the way? 
       The economy has always recovered, growing robust, and allowing the vast majority of people to live comfortable lives. Experts across the board credit the regulations governing financial activities as one step toward returning balance between the top of the economic ladder and the rest of the country.
       Still, the question looms today: Is another depression on the way?
       It's possible, but highly unlikely in the minds of historians, economists and financial experts at several US Catholic colleges and universities.   While massive consumer debt and the inability to repay it has fueled todays financial crisis as it did nearly 80 years ago, various protections are in place that - so far - have prevented a catastrophic economic recession in the world's largest economy.
       'We hope that it's not going to be the same," said Kevin Forbes, chairman of the business and economics department at The Catholic University of America in Washington.
       "But when people hear the term the Great Depression they usually think of the '29 stock-market crash. But that was only a small part of it. It's the consensus of economists that the stock-market crash was bad, but it probably would have created only a small downturn in the economy.
       "What really did us in was the collapse of the banking system," he told CNS.
       That explains why US officials jumped in so quickly in September to propose a US $700 billion bailout plan to save several banks and major financial institutions staggering under the weight of worthless mortgage-backed securities. By pouring money into the economy to buy the securities gone bad now that the housing bubble has burst, the federal government is hoping to stave off a financial collapse.
       Federal Reserve Chairman Ben Bernanke, widely acknowledged as an expert on the Great Depression, knows that history well. He and Treasury Secretary Henry Poulson walked in lock step as they took their plan to the White House and to the US Congress, convincing both that action now was preferable to letting the financial system fail.
       The government action, which found President George W. Bush signing the bailout bill passed by Congress on October 3, came quickly, just two weeks after Poulson, a former CEO at Goldman Sachs, submitted his rescue plan.
       The unusually fast action is in direct contrast to the government's tight money policy in response to the 1929 stock-market crash, which symbolises the start of the Great Depression.
       The boom in the market prior to the crash was fueled by speculators. The bull market was so strong that investors were borrowing money. However, as early as 1923 banks were failing, setting the stage for Black Thursday, October 24, 1929.
       Without an infusion of funds at that time, the banking system had no cash to lend, stifling business activity. Depositors lined up at their bank's doors demanding to withdraw their life savings. By 1933, 40 percent of the nation's banks failed and millions of people had lost their life savings.
       Today, the danger of lost bank accounts has disappeared because of the existence of the Federal Deposit Insurance Corporation, one of many economic reforms under the New Deal, said Joan Junkus, associate professor of finance at DePaul University in Chicago. The October 3 bailout legislation boosted the amount of deposits covered by government insurance from US $100,000 to US $250,000 per account.
       On the other hand, the stock market has lost nearly 40 per cent of its value since its October 2007 peak. While it's nowhere near as devastating as the 90 per cent decline in stock values in the 33 months after Black Thursday, the plummeting market is having repercussions worldwide.
       Even with the bailout, banks and other financial institutions face a long path to solvency. And there's some talk that US $700 billion may not be enough.
     The Depression: This photo taken in 1936 at a pea-pickers' camp in California is among the iconic images of the Great Depression. Part of the "Migrant Mother" series by photographer Dorothea Lange, the image shows Florence Thompson and two of her children. 
       "That number is so enormous, to think of it as insufficient is frightening," Astolfi said. "If that were the case then I think we'd move toward a crisis. There's an awful lot of politicians and average people who just can't see spending any more than that."
       Despite the broad support in the US for government intervention, opposition to interference with the market exists. Among those who urge a hands-off policy by the government is Larry Sdieikart, professor of history at the University of Dayton in Ohio.
       "It's a cyclical recession brought on by too much bad lending," he said of current financial conditions. But he quickly added that the current economic downturn is not "officially a recession."
       "The market will sort itself out if these guys don't get involved," he said.
       He also blamed two other groups for the economy's woes: those who signed for loans knowing they could not afford them and members of the US Congress who "stiff armed" lenders to expand lending opportunities to lower income people.
       "There's not a crisis in confidence in the market today," he said. "There's a crisis in government. The government has repeatedly screwed up."
       Still, the rescue plan is widely seen as just the first step toward rebuilding a lacklustre economy.
       Forbes of Catholic University said steps to regulate the banking industry again are necessary to prevent the abuses that developed over the last decade.
       "They have to," he said. "If all they do is pass this bill and then walk away, then they've really done us a disservice." In particular, Forbes added, new safeguards will have to be put in place to prevent the aggressive practices segments of the mortgage industry used to entice people to buy into loans they eventually could not afford.
       "It has to get to the point where there are standard criteria to get your mortgage approved, that the person originating the mortgage has to have some skin in the game so if the mortgage goes bad there's some downside risk," he explained. #
       Distribution's third way approach
          Vista 2-3

       [RECAPITULATION: By 1933, 40 percent of the nation's banks failed and millions of people had lost their life savings. […]
       "The market will sort itself out if these guys don't get involved," he said. […]
       "There's not a crisis in confidence in the market today," he said. "There's a crisis in government. The government has repeatedly screwed up." […] "It's a cyclical recession brought on by too much bad lending," he said of current financial conditions. ENDS.]
       [COMMENT: That was known for centuries, including in the 1880s and 1920s-1940s, so how come the same "mistakes" are made again? COMMENT ENDS.]
       [1932 SPEECH: "Now, since there is no question of the existence of a very considerable measure of internationaly controlled finance … what are the probable motives …The great financier is in most cases a great idealist, and … constructs a Utopia … to impose upon the world. … this idea of a centrally controlled world … is at the back of the drive which is being made to induce us to believe that the world can be considered as a single unit." -- address to the Rotary Club of Bournemouth, Britain, June 20, 1932. ENDS.]
    [Oct 15, 08]

    • $45 trillion : The Great Wealth Wipe out   

    $45 trillion :   The Great Wealth Wipe out

       The Renegade Economist website, , by Fred Harrison, at the Foreign Press Association, October 15, 2008
       At least $45 trillion will now be wiped off people's wealth and trigger a decade-long depression.
       Fred Harrison released his forecast during a Press conference at the Foreign Press Association, London. His estimate is based on conservative assumptions, it therefore under-estimates the true scale of the losses that are destroying banks and peoples savings around the globe.

    The Wealth Wipe-out of 2010
    Asset	Amount: US$ trillion		   
    Capital (stocks & shares)	$15	 	   
    Residential Property 	$20	 	   
    Commercial Property	$10	 	   
    All assets	$45 trillions (£23 trillion)	 	 
       Harrison describes the contagion spreading around the world in a new Renegade Economist film that may be viewed today on our YouTube channel.
       "By using the methodology that enabled me to forecast the current crisis back in 1997 – a full 10 years before the credit crunch crushed the banks – I am left in no doubt that the assets of home-owners and investors will be savaged," Harrison claims.
       The "wealth effect" - in which people tailor their spending according to the value of their assets – will crush consumption worldwide. This contraction in the demand for consumer goods and services makes a depression unavoidable, unless governments adopt the correct remedies.
    Futile Regulation and Arrested Growth
       At present, governments are banking on a regulatory approach to the credit crisis. This will not cure the systemic flaw in the market economy, warns Harrison, which is why politicians are leading their countries into what he calls a decade of "arrested growth".
       To avoid being sensationalist Harrison cautiously assumes a 20% drop in values. In the UK, residential property was valued at £4 trillion in 2006, according to Halifax, the nation's largest mortgage bank. If house prices drop by 20%, a loss of £800bn would be incurred. Fred actually expects them to drop by 30% on average.
       In the US, the value of wealth tied up in residential property alone declined by $3.4 trillion in the two years following the peak in prices in July 2006. The total wealth in the homes of American families exceeded $30 trillion. Assuming prices drop by no more than 20%, the wealth wipe-out in the US residential sector alone is more than $6 trillion. Fred expects US house prices to drop by at least 40%.
       In Australia, residential property was worth about AU$3 trillion in 2006. A 20% drop would incur a loss of AU$600bn. Worldwide, residential property will lose about $20 trillion in value.
       Unless the Federal government adopts the tax-led incentives - spelt out in Fred's forthcoming book - there will be no consumption-led recovery in America after 2010.
       In addition to the real estate estimates Fred estimates a $15 trillion wipe-out of capital invested in the business sector. The major losses will be concentrated in Europe and North America.
    Buying Time
       Worldwide, central bankers have committed about $2 trillion in taxpayer-backed bail-outs to banks. This is buying time, but the reform plans being discussed are useless. Politicians think that a new tier of regulations – trimming bankers' bonuses, checking the short sellers, enforced "transparency", improved risk assessment – will prevent further episodes of reckless property speculation. But these are symptoms, not the cause, of property bubbles.
       Sub-prime lending in the USA and UK has featured in every boom/bust over the last two centuries, and it will resurface in the next cycle in new forms to evade the controls of regulators. #

       [YOUTUBE for interview: ENDS.]$45trillion_the_great
    [October 15, 2008]

    • Ending unearned profits.   

    Ending unearned profits

       The Courier Mail (Brisbane, Qld, Australia), Letter from John Massam, Perth, October 15, 2008
       Until all land is rated on its unimproved capital value, so that people holding land waiting for big unearned profts will find that the cost of doing so is too great, these dishonest tricks will continue to enrich a lucky few, and the rest of the people will be paying them, and the banksters, a heavy tribute.

       [REPRINTED (with original wording revived) in Progress (Melbourne), November-December 2008, p 15. ENDS.]
    [Oct 15, 08]

    • [Thomas Jefferson on banks.]   

    [Thomas Jefferson on banks]

       David Brooks (Victoria, Australia), e-mail dated October 16, 2008
       UNITED STATES – I believe that banking institutions are more dangerous to our liberties than standing armies.
       If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.
       The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.
       – Thomas Jefferson, 3rd president of US (1743 - 1826) in a Letter to the Secretary of the Treasury, Albert Gallatin in 1802.

       [ACKNOWLEDGEMENT: David Brooks, Victoria, Australia. ENDS.]
    [Statement in 1802; e-mail Oct 16, 2008]

    • How our economy is killing the Earth -- Special report. 

    Special report: How our economy is killing the Earth

       New Scientist, http://media. newscientist. com/article/ mg20026786. 000-special- report-how- our-economy- is-killing- the-earth. html ; October 16, 2008
       THE graphs climbing across these pages (see graph, right, or explore in more detail) are a stark reminder of the crisis facing our planet. Consumption of resources is rising rapidly, biodiversity is plummeting and just about every measure shows humans affecting Earth on a vast scale. Most of us accept the need for a more sustainable way to live, by reducing carbon emissions, developing renewable technology and increasing energy efficiency.
       But are these efforts to save the planet doomed? A growing band of experts are looking at figures like these and arguing that personal carbon virtue and collective environmentalism are futile as long as our economic system is built on the assumption of growth. The science tells us that if we are serious about saving Earth, we must reshape our economy.
       This, of course, is economic heresy. Growth to most economists is as essential as the air we breathe: it is, they claim, the only force capable of lifting the poor out of poverty, feeding the world's growing population, meeting the costs of rising public spending and stimulating technological development - not to mention funding increasingly expensive lifestyles. They see no limits to that growth, ever.
      "Economists see no limits to growth - ever"  
       In recent weeks it has become clear just how terrified governments are of anything that threatens growth, as they pour billions of public money into a failing financial system. Amid the confusion, any challenge to the growth dogma needs to be looked at very carefully. This one is built on a long-standing question: how do we square Earth's finite resources with the fact that as the economy grows, the amount of natural resources needed to sustain that activity must grow too? It has taken all of human history for the economy to reach its current size. On current form it will take just two decades to double.
       In this special issue, New Scientist brings together key thinkers from politics, economics and philosophy who profoundly disagree with the growth dogma but agree with the scientists monitoring our fragile biosphere. The father of ecological economics, Herman Daly, explains why our economy is blind to the environmental costs of growth ("The World Bank's blind spot"), while Tim Jackson, adviser to the UK government on sustainable development, crunches numbers to show that technological fixes won't compensate for the hair-raising speed at which the economy is expanding ("Why politicians dare not limit economic growth").
       Gus Speth, one-time environment adviser to President Jimmy Carter, explains why after four decades working at the highest levels of US policy-making he believes green values have no chance against today's capitalism ("Champion for green growth"), followed by Susan George, a leading thinker of the political left, who argues that only a global government-led effort can shift the destructive course we are on ("We must think big to fight environmental disaster").
       For Andrew Simms, policy director of the London-based New Economics Foundation, it is crucial to demolish one of the main justifications for unbridled growth: that it can pull the poor out of poverty ("The poverty myth"). And the broadcaster and activist David Suzuki explains how he inspires business leaders and politicians to change their thinking ("Interview with an environmental activist").
       Just what a truly sustainable economy would look like is explored in "Life in a land without growth", when New Scientist uses Daly's blueprint to imagine life in a society that doesn't use up resources faster than the world can replace them. Expect tough decisions on wealth, tax, jobs and birth rates. But as Daly says, shifting from growth to development doesn't have to mean freezing in the dark under communist tyranny. Technological innovation would give us more and more from the resources we have, and as philosopher Kate Soper argues in "Nothing to fear from curbing growth", curbing our addiction to work and profits would in many ways improve our lives.
       It is a vision John Stuart Mill, one of the founders of classical economics, would have approved of.  In his Principles of Political Economy, published in 1848, he predicted that once the work of economic growth was done, a "stationary" economy would emerge in which we could focus on human improvement:  "There would be as much scope as ever for all kinds of mental culture, and moral and social progress … for improving the art of living and much more likelihood of it being improved, when minds cease to be engrossed by the art of getting on."
       Today's economists dismiss such ideas as naive and utopian, but with financial markets crashing, food prices spiralling, the world warming and peak oil approaching (or passed), they are becoming harder than ever to ignore.
    Read more:
       Why politicians dare not limit economic growth (FREE FEATURE)
       Harvesting renewable energy will help us to avert climate change without big changes to our lifestyles, right? Not without cutting consumption, says Tim Jackson
       Interview: The environmental activist
       Why do we fail to live within the constraints that nature has set for us, and fool ourselves things have never been better, asks environmental activist David Suzuki
       Economics blind spot is a disaster for the planet
       If we can't find a way to switch to a sustainable economy, we're heading for the ultimate crash Herman Daly
       Interview: Champion for green growth (FREE FEATURE)
       Gus Speth has influenced US environmental policy from the Supreme Court to the White House. He tells Liz Else why green values stand no chance against market capitalism
       The trickle-down myth: Does growth really help the poor?
       The argument that economic growth helps fight poverty is disingenuous and misguided, says economist Andrew Simms
       We must think big to fight environmental disaster
       As the ecological and financial crises mount, Susan George says our only option is to scale up positive actions to transform our economies
       What would life be like in a land without growth?
       What would a sustainable society actually be like? How would we make a living? And what would happen to all those bankers? New Scientist imagines the progress of a "steady state" economy 10 years after its inception
       Nothing to fear from curbing growth
       Breaking our dependence on profits and growth would make our lives better, not worse, says philosopher Kate Soper
       Editorial: Time to banish the god of growth
       Tips from scientists on how to save the planet
       Twelve recommended books on overconsumption
       The facts about overconsumption
       Recommended organisations and websites: read more and take action #

    [Oct 16, 08]

    • Why real estate spending could make Australia the new Iceland.     

