Gold was up again last week closing at 571.90 dollars an ounce, up 2.3% from
$558.90 the week before and up 13% since Christmas when it was at $505.90. The
dollar closed at 0.8317 euros on Friday, up 0.6% from 0.8269 the previous Friday.
The euro, then, closed at 1.2024 dollars, compared to 1.2094 the week before.
Gold in euros, then, would be 475.63 euros an ounce, up 2.9% from 462.13 euros
an ounce the week before. Oil closed at $65.37 a barrel, down 3.7% from 67.76
dollars a barrel at the previous week’s close. Oil in euros would be
54.37 euros a barrel, down 3.1% from 56.03 the week before. The gold/oil ratio
closed at 8.75 barrels of oil per ounce of gold, up 6.1% from 8.25 the at the
previous Friday’s close. In U.S. interest rates, the yield on the ten-year
U.S. Treasury note was 4.53 at the end of the week, up two basis points from
4.51 the week before. In the U.S. stock market, the Dow closed at 10,793.62,
down 1.1% from 10,907.21 at the close of the previous Friday. The NASDAQ
closed at 2,262.58, down 1.8$ from 2,304.23 the week before.
More signs of trouble in the housing market last week. This from Massachusetts:
Housing
slowdown squeezes borrowers
Foreclosure cases hit 12-year high
By Kimberly Blanton, Globe Staff | January 30, 2006
The number of foreclosure notices filed against Massachusetts homeowners last
year reached their highest level since the housing bust of the early 1990s,
as homeowners fell behind on their mortgages and lenders began the process
of taking back the properties.
Paradoxically, the sudden halt to sharply rising home prices put a squeeze
on many borrowers, analysts said. Homeowners who stretched their finances to
the limit to buy a home found it more difficult to make their payments on variable-rate
mortgages as interest rates rose, but they were less able to refinance their
loans at more attractive rates -- or sell and pay off their debts -- because
the value of their homes fell or remained flat.
“When prices are skyrocketing, you have the option" of
selling the house for a gain or refinancing, said Nicolas Retsinas, director
of the Joint Center for Housing Studies at Harvard University.
“In an economy where price appreciation is more modest or doesn't exist,
what option do you have left?" he said. “Sadly, one of those options
is foreclosure."
Last year, there were almost 11,500 foreclosure filings in Massachusetts Land
Court, where most notices are filed by banks and mortgage companies against
the homeowners, according to ForeclosuresMass Corp., which compiles and tracks
filings. That is a 32 percent increase from 2004, pushing the number of filings
on record to its highest level since 1993, when a once-booming housing market
was in a tailspin. The biggest increases were in Eastern Massachusetts.
During the housing boom of 1999 to 2004, the average price of Massachusetts
houses and condominiums surged by at least 10 percent every year except one,
putting the state's home-price appreciation among the nation's highest. But
last year, price gains slowed to 5 percent, and single-family home prices were
flat or even declined in some Boston and suburban neighborhoods.
“There's an epidemic of foreclosures," said Boston lawyer Gary
Klein, who represents borrowers in lawsuits against lenders. “We're
getting a steady stream of referrals of people who are looking for any option
to save their home."
Jeremy Shapiro, president of ForeclosuresMass, predicted filings would rise
again this year, because many homeowners with adjustable-rate mortgages will
see their monthly payments begin to rise along with interest rates.
“As we get into '06, '07, '08 and beyond, we're going to see more folks
whose rates adjust," he said.
When notice is filed, it typically takes a mortgage lender three to four months
to complete the foreclosure process and seize the property. Only about one
in three filings actually results in a bank or mortgage company taking ownership
of the home, but they provide a gauge of financial hardship.
Income was down, adjusting for inflation last year in the United States.
Wages
Up by Smallest Amount in Nine Years
By MARTIN CRUTSINGER, AP Economics Writer
Wages and benefits paid to civilian workers rose last year by the smallest
amount in nine years, the government reported Tuesday.
The Labor Department said that employee compensation was up 3.1 percent
in 2005, an increase that was slower than the 3.7 percent rise in 2004. The
slowdown reflected a big drop in benefit costs — items such as health insurance
and pensions — which rose by 4.5 percent last year after jumping by
6.9 percent in 2004.
The new Employment Compensation Index should ease concerns at the Federal
Reserve that improving labor markets could be starting to push up wage pressures.
Wages and salaries rose by 2.6 percent last year, only slightly higher than
a 2.4 percent increase in 2004.
The 3.1 percent increase in total compensation for the 12 months ending in
December was the smallest annual increase since a 2.9 percent rise in 1996.
Last year's increase was not enough to keep up with inflation. When inflation
is considered, overall compensation fell by 0.3 percent, the first time there
has been a decline since 1996, when total compensation after adjusting for
inflation was down by 0.4 percent.
