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Signs of the Times for Mon, 13 Mar 2006

Signs Editorial:

Donald J. Hunt
Signs of the Times
March 13, 2006

Gold closed at 542.50 dollars an ounce on Friday, down 4.6% from $567.20 for the week. The dollar closed at 0.8396 euros Friday, up 1.1% from 0.8307 the week before. That would put the euro at 1.1910 dollars, compared to 1.2038 at the end of the previous week. Gold in euros would be 455.50, down 3.4% from 471.17 euros an ounce the week before. Oil closed at 59.96 dollars a barrel, down 6.2% from $63.67 at the close of the previous week. Oil in euros would be 50.34 euros a barrel, down 5.1% from 52.89 for the week. The gold/oil ratio closed at 9.05 up 1.6% from 8.91 at the end of the previous week. In U.S. stocks, the Dow Jones Industrial Average closed at 11,076.34 on Friday, up 0.4% from 11,033.20 for the week, while the NASDAQ closed at 2,262.04 down 1.9% from 2,306.08. The yield on the ten-year U.S. Treasury note closed at 4.76, up 8 basis points from 4.68 for the week.

A good week for the U.S. imperial economy, if the numbers are any indication. Gold and oil fell sharply and the dollar rose. But the interests of the owners and managers of the imperial economy and those of the average person in the United States have diverged. Unemployment was up last month, though the media focused on the fact that the jobs numbers for February exceeded expectations. Notice how much space the following Bloomberg article devotes to positive spin and how little space is given to the negative numbers (bolded).

February Payrolls Rise 243,000; Jobless Rate at 4.8%

March 10 (Bloomberg) -- American employers added a greater- than-expected 243,000 workers in February and incomes rose, signs the job market will bolster consumer spending and economic growth. The unemployment rate increased to 4.8 percent.

The gain in employment followed a 170,000 rise in January that was smaller than previously reported, the Labor Department said today in Washington. The jobless rate rose from 4.7 percent the previous month, the lowest level since July 2001, as more workers entered the labor force seeking jobs.

Economic growth will depend more on jobs this year as housing, a source of strength in the last four years, starts to fade, economists said. Wages in the last 12 months rose by the most in more than four years, posing a risk of higher inflation.

"The labor market is heating up," Mark Vitner, a senior economist at Wachovia Corp. in Charlotte, North Carolina, said before the report. "Businesses have pushed as hard as they can in getting work out of their existing workforces and it's time to expand." The Federal Reserve "might have to raise rates more than they really want to."

Economists expected payrolls would rise by 210,000 last month following a previously reported increase of 193,000 in January, according to the median of 77 forecasts in a Bloomberg News survey. Estimates ranged from increases of 100,000 to 300,000. Economists also projected the unemployment rate would hold at 4.7 percent.

Service Jobs

Employment in service-producing industries, which include retailers, banks and government agencies, rose 198,000 last month after rising 105,000 in January, the report showed. The increase was led by education, health-care and business services jobs.

Construction employment rose 41,000 after a gain of 55,000 in January. Mining, including oil and gas industries, added 5,000 jobs.

Manufacturing lost 1,000 jobs last month, the first decline in five months. The manufacturing workweek rose to 41 hours from 40.9 in January and overtime rose to 4.6 hours from 4.5 hours.

Average weekly hours worked by production workers fell to 33.7 hours in February from 33.8 the prior month. Economists expected hours would hold at 33.8 for a sixth month, according to the Bloomberg News survey.

The bottom line is that joblessness was up, manufacturing jobs were lost, and any small pay raises were not enough to keep up with inflation.

In more bad news for the average person, interest rates including mortgage rates continued their rise and most analysts predict the Federal Reserve Board will raise interest rates again. They cite the fact that U.S. workers on average increased their pay by 3.5% last year. While that was below the rate of inflation, the people who can live on their investments and who don't depend on paychecks view the small rise in pay with alarm.

30-Year Mortgage Rates Jump to 2-Year High

By Martin Crutsinger, AP Economics Writer

Rates on 30-year mortgages jumped to the highest level in 2 1/2 years this week, driven higher by inflation worries in financial markets.

Mortgage giant Freddie Mac reported Thursday that rates on 30-year, fixed-rate mortgages averaged 6.37 percent this week, according to its weekly survey.

That was up sharply from a nationwide average of 6.24 percent last week and left 30-year rates at the highest level since they averaged 6.44 percent the week of Sept. 5, 2003.

