Saturday, February 28, 2009


This from economist Brad DeLong, by way of the Guatemala Times, reached from the blog Economists View.

The Stimulus Ostriches
Friday, 27 February 2009 10:56 J. Bradford DeLong

BERKELEY - Of all the strange things that have happened this winter, perhaps the strangest has been the emergence of large-scale Republican Party opposition to the Obama administration's effort to keep American unemployment from jumping to 10% or higher. There is no doubt that had John McCain won the presidential election last November, a very similar deficit-spending stimulus package to the Obama plan - perhaps with more tax cuts and fewer spending increases would have moved through Congress with unanimous Republican support.

As N. Gregory Mankiw said of a stimulus package back in 2003, when he was President George W. Bush's chief economic advisor, this is not rocket science. Deficit spending in a recession, he said, "help[s] maintain the aggregate demand for goods and services. There is nothing novel about this. It is very conventional short-run stabilization policy: you can find it in all of the leading textbooks..."

I can understand (though I disagree with) opponents of the stimulus plan who believe that the situation is not that dire; that the government spending will be slow and wasteful (whereas properly targeted tax cuts would provide a more effective stimulus); and thus that it would have been better to defeat Obama's stimulus bill and try again in a couple of months.

I can also understand (though I disagree with) opponents who believe that the short-run stimulus effect of the plan will be small, while America's weak fiscal position implies a large long-run drag on the economy from the costs of servicing the resulting debt.

What I do not understand is opposition based on the claim that the stimulus package simply will not work: the government will spend its money, households will receive their tax rebates, and nothing will happen afterwards to boost employment and production. In fact, there is a surprisingly large current of thought that maintains that stimulus packages simply do not work, ever.

This opposition is not coming only from politicians who are calculating that opposition to whatever is proposed may yield electoral benefits; indeed, it does not even reflect any coherent right-wing or indeed left-wing political position. Root-and-branch stimulus opponents whose work has crossed my desk recently include efficient-markets fundamentalists like the University of Chicago's Eugene Fama, Marxists like CUNY's David Harvey, classical economists like Harvard's Robert Barro, gold bugs like the Council on Foreign Relation's Benn Steil, and a host of others.

I simply do not understand their arguments that government spending cannot boost the economy. As far as I can tell, they are simply burying their heads in the sand.

At the start of 1996, the US unemployment rate was 5.6%. Then America's businesses and investors discovered the Internet. Over the next four years, annual US spending on information technology equipment and software roared upward, from $281 billion to $446 billion, the US unemployment rate dropped from 5.6% to 4%, and the economy grew at a 4.3% real annual rate as the high-tech spending boom pulled extra workers out of unemployment and into jobs.

Back at the start of 2004, America's banks discovered that they could borrow money cheaply from Asia and lend it out in higher-yielding domestic mortgages while using sophisticated financial engineering to wall off and strictly control their risks - or so they thought. Over the next two years, annual US spending on residential construction roared upward, from $624 billion to $798 billion, the US unemployment rate dropped from 5.7% to 4.6%, and the economy grew at a 3.1% real annual rate.

In both of these cases, large groups of people in America decided to increase their spending. You can argue that neither group should have boosted its spending to such a degree that both were subject to "irrational exuberance" - and that someone should have taken away the punchbowl earlier. But you cannot argue that these groups did not increase their spending, and that their increased spending did not pull large numbers of Americans - roughly two million in each case - into productive and valued employment.

The government's money is as good as anybody else's. If businesses' enthusiasm for spending on high-tech gadgetry and new homeowners' enthusiasm for spending on three-bedroom houses can boost employment and production, then what argument can Harvey, Fama, Barro, Steil, and company make that government spending will not? I simply do not see it.

J. Bradford DeLong, a former Assistant US Treasury Secretary in the Clinton administration, is Professor of Economics at the University of California at Berkeley.

Strange Stuff

Just could not resist this. Follow link for the rest of the story:

A Tibetan monk has been shot after setting fire to himself during a protest at Beijing's rule, reports say.

The incident happened in the Tibetan-populated town of Aba in southwest China's Sichuan province during a gathering of more than 1,000 monks.

The monk, named Tapey, is said to have shouted slogans and waved a Tibetan flag, then doused himself with petrol and set himself alight.

Campaign groups said witnesses then saw

Chinese police shoot the man.

This from Floyd Norris

Floyd Norris, the chief financial correspondent of The New York Times and The International Herald Tribune, covers the world of finance and economics.

February 27, 2009, 4:23 pm
Crime and Bubbles

Willie Sutton is supposed to have explained that he robbed banks because that was where the money was.

So it is with white collar crime. If you look where the bubble is, there too will be the crooks.

In the late 1990s, a company could be rewarded with a soaring stock price, and a valuation far beyond anything the company had actually accomplished — if it could show rapid growth. And stock options let executives monetize that gain almost immediately.

On the other hand, if your company was not hot, its share price could languish.

The result was a great temptation to fudge the numbers. At the extreme, we got Enron and WorldCom.

More recently, as soaring asset prices were pumped up by easy credit, it was money managers who could make zillions. Run a $500 million hedge fund and you get $10 million a year, plus 20 percent of the profits. Run a really big one that does very well, and you can take in a billion dollars.

And how do you attract enough money to manage? You show that you can produce outstanding investment results.

It turns out that the easiest way to do that was to lie about the results, and we are now seeing a succession of Ponzi schemes unveiled. The case involving Bernie Madoff may have been the largest, but others are multiplying.

It is no coincidence that we learn about the scandals after the bubbles burst. Enron had used its own high stock price to produce phony profits. When the stock price started to fall, it sparked a crisis and the facts eventually came out. So long as everyone believed assets were going up, money managers could siphon off new cash to pay those few investors who wanted to cash out. But when losses in other investments caused investors to flee, the game was up.

My suspicion is that there are more such schemes to be revealed.

More on AIG

This from The New York Times:

Talking Business
Propping Up a House of Cards

Published: February 27, 2009

Next week, perhaps as early as Monday, the American International Group is going to report the largest quarterly loss in history. Rumors suggest it will be around $60 billion, which will affirm, yet again, A.I.G.’s sorry status as the most crippled of all the nation’s wounded financial institutions. The recent quarterly losses suffered by Merrill Lynch and Citigroup — “only” $15.4 billion and $8.3 billion, respectively — pale by comparison.

At the same time A.I.G. reveals its loss, the federal government is also likely to announce — yet again! — a new plan to save A.I.G., the third since September. So far the government has thrown $150 billion at the company, in loans, investments and equity injections, to keep it afloat. It has softened the terms it set for the original $85 billion loan it made back in September. To ease the pressure even more, the Federal Reserve actually runs a facility that buys toxic assets that A.I.G. had insured. A.I.G. effectively has been nationalized, with the government owning a hair under 80 percent of the stock. Not that it’s worth very much; A.I.G. shares closed Friday at 42 cents.

Donn Vickrey, who runs the independent research firm Gradient Analytics, predicts that A.I.G. is going to cost taxpayers at least $100 billion more before it finally stabilizes, by which time the company will almost surely have been broken into pieces, with the government owning large chunks of it. A quarter of a trillion dollars, if it comes to that, is an astounding amount of money to hand over to one company to prevent it from going bust. Yet the government feels it has no choice: because of A.I.G.’s dubious business practices during the housing bubble it pretty much has the world’s financial system by the throat.

If we let A.I.G. fail, said Seamus P. McMahon, a banking expert at Booz & Company, other institutions, including pension funds and American and European banks “will face their own capital and liquidity crisis, and we could have a domino effect.” A bailout of A.I.G. is really a bailout of its trading partners — which essentially constitutes the entire Western banking system.