Wages are down, foreclosures up, yet the mainstream media was trumpeting the
supposedly “strong” employment figures for January that came out
on Friday. Wall Street panicked at the bad news (bad because they were
worried that people might get pay raises) out of fear of interest rate increases,
which have taken place. The fake strong employment figures gives the
new Federal Reserve Chairman Bernacke a fig leaf for the inevitable interest
rate increases. These increases are due to the massive current account,
fiscal and trade deficits that the United States is running, but now they can
blame working people for asking for measely raises.
The claim that the jobless rate is under five percent is ludicrous. That
would only really be the case if there were large numbers of job openings with
few applicants. Anyone living in the United States will tell you that
that is not the case.
The economy is presented to us as if it operated completely by natural laws.
We should always remember that the economic situation is one that was chosen
by people who have a large amount of say in the process. There has been a concerted
effort to eliminate any vestige of economic democracy from society since the
time of William Simon in the Nixon administration. Simon looked at the
media and the academy at the time (late sixties, early seventies) and decried
the fact that intellectuals seemed to be working against the dominant economic
system at the time (corporate late capitalism). Simon called for a portion
of corporate profits and the personal wealth of superrich families to be devoted
to funding an alternative constellation of think tanks, media outlets, book
and newspaper publishers, and radio and television stations devoted to pushing
a neoliberal ideology and to eliminating traces of New Deal/Great Society forms
of American social democracy. In the area of the law, a major part of this
effort has been played by the Federalist Society.
After four decades of right-wing anger with liberal jurisprudence, the Federalist
Society (if not Opus Dei) has now gained control of the United States Supreme
court. Leaving aside the profound importance this has in constitutional
matters, the economic consequences will be a return to a robber-baron type
of brutal capitalism, but not in a nineteenth-century, small scale. There
will be no competition; this will be a fascism run by global finance and monopoly
capitalism using fundamentalist religion and xenophobia for a sufficient level
of popular support. Here’s Joe
Kay:
What are the aims of the Federalist Society and the various right-wing groups
that have helped push the Alito and Roberts nominations? They include the rollback
of the welfare state, the elimination of corporate regulations, the repudiation
of international law, the expansion of executive power, and the elimination
of the separation of church and state. The elevation of Alito to the Supreme
Court poses a serious threat to the democratic rights and social interests
of the American people.
Politically this will mean an elected dictatorship of a one-party state
ruled by a “unitary executive.” The recent behavior of the Democratic
Party in the United States leaves no doubt that they are not an opposition
party in any real sense of the term.
These and the policies of the Bush administration as a whole are deeply
unpopular, and Bush’s poll numbers are falling again. A recent poll conducted by
ABC News and the Washington Post found that Bush’s approval rating
stands at 42 percent, which, except for Nixon during the Watergate scandal,
is the worst for a president entering his sixth year in half a century. Sixty
percent of the population disapproves of the war in Iraq and the same percentage
thinks that Bush does not understand their problems.
If the Democrats were serious about opposing Alito and his extreme right-wing
agenda, they would mount a political campaign among broad masses of the population.
However, this is the last thing they want, for this would pose a threat to
the interests the Democrats themselves support.
In spite of the declining support for the administration, the popular
opposition to the war and the assault on democratic rights, the anger that
has been generated due to declining living standards and growing inequality,
the ballooning corruption scandal surrounding lobbyist Jack Abramoff, and
the indictment of several administration officials—the Republicans
are able to carry their programs through the Senate with virtually no opposition
from the Democrats.
The Democratic Congressional leadership has sought to apologize for its
spineless surrender by citing the Republicans’ 55-45 majority in the upper house.
But there is no question that if the roles were reversed the Republicans would
be far more aggressive and provocative in the minority than the Democrats have
been in relationship to Bush’s agenda. Moreover, the last major action
carried out by the Democrats when they did control a similarly narrow majority
in the Senate was the infamous vote in October 2002 to authorize Bush to
wage war on Iraq, which passed overwhelmingly by a vote of 77 to 23, a margin
tellingly similar to the margin by which the Alito nomination was cleared
for a final vote.
This can be explained only by the fact that the Democrats have no real opposition
to the policies of war, attacks on democratic rights, the assault on social
programs, and, in general, the entire policy of the American ruling class.
Indeed, on all of these questions, the Democrats have facilitated the Republicans
in carrying out a right-wing agenda.
Now, the program is being exported to western Europe, where the corporate
fascists want to destroy social democracy. Listen to how the neoliberal
priesthood at Davos describe their new servant, Angela Merkel, the chancellor
of Germany:
Merkel
Makes Waves at Davos
By Jack Ewing
Thu Jan 26, 8:13 AM ET
In astonishingly short time, German Chancellor Angela Merkel has emerged
as the most dynamic leader in Europe. That at least seemed to be the verdict
of the applause meter at the World Economic Forum in Davos on Jan. 25. "You
have given us hope for the first time in a long time," Peter Brabeck-Letmathe,
chairman and chief executive of Swiss food giant Nestle, told Merkel after
she delivered the keynote address to a packed auditorium.
Merkel called for a massive reduction in bureaucracy in both Europe and
Germany, and an increase in the retirement age, among other measures. "We have
to be more flexible. We're holding back enormous potential," she said.