    Why real estate spending could make Australia the new Iceland

       Brisbane Times, http://www. brisbanetimes. business/ bwhy-real- estate-spending- could-make- australia- the-new- icelandb/ 2008/10/19/ 122435111 3115.html?s_rid= smh:top5 ; by Paul Sheehan, October 19, 2008
       On July 30 Hans Redeker, head of foreign exchange strategy at BNP Paribas, Europe's biggest investment bank, predicted: "The Aussie is going down, big time."
       Back then - it already seems like a long time ago - the Australian dollar was sitting majestically at 97 cents to the US dollar, which was taking a battering. But the Aussie did, indeed, go down, big time. Within three months it had crashed by 33 per cent to US65.5 cents. Now Redeker has issued another warning to Australia. We'll get to that. But first, let's look at his track record.
       December 2006: Redeker predicted a sharp recession in the United States, saying the condition of its housing market was worse than the experts were stating and the flow-on effects would be much worse than predicted. That was almost two years ago. He was right.
       January 2008: he predicted the Aussie dollar was facing two years of decline, and expected to see it fall to 66 cents. He was right. He also predicted a rise in financial market volatility, higher inflation worldwide, higher interest rates in Asia, weakening demand for Australia's minerals exports from China, and a weaker sharemarket in China, all of which would drive down the Australian dollar. Since then, the Shanghai sharemarket has crashed 50 per cent from its peak.
       October 2008: two weeks ago Redeker repeated his claim that abundant foreign money had been available to Australia and too much of it had been spent on real estate, creating a speculative bubble: "The easy money went straight into real estate - Australia will now have to generate 4 per cent of GDP to meet payments to foreign holders of its assets. This is twice as high as the burden faced by the US."
       After the Australian Reserve Bank slashed key interest rates by 1 per cent, Redeker also told London's Telegraph that he was concerned about what the Australian Government may do: "Yes, Australia has a fiscal surplus, but that does not offer as much protection as people think. If the Government boosts spending further, the current account deficit will spiral out of control."
       And what has the Rudd Government just done? Boost spending.
       There was certainly no discussion of the current account deficit spinning out of control, or Australia's excessive debt, when the Prime Minister, Kevin Rudd, launched his $10 billion economic stimulus package last week, nor any from the Opposition Leader, Malcolm Turnbull, who offered in-principle bipartisan support.
       It gets worse. Redeker continued: "There is a risk, however remote, that Australia could face some of the foreign funding difficulties we have seen in Iceland."
       Iceland! Iceland was the most leveraged economy in the developed world when it became the first economy to be bankrupted by the credit crisis. You do not want to be mentioned in the same sentence as Iceland unless the discussion is fishing or blondes.
       After quoting Redeker, the Telegraph's global business columnist, Ambrose Evans-Pritchard, weighed in with his own commentary: "The immediate problem for Australia's banks is that they gorged on offshore US dollar markets to fund expansion because the interest costs were lower. They were playing on a huge scale with leverage. European banks face much the same problem as dollar liabilities come back to haunt, but Australian lenders have pushed their luck even further."
       Gabriel Stein, of Lombard Street Research, weighed in with this, after noting that Australian household debt had reached 177 per cent of gross domestic product, almost a world record: "It is amazing that in the midst of the biggest commodity boom ever seen they have still been unable to get a current account surplus. They have been living beyond their means for 10 years. What worries me is that productivity growth has been very low: they have been coasting after their reforms in the 1990s."
       The global financial world is watching the Australian dollar because it holds a key to the great unanswered question of this uncertain era: will the global market punish a currency for its declining interest yield? Or will it reward a currency because of the soundness of its economy? Central banks are acutely interested in the answer.
       Evans-Pritchard thinks the early signs are hopeful that the answer is the good one, that nations will be rewarded for having sound economies. But he does not believe Australia can escape the consequences of excess: "Australia has allowed its net foreign liabilities to reach 60 per cent of GDP during a decade-long boom, twice the level of the US. The country will, in effect, have to pay 4 per cent of GDP in the form of rents to foreign asset-holders as the bill for such extravagance falls due."
       The bill is falling due. Earlier in the year Australians travelling in Europe would have paid about $1.50 for every euro spent. Today they need $2.10. The Aussie dollar is weak again, despite all the luck of the China boom. This raises a number of awkward questions. Did the lucky country became the greedy country? Did it fail to sufficiently embark on a program of nation-building during the resources boom? Was most of the bonus redistributed as tax cuts, which were spent chasing bigger mortgages, bigger homes, new cars and general consumption, stimulating short-term economic growth but not enough on long-term productivity and higher savings?
       During 17 years of unbroken economic expansion and a 10-year commodities boom, it took a lot of people, borrowing a lot of money, taking a lot of unproductive risk, to get to where we are today: a nation with excessive debt and excessive vulnerability to external circumstances barely within our control. #

       [RECAPITULATION: … abundant foreign money had been available to Australia and too much of it had been spent on real estate, creating a speculative bubble … ENDS.]
    [October 19, 2008]

    • Banking blips; Time for tariffs.

    Banking blips; Time for tariffs

       The Sunday Times (Perth, W. Australia), Letters to The Editor, p 65, Sunday, October 19, 2008
    Banking blips
       PRIME Minister Kevin Rudd, like several other political leaders around the world in the past few weeks, has again said that the country's financial system is robust.
       Seemingly the others didn't even blush as 14 major banks toppled over, and governments scrambled to prop them up with billions and billions of dollars, pounds, and euros etc. (except Lehman Brothers).
       Where was all that money while people went without enough nurses, doctors, police, rail maintenance, and so on?
       Or are the government billions created in the same way that banks do – mere blips on a computer screen? JOHN C. MASSAM, Greenwood
    Time for tariffs
       KEVIN Rudd should be congratulated on his effort to turn around the financial crisis.
       But he should have gone much further than just giving money to the unfortunate in our society, because unless that money is spent on Australian goods and services, it will not resolve the financial problem.  It will only make it worse.
       We do not live in a global village, as we are led to believe.  We live in a competitive world, so therefore we must look after our nation's affairs first.  If we don't, we will have higher unemployment and a lower standard of living.
       We must introduce tariffs and have a government bank. RON BELLAMY, Mandurah

       [ORIGINAL HEADING sent with first letter: "From whence come these billions?" ENDS.]
       [WORDS OMITTED on publication are shown like this. ENDS.]
    [Oct 19, 08]

    • Be wary of economic doomsayer   
    Academic lauded by media but his talk of another Great Depression must be questioned

    Be wary of economic doomsayer

       The West Australian, , By GERARD HENDERSON, p 21, Tuesday, October 21, 2008
    It had to happen. In the current international financial crisis, it was always likely that the cult of celebrity would merge with that of economic doomsayer. In Australia the leading doom-celeb is Steve Keen, Associate Professor of economics and finance at the University of Western Sydney.
       What a month it has been for Professor Keen. In late September he was photographed in colour in the Daily Telegraph along with his partner, Melina Forrest. He, looking at the camera, clad in a white T-shirt with a blue patch on which was printed a quote from the economist John Maynard Keynes. She, standing close and looking admiringly into his eyes.
       It's not often that a middle-aged academic from a suburban university receives such coverage in the popular press.
       How did he get there? By predicting another Great Depression, like the one that devastated the Western world in the 1930s, that's how.
       The immediate justification for the story was the announcement that Professor Keen has decided to sell his apartment in inner-city Sydney. There was even a touch of lament as he explained his reasoning to the avid reporter: "It breaks my heart. But I don't want to live my old age in poverty and there's no point in paying a mortgage on an asset that is going to fall by 40 per cent or so in the next few years."
      [Picture] Pessimistic: Professor Steve Keen is predicting another Great Depression with unemployment ranging up to 20 per cent  
       You wonder precisely why this doom-celeb believes that it is a good idea to advise potential buyers of his abode that any such purchase will decline in value by 40 per cent in a few years. Perhaps he is not such a fatalist, after all. Or perhaps he just likes the media attention which he would not have received if he had predicted a recession (rather than a depression) with housing prices declining by, say, only 20 per cent. To receive maximum coverage, doom-celebs need to err on the side of hyperbole.
       On Sunday night I learnt of Professor Keen's forthcoming appearance on 60 Minutes by a Channel 9 promo which announced his prediction of a depression accompanied by "at least a 10-15 per cent level of unemployment". The program, titled The Big Bust, certainly lived up to its heading. Presenter Liz Hayes referred to the current looming economic downturn as "the worst financial crisis the world has seen". It seems that she overlooked the Great Depression when, in Australia, unemployment rose to 30 per cent of the essentially male workforce.
       Soon the stage shifted to Professor Keen's domestic arrangements. Hayes reported that "he hasn't found a buyer yet" for his home but she seemed impressed that he had put his property where his mouth was, so to speak. So much so that the presenter saw a lesson in such behaviour for 60 Minutes viewers, commenting: "It says a lot when you, the economist, decide that you have got to sell." Hayes then asked: "Is that something we should all be doing?" The answer was broadly in the affirmative.
       Hayes' reference to Professor Keen as "the economist" was revealing. It is true that he was the only economist heard in that part of the program which covered the Australian economy. However, many economists would take a less alarmist view of the Australian – and even the United States' – economy. For example, on 60 Minutes, Professor Keen prophesied a depression lasting "about 10 years", whereas the American economist Jason Weisberg predicted a world recession (not depression) and maintained that it would be "not long-lived".
       In between his Daily Telegraph star coverage and his star billing on 60 Minutes, Professor Keen was interviewed by the 7.30 Report's Kerry O'Brien on ABC 1.
       A Google search reveals that Professor Keen invariably receives soft interviews on the ABC and is rarely, if ever, subjected to a debate where another qualified economist can test his seeming hyperbole. Professor Keen ran his familiar lines to O'Brien, except that he notched up his estimate of looming unemployment to 20 per cent.
       In Keen-speak that's not adding hyperbole, just rounding up.
       The following evening O'Brien interviewed Kevin Rudd. Instead of positing his own questions, the 7.30 Report presenter asked the Prime Minister to respond to Professor Keen's views. It was as if Australia's leading doom-celeb is the only economist worth hearing. Three times O'Brien asked Mr Rudd about Professor Keen's predictions that there will be a marked fall in property values. Not unexpectedly, the Prime Minister made it known that he was not in the business of providing predictions "about where house prices are going".
       Professor Keen has a deeply held view about debt. Put simply, he does not really approve of it. Who knows? His predictions of a debt-induced, decade-long depression, with home prices reduced by 40 per cent and unemployment rising to up to 20 per cent, may be correct. But this doom-celeb's soothsaying may prove to be wrong. In which case the Daily Telegraph, 60 Minutes and The 7.30 Report will have erred in running Professor Keen's views virtually without challenge.
       Professor Keen has been able to get away with the view that there is something inevitable about the coming of a 1930s style Great Depression.  This overlooks the fact that governments can take decisions which may alleviate increases in unemployment or falls in property prices, such as increasing expenditure and continuing high levels of immigration.
       Despite Professor Keen's economic determinism, there is little that is inevitable about economics.  The Australian media would be well advised to be more sceptical about economists with messages on their (fashionable) T-shirts.
       Gerard Henderson is executive director of The Sydney Institute #

       [1st RECAPITULATION: Professor Keen has a deeply held view about debt.  Put simply, he does not really approve of it. ENDS.]
       [1st COMMENT: Well, with both Australians and Americans hopelessly over-committed to credit cards and mortgages, their share and land prices ramped up by bank credit, and their actual economies only propped up by loans from economies such as China's, why not praise him?  Prof. Keen is closer to the truth than most people. ENDS.]
       [2nd RECAPITULATION: This overlooks the fact that governments can take decisions which may alleviate increases in unemployment or falls in property prices, such as increasing expenditure and continuing high levels of immigration. ENDS.]
       [2nd COMMENT: They never learn, the Right Wing, do they?  Besides its bad effects on social cohesion and public services such as hospitals and police, high immigration such as in recent years is a CAUSE of rental pressure, which in turn presses on wage claims and so has a deleterious effect on the economy, if the following statement quote is to be believed: ENDS.]
       [EVIDENCE: Housing Industry Association (HIA) managing director Ron Silberberg today blamed the shortage of private rental accommodation on net immigration he estimated at 250,000 people a year.  "There has been an uncontrolled expansion of the immigration program" … – The Australian, www.the australian. au/story/ 0,25197, 23467987- 36418,00.html , By Peter Williams and Kate Corbett | April 01, 2008. ENDS.]
       [AND ANOTHER THING: The Federal Reserve Bank of the United States was REDUCING interest down to about 1 per cent, while the Australian Reserve Bank was INCREASING interest, only having suddenly cut it recently.  Since the 1930s the economic gurus and big business have been telling the world that it is one world, economically speaking.  How could diametrically opposed interest policies both be correct?
       Think about it: How much does it really COST a bank to issue a cheque-book, with the proviso that society will accept cheques as if they were money?  In the pen and ink days of banking, it had been calculated that A HALF A PER CENT would provide bankers with a good living. ENDS.]
    [October 21, 2008]

    • Steve Keen:  An invitation to Gerard Henderson.   