I don’t doubt this bit of conventional wisdom; after the calamity that followed the fall of Lehman Brothers, which was far less enmeshed in the global financial system than A.I.G., who would dare allow the world’s biggest insurer to fail? Who would want to take that risk? But that doesn’t mean we should feel resigned about what is happening at A.I.G. In fact, we should be furious. More than even Citi or Merrill, A.I.G. is ground zero for the practices that led the financial system to ruin.

“They were the worst of them all,” said Frank Partnoy, a law professor at the University of San Diego and a derivatives expert. Mr. Vickrey of Gradient Analytics said, “It was extreme hubris, fueled by greed.” Other firms used many of the same shady techniques as A.I.G., but none did them on such a broad scale and with such utter recklessness. And yet — and this is the part that should make your blood boil — the company is being kept alive precisely because it behaved so badly.

When you start asking around about how A.I.G. made money during the housing bubble, you hear the same two phrases again and again: “regulatory arbitrage” and “ratings arbitrage.” The word “arbitrage” usually means taking advantage of a price differential between two securities — a bond and stock of the same company, for instance — that are related in some way. When the word is used to describe A.I.G.’s actions, however, it means something entirely different. It means taking advantage of a loophole in the rules. A less polite but perhaps more accurate term would be “scam.”

As a huge multinational insurance company, with a storied history and a reputation for being extremely well run, A.I.G. had one of the most precious prizes in all of business: an AAA rating, held by no more than a dozen or so companies in the United States. That meant ratings agencies believed its chance of defaulting was just about zero. It also meant it could borrow more cheaply than other companies with lower ratings.

To be sure, most of A.I.G. operated the way it always had, like a normal, regulated insurance company. (Its insurance divisions remain profitable today.) But one division, its “financial practices” unit in London, was filled with go-go financial wizards who devised new and clever ways of taking advantage of Wall Street’s insatiable appetite for mortgage-backed securities. Unlike many of the Wall Street investment banks, A.I.G. didn’t specialize in pooling subprime mortgages into securities. Instead, it sold credit-default swaps.

These exotic instruments acted as a form of insurance for the securities. In effect, A.I.G. was saying if, by some remote chance (ha!) those mortgage-backed securities suffered losses, the company would be on the hook for the losses. And because A.I.G. had that AAA rating, when it sprinkled its holy water over those mortgage-backed securities, suddenly they had AAA ratings too. That was the ratings arbitrage. “It was a way to exploit the triple A rating,” said Robert J. Arvanitis, a former A.I.G. executive who has since become a leading A.I.G. critic.

Why would Wall Street and the banks go for this? Because it shifted the risk of default from themselves to A.I.G., and the AAA rating made the securities much easier to market. What was in it for A.I.G.? Lucrative fees, naturally. But it also saw the fees as risk-free money; surely it would never have to actually pay up. Like everyone else on Wall Street, A.I.G. operated on the belief that the underlying assets — housing — could only go up in price.

That foolhardy belief, in turn, led A.I.G. to commit several other stupid mistakes. When a company insures against, say, floods or earthquakes, it has to put money in reserve in case a flood happens. That’s why, as a rule, insurance companies are usually overcapitalized, with low debt ratios. But because credit-default swaps were not regulated, and were not even categorized as a traditional insurance product, A.I.G. didn’t have to put anything aside for losses. And it didn’t. Its leverage was more akin to an investment bank than an insurance company. So when housing prices started falling, and losses started piling up, it had no way to pay them off. Not understanding the real risk, the company grievously mispriced it.

Second, in many of its derivative contracts, A.I.G. included a provision that has since come back to haunt it. It agreed to something called “collateral triggers,” meaning that if certain events took place, like a ratings downgrade for either A.I.G. or the securities it was insuring, it would have to put up collateral against those securities. Again, the reasons it agreed to the collateral triggers was pure greed: it could get higher fees by including them. And again, it assumed that the triggers would never actually kick in and the provisions were therefore meaningless. Those collateral triggers have since cost A.I.G. many, many billions of dollars. Or, rather, they’ve cost American taxpayers billions.

The regulatory arbitrage was even seamier. A huge part of the company’s credit-default swap business was devised, quite simply, to allow banks to make their balance sheets look safer than they really were. Under a misguided set of international rules that took hold toward the end of the 1990s, banks were allowed use their own internal risk measurements to set their capital requirements. The less risky the assets, obviously, the lower the regulatory capital requirement.

How did banks get their risk measures low? It certainly wasn’t by owning less risky assets. Instead, they simply bought A.I.G.’s credit-default swaps. The swaps meant that the risk of loss was transferred to A.I.G., and the collateral triggers made the bank portfolios look absolutely risk-free. Which meant minimal capital requirements, which the banks all wanted so they could increase their leverage and buy yet more “risk-free” assets. This practice became especially rampant in Europe. That lack of capital is one of the reasons the European banks have been in such trouble since the crisis began.

At its peak, the A.I.G. credit-default business had a “notional value” of $450 billion, and as recently as September, it was still over $300 billion. (Notional value is the amount A.I.G. would owe if every one of its bets went to zero.) And unlike most Wall Street firms, it didn’t hedge its credit-default swaps; it bore the risk, which is what insurance companies do.

It’s not as if this was some Enron-esque secret, either. Everybody knew the capital requirements were being gamed, including the regulators. Indeed, A.I.G. openly labeled that part of the business as “regulatory capital.” That is how they, and their customers, thought of it.

There’s more, believe it or not. A.I.G. sold something called 2a-7 puts, which allowed money market funds to invest in risky bonds even though they are supposed to be holding only the safest commercial paper. How could they do this? A.I.G. agreed to buy back the bonds if they went bad. (Incredibly, the Securities and Exchange Commission went along with this.) A.I.G. had a securities lending program, in which it would lend securities to investors, like short-sellers, in return for cash collateral. What did it do with the money it received? Incredibly, it bought mortgage-backed securities. When the firms wanted their collateral back, it had sunk in value, thanks to A.I.G.’s foolish investment strategy. The practice has cost A.I.G. — oops, I mean American taxpayers — billions.

Here’s what is most infuriating: Here we are now, fully aware of how these scams worked. Yet for all practical purposes, the government has to keep them going. Indeed, that may be the single most important reason it can’t let A.I.G. fail. If the company defaulted, hundreds of billions of dollars’ worth of credit-default swaps would “blow up,” and all those European banks whose toxic assets are supposedly insured by A.I.G. would suddenly be sitting on immense losses. Their already shaky capital structures would be destroyed. A.I.G. helped create the illusion of regulatory capital with its swaps, and now the government has to actually back up those contracts with taxpayer money to keep the banks from collapsing. It would be funny if it weren’t so awful.

I asked Mr. Arvanitis, the former A.I.G. executive, if the company viewed what it had done during the bubble as a form of gaming the system. “Oh no,” he said, “they never thought of it as abuse. They thought of themselves as satisfying their customers.”

That’s either a remarkable example of the power of rationalization, or they were lying to themselves, figuring that when the house of cards finally fell, somebody else would have to clean it up.

That would be us, the taxpayers

Friday, February 27, 2009

Welcome to Friday == banks # 15 and 16 failed today - taken over by the FDIC

Bank Failure #15 in 2009: Heritage Community Bank, Glenwood, Illinois

Bank Failure #16 in 2009: Security Savings Bank, Henderson, Nevada

In addition: From the LA Times: California unemployment rate reaches 10.1%

Oh yeah, the Governator declared a drought emergency in Kalifornia.

As far as the stock market goes:

Dow 7,062.93 -119.15 -1.66%
Nasdaq 1,377.84 -13.63 -0.98%
S&P 500 735.09 -17.74 -2.36%
Friday, February 27, 2009, 7:45PM ET
U.S. Markets Closed.