SHOW OF STATESMANSHIP. Merkel's Davos performance was only the latest in a
series of coups for the Chancellor. Since she was chosen in November to lead
a coalition government of her Christian Democrats and the center-left Social
Democrats, Merkel has repaired relations with the U.S., strained by the Iraq
war. She also has displayed a new toughness toward Russia by visiting human-rights
groups during a trip in January to see Russian President Vladimir Putin.
These and other shows of statesmanship have made her Germany's most popular
leader in years, banishing memories of last year's national election campaign,
when she squandered a commanding lead to barely achieve a plurality against
the Social Democrats. Immediately after her speech, Merkel showed
she's comfortable in the world of business as well as politics, bantering
on stage with members of a panel that included Michael Dell, chairman of
computer retailer Dell, and Henry McKinnell, chairman and CEO of drugmaker
Pfizer. Dell advised Merkel to cut jobless benefits to remove the incentive
not to work. "Good advice," replied
Merkel in English.
Merkel delivered the rest of her remarks in German, even though she speaks
English well -- a sign she was aiming at a domestic audience and setting the
tone for policy moves to come. In a Continent dominated by the likes of such
battle-scarred political warhorses as France's Jacques Chirac and Italy's Silvio
Berlusconi, Merkel is a badly needed fresh face. It's not just image. As the
chancellor reminded her listeners, she grew up in Communist East Germany and
has no emotional stake in the social-welfare state that holds down economic
growth.
The fact that a majority of the voters in Germany are completely opposed to
Merkel’s neoliberal economic policies and neoconservative foreign policies
is ignored in this Business Week article. If they mention public opinion at
all, it is seen only as a nuisance standing in the way of enlightened policies. On
either side of the Atlantic Ocean the contempt for democracy couldn’t
be clearer. Canada is clearly in the crosshairs of the neoliberals and
neoconservatives.
Here is what middle-class Europeans and Canadians have to look forward to
under the new “dynamism:”
The Middle Class on the Precipice
Rising financial risks for American families
by Elizabeth Warren
During the past generation, the American middle-class family that once could
count on hard work and fair play to keep itself financially secure has been
transformed by economic risk and new realities. Now a pink slip, a bad diagnosis,
or a disappearing spouse can reduce a family from solidly middle class to newly
poor in a few months.
Middle-class families have been threatened on every front. Rocked by rising
prices for essentials as men’s wages remained flat, both Dad and Mom
have entered the workforce—a strategy that has left them working harder
just to try to break even. Even with two paychecks, family finances are stretched
so tightly that a very small misstep can leave them in crisis. As tough as
life has become for married couples, single-parent families face even more
financial obstacles in trying to carve out middle-class lives on a single
paycheck. And at the same time that families are facing higher costs and
increased risks, the old financial rules of credit have been rewritten by
powerful corporate interests that see middle-class families as the spoils
of political influence.
Raising Incomes the Two-Worker Way
In just one generation, millions of mothers have gone to work, transforming
basic family economics. The typical middle-class household in the United States
is no longer a one-earner family, with one parent in the workforce and one
at home full-time. Instead, the majority of families with small children now
have both parents rising at dawn to commute to jobs so they can both pull in
paychecks.
Scholars, policymakers, and critics of all stripes have debated the social
implications of these changes, but few have looked at their economic impact.
Today the median income for a fully employed male is $41,670 per year (all
numbers are inflation-adjusted to 2004 dollars)—nearly $800 less than
his counterpart of a generation ago. The only real increase in wages for a
family has come from the second paycheck earned by a working mother. With both
adults in the workforce full-time, the family’s combined income is $73,770—a
whopping 75 percent higher than the median household income in the early 1970s.
But the gain in income has an overlooked side effect: family risk has risen
as well. Today’s families have budgeted to the limits of their new two-paycheck
status. As a result, they have lost the parachute they once had in times of
financial setback—a back-up earner (usually Mom) who could go into the
workforce if the primary earner got laid off or fell sick. This “added-worker
effect” could buttress the safety net offered by unemployment insurance
or disability insurance to help families weather bad times. But today, a
disruption to family fortunes can no longer be made up with extra income
from an otherwise-stay-at-home partner.
Income risk has shifted in other ways as well. Incomes are less dependable
today. Layoffs, outsourcing, and other workplace changes have trebled the
odds of a significant interruption in a single generation. The shift from
one income to two doubled the risks again, as both Mom and Dad face the possibility
of unemployment. Of course, with two people in the workforce, the odds of
income dropping to zero are lessened. But for families where every penny
of both paychecks is already fully committed to mortgage, health insurance,
and other payments, the loss of either paycheck can unleash a financial tailspin.
Nor are such risks solely related to unemployment. Consider health-related
exposures. Two wage-earners means either Mom or Dad could be out of work
from illness or injury, losing a substantial chunk of the family income.
Finally, the new everyone-in-the-workforce family faces higher risks for
caregiving. When there was one stay-at-home parent, a child’s serious illness or Grandma’s fall down the stairs was
certainly bad news, but the main economic ramification was the medical bills.