    Steve Keen:  An invitation to Gerard Henderson (Australian political on-line newsletter), By Steve Keen, Associate Professor of Economics at the University of Western Sydney; October 21, 2008
       Gerard Henderson's diatribe in today's SMH argues that the media has done a "soft" job on my views, which have only gained notoriety because of the extreme predictions I have made about the forthcoming economic downturn qualifying as not merely a recession, but a Depression.  It seems I've only got attention because of my extreme views, while the media has let the side down by doing a "tabloid" job only, and not subjecting my views to scrutiny.
       In fact, as many in the media know, I have gained attention because of my Debtwatch Report, which will be two years old as of the next issue (No. 28, to be published in November the day before the RBA meeting).  The journalists who have reported my views -- including of course Kerry O'Brien, who gets special attention from Gerard in his mockumentary -- have read my analysis for two years now.  Yet I saw no sign of any attention to the analysis behind my predictions in Henderson's piece, apart from possibly a "just in case" concession towards the end where he noted that "[Keen's] predictions of a debt-induced decade-long depression … may be correct."
       In that case, the commentator who deserves the approbrium for "tabloid" journalism is Henderson himself, and not the ABC, nor the Daily Telegraph, nor Sixty Minutes.  They, after all, read my research, have quizzed me extensively about it, and made the decision based on investigative journalism that my views deserved coverage.
       For this, I applaud them. I applaud them for standing up for the principles of the Fourth Estate.  Standard economic commentary has been dominated by the cheerleaders for the policies which have led to this crisis, while the authorities themselves and the academic profession of economics itself have turned a blind eye to any arguments that questioned the mantra in favour of deregulated finance.
       I know this from extensive experience.  I have made five applications for ARC funding to investigate the dynamics of debt-deflations and Depressions in the last ten years; all have been unsuccessful (including one time when I topped UWS researchers on the ARC's then published referees' point scores, after which seven UWS researchers received funding -- but I was not one of them).
       I made a submission to the Wallis Committee in July 1996, in which I warned that securitisation of loans could lead to a crisis exactly like the Subprime crisis that has now unfolded, and of course my comments were ignored.
       I wrote to the RBA in June 1998 offering to hold a seminar on the "Financial Instability Hypothesis", which is the foundation of my argument that we are likely to experience a Great Depression.  The offer was declined.
       As has often been said, official channels are clogged to make sure information and criticism doesn't get listened to. So when I saw the debt that Australia's speculative bubble in real estate and belatedly shares had got us into, I turned to the journalistic profession to raise the alarm. To its credit, since I made a good case and the empirical evidence was compelling, journalists listened to me.
       So Gerard, maybe you should do some investigative journalism now too. Go to my website, where you will find Debtwatch Reports going back to November 2006, and academic papers on debt deflation published as long ago as 1995 (maybe even read Debunking Economics; certainly check out its website).
       And if you'd like to take a real risk and play the ball rather than the man, I'm more than willing to give a seminar on debt deflation at your Sydney Institute.
       Over to you. #

       [MORE STUDY: "UWS Economist calls for tighter regulation of lenders," http://pubapps. news/index. php?act= view&story_ id=2230, July 01, 2008.
       University of Western Sydney economist Associate Professor Steve Keen says regulation of lenders will go a long way towards improving the Australian financial system.
       In a submission to the Federal Treasury's 'Green Paper on Financial Services and Credit Reform', Associate Professor Keen, from the UWS School of Economics and Finance, recommends that lending, rather than deposit-taking, should become the centrepiece of a regulatory framework.
       "The greatest hole in financial regulation is that deposit-taking banks and building societies are regulated, but non-bank lenders are not," says Associate Professor Keen. […] ENDS.]
       [ANOTHER WARNER: Mr David Keane, (note different spelling) of Western Australia, since April 2002 has been issuing quarterly warnings of inordinate debt and other economic dangers. An example is:
       [Debt-driven economy of Australia], "Recent Australian Economic Trends," , By David Keane, keane AT nw DOT com DOT au , Western Australia, January 26, 2007.
       […] In the analysis released in September 2004, the yearly increase in Total Australian Liabilities for the first time exceeded 25% of the Australian Gross Domestic Product. … We have clearly entered the end stage of our society's experiment with a debt driven economy. … turbulent weather ahead […]
       Mr Keane's latest article, "Hedge funds savage Australian dollar," of October 10, 2008, is on this webpage in date order. ENDS.]
       [ACKNOWLEDGEMENT of the Prof. Keen riposte: Dion Giles. ENDS.]
    [Oct 21, 08]

    • Humiliation for high priest of US capitalism.   

    Humiliation for high priest of US capitalism

       The Australian Financial Review, edletters § afr com au , http://www. home/login. aspx?ATL:// 20081025 000030460380& section= search ;
       SOME big historical mistakes are entirely obvious, yet it's still a surprise when the wrongdoer admits error.  Like the Vatican's concession that it was wrong in locking up Galileo for his heresy that the earth orbits around the sun. [* * *]
       The full article is available to subscribers only.
    [Oct 25, 08]

    • 'I made a mistake' admits Greenspan.   

    ‘I made a mistake’ admits Greenspan

       The Australian,,,24548000-20142,00.html , by David Nason, New York Correspondent, October 25, 2008
      [Picture] Shocked: Former US Federal Reserve chairman Alan Greenspan in Washington yesterday.    Picture: Reuters  
       WASHINGTON – ALAN Greenspan has finally conceded that the free market philosophy he championed for 40 years has fundamental flaws.
       The former US central banker from 1987 to 2006, who was once regarded as omnipotent in all things financial, said they must be addressed by a new era of regulation.
       He made his historic backflip before a Congressional hearing in Washington, the same kind of forum that for years acted as his personal free market cheer squad.
       In doing so he effectively marked the end of the Age of Reagan, the 30 years beginning with the rise of former President Ronald Reagan in which business was given free rein to create wealth wherever and however it wanted, with the bare minimum of government intrusion.
       But now, with the world's most advanced economies in the midst of the worst financial crisis since the Great Depression and hundreds of billions of taxpayers' dollars spent trying to prevent a full-scale global meltdown, Mr Greenspan said the free market ideology that had guided his life and dominated world capitalism for a generation did not work the way he thought it would.
       Appearing before the House Committee on Oversight and Government Reform, the man once dubbed "The Maestro" said he had found a flaw in the "critical functioning structure that defines how the world works". "I don't know how significant or permanent it is but I have been very distressed by that fact," Mr Greenspan said.
       "I made a mistake in presuming that the self-interests of organisations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms."
       Asked by committee chairman Henry Waxman if he was saying his world view was "not working", Mr Greenspan said: "Absolutely, precisely. You know, that's precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well."
       The extraordinary testimony was not a total act of contrition and during the four hours of testimony there were sharp exchanges with some committee members. Mr Waxman accused Mr Greenspan of failing to use his authority as Fed chairman to prevent the reckless sub-prime lending that started the housing market collapse and of doing nothing to regulate the derivatives products now causing stress in the credit markets. Mr Greenspan responded by saying that many parts of the derivatives market were performing well.
       He also insisted Fed officials were not well placed to assess national mortgage markets, of which sub-prime loans now comprise 10 per cent.
       But in a 2004 speech, Mr Greenspan had no problem urging lenders to think outside the square of the traditional US 30-year fixed-rate mortgage and offer a greater variety of products to homebuyers.
       "Innovation has brought about a multitude of new products, such as sub-prime loans and niche credit programs for immigrants," he said at the time.
       "Such developments are representative of the market responses that have driven the financial services industry throughout the history of our country.
       "With these advances in technology, lenders have taken advantage of credit-scoring models and other techniques for efficiently extending credit to a broader spectrum of consumers. Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately." In his prepared remarks to the committee, Mr Greenspan said he was in "a state of shocked disbelief" about the breakdown in the ability of banks to regulate themselves and, without putting a number on it, predicted a significant rise in unemployment in the coming recession.
       He also attempted to defend his record, saying that in 2005 he blew the whistle on the underpricing of risk and warned it could have dire consequences.
       "This crisis, however, has turned out to be much broader than anything I could have imagined," he said.
       "Fearful American households are attempting to adjust as best they can to a rapid contraction in credit availability, threats to retirement funds, and increased job insecurity."
       Mr Greenspan said it was the failure to properly price risky mortgage-backed securities that precipitated the crisis.
       "In recent decades, a vast risk management and pricing system has evolved, combining the best insights of mathematicians and finance experts, supported by major advances in computer and communications technology," he said.
       "A Nobel Prize was awarded for the discovery of the pricing model that underpins much of the advance in derivatives markets. This modern risk management paradigm held sway for decades.
       "When in August 2007 markets eventually trashed the credit agencies' rosy ratings, doubt was indiscriminately cast on the pricing of securities that had any taint of sub-prime backing.
       "As much as I would prefer it otherwise, in this financial environment I see no choice but to require that all securitisers retain a meaningful part of the securities they issue."
       Mr Greenspan admitted to being "partially" wrong in failing to regulate credit default swaps, but also appeared to warn against increased oversight that was too onerous when he said: "I think that it's interesting to observe that we find failures of regulation all the time." #


    Greenspan's admissions
       "I made a mistake in presuming that the self-interest of organisations, specifically banks and others, was such that they were best capable of protecting their own shareholders and the equity.

       Yes, I found a flaw … that is precisely the reason I was shocked because I'd been going for 40 years or more with very considerable evidence that it (our policy) was working exceptionally well.

       I was partially wrong … in opposing the regulation of derivatives.

       We were wrong quite a good deal of the time.  Forecasting never gets to the point where it's 100% accurate."
    How Greenspan was lauded on retiring in 2005
       Mr Greenspan's historic four terms had been the most successful tenure in history of a Federal Reserve chairman … one truly admirable for his vision, his wisdom and his strength. -- Britain's Treasury chief Gordon Brown (and now Prime Minister).
       Greenspan is the greatest central banker ever -- Alan Blinder, a Bill Clinton economist.
       Greenspan's legacy
    ■ Aug. 11, 1987: Alan Greenspan takes over at the Fed
    ■ Oct. 1987: "Black Monday" Dow Jones industrial average suffers a record one-day plunge of 23 per cent
    ■ March 1991: Recession ends and a 10-year expansion begins
    ■ Feb. 4, 1994: Fed publicly announces change in the federal funds rate
    ■ Dec. 5, 1996: Greenspan delivers "irrational exuberance" speech on stock market rise
    ■ March 2001: Record 10-year expansion ends and economic recession begins
    ■ Nov. 2001: Recession ends and job losses mount
    ■ 2007-2008: Global financial crisis in what Greenspan calls a "once-in-a-century credit tsunami"
       [RECAPITULATION: … "The Maestro" said he had found a flaw in the "critical functioning structure that defines how the world works". ENDS.]
       [COMMENT: But he hasn't found THE flaw!  Unless he has come across the schools of thought that expose the "unearned increments" and "non-liquidating" elements of the economic and financial systems, he will remain ignorant of the causes of financial depressions, and of economic booms. COMMENT ENDS.]
    [Oct 25, 08]

    • Global meltdown - "We told you so!"     

    Global meltdown - “We told you so!”

       John C. Massam, for the STOP(MAI) COALITION,, (affiliated with AFTINET ), sent to a total of about 34 news outlets, October 26, 2008
       The StopMAI Coalition in Perth for the past 10 years or so has been among those warning the public that globalism was only a house of cards, unsustainable. We believed it was going to be easy for the financiers and "banksters" to bring the global economy to its knees - not that this was necessarily a deliberate coordinated policy on their part rather than the unintended and long-delayed result of laissez-faire speculative activity!
       Unbelievable debt levels and current account deficits of the United States, Australia, and other countries had been pointed out by us (and even by some politicians on rare occasions trying to win political advantage), but we were persistently disregarded in policy-making by most Western political and business leaders.
       Within the past month top leaders have been saying that the economy's fundamentals were sound, and there was no need to fear. Some of our members agree with that, and say that the current credit squeeze, like that of the 1920s-30s, is artificial.
       Suddenly in October 2008 about 15 banks seemed to be collapsing, huge brokers were in trouble, and insurance giants were paralysed. Various governments suddenly pulled billions and billions of dollars in credit out of their magicians' hats, so as to prop up nearly all these supposedly stricken financial businesses - and they then declared there was a credit shortage!
       Last week we had the Reserve Bank of Australia on page one of a Perth paper telling us all would be well, while on an inside page we found the big banks telling us that a recession was starting.
       On Friday Alan Greenspan, the former head of the US Federal Reserve Bank, said he had made a mistake in opposing government regulation of "derivatives," those scraps of paper based on other paper scraps.  He had believed that the self-interest of the leaders of banks and others would protect their own shareholders and their own equity in the firms.
       He's still right!  That's exactly what the super-rich are doing -- making themselves richer! The global meltdown is proving that the leaders are acting to enrich themselves, Mr Greenspan!
       Other than the super-rich, who will benefit from a credit drought, worker layoffs, rampant export mania (leading to the destruction of small and middle-range business, farmers in the Third World etc.), ongoing cutbacks to health, education, transport and so on?
       For about 10 years the StopMAI Coalition has been saying globalism is bad for the people.  We told you so long before but your challenge now is to listen to informed thinking today and act upon it! #
    [Oct 26, 08]

    • Tax the land.   