In hard times, more U.S. women try to sell their eggs -- gee, I wonder what the right to life folks think about this.

I really do not feel good today. Looking at the news did not help. The above is just a little sample -- I've ignored all the reports of violence around the world, and all the reports from meeting of wing-nut "conservatives" going on now. I'm afraid they actually believe their lies - sad and strange

Thursday, February 26, 2009

Octopus are very smart

Global warming, economic meltdown, CPAC, other Republicans -- as if that's not enough to deal with, we now have to contend with Octopus planning world domination.

Where will it end?

Octopus opens valve, floods Santa Monica aquarium
4:54 PM | February 26, 2009

Octupus An octopus today managed to pry loose a water-control valve at the Santa Monica Pier Aquarium, flooding the facility with more than 200 gallons of saltwater.

The valve is inside the sea creature's tank, and officials think the octopus grabbed hold of it while exploring.

"It found something loose and just pulled on it," said Tara Treiber, the aquarium's education manager. "They are very smart creatures."

A worker arriving this morning found water overflowing out of the tank and "a lovely little lake" on the floor — about 3 inches of water that damaged newly installed carpets, as well as walls and facades, Treiber said.

The damage could have been much worse had workers discovered the open valve later — potentially harming the sea life inside, Treiber said.

The female California two-spotted octopus has been housed at the aquarium for two months, she said.

"They are solitary but curious creatures," Treiber said.

—Andrew Blankstein

"How The Economy Was Lost"

Here's another point of view. It seems an awful lot of people think we've lost our way.

February 24, 2009
Doomed by the Myths of Free Trade
How the Economy was Lost


The American economy has gone away. It is not coming back until free trade myths are buried six feet under.

America’s 20th century economic success was based on two things. Free trade was not one of them. America’s economic success was based on protectionism, which was ensured by the union victory in the Civil War, and on British indebtedness, which destroyed the British pound as world reserve currency. Following World War II, the US dollar took the role as reserve currency, a privilege that allows the US to pay its international bills in its own currency.

World War II and socialism together ensured that the US economy dominated the world at the mid 20th century. The economies of the rest of the world had been destroyed by war or were stifled by socialism [in terms of the priorities of the capitalist growth model. Editors.]

The ascendant position of the US economy caused the US government to be relaxed about giving away American industries, such as textiles, as bribes to other countries for cooperating with America’s cold war and foreign policies. For example, Turkey’s US textile quotas were increased in exchange for over-flight rights in the Gulf War, making lost US textile jobs an off-budget war expense.

In contrast, countries such as Japan and Germany used industrial policy to plot their comebacks. By the late 1970s, Japanese auto makers had the once dominant American auto industry on the ropes. The first economic act of the “free market” Reagan administration in 1981 was to put quotas on the import of Japanese cars in order to protect Detroit and the United Auto Workers.

Eamonn Fingleton, Pat Choate, and others have described how negligence in Washington DC aided and abetted the erosion of America’s economic position. What we didn’t give away, the United States let be taken away while preaching a “free trade” doctrine at which the rest of the world scoffed.

Fortunately, the U.S.’s adversaries at the time, the Soviet Union and China, had unworkable economic systems that posed no threat to America’s diminishing economic prowess.

This furlough from reality ended when Soviet, Chinese, and Indian socialism surrendered around 1990, to be followed shortly thereafter by the rise of the high speed Internet. Suddenly, American and other first world corporations discovered that a massive supply of foreign labor was available at practically free wages.

To get Wall Street analysts and shareholder advocacy groups off their backs, and to boost shareholder returns and management bonuses, American corporations began moving their production for American markets offshore. Products that were made in Peoria are now made in China.

As offshoring spread, American cities and states lost tax base, and families and communities lost jobs. The replacement jobs, such as selling the offshored products at Wal-Mart, brought home less pay.

“Free market economists” covered up the damage done to the US economy by preaching a New Economy based on services and innovation. But it wasn’t long before corporations discovered that the high speed Internet let them offshore a wide range of professional service jobs. In America, the hardest hit have been software engineers and information technology (IT) workers.

The American corporations quickly learned that by declaring “shortages” of skilled Americans, they could get from Congress H-1b work visas for lower paid foreigners with whom to replace their American work force. Many US corporations are known for forcing their US employees to train their foreign replacements in exchange for severance pay.

Chasing after shareholder return and “performance bonuses,” US corporations deserted their American workforce. The consequences can be seen everywhere. The loss of tax base has threatened the municipal bonds of cities and states and reduced the wealth of individuals who purchased the bonds. The lost jobs with good pay resulted in the expansion of consumer debt in order to maintain consumption. As the offshored goods and services are brought back to America to sell, the US trade deficit has exploded to unimaginable heights, calling into question the US dollar as reserve currency and America’s ability to finance its trade deficit.

As the American economy eroded away bit by bit, “free market” ideologues produced endless reassurances that America had pulled a fast one on China, sending China dirty and grimy manufacturing jobs. Free of these “old economy” jobs, Americans were lulled with promises of riches. In place of dirty fingernails, American efforts would flow into innovation and entrepreneurship. In the meantime, the “service economy” of software and communications would provide a leg up for the work force.

Education was the answer to all challenges. This appeased the academics, and they produced no studies that would contradict the propaganda and, thus, curtail the flow of federal government and corporate grants.

The “free market” economists, who provided the propaganda and disinformation to hide the act of destroying the US economy, were well paid. And as Business Week noted, “outsourcing’s inner circle has deep roots in GE (General Electric) and McKinsey,” a consulting firm. Indeed, one of McKinsey’s main apologists for offshoring of US jobs, Diana Farrell, is now a member of Obama’s White House National Economic Council.

The pressure of jobs offshoring, together with vast imports, has destroyed the economic prospects for all Americans, except the CEOs who receive “performance” bonuses for moving American jobs offshore or giving them to H-1b work visa holders. Lowly paid offshored employees, together with H-1b visas, have curtailed employment for older and more experienced American workers. Older workers traditionally receive higher pay. However, when the determining factor is minimizing labor costs for the sake of shareholder returns and management bonuses, older workers are unaffordable. Doing a good job, providing a good service, is no longer the corporation’s function. Instead, the goal is to minimize labor costs at all cost.

Thus, “free trade” has also destroyed the employment prospects of older workers. Forced out of their careers, they seek employment as shelf stockers for Wal-Mart.

I have read endless tributes to Wal-Mart from “libertarian economists,” who sing Wal-Mart’s praises for bringing low price goods, 70 per cent of which are made in China, to the American consumer. What these “economists” do not factor into their analysis is the diminution of American family incomes and government tax base from the loss of the goods producing jobs to China. Ladders of upward mobility are being dismantled by offshoring, while California issues IOUs to pay its bills. The shift of production offshore reduces US GDP. When the goods and services are brought back to America to be sold, they increase the trade deficit. As the trade deficit is financed by foreigners acquiring ownership of US assets, this means that profits, dividends, capital gains, interest, rents, and tolls leave American pockets for foreign ones.

The demise of America’s productive economy left the US economy dependent on finance, in which the US remained dominant because the dollar is the reserve currency. With the departure of factories, finance went in new directions. Mortgages, which were once held in the portfolios of the issuer, were securitized. Individual mortgage debts were combined into a “security.” The next step was to strip out the interest payments to the mortgages and sell them as derivatives, thus creating a third debt instrument based on the original mortgages.