Today, someone has to take off work—or hire help—in order to provide
family care. At a time when hospitals are sending people home “quicker
and sicker,” more nursing care falls directly on the family—and
someone has to be home to administer it.
… The data can be summarized in a financial snapshot of two families,
a typical one-earner family from the early 1970s compared with a typical two-earner
family from the early 2000s. With an income of $42,450, the average family
from the early 1970s covered their basic mortgage expenses of $5,820, health-insurance
costs of $1,130 and car payments, maintenance, gas, and repairs of $5,640.
Taxes claimed about 24 percent of their income, leaving them with $19,560 in
discretionary funds. That means they had about $1,500 a month to cover food,
clothing, utilities, and anything else they might need—just about half
of their income.
By 2004, the family budget looks very different. As noted earlier, although
a man is making nearly $800 less than his counterpart a generation ago, his
wife’s paycheck brings the family to a combined income that is $73,770—a
75 percent increase. But higher expenses have more than eroded that apparent
financial advantage. Their annual mortgage payments are more than $10,500.
If they have a child in elementary school who goes to daycare after school
and in the summers, the family will spend $5,660. If their second child is
a pre-schooler, the cost is even higher—$6,920 a year. With both people
in the workforce, the family spends more than $8,000 a year on its two vehicles.
Health insurance costs the family $1,970, and taxes now take 30 percent of
its money. The bottom line: today’s median-earning, median-spending
middle-class family sends two people into the workforce, but at the end of
the day they have about $1,500 less for discretionary spending than their
one-income counterparts of a generation ago.
What happens to the family that tries to get by on a single income today?
Their expenses would be a little lower because they can save on childcare
and taxes, and, if they are lucky enough to live close to shopping and other
services, perhaps they can get by without a second car. But if they tried
to live a normal, middle-class life in other ways—buy an average home, send their younger
child to preschool, purchase health insurance, and so forth—they would
be left with only $5,500 a year to cover all their other expenses. They would
have to find a way to buy food, clothing, utilities, life insurance, furniture,
appliances, and so on with less than $500 a month. The modern single-earner
family trying to keep up an average lifestyle faces a 72 percent drop in
discretionary income compared with its one-income counterpart of a generation
ago.
Combine changes in family income and expenses, and the biggest change of
all becomes evident—on the risk front. In the early 1970s, if any calamity
came along, the family devoted nearly half its income to discretionary spending.
Of course, people need to eat and turn on the lights, but the other expenses—clothing,
furniture, appliances, restaurant meals, vacations, entertainment, and pretty
much everything else—can be drastically reduced or even cut out entirely.
In other words, they didn’t need as much money if something went wrong.
If the couple could find a way—through unemployment insurance, savings,
or putting their stay-at-home parent to work—they could cover the basics
on just half of their previous earnings. Given the option of a second paycheck,
both could stay in the workforce for a few months once the crisis had passed,
pulling the family out of their financial hole.
But the position today is very different. Fully 75 percent of family income
is earmarked for recurrent monthly expenses. Even if they are able to trim
around the edges, families are faced with a sobering truth: every one of
those expensive items—mortgage, car payments, insurance, childcare—is
a fixed cost. Families must pay them each and every month, through good times
and bad; there is no way to cut back from one month to the next, as can be
done with spending on clothing or food. Short of moving out of the house,
withdrawing their children from preschool, or canceling the insurance policy
altogether, they are stuck.
In other words, today’s family has no margin for error. There is no
leeway to cut back if one earner’s hours are cut or if the other gets
sick. There is no room in the budget if someone needs to take off work to
care for a sick child or an elderly parent. Their basic situation is far
riskier than that of their parents a generation earlier. The modern American
family is walking a high wire without a net.
The Rules Have Changed
The one-two punch of income vulnerability and rising costs has weakened the
middle class, at the same time that the revision of the rules of financing
delivers a death blow to millions of families each year. Since the early
1980s, the credit industry has rewritten the rules of lending to families.
Congress has turned the industry loose to charge whatever it can get and
to bury tricks and traps throughout credit agreements. Credit-card contracts
that were less than a page long in the early 1980s now number 30 or more
pages of small-print legalese. In the details, credit-card companies lend
money at one rate, but retain the right to change the interest rate whenever
it suits them. They can even raise the rate after the money has been borrowed—a
practice once considered too shady even for a back-alley loan shark. When
they think they have been cheated, customers can be forced into arbitration
in locations thousands of miles from home. Some companies claim that they
can repossess anything a customer buys with a credit card.
Credit-card issuers are not alone in their boldness. Home-mortgage lenders
are writing mortgages that are so one-sided that some of their products are
known as “loan-to-own” because it is the mortgage company—not
the buyer—who will end up with the house. Payday lenders are ringing
military bases and setting up shop in working-class neighborhoods, offering
instant cash that can eventually cost the customer more than a thousand percent
interest.