       Harper's Magazine, By Michael Hudson, pp 40-42, November 2008
       To save industrial capitalism, we might begin by looking at changes sought by classical economists. Reformers from Adam Smith to John Stuart Mill to Thorstein Veblen hoped to streamline industry and increase economic competitiveness by doing away with the special privileges inherited from feudalism; namely, "economic rents" earned from longstanding land, monopoly, and banking rights. Income from these entitlements added to the cost of doing business but neither produced anything tangible nor spurred technological innovation. Classical economists contended that the tax burden needed to be shifted off of industry and

       Michael Hudson is Distinguished Professor of Economics at the University of Missouri-Kansas City and the author of many books, including Super Imperialism: The Origin and Fundamentals of U.S. World Dominance. His last article for Harper's Magazine, "The New Road to Serfdom," appeared in the May 2006 issue.

    labor and onto that which was taken from nature or granted by government decree – what Mill called the "unearned increment" that landlords extract "in their sleep."
       In the United States, progressive-era reforms advanced many of these ideas, and by World War I the nation was well on its way toward achieving what John Maynard Keynes would call "euthanasia of the rentier." The federal government passed its first income tax in 1913, at a time when even more wealth than today was either inherited or derived from insider dealings. Steeply progressive, the tax was levied on only the wealthiest 1 percent of the population (households earning more than $83,000 in today's dollars), with their income taxed at a marginal rate of 77 percent by 1918. Capital gains were taxed at the same level, on the reasoning that they added to net worth just as earnings and savings did. These policies helped create a middle class in America, while similar measures did much the same in Europe.
       But the class that Franklin D. Roosevelt called "economic royalists" fought back and over time (and particularly after 1980) reversed these progressive tax policies. The top marginal tax rate for personal income has been slashed, from a high of 94 percent in 1944 to roughly 35 percent today. Capital-gains taxes are now capped at 15 percent, and this tax is not even collected on the vast majority of real estate sales, since commercial owners are not taxed if they use their sales proceeds to buy new property. As a sop to homeowners, residential price gains have been made tax-free for the first $500,000. Rental income also has been rendered free from taxation by the accounting sophistry that property is depreciating rather than rising in value, even when actual market prices are soaring. At the state and local levels, prior to 1930 some 70 percent of public revenue came from property taxes; today, only 21 percent does, with the difference made up primarily in increased taxes on income and sales.
       These tax breaks on property and capital gains, along with the tax deduction for interest payments, provide a powerful incentive for buyers to go into debt; that is, to pay mortgage interest to bankers for property they hope to sell at a gain. Thus, the income that governments have relinquished through property-tax cuts ends up being paid by new buyers to banks as interest. Rather than funding new development projects, most savings have been turned into bank loans for housing that already exists, "post-industrializing" the economy and burdening it with an overhead of non-production costs. We are far from the wealth of nations that Adam Smith imagined.
       As reform-minded economists have long argued, we must tax the rentiers. Taxing their privilege would yield as much as the present income and sales taxes combined, without eating into the earned income of wages and profits. For example, roughly half of the estimated $1.4 trillion rental value of all residential and commercial real estate comes from the land on which buildings sit. The idea is to tax not the buildings but this land value – sites that are provided by nature and that increase in value incidentally when a rail line or a Starbucks is built nearby. By taxing only the land, we would no longer be penalizing new construction and would discourage speculative hoarding. Indeed, in both 2006 and 2007 the market price of land went up by $2.5 trillion. This increase in balance-sheet valuation was not earned, since landlords did not have to make an investment to create it; moreover, taxing these sites could help cover the costs of new development and would not reduce the supply of land.
       A related reform would abolish the tax deduction for interest payments. In 2006, property owners paid $742 billion in mortgage interest, accounting for 84 percent of the total interest collected by the financial sector. Assuming a 33 percent overall tax rate, this deduction alone cost the Treasury a quarter trillion dollars. (By encouraging debt financing rather than equity investment, this subsidy to mortgage lenders helped fuel the real estate bubble.)
       The public also should own – or at least be able to collect rental revenue on – the nation's infrastructure and the monopolies for which only one provider makes economic sense. The broadcasting and communications spectrum is just one example of immense private wealth that has been carved out of the public domain. (As with England's land barons, broadcasters received their right on the condition that they fulfill specific public obligations, which, over time, they came to resist.) I estimate that the broadcasting spectrum, recently valued at $480 billion, accounts for another $100 billion in free economic rent. Other privatized natural resources lose perhaps $250 billion more.
       The total lost tax revenue on property, capital gains, interest, and infrastructure is likely upwards of $1 trillion, a significant share of America's $12.4 trillion national income in 2007. Instituting these taxes on land would make it harder for property buyers to take on large loans for homes they cannot afford, a result that would ultimately drive down the cost of housing. Additionally, the money that was being funneled to banks in the form of inflated loan payments would now go to the government as taxes, thereby allowing income and sales taxes to be radically reduced. In all, a considerable net gain for Americans.
       In our country and elsewhere, the transition from a feudal economy to a modern one remains incomplete. Hereditary estates and monopolies still retain huge privileges; taxes on property and rents remain at historic lows. Taxing these "unproductive" incomes would help to unburden labor and enterprise, and these changes would go a long way toward fixing what ails our economic system. #

       [QUOTE from the introduction to Harper's Magazine's introduction to its "Forum" on the global financial meltdown: "Our system became so dominated by finance, insurance and real estate [FIRE], and by the complex derivative securities these industries engendered, that the most eminent financiers (and their unsleeping computers) were unable to protect us from economic shock." ENDS.]
       [OTHER ARTICLES in the Forum:
    • "Realign the interests of Wall Street," by Nobel Prize winner Professor Joseph E. Stiglitz, Columbia University;
    • "Abolish stock options," by author Barry C. Lynn, of the New America Foundation;
    • "Protect Financial Consumers," by Prof. Elizabeth Warren of Harvard Law School, and Amelia Warren Tyagi, of Business Talent Group.
    • "Plan," by economics author James K. Galbraith.
    • "Reindustrialize," by technology startup entrepreneur Eric Janszen.  A sample: "For twenty-five years, our economy has been dominated by asset bubbles in the finance, insurance, and real estate (FIRE) sector."
    • "Localize," by author Bill McKibben.
    •    Go to your local library, and spend two hours reading and digesting these articles, please. ENDS.]
       [SPELLINGS, USAGE: Following are some U.S. original spellings in the above, followed by the Australian preferences:- "labor" (labour), "fulfill" (fulfil), "privatized" (privatised), and "funneled" (funnelled).  In the second-last paragraph, the word "likely" would be written "probably" in Australia and Britain, maybe.  (Inserted to help younger Oz and Brit readers.) ENDS.]
    [Issue: November 2008]

    • Economic crisis: predicted and predictable.  Editorial. 
    Economic crisis:  predicted and predictable
       News Weekly (Vic., Australia), weekly. , Editorial, by Peter Westmore, national president of the National Civic Council, p 24, November 8, 2008 The worst of the economic crisis is behind us, Reserve Bank Governor Glenn Stevens suggested in his recent address to the Trans-Tasman Business Circle.
       After acknowledging the risks in prediction, he said that "it seems to me that the key elements of dealing with the root issues in the crisis are starting to come into place … It addresses the issues of liquidity, capital and confidence."
       "As a result," he said, "the likelihood of a global catastrophe has in fact declined over the past couple of weeks."
       It was at least refreshing that the Reserve Bank governor accepted that there was some likelihood of "a global catastrophe".
       What is unacceptable is that the Reserve Bank and the Australian Treasury, which are supposed to be the custodians of the Australian economy, were apparently unable either to anticipate the current economic crisis or to put in place measures to avert it.
       Instead, we have had economic policy development on the run, as the Rudd Government responded to collapsing confidence by injecting billions into the banking system to deal with the liquidity crisis, then later announced that $10 billion from the Budget surplus would be used to niake one-off payments to first home-buyers, families and pensioners, then later guaranteed all deposits in banks, building societies and credit unions – before partially changing direction.
    Long anticipated
       The hard fact is that this crisis was predicted long ago, even in the columns of News Weekly.  In the years before his death in 1998, B.A. Santamaria repeatedly warned that the massive growth of the debt economy, with the totally deregulated financial market which developed since the 1980s, was unsustainable.
       Back in 1996, an American academic economist, Thomas Palley, wrote an important article in The Atlantic Monthly titled, "The forces making for an economic collapse".
       Noting the soaring level of debt in the United States at the business, personal and government levels, he said, "The high level of indebtedness in the US economy implies that if prices and wages start falling, spending and fresh borrowing will most likely collapse, and bankruptcies will rocket. The economy could then find itself in a contractionary spiral, with wage deflation feeding a collapse in spending, and collapsing spending feeding further wage deflation." (Atlantic Monthly, July 1996).
       Economic historian and author Eamonn Fingleton recently wrote, "After all, it was not as if the crisis came as a complete surprise.  As far back as 2002, the inflating bubble was presciently identified by Dean Baker, as well as by Warren Buffett.  Yale economist Robert Shiller and financier Jim Rogers were among others who saw the disaster coming, and the Basel-based Bank of International Settlements gave [US Treasury Secretary Henry] Paulson a particularly blunt warning in the summer of 2007."  (The American Conservative, October 20, 2008).
       While we can probably be grateful that Mr Glenn Stevens has recognised that the world was on the brink of a financial catastrophe, he showed little sign of accepting what caused the crash, and what is needed to prevent the next one.
       He said, "The question, then, is how to restore confidence and stability to these important markets and institutions. The first thing is to continue to provide liquidity."
       Anatole Kaletsky, writing in the London Times, identified the causes in these terms: "Since the early 1990s, regulatory changes, inspired by an over-zealous belief in free-market economics, have intensified boom-bust cycles.  These regulatory distortions have rested on the naive belief that 'the market is always right'.
       "The greatest irony is that the last adherents of this free market dogma are the financial regulators whose raison d'etre is to guard against situations when the markets are dangerously wrong, but who still insist, for example, that energy prices are never manipulated by speculation or that governments must draw black and white distinctions between shareholders and creditors of troubled banks."  (The Times, London, September 15, 2008).
       Mr Stevens's assertion that "the key elements of dealing with the root issues in the crisis are starting to come into place", is wishful thinking, like his repeated assertions over the past 12 months that Australia's financial system is sound, when the country's net foreign debt has soared above $600 billion, and we are now heavily, or around 50 per cent, dependent on our trade with China, along with our gas and mineral exports.
       Along with our vulnerability to the global meltdown, the Reserve Banks's effective abandonment of the policy to control inflation could itself push Australia into stagflation (i.e., economic stagnation combined with inflation), which the World Bank's former chief economist, Joseph Stiglitz, has described as the major threat to the global economy and "the worst of both worlds".
       Mr Stevens should resign to make way for someone who will deal with the causes, not just the symptoms of the present crisis. #

       [1st RECAPITULATION: In the years before his death in 1998, B.A. Santamaria repeatedly warned that the massive growth of the debt economy, with the totally deregulated financial market which developed since the 1980s, was unsustainable. ENDS.]
       [1st COMMENT: Correct.  Because money comes into existence as a debt due to the financial system, nearly always with an interest bill added on, debt tends to increase continually.  The producers and consumers cannot pay back more than they borrowed, unless the banks keep creating more credit-money.  Australian economic commentator David Keane has kept warning of allowing debt to keep increasing. ENDS.]
       [2nd RECAPITULATION: He said, "The question, then, is how to restore confidence and stability to these important markets and institutions. The first thing is to continue to provide liquidity." ENDS.]
       [2nd COMMENT: Does liquidity mean making more of that "funny money" out of thin air, but without seeing that it is used to produce and distribute goods and services by Australians to Australians?  Or does it mean such parasitic practices as propping up people who sell "derivatives" – little bits of paper with lies on them?  Or helping people devastatingly debt-ridden because this was their way of paying no company tax and no income tax?
       Yes, Mr Stevens should resign, or be dismissed.  But others ought to be put on criminal charges. COMMENT ENDS.] cont20.htm#economic_crisis_predicted
    [Nov 8, 08]

    • The Great Depression of the 21st Century: Collapse of the Real Economy.       