In pursuit of ever more profits, financial institutions began betting on the success and failure of various debt instruments and by implication on firms. They bought and sold collateral debt swaps. A buyer pays a premium to a seller for a swap to guarantee an asset’s value. If an asset “insured” by a swap falls in value, the seller of the swap is supposed to make the owner of the swap whole. The purchaser of a swap is not required to own the asset in order to contract for a guarantee of its value. Therefore, as many people could purchase as many swaps as they wished on the same asset. Thus, the total value of the swaps greatly exceeds the value of the assets.*

The next step is for holders of the swaps to short the asset in order to drive down its value and collect the guarantee. As the issuers of swaps were not required to reserve against them, and as there is no limit to the number of swaps, the payouts could easily exceed the net worth of the issuer.

This was the most shameful and most mindless form of speculation. Gamblers were betting hands that they could not cover. The US regulators fled their posts. The American financial institutions abandoned all integrity. As a consequence, American financial institutions and rating agencies are trusted nowhere on earth.

The US government should never have used billions of taxpayers’ dollars to pay off swap bets as it did when it bailed out the insurance company AIG. This was a stunning waste of a vast sum of money. The federal government should declare all swap agreements to be fraudulent contracts, except for a single swap held by the owner of the asset. Simply wiping out these fraudulent contracts would remove the bulk of the vast overhang of “troubled” assets that threaten financial markets.

The billions of taxpayers’ dollars spent buying up subprime derivatives were also wasted. The government did not need to spend one dime. All government needed to do was to suspend the mark-to-market rule. This simple act would have removed the solvency threat to financial institutions by allowing them to keep the derivatives at book value until financial institutions could ascertain their true values and write them down over time.

Taxpayers, equity owners, and the credit standing of the US government are being ruined by financial shysters who are manipulating to their own advantage the government’s commitment to mark-to-market and to the “sanctity of contracts.” Multi-trillion dollar “bailouts” and bank nationalization are the result of the government’s inability to respond intelligently.

Two more simple acts would have completed the rescue without costing the taxpayers one dollar: an announcement from the Federal Reserve that it will be lender of last resort to all depository institutions including money market funds, and an announcement reinstating the uptick rule.

The uptick rule was suspended or repealed a couple of years ago in order to permit hedge funds and shyster speculators to rip-off American equity owners. The rule prevented short-selling any stock that did not move up in price during the previous day. In other words, speculators could not make money at others’ expense by ganging up on a stock and short-selling it day after day.

As a former Treasury official, I am amazed that the US government, in the midst of the worst financial crises ever, is content for short-selling to drive down the asset prices that the government is trying to support. No bailout or stimulus plan has any hope until the uptick rule is reinstated.

The bald fact is that the combination of ignorance, negligence, and ideology that permitted the crisis to happen still prevails and is blocking any remedy. Either the people in power in Washington and the financial community are total dimwits or they are manipulating an opportunity to redistribute wealth from taxpayers, equity owners and pension funds to the financial sector.

The Bush and Obama plans total 1.6 trillion dollars, every one of which will have to be borrowed, and no one knows from where. This huge sum will compromise the value of the US dollar, its role as reserve currency, the ability of the US government to service its debt, and the price level. These staggering costs are pointless and are to no avail, as not one step has been taken that would alleviate the crisis.

If we add to my simple menu of remedies a ban, punishable by instant death, for short selling any national currency, the world can be rescued from the current crisis without years of suffering, violent upheavals and, perhaps, wars.

According to its hopeful but economically ignorant proponents, globalism was supposed to balance risks across national economies and to offset downturns in one part of the world with upturns in other parts. A global portfolio was a protection against loss, claimed globalism’s purveyors. In fact, globalism has concentrated the risks, resulting in Wall Street’s greed endangering all the economies of the world. The greed of Wall Street and the negligence of the US government have wrecked the prospects of many nations. Street riots are already occurring in parts of the world. On Sunday February 22, the right-wing TV station, Fox “News,” presented a program that predicted riots and disarray in the United States by 2014.

How long will Americans permit “their” government to rip them off for the sake of the financial interests that caused the problem? Obama’s cabinet and National Economic Council are filled with representatives of the interest groups that caused the problem. The Obama administration is not a government capable of preventing a catastrophe.

If truth be known, the “banking problem” is the least of our worries. Our economy faces two much more serious problems. One is that offshoring and H-1b visas have stopped the growth of family incomes, except, of course, for the super rich. To keep the economy going, consumers have gone deeper into debt, maxing out their credit cards and refinancing their homes and spending the equity. Consumers are now so indebted that they cannot increase their spending by taking on more debt. Thus, whether or not the banks resume lending is beside the point.

The other serious problem is the status of the US dollar as reserve currency. This status has allowed the US, now a country heavily dependent on imports just like a third world or lesser-developed country, to pay its international bills in its own currency. We are able to import $800 billion annually more than we produce, because the foreign countries from whom we import are willing to accept paper for their goods and services.

If the dollar loses its reserve currency role, foreigners will not accept dollars in exchange for real things. This event would be immensely disruptive to an economy dependent on imports for its energy, its clothes, its shoes, its manufactured products, and its advanced technology products.

If incompetence in Washington, the type of incompetence that produced the current economic crisis, destroys the dollar as reserve currency, the “unipower” will overnight become a third world country, unable to pay for its imports or to sustain its standard of living.

How long can the US government protect the dollar’s value by leasing its gold to bullion dealers who sell it, thereby holding down the gold price? Given the incompetence in Washington and on Wall Street, our best hope is that the rest of the world is even less competent and even in deeper trouble. In this event, the US dollar might survive as the least valueless of the world’s fiat currencies.

*(An excellent explanation of swaps can be found here.)

Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He is coauthor of The Tyranny of Good Intentions.He can be reached at:

Tuesday, February 24, 2009


This was taken directly from Jesse's Cafe Americain. It is copied. I think people really have to read this -- be you left, right, or "I don't give a damn.".

I do not always agree with what he writes, but some things just make too much sense.

24 February 2009
Coup d'Etat by Crisis: Who Is Pulling the Strings?

Quite the dire, almost inflammatory piece from Time Magazine. It certainly paints Bank of America, Citigroup, General Motors, and AIG in a bad, almost villainous light.

It is time to for a real change. It is time to stop allowing the country to be held hostage by a relatively small number of financiers who have gamed the system and corrupted the regulatory and legislative process. It is time to stop allowing those deeply involved with the problem to manage the investigation and the solutions.

Put the money center banks into a managed restructuring, and stop calling it nationalization, which wrongfully suggests the British socialism of the post World War II era. We did not have to use that sort of language or raise these emotional issues when the Savings and Loan scandal was cleared.

Let's get this open sore cleaned, bound and stitched.

But one thing we might wish to keep in mind is that it may not be AIG, BAC, and C that are pulling the strings, that are at the center of this. They look more like patsies than prime motivators.

Transparency would be interesting in this case with regards to the CDS market and the derivatives markets.

Who has the most to gain and lose if Citi, Bank of America, and AIG are put into managed restructuring? Who has the most and biggest bets on their failure?

Let's have transparency of positions now. And we cannot take anyone's word on this.

The real sticking point is not the shareholders or managers of these companies, although they may be making the most noise at this point.

We will be surprised, if transparency is actually provided, and new and independent regulators armed with the full array of investigative tools, dig into this mess to see where the strings lead, if we do not find many of them in the hands of the other major Wall Street banks, media giants, and corporate conglomerates among others.

We will keep an open mind, but do not expect any light or serious new information to come from these Congressional Committees with their circus, show trial atmosphere.

Time to bring back Glass-Steagall and to enforce the Sherman Anti-Trust laws. Time to compel the three or four banks to unwind their trillions in opaque derivatives. Time to audit the Federal Reserve, and clarify their role in our system to them, and nail a copy of the Constitution to their front door.

We do not need or want fewer, bigger, more powerful banks as a drag on the real economy, taking a tax on each transaction whether it be through credit cards or fees or loans or subsidies.