For those who can stay out of debt, the rules of lending may not matter. But
the economic pressures on the middle class are causing more families to turn
to credit just to make ends meet. When something goes wrong the only place
to turn is credit cards and mortgage refinancing. At that moment, the change
in lending rules matters very much indeed. The family that might manage $2,000
of debt at 9 percent discovers that it cannot stay afloat when interest rates
skyrocket to 29 percent. And the family that refinanced the home mortgage to
pay off other debts suddenly faces escalating monthly payments and may find
itself staring at foreclosure. Job losses or medical debts can put any family
in a hole, but a credit industry that has rewritten the rules can keep that
family from ever climbing back.
…During the same period, families have been asked to absorb much more
risk in their retirement income. In 1985, there were 112,200 defined-benefit
pension plans with employers and employer groups around the country; today
their number has shrunk to 29,700 such plans, and those are melting away fast.
Steelworkers, airline employees, and now those in the auto industry are joining
millions of families who must worry about interest rates, stock market volatility,
and the harsh reality that they may outlive their retirement money. For much
of the past year, President Bush campaigned to move Social Security to a savings-account
model, with retirees trading much or all of their guaranteed payments for payments
contingent on investment returns. For younger families, the picture is not
any better. Both the absolute cost of healthcare and the share of it borne
by families have risen—and newly fashionable health-savings plans are
spreading from legislative halls to Wal-Mart workers, with much higher deductibles
and a large new dose of investment risk for families’ future healthcare.
Even demographics are working against the middle class family, as the odds
of having a frail elderly parent—and all the attendant need for physical
and financial assistance—have jumped eightfold in just one generation.
From the middle-class family perspective, much of this, understandably,
looks far less like an opportunity to exercise more financial responsibility,
and a good deal more like a frightening acceleration of the wholesale shift
of financial risk onto their already overburdened shoulders. The financial
fallout has begun, and the political fallout may not be far behind.
Elizabeth Warren is Gottlieb professor of law and faculty director of the
Judicial Education Program.
It looks like the British are ahead of the curve, compared to the rest of
the EU:
Number
of bankrupt British families hits record
Sat Feb 4, 1:56 PM ET
LONDON (AFP) - The number of British households declaring bankruptcy because
of an unmanageable burden of debt hit a record high last year, according to
official figures.
The total of 67,580 bankruptcies was 45 percent up on 2004 and the highest
since the statistic began to be recorded 45 years ago.
Analysts warned the figure could hit 100,000 in the current year, a new rise
of almost 48 percent.
Steve Treharne, head of personal insolvency at consultants KPMG, said Saturday: "The
bankruptcy bubble is getting bigger, but seems unlikely to burst for some
time yet."
The number of households who saw their homes repossessed because they could
not meet their mortgage repayments rose by 22 percent in the second half of
2005 to 5,630.
The total for the year was 10,260, 70 percent up on 2004.
Those who fell behind on their mortgage payments increased 20 percent between
the first and the second half of 2005.
British households' private debt soared to 1.130 trillion pounds (1.650 trillion
euros, 2.011 trillion dollars) following the Christmas season. On credit cards
alone it stands at two-thirds of the total in the whole European Union.
As for people in the United States, a look at Latin America in the era of
right-wing military dictatorships or post-collapse Russia might give us an
idea of what’s planned.
The True State
of the Union
More Deception from the Bush White House
By Paul Craig Roberts
February 1, 2006
Gentle reader, if you prefer comforting lies to harsh truths, don't read this
column.
The state of the union is disastrous. By its naked aggression, bullying, illegal
spying on Americans, and illegal torture and detentions, the Bush administration
has demonstrated American contempt for the Geneva Convention, for human life
and dignity, and for the civil liberties of its own citizens. Increasingly,
the US is isolated in the world, having to resort to bribery and threats to
impose its diktats. No country any longer looks to America for moral leadership.
The US has become a rogue nation.
Least of all did President Bush tell any truth about the economy. He talked
about economic growth rates without acknowledging that they result from eating
the seed corn and do not produce jobs with a living wage for Americans. He
touted a low rate of unemployment and did not admit that the figure is false
because it does not count millions of discouraged workers who have dropped
out of the work force.
Americans did not hear from Bush that a new Wal-Mart just opened on Chicago's
city boundary and 25,000 people applied for 325 jobs (Chicago Sun-Times, Jan.
26), or that 11,000 people applied for a few Wal-Mart jobs in Oakland, California.
Obviously, employment is far from full.
Neither did Bush tell Americans any of the dire facts reported by economist
Charles McMillion in the January 19 issue of Manufacturing & Technology
News:
During Bush's presidency the US has experienced the slowest job creation
on record (going back to 1939). During the past five years private business
has added only 958,000 net new jobs to the economy, while the government
sector has added 1.1 million jobs. Moreover, as many of the jobs are not
for a full work week, "the country ended 2005 with fewer private
sector hours worked than it had in January 2001."