    The Great Depression of the 21st Century

    Collapse of the Real Economy
       Global Research, index.php ?context=va &aid=10977 , By Michel Chossudovsky, November 15, 2008
       The financial crisis is deepening, with the risk of seriously disrupting the system of international payments.
       This crisis is far more serious than the Great Depression. All major sectors of the global economy are affected. Recent reports suggest that the system of Letters of Credit as well as international shipping, which constitute the lifeline of the international trading system, are potentially in jeopardy.
       The proposed bank "bailout" under the so-called Troubled Asset Relief Program (TARP) is not a "solution" to the crisis but the "cause" of further collapse.
       The "bailout" contributes to a further process of destabilization of the financial architecture.  It transfers large amounts of public money, at taxpayers' expense, into the hands of private financiers.  It leads to a spiraling public debt and an unprecedented centralization of banking power.  Moreover, the bailout money is used by the financial giants to secure corporate acquisitions both in the financial sector and the real economy.
       In turn, this unprecedented concentration of financial power spearheads entire sectors of industry and the services economy into bankruptcy, leading to the layoff of tens of thousands of workers.
       The upper spheres of Wall Street overshadow the real economy. The accumulation of large amounts of money wealth by a handful of Wall Street conglomerates and their associated hedge funds is reinvested in the acquisition of real assets.
       Paper wealth is transformed into the ownership and control of real productive assets, including industry, services, natural resources, infrastructure, etc.
    Collapse of Consumer Demand
       The real economy is in crisis. The resulting increase in unemployment is conducive to a dramatic decline in consumer spending which in turn backlashes on the levels of production of goods and services.
       Exacerbated by neoliberal macro-economic policy, this downward spiral is cumulative, ultimately leading to an oversupply of commodities.
       Business enterprises cannot sell their products, because workers have been laid off. Consumers, namely working people, have been deprived of the purchasing power required to fuel economic growth. With their meager earnings, they cannot afford to acquire the goods produced.
    Overproduction Triggers a String of Bankruptcies
       Inventories of unsold goods pile up. Eventually, production collapses; the supply of commodities declines through the closing down of production facilities, including manufacturing assembly plants.
       In the process of plant closure, more workers become unemployed. Thousands of bankrupt firms are driven off the economic landscape, leading to a slump in production.
       Mass poverty and a Worldwide decline in living standards is the result of low wages and mass unemployment. It is the outcome of a preexisting global cheap labor economy, largely characterized by low wage assembly plants in Third World countries.
       The current crisis extends the geographic contours of the cheap labor economy, leading to the impoverishment of large sectors of the population in the so-called developed countries (including the middle classes).
       In the US, Canada and Western Europe, the entire industrial sector is potentially in jeopardy.
       We are dealing with a long-term process of economic and financial restructuring. In its earlier phase, starting in the 1980s during the Reagan Thatcher era, local and regional level enterprises, family farms and small businesses were displaced and destroyed. In turn, the merger and acquisition boom of the 1990s led to the concurrent consolidation of large corporate entities both in the real economy as well as in banking and financial services.
       In recent developments, however, the concentration of bank power has been at the expense of big business.
       What is distinct in this particular phase of the crisis, is the ability of the financial giants (through their overriding control over credit) not only to create havoc in the production of goods and services, but also to undermine and destroy large corporate entities of the real economy.
       Bankruptcies are occurring in all major sectors of activity: Manufacturing, telecoms, consumer retail outlets, shopping malls, airlines, hotels and tourism, not to mention real estate and the construction industry, victims of the subprime mortgage meltdown.
       General Motors has confirmed that "it could run out of cash within a few months, which could prompt one of the biggest bankruptcy filings in U.S. history". (, November 11, 2008))  In turn this would backlash on a string of related industries. Estimates of job losses in the US auto industry range from 30,000 to as much as 100,000.(Ibid).
    [Image:] Collapse of General Motors Share Price
       In the US, consumer retail companies are in difficulty: the share prices of JC Penney and Nordstrom department store chains have collapsed. Circuit City Stores Inc. filed for Chapter 11 protection. The shares of Best Buy, the electronics retail chain, have plunged.
       The Vodafone Group PLC, the world's biggest mobile phone company not to mention InterContinental Hotels PLC are in difficulty, following the collapse of stock values. (AP, Nov 12, 2008).  Worldwide, over two dozen airlines have gone under in 2008, adding to a string of airline bankruptcies in the course of the last five years. (Aviation and Aerospace News, 30 October 2008).
       Denmark's Second commercial airline Stirling has declared bankruptcy. In the US, a growing list of real estate companies have already filed for bankruptcy protection.
    [Image:] Vodophone. Collapse of Share Price
    [Image:] InterContinental Hotels PLC
       In the last two months, there have been numerous plant closures across America leading to the permanent layoff of tens of thousands of workers. These closures have affected several key areas of economic activity including the pharmaceutical and chemical industries, the automobile industry and related sectors, the services economy, etc.
       US factory orders have declined dramatically. Research firm Autodata reported in October that "sales of cars and light trucks in September had declined 27 percent compared with a year earlier."(Washington Post, October 3, 2008)
       According to the US Bureau of Labor Statistics, an additional 240,000 jobs were lost during the month of October alone:
    "Nonfarm payroll employment fell by 240,000 in October, and the unemployment rate rose from 6.1 to 6.5 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. October's drop in payroll employment followed declines of 127,000 in August and 284,000 in September, as revised. Employment has fallen by 1.2 million in the first 10 months of 2008; over half of the decrease has occurred in the past 3 months. In October, job losses continued in manufacturing, construction, and several service-providing industries…
       Among the unemployed, the number of persons who lost their job and did not expect to be recalled to work rose by 615,000 to 4.4 million in October. Over the past 12 months, the size of this group has increased by 1.7 million." (Bureau of Labor Statistics, November, 2008)
       The official figures do not describe the seriousness of the crisis and its devastating impact on the labor market, since many of the job losses are not reported.
       The situation in the European Union is equally disturbing. A recent British report points to the potential plight of mass unemployment in North Eastern England. In Germany, a report published in October, suggests that 10-15% of all automotive jobs in Germany could be lost.
       Job cuts have also been announced at General Motors and Nissan-Renault plants in Spain. Sales of new cars in Spain plummeted by 40 percent in October in relation to sales in the same month last year.
    [Image:]Workers of Nissan automaker protest in front of the Japanese company's building in Barcelona (AFP)
    Bankruptcies and Foreclosures: A Money-spinning Operation for the Financial Giants
       Among the companies on the verge of bankruptcy are some highly lucrative and profitable operations. The important question: who takes over the ownership of bankrupt giant industrial corporations?
       Bankruptcies and foreclosures are a money-spinning operation. With the collapse in stock market values, listed companies experience a major collapse of the price of their stock, which immediately affects their creditworthiness and their ability to borrow and/ or to renegotiate debts (which are based on the quoted value of their assets).
       The institutional speculators, the hedge funds, et al   have cashed in on their windfall loot.
       They trigger the collapse of listed companies through short selling and other speculative operations. They then cash in on their large scale speculative gains.
       According to a report in the Financial Times, there is evidence that the plunge of the US automobile industry was in part the result of manipulation:  "General Motors and Ford lost 31 per cent to $3.01 and 10.9 per cent to $1.80 despite hopes that Washington may save the industry from the brink of collapse.  The fall came after Deutsche Bank set a price target of zero on GM." (FT, November 14, 2008, emphasis added)
       The financiers are on a shopping-spree. America's Forbes 400 billionaires are waiting in limbo.
       Once they have consolidated their position in the banking industry, the financial giants including JP Morgan Chase, Bank of America, et al  will use their windfall money gains and bailout money provided under TARP, to further extend their control over the real economy.
       The next step consists in transforming liquid assets, namely money paper wealth, into the acquisition of real economy assets.
       In this regard, Warren Buffett's Berkshire Hathaway Inc. is a major shareholder of General Motors. More recently, following the collapse in stock values in October and November, Buffett boosted his stake in oil producer ConocoPhillips, not to mention Eaton Corp, whose price on the NYSE tumbled by 62% in relation to its December 2007 high (Bloomberg).
       The target of these acquisitions are the numerous highly productive industrial and services sector companies, which are on the verge of bankruptcy and/or whose stock values have collapsed.
       The money managers are picking up the pieces.
    Ownership of the Real Economy
       As a result of these developments, which are directly related to the financial meltdown, the entire ownership structure of real economy assets is in turmoil.
       Paper wealth accumulated through insider trading and stock market manipulation is used to acquire control over real economic assets, displacing the preexisting ownership structures.
       What we are dealing with is an unsavory relationship between the real economy and the financial sector. The financial conglomerates do not produce commodities. They essentially make money through the conduct of financial transactions. They use the proceeds of these transactions to take over bona fide real economy corporations which produce goods and services for household consumption.
       In a bitter twist, the new owners of industry are the institutional speculators and financial manipulators. They are becoming the new captains of industry, displacing not only the preexisting structures of ownership but also instating their cronies in the seats of corporate management.
    No Reform Possible under the Washington-Wall Street Consensus
       The November 15 G-20 Financial Summit in Washington upholds the Washington-Wall Street consensus.
       While formally presenting a project to restore financial stability, in practice, the hegemony of Wall Street remains unscathed. The tendency is towards a unipolar monetary system dominated by the United States and upheld by US military superiority.
       The architects of financial disaster under the 1999 Gramm-Leach-Bliley Financial Services Modernization Act (FSMA) have been entrusted with the task of mitigating the crisis, which they themselves created. They are the cause of financial collapse.
       The G20 Financial Summit doesn't question the legitimacy of the hedge funds and the various instruments of derivative trade. The final Communiqué includes an imprecise and blurred commitment "to better regulate hedge funds and create more transparency in mortgage-related securities in a bid to halt a global economic slide."
       A solution to this crisis can only be brought about through a process of "financial disarmament", which forcefully challenges the hegemony of the Wall Street financial institutions including their control over monetary policy.
       "Financial disarmament" would also require freezing the instruments of speculative trade, dismantling the hedge funds and democratizing monetary policy. The term "financial disarmament" was initially coined by John Maynard Keynes in the 1940s.
    Obama Endorses Financial Deregulation
       Barack Obama has embraced the Washington-Wall Street consensus. In a bitter twist, former Congressman Jim Leach, a Republican who sponsored the 1999 FSMA in the House of Representatives is now advising Obama on formulating a timely solution to the crisis.
    [Image:] Jim Leach
       Jim Leach, Madeleine Albright and former Treasury Secretary Larry Summers, who also played a key role in pushing through the FSMA legislation, were in attendance at the November 15 G-20 Financial Summit, as part of President-elect Barack Obama's advisory team:
    "President-elect Barack Obama and Vice President-elect Joe Biden announced that former Secretary of State Madeleine Albright and former Republican Congressman Jim Leach would be available to meet with delegations at the G-20 summit on their behalf.  Leach and Albright are holding these unofficial meetings to seek input from visiting delegations on behalf of the president-elect and vice president-elect. ( , November 15, 2008) #

       Related Article: Who are the Architects of Economic Collapse? Will an Obama Administration Reverse the Tide? - by Michel Chossudovsky - 2008-11-09
    The engineers of financial disaster are being considered by President-Elect Barack Obama for the position of Treasury Secretary.
       Book: The Globalization of Poverty and the New World Order, by Michel Chossudovsky
       In this new and expanded edition of Chossudovsky's international best-seller, the author outlines the contours of a New World Order which feeds on human poverty and the destruction of the environment, generates social apartheid, encourages racism and ethnic strife and undermines the rights of women. The result as his detailed examples from all parts of the world show so convincingly, is a globalization of poverty.
       This book is a skilful combination of lucid explanation and cogently argued critique of the fundamental directions in which our world is moving financially and economically.
       In this new enlarged edition – which includes ten new chapters and a new introduction-- the author reviews the causes and consequences of famine in Sub-Saharan Africa, the dramatic meltdown of financial markets, the demise of State social programs and the devastation resulting from corporate downsizing and trade liberalisation.
       Michel Chossudovsky is Professor of Economics at the University of Ottawa and Director of the Centre for Research on Globalization (CRG), which hosts the critically acclaimed website . He is a contributor to the Encyclopedia Britannica. His writings have been translated into more than 20 languages.
       Published in 12 languages. More than 150,000 copies sold Worldwide.
    [Nov 15, 08]

    • [Collapse? No, the financiers work system for themselves.]

    [Collapse?  No, the financiers work system for themselves]

       The West Australian, Letter to The Editor, p 22, Monday, November 17, 2008
       George Bush is right:  the failed financial system collapse is not the fault of the bankers and hedge fund managers.
       They have made billions from it.
       The system does work, but only for those bright or crooked enough to know how. J. Richmond, Stirling #

       [RECAPITULATION: The system does work .. ENDS.]
       [COMMENT: .. for the financiers. COMMENT ENDS.]
    [Nov 17, 2008]

    • It's OK to go into red: RBA boss Glenn Stevens  [Internet heading]  

    It's OK to go into red: RBA boss

      [Print heading]
       The Australian, http://www. theaustralian. business/ story/0,,2467 8469-36418,00. html , by David Uren, Economics correspondent, Pages One and 4, November 20, 2008
       MELBOURNE (Vic), Australia –
       THE Reserve Bank has given the green light for federal and state governments to go into deficit to support economic growth in the face of the global downturn.
       Reserve Bank governor Glenn Stevens said lowering interest rates alone might not be enough to rekindle consumer demand and business confidence.
       Addressing a business dinner in Melbourne last night, Mr Stevens said there was a case for government going into debt to support public projects that boost demand.
       "If governments are able to so order their affairs as to continue supporting worthwhile - and I emphasise worthwhile - public investment (even if that involves some prudent borrowing), then Australia will come through the present period," he said. While the Government has indicated it would be prepared to produce further economic stimulus packages if required to keep the economy growing, senior ministers have consistently refused to speculate on whether the budget might go into deficit.
       Speaking at the weekend, Finance Minister Lindsay Tanner defended the Government's refusal to use the word "deficit", despite the fact it would have to go into the red if it were to spend significantly more to stimulate the economy.
       "The last thing we want is to have the Government speculating about some of these comparisons with recessions and depressions, speculating about deficits," he said. "All they do, if we fuel that speculation, is stream into lower confidence, which becomes a key part of the problem."
       Last night, Mr Stevens said it was possible that lowering interest rates would not result in either increased demand for credit or increasing willingness of banks to supply it.
       He said that falling wealth and weakening incomes were encouraging households to save more.
       "The problem is that, for the economy as a whole, if everyone attempts this change simultaneously, the 'paradox of thrift' says that the economy will contract."
       He said the solution was for the Government to reduce its level of savings, by increasing public spending, to offset the rise in savings by the household sector.
       However, the Reserve Bank wants a tougher test on any additional government spending than the Treasury's recommendation that it should be "timely, targeted and temporary".
       Mr Stevens emphasised that any government spending should satisfy a "good policy test", which he explained by saying: "If it was a good project a year ago, it probably still is and if it was a bad project a year ago, it still is."
       Mr Stevens declined to say more, claiming it would "get him into trouble", however the bank's test may not cover the $1000-plus giveaways to pensioners and low-income families planned by the Government.
       The growth outlook for the economy is getting worse, with the leading index of economic growth compiled by Westpac and the Melbourne Institute showing the biggest two-month deterioration since the mid-1980s.
       Westpac chief economist Bill Evans said the index suggested growth would be barely positive in the first half of next year, with a risk it could slip into recession.
       Mr Stevens said he had thought Australia was headed for only a mild slowdown, similar to that in 2001.
       "With recent international economic and financial events, the economy will probably now experience a more significant slowing," he said.
       However, he said this was "barely detectable" in the official economic statistics so far, with little tangible evidence of "the more cautious mood in the business community that is now taking effect".
       Figures for the number of people on unemployment benefits released yesterday showed there had been no change in the past year, while the number of long-term unemployed had dropped 4.9per cent, touching a record low in October.
       "Nonetheless, in the period just ahead, we are likely to see for a time growth at quite a slow pace," Mr Stevens said.
       Mr Stevens said Australia was fortunate in having scope to increase budget spending, unlike many other countries that were running large deficits already.
       "Calls for fiscal expansion around the world are being accompanied by calls for credible statements of how the long-run soundness of public finances will be maintained."
       He said Australia was among the countries that had run disciplined economic policies for many years and now had the ability to lift spending.
       "It is still important for fiscal measures to pass the 'good policy' test," Mr Stevens said. "Poor public policy proposals should not be accepted simply because they are presented as boosting short-term aggregate demand."
       He said it would be six to nine months before the additional budget spending initiatives in Australia and in other countries would result in an improvement in the official statistics.
       The slowdown in China had been much more rapid than most people, including the Chinese authorities, expected.
       Mr Stevens said that, although it was difficult to assess the details of the Chinese Government's budget spending package, it was possible that it would increase demand by as much as 2per cent of GDP over each of the next two years. "I suspect that, while China is weakening at present, it will be strengthening a year from now," he said.
       For the moment, however, economic forecasts were in a state of "almost continual revision".
       Giant banking group Citigroup yesterday forecast that the US economy would contract at an annual rate of 4 per cent in the fourth quarter. Its economists described it as "one of the largest quarterly contractions in economic activity in modern times".
       The bank's co-head of Australian economics, Paul Brennan, said the risk was that the US contraction might even be worse. He said the forecast did not take account of the risk that major non-financial corporations might collapse, as was threatened for General Motors.
       Mr Stevens said it was important not to be too pessimistic. "The long-run prospects for the Australian economy have not deteriorated to the extent that might be suggested by some of the gloomy talk that is around," he said.
       The Reserve Bank believed the steps governments had taken so far, including banking guarantees, nationalisation of weak financial institutions and pumping funds into markets, had been effective. "The measures averted, in my judgment, potential systematic collapses that would have had massive repercussions throughout the world," Mr Stevens said. #

       [RECAPITULATION: Mr Stevens said he had thought Australia was headed for only a mild slowdown, similar to that in 2001. …
       Mr Stevens said Australia was fortunate in having scope to increase budget spending, unlike many other countries that were running large deficits already. ENDS.]
       [COMMENT: In other words, he knows little more than anybody else.  To recommend MORE debt is not a new policy.  Banking gurus have often in past decades approved "borrowing your way out of debt."  Think!  And, who profits from governments and people borrowing beyond their means?  Who is most likely to strive to arrange public affairs so that people must lose assets because they can't repay the interest and/or principal on loans?  Mr Stevens is only parroting bankers' "hocus pocus".
       He hasn't admitted that a proximate cause of the Great Recession (as of the 1929-41 Great Depression) is that banks have cut back on credit, and are not renewing loans to millions of healthy businesses, thus causing them to reduce stock and reduce employees.
       The idea of reducing interest is NOT likely to encourage banks around the world to create more credit -- would YOU lend more if your return was to be less?  Even if such talk fools the politicians and the chattering classes, does it fool you, Ms or Mr Reader?  Remember, trade is less profitable than war for the super-rich – so watch the arms trade boom.
       Regarding the level of deficits that Mr Stevens mentioned, clever bookkeeping has hidden the REAL liabilities of the Federal, State, and Local Governments in Australia, as in many other lands.  For example, superannuation debt for public employees, politicians, and the Crown's representatives is growing, not saved up for, year after year.  Maintenance on the infrastructure has been deferred time after time.  Proper accounting would have listed these items as liabilities, and would have encouraged politicians and the public to start putting money aside or increasing taxes and charges to pay for these future costs, instead of pretending that "the budgets are in surplus". - jcm 22 Apr 2009. COMMENT ENDS.]
    [Nov 20, 08]

    • Ben Bernanke supports second US stimulus plan.   