"Stronger than expected gains in the manufacturing and service industries - coupled with higher labor costs - ignited inflation concerns, which led to the rise in mortgage rates this week," said Frank Nothaft, chief economist at Freddie Mac.

He said investors have begun to worry that the Federal Reserve, which has been raising interest rates to combat inflation, may not stop with just one or two more rate hikes but may actually boost rates three more times this year.

The rising rates have begun to cool the sizzling housing market with sales of both new and existing homes posting bigger-than-expected declines in January.

Nothaft said the housing sector, which posted record sales levels for five straight years, was shifting to a slower pace, but he predicted the decline would not be severe enough to disrupt the overall economy like the bursting of the stock market did in 2000.

"We see no signs of a bursting bubble, but rather a return to a more normal pace of activity," he said.

Some economists believe that 30-year mortgage rates could rise as high as 7 percent by the end of the year.

The Freddie Mac survey found sharp increases for all types of mortgages this week.

There are ominous signs of a real crash in real estate, despite what the AP writer said. Interest rates are designed to slow the economy, but there are other signs that the people who control the money are about to slam on the brakes. Signs of the Times published this piece from Safehaven.com on Saturday, but it is worth revisiting.

The Fed Officially Kicks Off the Next Recession

by Robert McHugh
March 12, 2006

It is official. A recession is coming. How do I know? Because this week new Fed Chairman Ben Bernanke gave an official warning to bankers about commercial real estate loans. That is always the kickoff to a recession. It is the starter's gun, the national anthem before a ballgame, the opening hymn at a church service. Here is how it works. The Fed has three official tools to control the money supply: Setting reserve requirements (telling banks how much of their deposits they cannot lend. The higher the reserve requirements, the less loans, the less money creation by the economy). The second tool is open market operations. Here they set the amount of money in the system by buying or selling securities. Third is setting the discount rate, the rate of interest banks must pay to borrow money at the Fed. Theoretically, the higher the rate, the less money banks will borrow, the less they have to lend, and the less money that is created by the banking system.

However, there is a fourth tool, a stealth tool, which has more power and impact than the other three. It is called the Federal Reserve Bank examiner. He/she is the person who goes into a bank about once a year and decides which loans are good and which are bad. Based upon their holy edict, a loan is classified in one of several categories which determines how much money the banks must set aside from earnings to reserve for possible losses. It is completely an estimation game. So the rules can and do change, based upon the whims of the examiner, taking his marching orders from the Fed Chairman. If the Fed wants the money supply to expand, then Fed examiners come in with reasonable standards for review of loans, and classify those loans with a general leaning that they will be repaid according to terms. Thus banks do not have to reserve as much for possible estimated losses and are in effect not discouraged from making more loans. When the Fed wants money supply to grow, aggressive lending standards often get passing grades. That's when you business people will see your friendly bank commercial lender more often, jawing you into that expansion project you've been thinking about, inviting you to golf outings and ball games. They want more loans. They need your expansion project.

However, once the Fed Chair sounds the alarm about commercial real estate loans, it starts an entire chain of events that ultimately and unequivocally leads to economic recession. Here's what happens. Out of the blue... those friendly back-slapping Federal Reserve examiners… show up with a scowl that droops like the golden arch. They ask for the files, a table, an outlet, a coffee pot, and the key to the little boys and girls room. About two days after they arrive, the banker knows something has changed, something serious, and he gets this knot in the pit of his stomach that will last for about three years. Examiner Margo asks for a meeting with banker Joe. She brings her supervisor to raise the fear level of the meeting. The Bank's President, Joe, brings his top commercial lender for protection of his fanny, and that lender brings his junior lender who will ultimately be the sacrificial lamb and get the ax should things blow up.

Bottom line: Margo feels that a good commercial real estate loan, paying on time, plenty of collateral, doesn't quite throw off enough cashflow on its financial statements in file, and is now suddenly rated below satisfactory. Not quite doubtful. What this means is the banker now has to set aside 20 percent of the loan in reserves for possible losses. That reduces income, and he has a big one-time hit coming to earnings this quarter.

…At the end of the day, a junior lender gets canned, the Board steps up the heat on the President to do something about this, and banker Joe and his senior lender immediately decide to stop making commercial real estate loans.

For the economy, this means a credit crunch has started. Expansion stops. Willing buyers can no longer obtain financing to buy properties. This reduces demand for properties at the exact same time bankers are encouraging these suddenly classified borrowers on their books to sell their properties and pay back the loans. This increases the supply of properties for sale at the exact wrong time, lowering prices.