McMillion reports that the largest sources of private sector jobs
have been health care and waitresses and bartenders. Other areas of the
private sector lost so many jobs, including supervisory/managerial jobs,
that had health care not added 1.4 million new jobs, the private sector
would have experienced a net loss of 467,000 jobs between January 2001
and December 2005 despite an "economic
recovery." Without the new jobs waiting tables and serving drinks, the
US economy in the past five years would have eked out a measly 64,000 jobs.
In other words, there is a job depression in the US. McMillion reports that
during the past five years of Bush's presidency the US has lost 16.5% of
its manufacturing jobs. The hardest hit are clothes manufacturers, textile
mills, communications equipment, and semiconductors. Workforces in these
industries shrunk by 37 to 46 percent. These are amazing job losses. Major
industries have shriveled to insignificance in half a decade.
Free trade, offshore production for US markets, and the outsourcing of US
jobs are the culprits. McMillion writes that "every industry that faces
foreign outsourcing or import competition is losing jobs," including
both Ford and General Motors, both of which recently announced new job losses
of 30,000 each. The parts supplier, Delphi, is on the ropes and cutting thousands
of jobs, wages, benefits, and pensions.
…Americans are constantly reassured that America is the leader in
advanced technology and intellectual property and doesn't need jobs making
clothes or even semiconductors. McMillion puts the lie to this reassurance.
During Bush's presidency, the US has lost its trade surplus in manufactured
Advanced Technology Products (ATP). The US trade deficit in ATP now exceeds
the US surplus in Intellectual Property licenses and fees. The US no longer
earns enough from high tech to cover any part of its import bill for oil,
autos, or clothing.
This is an astonishing development. The US "superpower" is
dependent on China for advanced technology products and is dependent on
Asia to finance its massive deficits and foreign wars. In view of the rapid
collapse of US economic potential, my prediction in January 2004 that the
US would be a third world economy in 20 years was optimistic. Another five
years like the last, and little will be left. America's capacity to export
manufactured goods has been so reduced that some economists say that there
is no exchange rate at which the US can balance its trade.
McMillion reports that median household income has fallen for a record fifth
year in succession. Growth in consumer spending has resulted from households
spending their savings and equity in their homes. In 2005 for the first time
since the Great Depression in the 1930s, American consumers spent more than
they earned, and the government budget deficit was larger than all business
savings combined. American households are paying a record share of their disposable
income to service their debts.
With America hemorrhaging red ink in every direction, how much longer can
the dollar hold on to its role as world reserve currency?
…Globalization is wiping out the American middle class and terminating
jobs for university graduates, who now serve as temps, waitresses and bartenders.
But the whores among economists and the evil men and women in the Bush administration
still sing globalization's praises.
The state of the nation has never been worse. The Great Depression was an
accident caused by the incompetence of the Federal Reserve, which was still
new at its job. The new American job depression is the result of
free trade ideology. The new job depression is creating a reserve army of
the unemployed to serve as desperate recruits for neoconservative military
adventures. Perhaps that explains the Bush administration's enthusiasm for
globalization.
Ironically, things in Latin America are looking up. The Interntional
Monetary Fund is worried about the fact that Brazil and Argentina are paying
their loans off early.
IMF
Faces Deficit, Doubts on Role as Brazil, Argentina Pay Debt
Feb. 2 (Bloomberg) -- The International Monetary Fund's loss of two of its
biggest borrowers last month has left the lender with a widening budget shortfall
and renewed questions about its role in the global economy.
In the past six weeks, Brazil made early repayment of $15.5 billion it owed
and Argentina repaid $9.5 billion in debt two years ahead of schedule, closing
the accounts of the IMF's first- and third-largest borrowers.
The enticement to pay the debt -- foreign reserves that have swelled as Latin
American economies rebound from recession and investors' appetites for government
bonds grow -- is present in other large borrowing nations, including Pakistan,
Serbia and Ukraine, which have hinted they too may sever ties to the lender.
…Founded at the end of World War II to promote global economic stability,
the IMF typically makes loans to countries on the condition that the borrowers
undertake economic policy changes such as adjusting their balance of payments
or reducing inflation.
With elections nearing, those conditions grew unpopular in Argentina and
Brazil, where the public has blamed their countries’ economic crises on IMF-mandated
changes. And those countries aren’t alone.
Pakistan, the IMF’s third-largest debtor now that Argentina has walked
away, is carrying $1.51 billion in debt and says it’s seeking to cut
its dependence on the fund; Ukraine, the fourth- largest debtor, said in 2004
it would probably decline any additional assistance; and Serbia, which owes
the IMF about $874 million, said last month it wouldn’t borrow any
more.
Russia, Thailand Repay
A year ago, Russia repaid early its $3.3 billion debt to the IMF following
seven years of economic expansion; in 2003, Thailand finished paying off its
obligations two years ahead of schedule.
When the IMF lends to a nation, it often forces changes in fiscal policies
that are rarely popular among citizens, said Desmond Lachman, who spent 24
years as an IMF economist and is now a senior fellow at the American Enterprise
Institute, a Washington-based think tank.