    Ben Bernanke supports second US stimulus plan

       The Australian, http://www. theaustralian. business/ story/0,, 24528782- 36418,00.html , Business pages (with Wall Street Journal), by Brian Blackstone | Article from Dow Jones Newswires | October 21, 2008
       FEDERAL Reserve chairman Ben Bernanke has thrown his support behind a second round of significant fiscal stimulus by the government.
       The chief of the US central bank said the package would be designed to limit the risk of a "protracted" slowdown in the economy, reversing his position from three months ago.
       Mr Bernanke, meanwhile, declined to follow other Fed officials in stating that the economy was in a recession, though he did say the slowdown was "serious".
       "With the economy likely to be weak for several quarters, and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate," Mr Bernanke said in remarks to the House Budget Committee.
       Mr Bernanke offered many caveats, however. Any stimulus should be "well-targeted," he said, and focused on ways to "help improve access to credit by consumers, homebuyers, businesses, and other borrowers".
       Any program "should be designed, to the extent possible, to limit longer-term effects on the federal government's structural budget deficit," Mr Bernanke said, though he also said that a near-term increase in government red ink wasn't inappropriate given the economic slowdown.
       Democratic lawmakers are considering up to $US300 billion ($429 billion) in stimulus targeted at infrastructure spending, aid to states, food stamps and jobless benefits. The White House has so far been cool to the Democrats' proposals.
       "What we've seen put forward so far by the leaders in Congress, the Democrats, were elements of a package that we did not think would actually stimulate the economy. So we would want to take a look at anything very carefully," White House spokeswoman Dana Perino told reporters.
       Mr Bernanke, whose support was key to moving the first $US168 billion stimulus package forward early this year, was reluctant over the summer to back a second round, telling lawmakers in July "it's just a bit early" to consider a second package.
       And while declining to endorse a specific dollar amount for a second stimulus, Mr Bernanke did say it should be "significant".
       Indeed, recent economic data have raised the odds of an economic recession while easing inflation worries. Consumer prices were flat in September, according to a government report last week, the second-straight month that prices failed to rise.
       Mr Bernanke said that he expected inflation to moderate "down to levels consistent with price stability".
       Meanwhile, a sharp drop in September retail sales suggests gross domestic product figures for the third quarter will show a contraction, Wall Street economists say.
       Fed officials, including Richmond Fed president Jeffrey Lacker and San Francisco Fed president Janet Yellen, have already signalled they think the economy was in recession.
       Mr Bernanke didn't go that far, saying instead that the pace of activity "is likely to be below that of its longer-run potential for several quarters".
       Pressed by House Representative Rosa DeLauro on whether the economy was in recession, Mr Bernanke replied that recession was a technical term and whether the current downturn was called one or not was of "no consequence".
       The popular rule-of-thumb for a recession is two consecutive quarterly contractions in gross domestic product, though the National Bureau of Economic Research bases its official determination on several economic indicators.
       Recession or not, Fed officials are widely expected to lower the target federal funds rate for interbank lending when they meet October 28-29. Less than two weeks ago, the Fed, in concert with other major central banks, slashed official rates by one-half percentage point, which left the fed funds rate at 1.5 per cent.
       While Mr Bernanke's remarks focused more on what Congress can do to boost the economy's growth prospects, comments last week suggested the Fed was open to more rate cuts.
       Mr Bernanke said last Wednesday "we will not stand down until we have achieved our goals of repairing and reforming our financial system and restoring prosperity".
       In his latest comments, Mr Bernanke said that he saw "some encouraging signs" from measures announced in recent days by the Federal Reserve, Treasury and Federal Deposit Insurance Corporation to spur lending in credit markets, though "it is too early to assess their full effects".
       Still, financial market stabilisation, "though an essential first step, will not quickly eliminate the challenges still faced by the broader economy," he warned, noting that housing "remains depressed" and the drop in automobile sales "has been particularly sharp."
       Mr Bernanke said an eventual stabilisation in financial markets and "the stimulus provided by monetary policy" should help the economy return to a solid growth path.
       However, "the uncertainty currently surrounding the economic outlook is unusually large," he said.
       Dow Jones Newswires #

       [RECAPITULATION: The chief of the US central bank said the package would be designed to limit the risk of a "protracted" slowdown in the economy, reversing his position from three months ago. … Any program "should be designed, to the extent possible, to limit longer-term effects on the federal government's structural budget deficit," Mr Bernanke said, though he also said that a near-term increase in government red ink wasn't inappropriate given the economic slowdown. ENDS.]
       [COMMENT: He reversed his opinion, did he?  "Structural budget deficit."  Do ordinary World Citizens know that this means the U.S.A. is really the Unlimited State of Insolvency?  Do Westerners realise that the USA is being sold off, piece by piece, to unfriendly powers?  Yes, that's what happens to countries that allow industry after industry to "go offshore," yet at the same time want to seize oil-rich Iraq from a population that believes that they, and Heaven, own the land and the oil beneath it.  The Bush Administration was trying to reverse the decades-old Iraq oil nationalisation, and the Iraqi politicians are delaying and delaying.
       If the Coalition of the Killing withdrew, the cost of billions a week would not continue being written up as debt.  Of course, the armaments-makers and the debt-mongers and their "parrots" would be burrowing away underground trying to involve the USA in more wars. - jcm 22 Apr 09. ENDS.]
       [2nd RECAP.: Recession or not, Fed officials are widely expected to lower the target federal funds rate for interbank lending when they meet October 28-29. Less than two weeks ago, the Fed, in concert with other major central banks, slashed official rates by one-half percentage point, which left the fed funds rate at 1.5 per cent. ENDS.]
       [2nd COMMENT: Later this rate was reduced to between zero and 0.5%.  Think!  Does it make sense? - jcm 22 Apr 09. ENDS.]
    [Oct 21, 08]

    • Report blasts US over arms trade boom.                             

    Report blasts US over arms trade boom

       The West Australian, , p 30, Friday, December 12, 2008
       WASHINGTON – The US arms trade was booming, with half the buyers in the developing world either undemocratic governments or regimes engaged in human rights abuses, a private think tank said this week.
       US arms sales reached $US32 billion ($48 billion) last year, the report by the New America Foundation, a non-partisan policy institute, said.
       Timed to coincide with the 60th anniversary of the United Nations' Universal Declaration of Human Rights, the report named 13 of the top 25 arms purchasers in the developing world as either undemocratic or engaged in major human rights abuses.
       The 13 listed in the report were Pakistan, Saudi Arabia, Iraq, the United Arab Emirates, Kuwait, Egypt, Colombia, Jordan, Bahrain, Oman, Morocco, Yemen and Tunisia.  Sales to these countries totalled more than $US16.2 billion over 2006 and last year.
       The total "contrasts sharply with the Bush administration's pro-democracy rhetoric", the report said.  It also said that 20 of the 27 nations engaged in major armed conflicts were receiving weapons and training from the US.
       "US arms transfers are undermining human rights, weakening democracy and fuelling conflict around the world," the report said.
       At the State Department, a spokesman said US policy on sale or transfer of US munitions was well-established.
       The decision to approve any sale or transfer was made only after a careful review within the Government, Jason Greer, a spokesman for the Bureau of Political-Military Affairs, said.
       It took into account a country's need for an item, its human rights record and whether the arms transfer supported US foreign policy and national security goals, he said.
       "We consult closely with Congress on such matters," Mr Greer said.
       William Hartung, lead author of the report, said: "The United States cannot demand respect for human rights and arm human rights abusers at the same time."
       US arms sales grew to $US32 billion last year, more than three times the level when President George Bush took office in 2001, the report said. The US is the world's biggest arms supplier.
       US exports range from combat aircraft to Pakistan, Morocco, Greece, Romania and Chile to small arms and light weapons to the Philippines, Egypt and Georgia.
       In 2006 and last year, the US sold weapons to more than 174 states and territories.  At the beginning of the Bush administration there were 123 arms clients, the report said.

       [RECAPITULATION: … the report named 13 of the top 25 arms purchasers in the developing world as either undemocratic or engaged in major human rights abuses. […] US arms sales grew to $US32 billion last year, more than three times the level when President George Bush took office in 2001 … ENDS.]
       [COMMENT: It isn't a Dirty Dozen or a Baker's Dozen, it's a Dirty Fourteen ! And, war criminal BLUSH is arming the Islamic world, while attacking two countries in the Islamic world! COMMENT ENDS.]
       [LINKS: Campaign Against the Arms Trade:; . ENDS.]
    [Dec 12, 08]

    • Bill Clinton releases donor list;  Saudi Arabia donated between $10m to $25m.       


       The New York Post, http://www. seven/ 12182008/ news/national news/ bill_clinton_ releases_donor_ list_144800. htm?page=0 #commentsiframe , By CHUCK BENNETT, Posted 11:35 am, Last updated 1:02 pm, December 18, 2008
       [Picture] Bill Clinton
       UNITED STATES – Former President Bill Clinton released a list of donors to his private foundation this morning after resisting making the names of his Saudi Arabian and other foreign benefactors public for years.
       See the Full List Here
       Blackwater Donation May Pose Conflict
       The moves comes as Sen. Hillary Clinton prepares to become Secretary of State under President-elect Barack Obama and highlights the potential conflicts of interest she may face when sits down to negotiate with heads of state of foreign countries.
       For instance, the Kingdom of Saudi Arabia itself donated between $10 million to $25 million to the William J. Clinton Foundation, the nonprofit that manages his presidential library in Arkansas as well as donate to charities around the world.
       Foreign governments directly donated at least $41 million.
       In addition, Saudi businessman Nasser Al-Rashid gave between $1 million to $5 million, as did the organizations Friends of Saudi Arabia and the Dubai Foundation.
       Other Middle Eastern government donors include Kuwait, Qatar, Brunei and Oman - all of whom gave between $1 million to $5 million. Norway donated $5 to $10 million while Italy and Jamaica gave between $50,000 to $100,000.
       Also on the list are influential Indian politicians and businessmen which critics say could hurt a Secretary of State Clinton's perception of being an impartial arbiter between India and Pakistan.
       The list also underscores ties between the Clintons and India, a connection that could complicate diplomatic perceptions of whether Hillary Clinton can be a neutral broker between India and neighbor Pakistan in a region where President-elect Barack Obama will face an early test of his foreign policy leadership.
       The former president did not release specific totals for each donor, providing only ranges of giving. Nor did he identify individual contributors' occupations or countries of residence.
       Donors gave Clinton's foundation at least $492 million from its inception in 1997 through last year, the most recent figures available.
       Representatives of the foundation, including CEO Bruce Lindsay and attorney Cheryl Mills, met privately Wednesday with aides to incoming Foreign Relations Committee Chairman John Kerry of Massachusetts and ranking Republican Richard Lugar of Indiana to discuss the foundation's activities and review a memorandum of understanding drawn up by the Clinton and Obama teams.
       The Foreign Relations Committee will hold hearings and vote on Hillary Clinton's nomination before sending it to the full Senate. Shortly after Obama tapped Clinton, Lugar said he would support her, although he said there would still be "legitimate questions" raised about the former president's extensive international involvement.
       "I don't know how, given all of our ethics standards now, anyone quite measures up to this who has such cosmic ties," Lugar said.
       Some of the donors have extensive ties to Indian interests that could prove troubling to Pakistan. Tensions between the two nuclear nations are high since last month's deadly terror attacks in Mumbai.
       Amar Singh, a donor in the $1 million to $5 million category, is an Indian politician who played host to Bill Clinton on a visit to India in 2005 and met Hillary Clinton in New York in September to discuss an India-U.S. civil nuclear agreement.
       Also in that giving category was Suzlon Energy Ltd. of Amsterdam, a leading supplier of wind turbines. Its chairman is Tulsi R. Tanti, one of India's wealthiest executives.  Tanti announced plans at Clinton's Global Initiative meeting earlier this year for a $5 billion project to develop environmentally friendly power generation in India and China.
       Two other Indian interests gave between $500,000 and $1 million each:
  • The Confederation of Indian Industry, an industrial trade association.
  • Dave Katragadda, an Indian capital manager with holdings in media and entertainment, technology, health care and financial services.
       Other foreign governments also contributed heavily to the foundation.
       AUSAID, the Australian government's overseas aid program, and COPRESIDA-Secretariado Tecnico, a Dominican Republic government agency formed to fight AIDS, each gave $10 million to $25 million.  Norway gave $5 million to $10 million.  Kuwait, Qatar, Brunei and Oman gave $1 million to $5 million each.  The government of Jamaica and Italy's Ministry for Environment and Territory gave $50,000 to $100,000 each.
       The biggest donations, more than $25 million each, came from two donors. They are the Children's Investment Fund Foundation, a London-based philanthropic organization founded by hedge fund manager Chris Hohn and his wife Jamie Cooper-Hohn and dedicated to helping children, primarily in Africa and India; and UNITAID, an international drug purchase organization formed by Brazil, France, Chile, Norway and Britain to help provide care for HIV-AIDS, malaria and tuberculosis patients in countries with high disease rates.
       The foundation's donor list is heavy with overseas business interests.
       Friends of Saudi Arabia and the Dubai Foundation each gave $1 million to $5 million, as did the Taiwan Economic and Cultural Office. The Confederation of Indian Industry and the Swedish Postcode Lottery gave $500,000 to $1 million each. China Overseas Real Estate Development and the U.S. Islamic World Conference gave $250,000 to $500,000 apiece.
       The No. 4 person on the Forbes billionaire list, Lakshmi Mittal, chief executive of the international steel company ArcelorMittal, gave $1 million to $5 million. Mittal is a member of the Foreign Investment Council in Kazakhstan, Goldman Sachs' board of directors and the World Economic Forum's International Business Council, according to the biography on his corporate Web site.
       Among other $1 million to $5 million donors:
  • Harold Snyder, director for Teva Pharmaceutical Industries, the largest drug company in Israel. His son, Jay T. Snyder, serves on the U.S. Advisory Commission on Public Diplomacy, which oversees State Department activities, and served as a senior U.S. adviser to the United Nations, where he worked on international trade and poverty.
  • No. 97 on the Forbes billionaire list, Ethiopian-Saudi business tycoon Sheikh Mohammed H. Al-Amoudi.
  • Issam Fares, a former deputy prime minister of Lebanon.
  • Mala Gaonkar Haarman, a partner and managing director at the private investment partnership Lone Pine Capital.
  • Lukas Lundin, chairman of oil, gas and mining businesses including Tanganyika Oil Company Ltd., an international oil and gas exploration and production company with interests in Syria; and Vostok Nafta Investment Ltd., an investment company that focuses on Russia and other former Soviet republics.
  • Victor Pinchuk, son-in-law of the former president of Ukraine. Clinton spoke in 2007 at an annual meeting of Yalta European Strategy, a group Pinchuk founded to promote Ukraine for membership in the European Union.
       The top ranks of Clinton's donor list are heavy with longtime Democratic givers, including some who are notable for their staunch support of Israel.
       TV producer Haim Saban and his family foundation, who donated between $5 million and $10 million, splits his time between homes in Israel and California. "I'm a one-issue guy, and my issue is Israel," he told The New York Times in 2004.
       Slim-Fast diet foods tycoon S. Daniel Abraham, a donor of between $1 million and $5 million, has been a board member of the American Israel Public Affairs Committee, which promotes Israel's interests before the U.S. government.
       The American Jewish Committee and the United Nations Foundation donated $100,000 to $250,000.
       Clinton thanked his donors in a statement for being "steadfast partners in our work to impact the lives of so many around the world in measurable and meaningful ways."
       According to the memorandum negotiated by the foundation and top Obama advisers, Bill Clinton agreed to publish the names of all past and future contributors to his foundation during Hillary Clinton's tenure as secretary of state.
       The former president also agreed to step away from direct involvement in the Clinton Global Initiative, an annual charitable conference where businesses and many foreign governments pledge donations to help ameliorate AIDS, poverty and other social ills. He will continue serving as CGI's founding chairman but will not solicit money or sponsorships. The CGI will cease accepting foreign contributions and will not host events outside the United States.
       Clinton started raising money for his library before leaving the White House. Over the years, the Clintons repeatedly refused to identify all the foundation donors and continued to do so during Hillary Clinton's 2007-08 presidential campaign.
       Names surfaced nonetheless. Several news organizations unearthed foreign-government donors, and in 2001, Bill Clinton turned over a list of 150 top foundation donors to a House committee investigating his pardon of fugitive businessman Marc Rich, whose ex-wife, Denise Rich, gave the library foundation at least $450,000. -- With AP #