But the black hole is just getting started -- just beginning to suck the economy into the abyss. What I outlined above is merely round one.

About six month later, property values have dropped from this excess of supply and lack of demand due to the curtailing of bank commercial real estate loans. This means the collateral values of the loans on the bank's books have declined.
Another Fed examination is scheduled, they are back in, and with the battle well under way, it is time for these public servants to start shooting the wounded. They are fully aware that property values have dropped, and -- ignoring the fact that they caused them to drop -- they march to the file room, grab their favorite previously classified loans, and get to work. They assign the most experienced examiners to review the classified loans while they send the rookies to find potential problems among the previously good loans. But the action is with the classified bad boys.

That loan they rated less than satisfactory because of cashflow problems the last time they were in has now deteriorated to doubtful because of the compounded affect of collateral undervaluation. That means instead of setting aside 20 percent of the loan amount into the reserve for possible losses, banker Joe must now set aside 50 percent, another big hit to earnings. He had promised the Board of Directors that last year's one-time hit for potential loan losses would be a one-time occurrence. He realizes that is not the case, and begins to wish he had become a UPS delivery man.

At the end of the day, the bank's rating has dropped, the Board is scared about Director liability, and Joe is pulling out every political favor he's accumulated among a majority of the Board to keep him around for one more year. He agrees to sacrifice the bank's Senior Lending officer, who has served as a shield the past year, not making loans, but sitting in his office, ready to be ejected for the good of banker Joe's considerable stock options portfolio and other bennies that come with holding on to a bank presidency for a decade or so. The senior lender is replaced by a credit hack, someone with no people skills, adept at strong-arming bank borrowers into paying back the money. The goal is to shrink the loan portfolio by not making new ones, using the normal cashflow from payments to reduce outstandings, and to sell at a discount or coerce partial payments from existing loan customers who were rated unsatisfactory by the Federal Reserve's finest. This means lawyers get involved, lots of lawyers, skilled at scaring borrowers into "working out" loan repayments with this new nasty bank lender. This means less money is available for potential buyers of property in the economy, more distressed sale supply hits the market, and real estate values fall even further.

It is about now that everyone recognizes a recession is well underway, led by a real estate collapse. The truth of the matter is, the rules were changed by the Fed and nobody was told until it was too late, and the economy plunges. Voters scream, a few politicians get tossed, and the phrase "credit crunch" becomes a darling of the media. It takes action by the President of the United States to haul in the Federal Reserve Chairman, and explain to him the reality of the reappointment process every four years. Suddenly, at the next bank exam, a new friendlier, examination teams shows up, drinks more coffee, has a few extra newspapers tucked next to their laptops, are asking for fewer files, complain they have to rush to another job in two weeks so won't be there as long as the last time, and leave with little fanfare. The bankers are told in the wrap-up meeting, that they've improved their loan quality, the bank's rating is boosted one grade, and all is well with the world -- end of recession.

To those who have much, more has been given, though, as the numbers of billionaires has reached new highs. These are the people who will be able to buy up all the assets of the indebted workers for pennies on the dollar.

Billionaire Bacchanalia

Edited by Luisa Kroll and Allison Fass
Forbes.com

Making a billion just isn't what it used to be. In our inaugural ranking of the world's richest people 20 years ago we uncovered some 140 billionaires. This year the list is a record 793, up 102 from last year.

They're worth a combined $2.6 trillion, up 18% since last March. Their average net worth: $3.3 billion. Strong stock markets around the world (the U.S. being the notable exception) contributed to this surge in wealth.

…The U.S. is home to 44 new billionaires and commands nearly half of the fortunes on the roster. Bill Gates retains his title as the world's richest person for the twelfth straight year, proving that while it's getting easier to make a billion, the same can't be said for making $50 billion.

In second place is his good friend and bridge partner Warren Buffett. The Sage of Omaha is worth $42 billion this year, $2 billion less than last.

Other notables in the Top 20 include number 7, Bernard Arnault, the pope of fashion who runs LVMH and oversees its high-end brands including Louis Vuitton and Dom Perignon; and Roman Abramovich, the 39-year-old Russian oil baron who liquidated his biggest asset last year for $13 billion.

Seventy-eight women make the list, 10 more than last year, though only six are self-made including the Queen of All Media, Oprah Winfrey, Harry Potter author J.K. Rowling and Ebay's Meg Whitman.