“This plays very well politically in those countries,” Lachman
said. “Prepaying the IMF is declaring independence.”
Argentina had been pursuing a new loan with the IMF last year. Talks failed
after President Nestor Kirchner rebuffed IMF demands to remove a cap on utility
rates, reduce intervention in currency markets that has kept the peso low
against the dollar and bolster national savings. Kirchner said the IMF’s suggestions
would have hurt the nation’s economy.
Back in the United States, the transformation of the country from Athens to
Sparta seems complete as the Bush Administration requested total military spending
for next year of more than a half-trillion dollars. The official numbers are
more in the 400 billion range, but those totals don’t include supplemental
requests for money for the wars in Iraq and Afghanistan, requests that end
up totaling more than 200 billion a year:
Bush
to Request $70B More for War Funding
By ANDREW TAYLOR, Associated Press Writer
The White House has told Congress to expect requests for about $70 billion
more for the wars in Iraq and Afghanistan in the ongoing budget year and
$18 billion more for hurricane relief, Senate Republican aides say.
The details of the requests are not finalized but President Bush's budget
for 2007, to be submitted next week, will reflect the totals for planning purposes,
said the aides, who spoke on condition of anonymity because the White House
has not yet announced the requests. Another $2.3 billion to combat avian flu
is also expected.
The funding for Iraq is in addition to $50 billion approved in December and
should be enough to conduct the war through Sept. 30, the end of the fiscal
year.
Bush is also expected to set aside $50 billion in the 2007 budget for the
war effort, though such funds won't be enough for the entire year.
"We understand that besides the supplemental that now, for the first
time, they're going to request a bridge fund," said Rep. C.W. "Bill" Young,
R-Fla., who chairs the House Appropriations Defense Subcommittee. "This
is what we're hearing."
Young and Rep. John Murtha of Pennsylvania, the senior Democrat on the panel,
said late last year that military officials had told them to expect additional
Iraq funding of as much as $100 billion for 2006.
In the 1990s the total defense budget was around 300 billion a year. Where
is the money coming from? From anything that might help the struggles
of ordinary people:
US budget
slashes social spending to fund war and tax cuts for the rich
By Bill Van Auken
3 February 2006
In the wake of George W. Bush’s State of the Union address, the White
House and the Republican-led Congress have moved swiftly to implement a series
of budget measures that will slash funding for health care and education while
allocating vast new sums for the wars in Iraq and Afghanistan and tax cuts
for America’s wealthy elite.
The House of Representatives approved a $39.5 billion five-year budget-cutting
package on Wednesday. More than half of the savings has been carved out of
funding for Medicare and Medicaid, the principal programs that provide minimal
health care coverage to the elderly, poor and disabled.
On Thursday, Congressional sources reported that the White House was preparing
to ask Congress for another $70 billion to pay for the US wars in Iraq and
Afghanistan. This comes on top of $50 billion approved just last December,
and brings the total allocated for these military interventions in little over
four years to more than $420 billion, the vast majority of it spent on the
aggression against Iraq.
Before the year is out, the administration will seek yet another supplemental
appropriation to pay for the military operations in the two countries. It
is anticipated that before the end 2006, the cost of these wars will top
the $500 billion mark—ten times the amount estimated by the administration
prior to the invasion of Iraq.
Meanwhile, the Senate continued debate on a $56 billion tax cut that has already
been passed by the House.
Taken as a whole, these legislative initiatives will deepen the
social misery in America while widening the already enormous gulf separating
a tiny financial oligarchy from the masses of working people. They further
underscore American capitalism’s growing dependence upon militarism
to offset the decline in its economic position in the world arena.
The House bill is misnamed the Deficit Reduction Act. In fact, it will do
next to nothing to reduce the US budget deficit, which is expected to rise
to $360 billion this year. While draconian in their impact on those who depend
on the programs being slashed, the budget cuts hardly make a dent in this deficit
and account for less than 3 percent of the $14.3 trillion in federal spending
projected over the next five years.
The House leadership and the Bush White House praised the budget
package for taking what one Republican congressman termed a “first step toward long-term
fiscal discipline.” However, it is clear that discipline is being demanded
only from those at the bottom of the social ladder, who will pay for the
amassing of even greater personal fortunes by those at the top.
The tax package that is currently under consideration is centered on the
extension of capital gains and dividend tax cuts, over half of which would
go to the top 0.2 percent who have incomes in excess of $1 million a year.
Over three-quarters of the tax cuts benefit only households making more than
$100,000 a year—just
14 percent of the population. According to some estimates, the real cost
of this give-away to the super-rich and the most privileged sections of the
upper-middle-class will be closer to $100 billion in lost federal revenues
over the next five years.
The biggest spending cuts enacted by Congress include $6.4 billion slashed
from Medicare, the health program for the elderly, and $4.8 billion from Medicaid,
which provides health coverage for the poor and disabled.