  •    [RECAPITULATION: Read the last sentence again. ENDS.]
       [COMMENT: At elections, about a half of the United States public do NOT vote.  Both voters and non-voters are partly to blame for the wrong behaviours of Bush Junior, Clinton, and others. COMMENT ENDS.]
    [Dec 18, 08]

    • [Make the GM Volt in Holden plants]   

    [Make the GM Volt in Holden plants]

       The West Australian, Letter SENT to The Editor, December 22, 2008
       Having clearly demonstrated he simply doesn't grasp the gravity of the threat posed by climate change, Mr Rudd now proves he totally fails to comprehend the magnitude of the economic downturn too by backing the production of a smaller (but otherwise entirely conventional) Holden to the tune of $149 Million.
       People wanting a small four-cylinder car already have a wide choice. General Motors Australia needs to provide a real alternative if it hopes to make sales during the looming "perfect storm" of financial and climate crises and inevitable fuel shortages.
       Why not just manufacture their "Volt" electric vehicle here too?
       How can a country as progressive and pioneering as Australia produce both politicians and industrialists so lacking in vision that they pose a real threat to the very future of the nation? Tony Troughton-Smith
    [Dec 22, 08]

    • The Coming Capitalist Consensus. 

    The Coming Capitalist Consensus

       Foreign Policy in Focus, http://www. fpiftxt/5765 , as in http://www. commondreams. org/view/ 2008/12/24-6 , by Walden Bello, Wednesday, December 24, 2008
       Not surprisingly, the swift unraveling of the global economy combined with the ascent to the U.S. presidency of an African-American liberal has left millions anticipating that the world is on the threshold of a new era. Some of President-elect Barack Obama's new appointees – in particular ex-Treasury Secretary Larry Summers to lead the National Economic Council, New York Federal Reserve Board chief Tim Geithner to head Treasury, and former Dallas Mayor Ron Kirk to serve as trade representative – have certainly elicited some skepticism. But the sense that the old neoliberal formulas are thoroughly discredited have convinced many that the new Democratic leadership in the world's biggest economy will break with the market fundamentalist policies that have reigned since the early 1980s.
       One important question, of course, is how decisive and definitive the break with neoliberalism will be. Other questions, however, go to the heart of capitalism itself. Will government ownership, intervention, and control be exercised simply to stabilize capitalism, after which control will be given back to the corporate elites? Are we going to see a second round of Keynesian capitalism, where the state and corporate elites along with labor work out a partnership based on industrial policy, growth, and high wages – though with a green dimension this time around? Or will we witness the beginnings of fundamental shifts in the ownership and control of the economy in a more popular direction? There are limits to reform in the system of global capitalism, but at no other time in the last half century have those limits seemed more fluid.
       President Nicolas Sarkozy of France has already staked out one position. Declaring that "laissez-faire capitalism is dead," he has created a strategic investment fund of 20 billion euros to promote technological innovation, keep advanced industries in French hands, and save jobs. "The day we don't build trains, airplanes, automobiles, and ships, what will be left of the French economy?" he recently asked rhetorically. "Memories. I will not make France a simple tourist reserve." This kind of aggressive industrial policy aimed partly at winning over the country's traditional white working class can go hand-in-hand with the exclusionary anti-immigrant policies with which the French president has been associated.
    Global Social Democracy
       A new national Keynesianism along Sarkozyan lines, however, is not the only alternative available to global elites. Given the need for global legitimacy to promote their interests in a world where the balance of power is shifting towards the South, western elites might find more attractive an offshoot of European Social Democracy and New Deal liberalism that one might call "Global Social Democracy" or GSD.
       Even before the full unfolding of the financial crisis, partisans of GSD had already been positioning it as alternative to neoliberal globalization in response to the stresses and strains being provoked by the latter. One personality associated with it is British Prime Minister Gordon Brown, who led the European response to the financial meltdown via the partial nationalization of the banks. Widely regarded as the godfather of the "Make Poverty History" campaign in the United Kingdom, Brown, while he was still the British chancellor, proposed what he called an "alliance capitalism" between market and state institutions that would reproduce at the global stage what he said Franklin Roosevelt did for the national economy: "securing the benefits of the market while taming its excesses." This must be a system, continued Brown, that "captures the full benefits of global markets and capital flows, minimizes the risk of disruption, maximizes opportunity for all, and lifts up the most vulnerable – in short, the restoration in the international economy of public purpose and high ideals."
       Joining Brown in articulating the Global Social Democratic discourse has been a diverse group consisting of, among others, the economist Jeffrey Sachs, George Soros, former UN Secretary General Kofi Annan, the sociologist David Held, Nobel laureate Joseph Stiglitz, and even Bill Gates. There are, of course, differences of nuance in the positions of these people, but the thrust of their perspectives is the same: to bring about a reformed social order and a reinvigorated ideological consensus for global capitalism.
       Among the key propositions advanced by partisans of GSD are the following:
  • Globalization is essentially beneficial for the world; the neoliberals have simply botched the job of managing it and selling it to the public;
  • It is urgent to save globalization from the neoliberals because globalization is reversible and may, in fact, already be in the process of being reversed;
  • Growth and equity may come into conflict, in which case one must prioritize equity;
  • Free trade may not, in fact, be beneficial in the long run and may leave the majority poor, so it is important for trade arrangements to be subject to social and environmental conditions;
  • Unilateralism must be avoided while fundamental reform of the multilateral institutions and agreements must be undertaken – a process that might involve dumping or neutralizing some of them, like the WTO's Trade-Related Intellectual Property Rights Agreement (TRIPs);
  • Global social integration, or reducing inequalities both within and across countries, must accompany global market integration;
  • The global debt of developing countries must be cancelled or radically reduced, so the resulting savings can be used to stimulate the local economy, thus contributing to global reflation;
  • Poverty and environmental degradation are so severe that a massive aid program or "Marshall Plan" from the North to the South must be mounted within the framework of the "Millennium Development Goals";
  • A "Second Green Revolution" must be put into motion, especially in Africa, through the widespread adoption of genetically engineered seeds.
  • Huge investments must be devoted to push the global economy along more environmentally sustainable paths, with government taking a leading role ("Green Keynesianism" or "Green Capitalism");
  • Military action to solve problems must be deemphasized in favor of diplomacy and "soft power," although humanitarian military intervention in situations involving genocide must be undertaken.
    The Limits of Global Social Democracy
       Global Social Democracy has not received much critical attention, perhaps because many progressives are still fighting the last war, that is, against neoliberalism. A critique is urgent, and not only because GSD is neoliberalism's most likely successor. More important, although GSD has some positive elements, it has, like the old Social Democratic Keynesian paradigm, a number of problematic features.
       A critique might begin by highlighting problems with four central elements in the GSD perspective.
       First, GSD shares neoliberalism's bias for globalization, differentiating itself mainly by promising to promote globalization better than the neoliberals. This amounts to saying, however, that simply by adding the dimension of "global social integration," an inherently socially and ecologically destructive and disruptive process can be made palatable and acceptable. GSD assumes that people really want to be part of a functionally integrated global economy where the barriers between the national and the international have disappeared. But would they not in fact prefer to be part of economies that are subject to local control and are buffered from the vagaries of the international economy? Indeed, today's swift downward trajectory of interconnected economies underscores the validity of one of anti-globalization movement's key criticisms of the globalization process..
       Second, GSD shares neoliberalism's preference for the market as the principal mechanism for production, distribution, and consumption, differentiating itself mainly by advocating state action to address market failures. The kind of globalization the world needs, according to Jeffrey Sachs in The End of Poverty, would entail "harnessing" the remarkable power of trade and investment while acknowledging and addressing limitations through compensatory collective action." This is very different from saying that the citizenry and civil society must make the key economic decisions and the market, like the state bureaucracy, is only one mechanism of implementation of democratic decision-making.
       Third, GSD is a technocratic project, with experts hatching and pushing reforms on society from above, instead of being a participatory project where initiatives percolate from the ground up.
       Fourth, GSD, while critical of neoliberalism, accepts the framework of monopoly capitalism, which rests fundamentally on deriving profit from the exploitative extraction of surplus value from labor, is driven from crisis to crisis by inherent tendencies toward overproduction, and tends to push the environment to its limits in its search for profitability. Like traditional Keynesianism in the national arena, GSD seeks in the global arena a new class compromise that is accompanied by new methods to contain or minimize capitalism's tendency toward crisis. Just as the old Social Democracy and the New Deal stabilized national capitalism, the historical function of Global Social Democracy is to iron out the contradictions of contemporary global capitalism and to relegitimize it after the crisis and chaos left by neoliberalism. GSD is, at root, about social management.
       Obama has a talent for rhetorically bridging different political discourses. He is also a "blank slate" when it comes to economics. Like FDR, he is not bound to the formulas of the ancien regime. He is a pragmatist whose key criterion is success at social management. As such, he is uniquely positioned to lead this ambitious reformist enterprise.
    Reveille for Progressives
       While progressives were engaged in full-scale war against neoliberalism, reformist thinking was percolating in critical establishment circles. This thinking is now about to become policy, and progressives must work double time to engage it. It is not just a matter of moving from criticism to prescription. The challenge is to overcome the limits to the progressive political imagination imposed by the aggressiveness of the neoliberal challenge in the 1980s combined with the collapse of the bureaucratic socialist regimes in the early 1990s. Progressives should boldly aspire once again to paradigms of social organization that unabashedly aim for equality and participatory democratic control of both the national economy and the global economy as prerequisites for collective and individual liberation.
       Like the old post-war Keynesian regime, Global Social Democracy is about social management. In contrast, the progressive perspective is about social liberation.
       Copyright © 2008, Institute for Policy Studies
       Walden Bello is a columnist for Foreign Policy In Focus, a senior analyst at the Bangkok-based Focus on the Global South, president of the Freedom from Debt Coalition, and a professor of sociology at the University of the Philippines. #

  •    [ACKNOWLEDGEMENT: Common Dreams, by courtesy of StopMAI Coalition Western Australia. Registered members can read StopMAI_WA archives at: . ENDS.] cont20.htm#the-coming_capitalist_consensus
    [Dec 24, 08]

    • Simon Crean hopes to cash in on US green program.     

    Simon Crean hopes to cash in on US green program

       The Australian, http://www. theaustralian. business/ story/0,,2484 5394-36418,00. html ; by Sid Maher | December 27, 2008
       AUSTRALIA – [Click above link to read the item, which includes the words "dealing with radioactive waste and designing and building desalination plants." ENDS.]