Hind Hariri, daughter of slain Lebanese prime minister Rafik Hariri, who is eight months younger than Germany's Prince Albert von Thurn und Taxis, is, at 22, the list's youngest member.

Twelve people return to the list including Hiroshi Mikitani, founder of Japanese Internet shopping mall Rakuten.

Thirty-nine people depart from it. Eleven of them died including John Walton, the son of Wal-Mart founder Sam Walton; he perished in a plane crash last June.

The other 28 fell off either because of stock drops, repercussions from dubious ethics or because we discovered they shared it with more family members (individually, they each had less than $1 billion).

High profile drop-offs include Martha Stewart, whose net worth has fallen to an estimated $500 million since she got out of jail, and Mikhail Khodorkovsky, once Russia's richest man, who was convicted of fraud and theft and is serving an 8-year-prison sentence in Eastern Siberia.

Where did these billionaires come from? What have they contributed to deserve such riches? Can the rise in the fortunes of the superrich really be a positive sign for the world economy? Maybe a little historical perspective is in order. Barry Grey of the World Socialist Web Site has published a two-part series this month called, "The Bush administration and the global decline of American capitalism." Grey looks at the rise of the parasitical class of supperrich in longer-term historical perspective:

At the end of the war [the Second World War], the US occupied a position of overwhelming economic supremacy. It produced the vast bulk of the world's steel, electricity, autos, etc., and it possessed almost all of the world's gold holdings. This enabled the US, through the Marshall Plan and similar measures, to subsidize an economic revival in Europe and capitalist Asia that made possible two decades of rapid growth of the world economy. The post-war boom provided the economic basis for social reform policies that dampened class antagonisms - at least in North America, Western Europe and Japan.

But the attempt of American capitalism to rebuild world capitalism inevitably ran up against contradictions lodged in the fundamental contradiction between world economy and the nation-state system. In promoting the industrial and financial revival of Europe and Japan, the US was strengthening imperialist competitors and rivals. By the 1960s, the dollar was coming under increasing pressure and countries such as Germany and Japan were gearing up to challenge American dominance in world markets - including the American market.

The social and political shock waves from these tectonic shifts in the economic foundation took increasingly explosive forms in the 1960s within the US. One need only mention the assassination of John F. Kennedy in 1963 and the political assassinations that followed later in the decade, the civil rights struggles, militant wages struggles in virtually every sector of the economy, the urban riots, and the mass movement against the war in Vietnam. These social and political upheavals, in turn, acted upon and intensified the underlying economic crisis.

The erosion of American capitalism's previously hegemonic position in the world economy found definitive expression in Richard Nixon's August 15, 1971 measures. Under conditions of a run on the dollar and dwindling gold reserves in Fort Knox, Nixon ended dollar-gold convertibility, which had served as the lynchpin of the global financial arrangements established by the Bretton Woods agreements of 1944.

This was a major turning point, marking in general terms both the end of the post-war boom and the end of American industrial and financial hegemony. What followed was the oil shock of 1973-74, spiraling inflation and the deepest recession in the US since the 1930s.

Throughout the 1970s the US remained in the grip of a profound economic malaise, which was dubbed "stagflation" - a combination of slow economic growth and steep inflation. At the same time, US capitalism was facing an ever-greater challenge from its major competitors in Europe and Asia - Germany and Japan, in particular. American corporations - in steel, auto, electronics and other industries - were rapidly losing market share internationally, and within the US, foreign auto and steel imports were growing, cutting significantly into the share of the domestic market controlled by the Big Three auto companies and steel giants such as US Steel.

The American working class, despite its political subordination to the capitalist two-party system, which was enforced by the trade union bureaucracy, retained much of the militancy that attended the birth of the mass industrial unions in the sit-down strikes of the 1930s and industry-wide strikes that continued in the post-war period. There were bitter strikes throughout the 1970s, and a marked political radicalization among young workers in virtually every industry.

This militancy was connected to a whole series of social reforms and regulations on business dating back to Roosevelt's New Deal. These were generally seen, with justification, as concessions wrenched by the working class from the American ruling class. Facing a steep and obvious decline in its global economic position, stagnant growth, mounting debt, chronic inflation, falling profit rates, the US ruling elite was compelled to launch an attack on these past reforms and regulations, which in various ways placed restrictions on the operations of the capitalist market, and in that way weaken the position of the working class and undermine its militant resistance.