Time for a real change. Time to remind Congress where the power and legitimacy of their offices resides. Time for the lobbyists, corrupt regulators, corporate princes and the enablers and motivators of this grand theft to find a place in an unemployment line or a witness stand.

We must demand action from the Congress and the Administration who we recently put in place through the elections to clean this mess up and then change the system that delivered it.

Contact the White House

Contact Your Senator

We do not want fewer, bigger banks exacting a fee on every commericial transaction in this country.

1. Bring back Glass-Steagall.

2. Clean up the derivatives mess, starting with J.P. Morgan.

3. Enforce the various anti-trust laws, enacting new ones where necessary, and break up the media and banking conglomerates.

4. Enact aggregate position limits in all commodity markets and transparency with immediate disclosure of all position over 5% in any market.

5. Effective restrictions and enforcement of naked short selling, price manipulation, reinstatement of the 'uptick rule,' the prohibition of regulated banks from engaging in any speculative markets either for themselves or as agents, and usury laws and regulation of all interstate financial transactions at the national level.

And for the sake of the country, enact serious campaign financing reform.

Monday, February 23, 2009

The New "Golden Years"

Elderly Emerge as a New Class of Workers -- and the Jobless


AKRON, Ohio -- Mary Appleby, 76 years old, lost her job in January as a cashier at a courthouse cafeteria here. She is now looking for minimum-wage work.

Mary Bennett, 80, began filling out applications for fast-food restaurants and convenience stores after she was laid off last March as a machinist. Fred Dase, 81, a bartender until last summer, also needs another job.

Mary Appleby lost her job in January as a cashier at a courthouse cafeteria and the 76-year-old Ohio woman is looking for minimum-wage work.
Clare Ansberry/The Wall Street Journal

During past recessions, older workers simply would have retired rather than searching want ads and applying for jobs. But these days, with outstanding mortgages, bank loans and high medical bills, many of them can't afford to be out of work.

With jobs so scarce, people in their seventh and eighth decades are up against those half their age in a desperate scramble for work.

The number of unemployed workers 75 and older increased to more than 73,000 in January, up 46% from the prior January. Among workers 65 and older, the jobless rate stands at 5.7%. That's below the national average, but well above what it was in previous recessions, including the recession of 1981, when it reached at 4.3%.

The growing numbers reflect, in part, an increase in the number of older workers. The percentage of people 65 and older who are in the work force rose to 16.8% at year end, from 11.9% a decade earlier. Among people 75 and older, the increase was even greater -- to 7.3%, from 4.7%.

As people live longer and stay in better health, some of them merely want the stimulation and challenge of a job. But for workers like Ms. Appleby, Ms. Bennett and Mr. Dase, the motivation is financial necessity.

* Do diminished retirement savings mean you're getting back to work?

Fewer people than in years past are covered by defined-benefit plans, such as company-sponsored pensions that guarantee them specific monthly income for life. Those with retirement investments have seen their values erode with the stock-market tumble. Others worked for smaller companies, or were self-employed, and never had pensions. Many are outliving whatever savings they might have had, especially by the time they reach their mid to late 70s. Mortgages and medical bills push others into the job market because Social Security and Medicare, though helpful and critical, aren't enough.

There are few programs to help older unemployed workers. Several states are developing pilot programs. The Obama administration is receiving proposals for new ways to connect workers 55 years and older with local jobs.

"We're seeing a tremendous increase in the number of people coming for help," says Cynthia Metzler, who heads Experience Works. The Arlington, Va.-based national nonprofit organization offers job training and placement for 20,000 older adults in 30 states, and has a waiting list. The Cleveland office of another nonprofit group, the Senior Employment Center, has been seeing about 570 people coming in for help each month.

Even when the economy is humming along, older workers who get laid off tend to spend more time unemployed. In December, the average period for joblessness for workers older than 55 was 25 weeks, compared with 18.7 weeks for those under 55, according to the AARP Public Policy Institute. The physical limitations of some older workers likely account for part of the difference. But Marcie Pitt-Catsouphes, director of the Sloan Center on Aging and Work at Boston College, cites lingering stereotypes that older workers are more expensive, less productive and resistant to change.

Today's sputtering economy has flooded the labor market with a multitude of younger workers looking for jobs, which has made it even harder for older ones.

Mr. Dase, the unemployed bartender, knows. He spent 40 years working at Pittsburgh taverns and at his own bar, never receiving a pension. Over the years, when the $1,625 Social Security check he and his wife receive each month didn't cover prescriptions or other medical costs such as supplemental Medicare insurance, they used their charge cards. Last year, when their credit-card debt reached $29,000, they took out a $26,000 home-equity loan to pay off most of it. He still owes $5,000 on one credit card, and needs to come up with $363 a month for eight years to pay off the home-equity loan.

Mr. Dase had been working at a local Veterans of Foreign Wars club as a bartender. But he had to leave in August because it required too much standing. He looked for other jobs, applying at Big Lot stores, but he never heard back. "Who is going to hire an 81-year-old man?" he asks.

Three weeks ago, he entered a jobs-training program called the Senior Community Service Employment Program. The program pays him $7.15 an hour to stuff envelopes and greet visitors at the human-services center in Turtle Creek, Pa. "It helps quite a bit," he says. "Towards the end of the month, we start to run out of food. But luckily my daughter comes and helps us out."

At the moment, the Senior Community Service program, which currently has $433 million in funding, is the lone federal jobs initiative that targets unemployed older workers. Workers must be at least 55 and not have incomes more than 25% over the poverty level -- $13,000 a year for individuals. The program matches older adults with community nonprofit or public organizations. They receive on-the-job training, and are paid minimum wage, by the federal government, for up to 20 hours a week. Although it handles about 92,000 workers a year, the program is currently funded to serve less than 1% of the workers who would qualify, according to the Sloan Center, citing a General Accountability Office report.

The goal is to help both unemployed older adults and community organizations, which often are short on staff. But it isn't meant to provide permanent employment. The paid training is supposed to last for no more than 24 to 36 months. Increasingly, those limits are being exceeded because there are fewer paying jobs available, especially in smaller towns and rural areas.

Lois Humphrey, 80, has trouble climbing stairs and suffers severe hearing loss, so she needs an amplifier on her phone. She had to leave her department-store job because it was too hard on her feet. But she must keep working to pay for rent and prescriptions. She started at Experience Works in 2000. She has moved from one community organization to another in her Mechanicsburg, Pa., community, receiving different training along the way.

She is now back with Experience Works, the nonprofit training and placement organization, which thus far has been unable to find her a private-sector job. "I've been stuck in here," she says, but gladly so. "I still need to work because of medications," says Ms. Humphrey, who has cancer, diabetes and arthritis.

Justyn Jaymes of the Senior Employment Center in Akron, which administers the federal training program locally, is expected to move 27 to 32 people a year into private-sector paying jobs. They aren't supposed to spend more than 27 months in the program, on average. Several people are at that level or have exceeded it.

"I'm going to have to be aggressive pushing people out in the next year," says Mr. Jaymes. He says he's always on the lookout for jobs, noticing a help-wanted sign in an Office Max store, and whether hotels need housekeepers, janitors and breakfast hostesses.

Every week, he meets with at least four new older unemployed adults. He says he is "pretty blunt with them," telling them up front: "This is not a job. It looks like a job and feels like a job, but it is training and temporary. Are you going to job hunt or get comfortable?" Those accepted into the program must keep a log, recording their job-hunting efforts.

Getting hired isn't impossible. Dorothy Adams, 90, who raised six sons, had been a waitress. She quit at age 85 because of the physical demands. She couldn't make it on $8,000 a year in Social Security and $1,140 in food stamps, so she enrolled in an Experience Works training program in central Pennsylvania.