       [COMMENT: A response:
       I hate to say it, and really I hope I'm entirely wrong, but did you notice those words "radioactive waste" up at the beginning of the article? These are the two key words in the whole piece - the rest is designed simply to divert our attention from them and suggest a positive spin.
       In fact this to me looks more like Mr. KRudd positioning Australia to earn a lot of brownie points, and US$ (which may be trading at par before long) by offering to rid the US and its new President of their nuclear waste headache by taking the stuff off their hands. They have a helluva lot of it and it's a serious problem for them, with NIMBYs in every neighbourhood.
       I imagine Americans look at Australia and say "Well heck, you guys say you're our buddies, and you sure got a lot of wide open spaces there. Howsabout we rent some of that real-estate off of you for a real good (US$) price, and we'll handle all the transportation, dig the holes and watch over them in perpetuity?" (perpetuity being defined in the very small print).
       This is exactly what Americans mean by free trade, after all. They print the dollars and then kiss 'em goodbye. Free, as in it doesn't cost America anything. This may have to stop sometime soon, and the bucks will all go flooding back home, trying to get there while they still have some value, but I doubt Messrs Rudd and Co. have heard about this, or would believe it if they did.
       Cynical? Moi? # ENDS.]
       [ACKNOWLEDGEMENT: StopMAI Coalition List. ENDS.]
    [Dec 27, 08]

    • Future cars.

    Future cars

       The West Australian, Letter to The Editor, p 22, Saturday, December 27, 2008
       I object to public money going to prop up Holden unless it designs a much better car. The designers so far have provided unsuitable cars.
       Today cars are designed by Young Turks and CEOs who express their fantasies in their macho designs. The advertising that goes with their designs are fast, furious, sleek, dangerous, designed for the sexy young executive male and females or the family people movers.
       These people think they are the only clients who buy cars. They have not analysed the market of tomorrow.
       There is a growing cohort of over 55s who will buy cars in future.
       They want a car that is easy to get in and out of. A two-door car would suffice because this age group needs a car for just one or two people. Their journeys will be mostly short local trips that do not need excessive speed.
       An electric or solar car would be a more appropriate design for their future needs. So who is going to design their perfect car? Not Holden, by the look of it! Its gas/ethanol cars are not what future clients or the environment need.
       The Government is once again wasting an opportunity to resolve a problem that has been allowed to escalate over the past decade. Manufacturers refuse to re-tool their factories to produce cars that are more economical and suit the environment and clienteles' future needs.
       A car designed for future clients would also be safer for the under-25 age group that is responsible for many road accidents. Before any grants are handed out there needs to be an objective study of where taxpayers' money should be invested in the car industry.
       The Luddites cannot hang on to their jobs for ever. New jobs evolve from new technology and that needs Government funding in new designs. Holden's latest announcement just does not fit the taxpayers' needs. Mary Jenkins, Spearwood.
    [Dec 27, 08]

    CONTENTS and ANCHOR LIST (After reading an article, use Browser's "Back" button to return to Anchor List)
    1,650 new migrants invade UK every day. ONCE-GREAT BRITAIN. Aug 26-Sep 1, 2008
    [$35b of $62b of Australia's Future Fund used to avoid total meltdown as world teeters.] Letter. August 6, 2008
    $45 trillion : The Great Wealth Wipe out. BRITAIN: Fred Harrison had advised British Chancellor, now PM, how to stop the depression. October 15, 2008
    ABC Learning lowers forecast amid US talks. [OR, How banks use credit creation to ramp up share prices, having already over-lent to the enterprise, and then ..]  AUSTRALIA Apr 9, 08
    * Anatomy of the American Financial Crisis:  How it is Turning into a Worldwide Crisis. Prof. Rodrigue Tremblay of CANADA. October 12, 2008
    * Andrews wanted Christian migrants. AUSTRALIA: Former minister saw corrupt officials averse to Christian refugees. July 19-20, 2008
    Banking blips; Time for tariffs. W. AUSTRALIA letters to the editor. Did governments create billions of money out of computer blips? Oct 19, 08
    Banks Crashing Worldwide – Only LaRouche Knows What to Do! UNITED STATES and AUSTRALIA. September 16, 2008
    • The banks supposedly short of money -- just like the Great Depression. Jan 12, 2008
    Bears back off in bourse recovery [as lenders force in-debt investors to sell good shares and bad.] AUSTRALIA. Jan 26-27, 2008
    Ben Bernanke supports second US stimulus plan. UNITED STATES' Federal Reserve Bank chairman, realising that the danter of the politicians waking up to the credit resrictions of the banks, but will run up debt instead of replacing the created credit, reverses himself, and so backs another "stimulus" plan. Oct 21, 08
    Be wary of economic doomsayer. AUSTRALIA: An anti-debt economics expert Assoc. Prof. Steve Keen is slagged by Right-wing think tank' Gerard Henderson. Oct 21, 08
    [Big Money and Housing Unaffordability]. MELBOURNE Speakers' Corner. John C. Massam, of Perth. YouTube internet address. June 1, 08
    Bill Clinton releases donor list; Saudi Arabia donated between $10m to $25m. UNITED STATES. December 18, 2008
    Brisbane teacher jailed for possessing explosives. BRISBANE: Ango-Celt name, but trying to impress potential parents-in-law, pretended to be in Al-Qaeda! Feb 25, 08
    Business calls for state tax relief. AUSTRALIA: Payroll tax and stamp duty getting record intakes, ought to be reduced. Apr 07, 08
    Chinese given green light for raid on Rio. AUSTRALIA: Up to 11 per cent of Rio Tinto can go under the control of the butchers of Tienamin Square. Aug 25, 08
    • The changing face of Britain. The number of foreigners has risen by 1.1 million in three years. August 26 to September 1, 2008
    [Collapse? No, the financiers work system for themselves.] Letter about global credit crunch. Nov 17, 2008
    • The Coming Capitalist Consensus. NEW YORK. Dec 24, 08
    Cop admits his lies sent 150 to jail. WELLINGTON, New Zealand: An undercover policeman on covert anti-drug operations now admits that in the 1970s he lied in court cases. Oct 13, 08
    'Creative Destruction' -- The Madness Of The Global Economy. Huge bonuses help to bring down the house of cards, as the world races unsustainably into the future. Feb 5, 08
    Daniel Golden: Iraqi oil workers want people to own resource. Feb 21, 08
    [Delete payroll tax, reduce stamp duties, tax UCV.] AUSTRALIA: Mar 27, 08
    Does Immigration aggravate labour shortages? AUSTRALIA. By Dr (Ms) Paddy Weaver. August 2008
    [Dr Mal Washer to hear Sustainable's views. WESTERN AUSTRALIA. For July 6, 2008. June 2008 edition.
    Economic crisis: predicted. and predictable Editorial.  The "bubbles" had been explained by Thomas Palley 1996, B.A. Santamaria up to 1998, Dean Baker 2002, Warren Buffett 2002, Robert Shiller, Jim Rogers, Bank of International Settlements 2007. Nov 8, 08
    Economic Democracy and a Guide to the 2008 U.S. Presidential Election. January 10, 2008
    Editorial hits the button! [China must not control our mining companies.] AUSTRALIA. Feb 4, 08
    Ending unearned profits. AUSTRALIA: Letter. Oct 15, 08
    From Hillary's Whitewater Deal to Bill's Uranium Mine to Obama's Ba'athist Ties; Hot Democratic Properties. Feb 02, 08
    Future cars. W. AUSTRALIA: Electric or solar two-door cars preferred, not the Holden design. Letter from Mary Jenkins, Spearwood.
    Gagged US whistleblower reports to London Sunday Times [about nuclear sell-out]. Jan 06, 08
    [Globalisation -- English brand Willow Pattern china from China … and Colombia, Malaysia] in WESTERN AUSTRALIA. Apr 7, 08
    Global meltdown - "We told you so!" PERTH (W. Australia): StopMAI Coalition has been warning that globalisation was a house of cards. Ten years warnings but few leaders paid heed. Oct 26, 08
    • The Great Depression of the 21st Century: Collapse of the Real Economy. By Michel Chossudovsky. Financiers poised to take real economy, and unemployment to rise. Nov 15, 08
    Group of men attack woman in Turvey Park. AUSTRALIA. Feb 26, 08
    Hedge Funds Savage Australian Dollar. David Keane's "Recent Australian Economic Trends." Oct 10, 08
    Hillary Clinton's Bosnia sniper story exposed. UNITED STATES. Mar 26, 08
    Housing crunch blamed on immigration. AUSTRALIA: Apr 1, 08
    How our economy is killing the Earth. -- Special report. New Scientist. Economists see no limit go growth, ever. Oct 16, 08
    How rowdy pupils are forcing our new teachers to quit classrooms. BRITAIN. July 22, 08
    Humiliation for high priest of US capitalism. WASHINGTON: Alan Greenspan "lost at sea." Oct 25, 2008
    'I made a mistake' admits Greenspan. WASHINGTON: Alan Greenspan found a flaw, but not THE flaws, and reverses himself (now he's not the Fed chief any more). Oct 25, 2008
    It's OK to go into red: RBA boss Glenn Stevens. AUSTRALIA. Reversing the financiers' previous stance, he recommends judicious increase of debt. Nov 20, 08
    Journalist faces jail over leak.  W. AUSTRALIA: Paul Lampathakis is threatened by a Parliamentary committee for not revealing his source/s. July 8, 2008
    Kandhamal Massacres in Orissa - Where is the State and National Human Rights Commission? INDIA. ? Sep 4, 2008
    London 'Times' Story Says U.S. Complicit in Nuclear Proliferation -- Ellsberg Charges Media 'Coverup' Here. Jan 23 or Jan 21, 08
    [Make the GM Volt in Holden plants]. AUSTRALIA. Letter sent by Tony Troughton-Smith. Dec 22, 08
    Market fall wipes off another $40b. AUSTRALIA and USA. Jan 22, 08
    'Massive rise in immigrants is fuelling homes cost crisis'. CANBERRA, Australia. Apr 2, 08
    Mayhem squeezes punters; Lenders put hard word on margin borrowers as investments turn sour amid turmoil.  ["Investing" by going into debt!  And now the banks want their pound of flesh!]  Jan 23, 08
    One in 4 new babies has a foreign mother. BRITAIN. August 26, 2008
    On starvation train. AUSTRALIA: Agents push up prices by promoting getting rich through houses, and rents rise. May 15, 2008
    Pessimism rules for managers. AUSTRALIA: Investment manager had tried to increase his cash holdings last year.  Others trying to shift to safer investments. Jan 23, 08
    Please explain this unusual move. Letters to the Editor expose the bale-out of the banks by the politicians. Oct 14, 08
    • A Quiet US Confession; Weapons Were Not Made In Iran After All. May 12, 2008
    • The Real Estate Bubble drives Homebuyers into Debt Peonage, by Michael Hudson. July 2008
    Report blasts US over arms trade boom. WASHINGTON: 13 Undemocratic or human rights abusing governments get U.S. arms. Dec 12, 08
    Ripper: WA is solid as a rock. WESTERN AUSTRALIA. State Treasurer says "The State is well-prepared for any economic slowdown." Jul 01, 08
    Rudd must not fiddle while China snaps up our miners. AUSTRALIA. Editorial. Feb 4, 08
    Share price distortions, credit fakery, help Chinese take resources. AUSTRALIA. Letter to Editors. Aug 25, 08
    Similar forces at work eight decades apart: 1929 vs 2008. UNITED STATES: Historian Douglas Astolfi compares the bank crashes of the 1890s and 1930s with the bank rescues of 2008, and asks if another Great Depression on the way. Oct 15, 08
    Simon Crean hopes to cash in on US green program. AUSTRALIAN Federal Minister wants nuclear waste and desalination. Dec 27, 08
    Sovereign Wealth Funds threaten Australia's independence: Foreign investment. AUSTRALIA: China and other nations buying Australia out. August 2, 2008
    Steve Keen: An invitation to Gerard Henderson. AUSTRALIA. Oct 21, 08
    Stop persecuting whistleblowers. W. AUSTRALIA: Threats to journalist Paul Lampathakis. July 13, 08
    Tax the land.  Harper's Magazine contribution by Prof. Michael Hudson of Kansas, U.S.A.  His solution is to lift the tax burden from labour and capital. November 2008
    [Thomas Jefferson on banks] Originally 1802.
    Three Little Pigs 'too offensive' [to the Asian (read "Muslim") community.] BRITAIN: Jan 23, 08
    Tibet, the 'Great Game,' and the CIA. Information Clearing House's list of current news. Mar 31, 08
    • The Time for a Genuine Migration Debate. AUSTRALIA. by John Sutton, CFMEU national secretary (orig Jun 11, 2008). August 2008
    • The Trials of Abu Omar. ITALY: Italian judges are trying to put U.S. agents on trial for kidnapping an Italian citizen and secretly flying him in 2003 to Egypt for torture. Mar 12, 08
    • The US Mortgage Crisis: Fannie and Freddie. Give Away the Farm. UNITED STATES. Dr. Ellen Hodgson Brown gives ideas for the way out. August 7, 2008
    • The Voters killed the Democrats. AND "[Howard was honest about GST]". AUSTRALIA: National Australian Democrats leaders and senators gave up being democratic. Letter, former Nat. Exec. member Brian Jenkins of W.A., AND David Ward, Ormond, Vic. Jun 30, 08
    Why the Democrats declined; AND "[No commitment to genuine solar homes.]" AUSTRALIA: Set aside grassroots membership, including the vote for the Goods and Services Tax (GST). Letter, former Senator Jean Jenkins of W.A., AND Peter Lea, Margaret River, W.A. Jun 30, 08
    • The Willow-Pattern plate legend. ENGLAND: Three versions.  First one ? 1939-40
    UK growing older; Asylum bids soar. BRITAIN. August 26 to September 1, 2008
    • The U.S. Financial System in Serious Trouble. Prof. Rodrigue Tremblay, of Montreal, CANADA. September 16, 2008
    We'll all pay a high price for boom and bust. BRITAIN: Fred Harrison had warned of the land speculation "bust" in April 2005. June 20, 2008
    Who is Behind the Financial Meltdown? Market Manipulation and the Institutional Speculator. Prof. Michel Chossudovsky of CANADA article. Oct 11, 08
    Who is responsible for population rising in a housing affordability crisis? And selling bargain gas? W. AUSTRALIA. June 6, 2008
    Why real estate spending could make Australia the new Iceland. EUROPE. Hans Redeker's views. October 19, 2008
    • The worst market crisis in 60 years [precipitated by US housing 'bubble'.] Jan 23, 08
    Your questions answered. AUSTRALIA: Quitting share-based investments in the present economic climate, when the stock market is clearly under-valued, would be one of the worst strategies possible. July 13, 08

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