Deregulation

The first major step in this direction was the policy of deregulation, inaugurated by the Carter administration and promoted by liberals such as Senator Edward Kennedy. Targeting first mass transport industries such as commercial air travel and trucking, deregulation represented the beginning of a ruling class counteroffensive. The political and ideological premise of deregulation was the innate superiority of the market to government regulation and control.

The overthrow of the Shah and the resulting spike in oil prices in 1979 brought the economic crisis in the US to a head, leading to another major turning point with the appointment of Wall Street banker Paul Volcker to head the Federal Reserve Board. Volcker, a Democrat, launched the American version of shock therapy - hiking interest rates to unprecedented levels in order to "wring inflation out of the economy" by plunging the US into a deep recession.

This was a dramatic and highly conscious move to force the closure of plants and factories, drive up unemployment and create the conditions for a frontal assault on the past gains of the working class.

…As auto, steel, rubber, electrical and other industrial plants closed down around the country, business journals such as Business Week began openly to speak of the "deindustrialization" of America. Very rapidly, traditional industrial centers such as Detroit, Cleveland, Pittsburgh, Youngstown, parts of Los Angeles were devastated by plant closures and mass layoffs. Whole cities were turned into centers of economic dislocation, poverty and misery. Hundreds of thousands, then millions of workers almost overnight found themselves without a decent-paying job.

This was the birth of the so-called "rust belt," which for the most part persists in large sections of the country. Manifested in abandoned stone and mortar and abandoned human beings was the objective decline in the world position of American capitalism.

The election of the right-wing Republican presidential candidate Ronald Reagan in 1980 signaled an intensification of the anti-working class offensive that had been launched under the previous, Democratic administration. "Reaganomics" became the catchphrase for a ruthless policy of union-busting, wage-cutting, the gutting of social programs, tax cuts for corporations and the wealthy, and the lifting of regulations on industrial pollution, workplace health and safety and many other aspects of economic life.

Economic policy was formulated quite openly to facilitate a vast transfer of wealth from the working population to the richest and most privileged layers, on the essentially parasitic basis of a massive downsizing of industry and a sharp increase in the national debt. The stock market became more than ever the focus of personal wealth accumulation for the financial elite, and driving up share values became a central preoccupation of government economic and social policy.

The decade of the 1980s saw a return to open and violent strikebreaking, employing goon squads, private police, state repression, frame-ups and victimizations - tactics that had largely receded in the post-war period. The working class resisted, waging dozens of bitter strikes in virtually all sectors of the economy. But every struggle was betrayed by the AFL-CIO, which isolated the struggles and then exploited their defeat to repudiate the militant traditions of the past and establish corporatist relations with the employers, all the while opposing any move toward a break with the Democratic Party and an independent political party.

By the end of the decade, the American labor movement had been essentially destroyed as a social instrument of resistance to US big business.

Retrenchment, bankruptcies, parasitism

The retrenchment in basic industry and other sectors has proceeded apace, punctuated by a series of spectacular bankruptcies. Flagship companies which symbolized the power of American capitalism have disappeared: Pan American Airlines and Eastern Airlines immediately come to mind. Since the late 1990s, more than 50 US steel producers have gone into bankruptcy, including such giants as Bethlehem, LTV, Republic, National and Wheeling-Pittsburgh. The Big Three auto companies have relentlessly downsized, slashing their work forces by more than half.

One can speak of a "hollowing out" of the American economy, in which corporate profit-making and the personal enrichment of the ruling elite grew increasingly divorced from the production of useful goods and the expansion of productive facilities, and more and more bound up with speculation in stocks and bonds and other forms of essentially parasitic activity. Outright swindling, accounting fraud and other forms of corporate criminality proliferated. Investment in research and development, maintaining and improving the industrial and social infrastructure - including education, health care, even roads, bridges, ports, levees, the electrical grid, the housing stock, the environment - took a back seat.
…The elevation of the "free market" to the status of political dogma and secular religion continues to produce disastrous results. Recent years have seen a new wave of corporate bankruptcies - from United Airlines and US Air to Delphi, the world's largest auto parts maker. General Motors itself - once the world's largest corporation and symbol par excellence of American industrial might - is flirting with bankruptcy, as is Ford.

These deep-going changes have had a major impact on relations between the classes, and on the social physiognomy of the various classes within the US. The American ruling elite itself has changed. The general process of decline finds a noxious expression in the political, intellectual and even moral decay of the ruling layers. In general, the most predatory, ignorant, short-sighted and reactionary elements have risen to the top.