She got a job last year at a home-health-care agency. She drives to the homes of elderly adults who are sick and homebound. She reads them their mail, takes them to appointments, helps them dress and prepares light meals. She gets paid $7.50 an hour, plus mileage reimbursement.
[staying power]

Ms. Bennett, the laid-off machinist, had worked steadily since she entered a dress factory at the age of 17, taking time off only for the births of her seven children and a quintuple-bypass surgery in 1995. After a divorce, she worked two jobs, assembling coffee pots in the day and working at truck stops or tending bar at night. When one factory or shop or restaurant closed, she would look for another with a help-wanted sign posted in the window.

In her mid 70s, she left the truck stop hoping to retire, but found that she couldn't afford to. She applied at a machine shop in central Pennsylvania. Although she had never been a machinist, she got the job, and began making parts for door hinges, trucks, cranes and guns for $9 an hour. "I'm an easy person to teach," she says.

Ms. Bennett and a few dozen others were laid off last March. She applied at restaurants, stores and the local mall, which needed a cleaning person. She had two interviews. They seemed to go well, but she never heard back. "I thought I had a good chance, but a lot of places want to hire younger people," she says.

As weeks passed, with no luck, she applied for unemployment for the first time in her life. She continued hunting for work before resorting to the federal job-training program.

About a month ago, she started at the cafeteria of a local hospital, waiting on customers and running the cash register for $7.15 an hour. She works five hours a day, four days a week.

Her children, including her oldest, who is retired, want her to retire. "I don't have the money to do that," Ms. Bennett says. "I couldn't plan for retirement because I was raising seven children, and it just took all the money."

Ms. Appleby, of Akron, is still without a job. For 18 years, she had worked at a small snack shop in the basement of the Summit County Courthouse. She cooked, cleaned tables and served. As her knees got weak and she relied increasingly on a cane, she was stationed at the cash register.

She earned only minimum wage, but it helped supplement her $723-a-month Social Security check, and was enough to make her house payments. Five years ago, she tore down her childhood home, which needed too many costly repairs, and built a small white bungalow in its place. Ms. Appleby, who never married and has outlived most of her relatives, other than a few far-flung cousins, took out a loan -- a move she now regrets.

Last year, sales at the snack shop, called Buddy's Place, fell as more office workers began packing lunches and governments trimmed staff, resulting in fewer people stopping for coffee and soup. The owner, Aaron Hopkins, who is 36 and blind, watched labor costs balloon to 29% of sales. That put him in danger of losing his own business. Under a state program for the visually impaired that got him the snack-shop job, he had to keep labor costs down to no more than 20% of sales. Mr. Hopkins, who earned $22,000 last year, reluctantly laid off Ms. Appleby.

Her mobility and age limit her options. She doesn't have a résumé. A local law firm organized a benefit to help her get through the winter and pay mortgage bills. "It is our way, as courthouse family, to try to do something to help her get back on her feet," says Jonathan Sinn, an Akron attorney. Given her age and health, Mr. Sinn doubts she will be able to get another job in the court.

She is considering knee surgery, which may make her more mobile, and thus more marketable. She is applying for unemployment.

"I was waiting to see if [Mr. Hopkins] would call me back, and he hasn't," says Ms. Appleby. She lives modestly, with Timmy, a 13-year-old white spaniel mix, amid piles of papers, boxes and a lone black-and-white photo from her high-school graduation. "I was fine with Social Security and my job. I have to find other work.

Britain Faces Summer of Rage

Britain faces summer of rage - police

Middle-class anger at economic crisis could erupt into violence on streets

* Paul Lewis
* The Guardian, Monday 23 February 2009

Police are preparing for a "summer of rage" as victims of the economic downturn take to the streets to demonstrate against financial institutions, the Guardian has learned.

Britain's most senior police officer with responsibility for public order raised the spectre of a return of the riots of the 1980s, with people who have lost their jobs, homes or savings becoming "footsoldiers" in a wave of potentially violent mass protests.

Superintendent David Hartshorn, who heads the Metropolitan police's public order branch, told the Guardian that middle-class individuals who would never have considered joining demonstrations may now seek to vent their anger through protests this year.

He said that banks, particularly those that still pay large bonuses despite receiving billions in taxpayer money, had become "viable targets". So too had the headquarters of multinational companies and other financial institutions in the City which are being blamed for the financial crisis.

Hartshorn, who receives regular intelligence briefings on potential causes of civil unrest, said the mood at some demonstrations had changed recently, with activists increasingly "intent on coming on to the streets to create public disorder".

The warning comes in the wake of often violent protests against the handling of the economy across Europe. In recent weeks Greek farmers have blocked roads over falling agricultural prices, a million workers in France joined demonstrations to demand greater protection for jobs and wages and Icelandic demonstrators have clashed with police in Reykjavik.

In the UK hundreds of oil refinery workers mounted wildcat strikes last month over the use of foreign workers.

Intelligence reports suggest that "known activists" are also returning to the streets, and police claim they will foment unrest. "Those people would be good at motivating people, but they haven't had the 'footsoldiers' to actually carry out [protests]," Hartshorn said. "Obviously the downturn in the economy, unemployment, repossessions, changes that. Suddenly there is the opportunity for people to mass protest.

"It means that where we would possibly look at certain events and say, 'yes there'll be a lot of people there, there'll be a lot of banner waving, but generally it will be peaceful', [now] we have to make sure these elements don't come out and hijack that event and turn that into disorder."

Hartshorn identified April's G20 meeting of the group of leading and developing nations in London as an event that could kick-start a challenging summer. "We've got G20 coming and I think that is being advertised on some of the sites as the highlight of what they see as a 'summer of rage'," he said.

His comments are likely to be met with disappointment by protest groups, who in recent weeks have complained that police are adopting a more confrontational approach at demonstrations. Officers have been accused of exaggerating the threat posed by activists to justify the use of resources spent on them.

Police were said to have been heavy-handed at Greek solidarity marches in London in December and, last month, at protests against Israel's invasion of Gaza. In August 1,000 officers, helicopters and riot horses were drafted to Kent from 26 UK police forces to oversee the climate camp demonstration against the Kingsnorth power station. The massive operation to monitor the protesters cost £5.9m and resulted in 100 arrests. But in December the government was forced to apologise to parliament after the Guardian revealed that its claims that 70 officers had been hurt in violent clashes were wrong.

However, Hartshorn insisted: "Potentially there will be more industrial actions ... History shows that some of those disputes - Wapping, the miners' strike - have caused great tensions in the community and the police have had difficult times policing and maintaining law and order."

Both "extreme rightwing and extreme leftwing" elements are looking to "use the fact that people are out of jobs" to galvanise support, he said.

A particularly worrying development was the re-emergence of individuals involved in the violent fascist organisation Combat 18, he said. "They are using the fact that there's been lots of talk about eastern European people coming in and taking jobs on the Olympic sites," he said. "They're using those type of arguments to look at getting support."

Hartshorn said he also expected large-scale demonstrations this year on environmental issues, with hardcore green activists "joining forces" with middle-class campaigners over issues such as airport expansion at Heathrow and Stansted. With the prospect of angry demonstrations against the economy, that could open the door to powerful coalitions.

"All you've got to do then is link in with the environmentalists, and look at the oil companies. They're seen to be turning over billions of pounds profit in issues that are seen to be against the environment."

So goes the "Irish Miracle"

Ireland in the face of default?

As the Irish economy along with the rest of Europe continues to deteriorate with the banking sector in a clutter the cost of insuring sovereign Irish debt against default enormously increased. Last week spreads Ireland's five-year credit default swaps rose to a record 377 basis points. Thus, it would cost $377,000 a year to insure a notional $10 million of debt against default. Last year this figure stood just for $24,000.