..While slashing benefits for the poor and elderly, the legislation was
carefully crafted to protect the interests of the managed health care industry
and the major drug companies. Provisions in the Senate version of the bill
that would have required the big pharmaceutical firms to give larger rebates
on drugs bought by states under Medicaid and cut overpayments to HMOs covering
Medicare beneficiaries—which alone would have saved an estimated $22 billion over
10 years—were stripped from the legislation. Some in Congress charged
that the final language of the bill was directly dictated by lobbyists for
HMOs and drug companies, which are among the largest campaign contributors
to both major parties.
Another socially regressive provision will sharply increase interest rates
on college loans to students and their parents. The interest rate on PLUS loans
to parents will rise from the current 6.1 percent to 8.5 percent next July,
while the rate on federal Stafford Loans used by some 10 million students will
climb from 5.3 percent to 6.8 percent.
This change amounts to a cut in financial aid that will ultimately deprive
a section of working class youth of the right to a higher education. It is
projected to generate as much as $14 billion in revenue over five years, money
that will be used to defray the cost of tax cuts for the rich.
At least we in the United States still have bread and circuses. Yesterday
was Super Sunday and this year the Super Bowl was played in Detroit:
Super Bowl City
on the Brink
Fourth and Long in Detroit
By Dave Zirin
February 3, 2006
"A celebration of concentrated wealth."
That's what Washington Post sportswriter Tony Kornheiser called the National
Football League's two-week long pre-Super Bowl party binge. Every Super Bowl
Sunday, corporate executives and politicians exchange besotted, sodden backslaps,
amidst an atmosphere that would shame Jack Abramoff. Only this year the bacchanalia
-- complete with ice sculptures peeing Grey Goose vodka and two tons of frozen
lobster flown directly to the stadium -- is happening in the United States'
most impoverished, ravaged city: Detroit. Detroit's power elites in government
and the auto industry are rolling out the red carpet while many of its people
shiver in fraying rags. This contrast between the party atmosphere and abject
urban suffering has been so stark, so shocking and so utterly revealing that
news coverage on the city's plight has appeared in the sports pages of the
New York Times and Detroit Free Press, among others.
Only a Bush speechwriter couldn't notice the gritty backdrop while
limos clog the streets and escort services are flying in female reinforcements
like so much shellfish. Detroit -- and there is no soft way to put this --
is a city on the edge of the abyss. Its 2005 unemployment rate was 14.1 percent,
more than two and a half times the national level. Its population has plummeted
since the 1950s from over two million to fewer than 900,000, and more than
one-third of its residents live under the poverty line, the highest rate
in the nation. In addition, the city has in the past year axed hundreds of
municipal employees, cut bus and garbage services, and boarded up nine recreation
centers. As the Associated Press wrote, "Much of the rest of Detroit
is a landscape dotted with burned-out buildings, where liquor stores abound
but supermarkets are hard to come by, and where drugs, violence and unemployment
are everyday realities."
Ryan Anderson of Detroit, wrote me a chilling email saying, "The mood
is one of Orwellian-flavored siege: dire warnings of a 30-day police speeding
ticket bonanza, designed to raise $1 million for the construction of a damn
bridge welcoming out-of-towners to the Motor City; the mayor, the governor,
and every other notable on the radio urging us all to 'show 'em what we got'
[read: Don't further sully our already bad reputation]; and the homeless
being taken to a three-day 'Superbowl Party,' where they'll get the actual
food and shelter they need until the big game's over, after which they'll
be kicked back out on the streets. Welcome to the Poorest City in America,
sponsored and enabled by lily-white Oakland County."
Anita Cerf, a teacher in Detroit also wrote to me, "I am appalled by
the living conditions of its residents as contrasted with the hype for the
Super Bowl and the fancying up of downtown for all the rich out-of-town guests.
I live on the East Side, which probably has one of the highest poverty rates
in the country, and I teach high school dropouts on the Southwest Side. My
students have horrific problems, many of which stem from these economic and
social conditions. It's disgusting."
Mitch Albom of the Detroit Free Press described the shelter, called the
Detroit Rescue Mission, throwing the "three day party" to cleanse homeless
people from the city's landscape. As Albom wrote, "Lines formed before
sunset, dozens of men in dirty sweatshirts, old coats, worn-out shoes. They
had to line up in an alley, because, [the shelter's director says], the city
doesn't want lines of homeless folks visible from the street. Even at a shelter,
they have to go in the back door."
But these days Detroit is dealing with more than normal tough times. While
the Super Bowl is played at Ford Field, the Ford family announced last week
that it would eliminate up to 30,000 jobs and close 14 plants in the next six
years. The cuts mean it's the unemployment line, and maybe Albom's shelter,
for about a third of the 87,000 Ford workers who are members of the United
Auto Workers (UAW).
For a city that built a stable "middle class" out of union
struggle and the auto plants, this is injury added to insult. But have
no fear. NORAD, the North American Aerospace Defense Command, will be flying
sorties over Ford Field to protect everyone from terrorist missile attacks.
There is no NORAD however on the streets of Detroit to protect people from
Operation Enduring Class War otherwise known as the Super Bowl.
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