Further on I will refer to the current list of Forbes magazine's 400 richest Americans. For the present, I wish only to note that the current crop of multi-millionaires and multi-billionaires differ, broadly speaking, in one important respect from the robber barons who bestraddled American society a century ago. The Rockefellers, Carnegies, Fords, Edisons, Firestones who dominated economic life back then were ruthless and politically reactionary men. But they made their fortunes by overseeing the construction of industrial empires. Their names are associated with an immense development of the productive forces.

The current batch of moguls has, for the most part, no such relationship to the development of industry or productive capacity. Warren Buffett, Kirk Kerkorian, Carl Icahn, Sumner Redstone leave in their wake no industrial empires. In many cases, they and their peers made their fortunes by downsizing and asset-stripping what the robber barons had built. They are the beneficiaries of leveraged buyouts, mega-mergers and various, often esoteric, forms of speculation.

This parasitism reached new levels in the heady days of the Clinton administration, when the stock market spiraled upward and swindling and accounting fraud assumed malignant proportions. The general plundering of the American economy by the ruling elite was compounded by the wholesale plundering of companies by their own top executives.

Social inequality

The enormous concentration of wealth at the very top of American society and the growth of social inequality are part of the same process of decline, in terms of the world market, and internal decay. That American society ever more openly assumes the form of a plutocracy is a symptom not of health and vigor, but rather the opposite. The previous ability of the American ruling class - under enormous pressure from below, and certainly not without internal friction - to bring about a general rise in working class living standards and a moderation of economic disparities was an expression of economic strength and confidence in the future.

Those conditions no longer exist. There are by now hundreds of studies and thousands of statistics documenting the staggering and ever-widening chasm between the uppermost social layers and the vast majority of the American people. Large sections of the population live in a state of desperation and near destitution. But more broadly, working people and most of the professional, managerial and self-employed population have been swept up in a permanent maelstrom of economic insecurity and dislocation.

Just to cite one statistic: the New York Times recently reported that the very wealthiest Americans - some 45,000 taxpayers with incomes starting at $1.6 million, who comprise the top 0.1 percent - saw their share of the nation's income more than double since the 1970s, reaching 10 percent in the year 2000. That is a level of income concentration last seen in the 1920s.

The existence of such obscene levels of wealth and grotesque levels of inequality is noted only on occasion in the media, and even more rarely by the Democratic Party, which still claims to be the "party of the people." The mind set that prevails in ruling circles - "liberal" as well as conservative - was starkly revealed in the recent strike by transit workers in New York. Even as workers who make $50,000 a year were being roundly denounced by politicians and newspapers as greedy thugs and rats, it was reported that Wall Street was planning to hand out some $21.5 billion in year-end executive bonuses…

A snapshot of America's ruling elite

To return to the question of the changes in the composition of the American ruling elite, this is an important question that requires serious analysis. A systematic examination of this issue is beyond the scope of this report. However, I think some insight can be gleaned from a look at Forbes magazine's most recent list of the 400 richest Americans.

Restricting our consideration to the top fifty billionaires on the list, the first thing that strikes one is who is missing. There are no Fords, Rockefellers, DuPonts. No scions of the "captains of industry" who occupied such a prominent place in the Sixty Families that bestrode America's industrial and financial empire during much of the last century.

Topping the list, at $51 billion, is Microsoft's William Gates. Then comes Warren Buffett, with $40 billion. The source of his wealth is listed as Berkshire Hathaway, an investment firm. The next three positions are occupied by the heads of computer and computer-related firms. Then come five members of the Walton family, whose fortunes are based on the retail giant Wal-Mart - now the largest corporation in the world.

Outside of computers, the other industrial sector prominently represented in the top 50 list is oil and energy. Fully six of the top 50 have listed as the source of their wealth activities of an entirely speculative character: Kirk Kerkorian ($10 billion from investments and casinos), Carl Icahn ($8.5 billion from leveraged buyouts), Philip Anschultz ($7.2 billion from investments), George Soros ($7.2 billion from hedge funds), Ronald Perelman ($6 billion from leveraged buyouts) and Eli Broad ($5.5 billion from investments).

This gives some indication of the underlying decay of American capitalism. And this decline - concretely expressed in massive budget, balance of trade, and balance of payments deficits - has very real consequences for the US on the international arena. The decline in the global economic position of American capitalism has prompted the intensified turn by the ruling elite to militarism and war. Wall Street and Washington seek to use their military supremacy to offset their economic decline.


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