The economy downturn deeply impacted financial system of the country with the three largest Irish banks nationalized in the course of the government’s bailouts. Still the state will have to pump even more funds to support the economy. Some Irishmen express their concern that the country can get to the same hole as the Iceland which was left virtually bankrupt after its outsized financial sector collapsed under the weight of massive foreign-denominated debt.

Still analysts think that Ireland is not the similar case as Iceland inasmuch as the country ‘has recourse to the European Central Bank and a lot of funds’ while Iceland didn’t. Those who made premature comparisons with Iceland are basing their conclusions on the so-called no-bailout clause of the Maastricht Treaty which allegedly prohibits fellow euro members from coming to the rescue of a member state in risk of default. But analysts say that the threat of a default would likely force fellow members to come to Ireland's aid as they want to keep euro currency intact.


We Need New License Slogans - Column

“Live Free or Die”—can’t we be a little more imaginative than that?

January 2009

I’m not seeing imaginative mottoes and slogans on license plates these days. Wouldn’t it be a source of revenue for cash-strapped states? Here are some starter ideas, free of charge. All yours. My pleasure. Really. Don’t mention it.


Minnesota: LOOK FOR 10,000 FINNS IN OUR LAKES.
West Virginia: GREEN WITH ENVY.


Prince Edward Island: BUDS, SUDS, SPUDS.

Sunday, February 22, 2009

McDonalds reaches new levels of Suckitude

McDonald's: No workers comp for employee shot protecting patron
Muriel Kane
Published: Sunday February 22, 2009

Fast food giant McDonald's has denied workers compensation benefits to a minimum wage employee who was shot when he ejected a customer who had been beating a woman inside the restaurant.

A representative of the administrator for McDonald's workers compensation plan explained that "we have denied this claim in its entirety as it is our opinion that Mr. Haskett's injuries did not arise out of or within the course and scope of his employment."

Nigel Haskett, then aged 21, was working at a McDonald's in Little Rock, Arkansas last summer when he saw a patron, later identified as Perry Kennon, smacking a woman in the face. A surveillance video of the incident, which had been posted to YouTube, was taken down after McDonald's charged copyright infringement, but according to written descriptions of the video, Haskett tackled Kennon, threw him out, and then stood by the door to prevent him from reentering.

Kennon went to his car, returned with a gun, and shot Haskett multiple times. Haskett staggered back into the restaurant and collapsed.

Kennon, who has a long criminal record, was arrested a few days later and charged with first-degree battery. The judge at his arraignment praised Haskett as a hero.

Haskett has since undergone three abdominal surgeries and has incurred over $300,000 in medical bills. McDonald's has declined to comment on their reasons for refusing his claim, because the case is still pending before the Workers Compensation Commission, but according to Haskett's lawyer, Philip M. Wilson:

"McDonald's position now is that during thirty-minute orientation Mr. Haskett and the other individuals going through the orientation were supposedly told that in the event of a robbery or anything like a robbery . . . not to be a hero and simply call 911. Mr. Haskett denies that anything like that was even mentioned during orientation or at any time during his employment with McDonald's."

McDonald's may be on shaky legal ground in their attempt to deny benefits. As explained by the blog "Joe's Union Review," courts have repeatedly ruled that injuries incurred in the course of "good samaritan" acts while on the job are entitled to compensation, especially if they result in good will towards the employer.

"McDonald’s is really living up to it’s reputation as an evil empire," another blog comments. "They’re no longer merely all about moving in on the little guy, or clogging your arteries with fry grease, or making kids big chunkers, but are also now turning on their employees."

Saturday, February 21, 2009

Soros Chimes In

Soros sees no bottom for worlds financial collapse

NEW YORK (Reuters) - Renowned investor George Soros said on Friday the world financial system has effectively disintegrated, adding that there is yet no prospect of a near-term resolution to the crisis.

Soros said the turbulence is actually more severe than during the Great Depression, comparing the current situation to the demise of the Soviet Union.

He said the bankruptcy of Lehman Brothers in September marked a turning point in the functioning of the market system.

"We witnessed the collapse of the financial system," Soros said at a Columbia University dinner. "It was placed on life support, and it's still on life support. There's no sign that we are anywhere near a bottom."

His comments echoed those made earlier at the same conference by Paul Volcker, a former Federal Reserve chairman who is now a top adviser to President Barack Obama.

Volcker said industrial production around the world was declining even more rapidly than in the United States, which is itself under severe strain.

"I don't remember any time, maybe even in the Great Depression, when things went down quite so fast, quite so uniformly around the world," Volcker said.

(Reporting by Pedro Nicolaci da Costa and Juan Lagorio; Editing by Gary

Waterford Crystal shuts doors

If you love crystal and glass -- this is a dark day. I guess such things happen during a DEPRESSION

Famed Waterford Crystal Shutters Doors
Workers Protest As Debt-Crippled Company Announces Closure

Thousands of jobs are in jeopardy at a British company that has defined luxury for 250 years. Waterford Wedgwood has filed for bankruptcy after losing money for five years. Elizabeth Palmer reports.

(AP) Waterford Crystal workers clashed with security guards and mounted a sit-down protest Friday after bankruptcy officials shut down their world-famous but debt-crippled factory.

Union leaders warned that more than 200 workers would refuse to leave the factory in the city of Waterford, southeast Ireland, until the receivers handling Waterford Wedgwood PLC's bankruptcy proceedings reversed the closure.

The approximately 650 remaining Irish employees at the iconic plant had already been reduced to working part-time as the company negotiated with potential American buyers to take over part or all of the business.

Waterford Crystal is widely regarded as the most famous producer of hand-cut lead glass worldwide. Founded by a Czech immigrant in 1948, the crystal plant enjoyed growing success in the 1980s and 1990s, employing more than 3,000 people at three Irish locations at its height.

Traditionally Americans account for about half of Waterford Crystal sales — a key factor in Waterford's failure to record a profit since 2002, when the U.S. dollar fell into chronic weakness versus the euro. The company also has battled high Irish labor costs versus growing Eastern European competition. Consumer tastes also have increasingly favored lighter, more practical glassware.

On Friday, David Carson, the receiver still negotiating with two U.S. private equity firms, said in a statement that all Waterford Crystal workers had been laid off with immediate effect and the factory — including its tourist center, one of Ireland's top tourist attractions — would be closed indefinitely.

Carson held out hope that both the factory and visitors center might eventually reopen under new ownership.

The Waterford Crystal factory's unionized workers discovered their fate Friday when the afternoon shift was blocked from entering the factory. They tried to force their way in past private security guards who were reinforced this month at the plant to deter labor unrest.

Witnesses said one worker was cut during scuffles, and at least one plate-glass window was shattered, before police intervened to separate the two groups. Some workers got into the building during the melee and joined comrades from the day shift who were refusing to leave.

Walter Cullen, the spokesman for Waterford Crystal workers represented by the Unite labor union, said Carson had told him by phone that he could not wait any longer for an American "white knight" investor.

"He told me he had run out of money, and this was why he was making the decision," Cullen said. "I reminded him that he had broken his word. He had promised not to shut us down like this without warning or negotiations to explore alternatives."

Cullen said the protesting workers would leave the factory "only if the decision of the receiver is reversed."

The Associated Press left e-mails and phone messages with the receiver and other Waterford Wedgwood officials, but no messages were returned.

Eleven of Waterford Wedgwood's 14-member board of directors has resigned this month, including its two major investors, Irish publishing magnate Tony O'Reilly and his brother-in-law Peter Goulandris. The pair personally invested more than euro400 million to keep the company afloat in recent years — and today own more than half of Waterford Wedgwood's virtually worthless stock.

The company in recent years has slashed production in its traditional heartlands — crystal in Ireland, china in England — and shifted crystal production overseas to Eastern Europe and china to Indonesia.

But Waterford Wedgwood still needed to keep borrowing money and floating new shares to pay its bills, and hit a brick wall last year amid tightening credit markets worldwide. The Irish government refused to underwrite any private bank loans, and O'Reilly and Goulandris decided that someone else must lead the next bailout.

Waterford Wedgwood filed for bankruptcy protection Jan. 5, and a week later more than 350 people were laid off from the Wedgwood china side of the operation. Earlier this week, the Waterford side of the business stopped making payments to more than 250 recently laid-off workers, compounding its longer-term failure to pay full pension benefits to retired glassworkers.

The company has identified a U.S. private equity firm, KPS Capital Partners of New York, as the leading bidder for undisclosed parts of Waterford Wedgwood. A second New York-based firm, Clarion Capital, joined the negotiations last week and met Waterford workers Thursday but has yet to confirm a formal bid for any assets.

I guess they have more spirit in other countries.

Home » World
100,000 Protest Irish Gov't Over Recession
Dublin March A Warning Shot To Leaders Who Plan Wage Reductions For Workers While Pumping Billions Into Banks

Thousands of public sector workings taking to the streets of Dublin today to demonstrate over the Government's handling of the recession.

(AP) Around 100,000 people filled the streets of the Irish capital Saturday in protest at the government's handling of the country's economic crisis, police said.

The march through the heart of Dublin - organized by the Irish Congress of Trade Unions - was meant as a warning shot to the government, which wants to cut public sector pay even as it pumps billions of euros into its troubled banks.

The government has argued that wage reductions are needed to keep Ireland's ballooning deficits under control and reassure international markets that Ireland isn't spiraling toward a default.

But the plan - which effectively docks 7 percent from the paychecks of 350,000 Irish workers - comes amid revelations of shady dealings and irresponsible lending at the banks now getting the taxpayers' help.

Anglo Irish Bank, which was nationalized last month after collapsing under the weight of its bad debts, said Friday it expected to lose about €300 million ($385 million) on loans made to favored investors. Anglo's former chairman, Sean FitzPatrick, was forced out last year after it emerged that he secretly took out €87 million in personal loans from the bank.

Organizers originally planned the demonstration as a protest at the wage cutbacks, but later called on all Irish workers to turn out in a show of strength. Uniformed members of the Irish Fire Brigade rubbed shoulders with health workers and red flag-waving activists to vent their anger at the government - and the country's financial elite.

"Our generations yet unborn have been mortgaged in order to keep this banking system together," Congress of Trade Unions General Secretary David Begg told cheering crowds at Dublin's Merrion Square.

Our generations yet unborn have been mortgaged in order to keep this banking system together.
David Begg
"Your children and my children and our grandchildren will all have to try to deal with what has been laid upon their shoulders."

Sean Whelan, 45, said he was outraged by the bank bailout.

"You could practically say it's illegal what they are doing," said Whelan, an employee of Dublin's city council. He said the salary reduction would leave him only a few euros a week to live on.

The trade unions are hoping the turnout will convince the government that organized labor is ready to strike if its demands are ignored. The Congress, an umbrella group representing about 55 unions in Ireland and Northern Ireland, recently published a wish-list which included, among other things, more support for the unemployed, a moratorium on home repossessions and the nationalization of the country's banking sector.

The Irish government said in a statement Saturday that much of the plan was "entirely consistent" with its own agenda, before warning that the measures it was taking to salvage the country's economy would necessarily have to be "difficult and, in some cases, painful."

Ireland once had one of the fastest-growing economies in Europe, but boom turned to bust last year as shock waves from the subprime lending crisis in the United States spread across the globe.

U.S. can not go back to the old ways - somebody please tell CNBC

U.S. cannot go back to old ways, Nobel laureates say

By Pedro Nicolaci Da Costa – Fri Feb 20, 7:15 pm ET
Jeffrey Sachs of the Earth Institute speaks during the Service Nation Summit in Reuters – Jeffrey Sachs of the Earth Institute speaks during the Service Nation Summit in New York September 12, …

NEW YORK (Reuters) – The United States cannot battle its economic crisis by simply trying to go back to its old ways of spending too much and saving too little, two Nobel prize-winning economists said on Friday.

Jeffrey Sachs, director of the Earth Institute at Columbia University in New York, said a $40 trillion loss in global wealth, a reflection of declines in stock prices and home values, would not easily be reversed.

"The scale and drama and rapidity is extraordinary," Sachs said at a panel at Columbia. "We're not likely to be sending demand and consumption back up. Fixing the banks is not really the key to unlocking the demand side."

Joseph Stiglitz, a former chief economist of the International Monetary Fund and a professor at Columbia, said in a separate panel that the banking sector has shown itself to be a detriment to society rather than a positive driving force.

The world economy is in the grips of a crisis that shows few signs of abating, and which most analysts consider to be the most severe shock since the Great Depression of the 1930s.

Stiglitz said that, under the guise of innovation, banks discovered new ways of taking risks that brought few benefits to most people and are now threaten the entire global economy.

"They not only didn't innovate, they actually resisted innovations that were important," Stiglitz said. "It was heads I win, tails you lose. And you lost."

He argued that talk of increasing transparency is actually an effort to divert attention from the real issue: financial complexity designed to pad profits and hide them from the eyes of regulators.

He suggested that, to date, efforts to simply pump money into banks have been a fool's errand. "Think of what we could do if we had spent $700 billion in a new, good bank."

Talk about moving toxic assets off bank balance sheets is also misguided, Stiglitz said. "Moving things around doesn't actually create value."

With this in mind, Sachs said that rather than trying glue back together a broken financial financial system, policy-makers should focus on a long-term vision that includes productive investments in transportation and energy infrastructure.

"We ought to be thinking about how to get the saving into future oriented development, not to recreate the bubble," Sachs said.

(Editing by Leslie Adler)

More Doom and Gloom - but most likely true

Another bundle of laughs:

By CHARLES J. HANLEY, AP Special Correspondent Charles J. Hanley, Ap Special Correspondent – 57 mins ago

CAPE TOWN, South Africa – If we don't deal with climate change decisively, "what we're talking about then is extended world war," the eminent economist said.

His audience Saturday, small and elite, had been stranded here by bad weather and were talking climate. They couldn't do much about the one, but the other was squarely in their hands. And so, Lord Nicholas Stern was telling them, was the potential for mass migrations setting off mass conflict.

"Somehow we have to explain to people just how worrying that is," the British economic thinker said.

Stern, author of a major British government report detailing the cost of climate change, was one of a select group of two dozen — environment ministers, climate negotiators and experts from 16 nations — scheduled to fly to Antarctica to learn firsthand how global warming might melt its ice into the sea, raising ocean levels worldwide.

Their midnight flight was scrubbed on Friday and Saturday because of high winds on the southernmost continent, 3,000 miles from here. While waiting at their Cape Town hotel for the gusts to ease down south, chief sponsor Erik Solheim, Norway's environment minister, improvised with group exchanges over coffee and wine about the future of the planet.

"International diplomacy is all about personal relations," Solheim said. "The more people know each other, the less likely there will be misunderstandings."

Understandings will be vital in this "year of climate," as the world's nations and their negotiators count down toward a U.N. climate conference in Copenhagen in December, target date for concluding a grand new deal to replace the Kyoto Protocol — the 1997 agreement, expiring in 2012, to reduce carbon dioxide and other global-warming emissions by industrial nations.

Solheim drew together key players for the planned brief visit to Norway's Troll Research Station in East Antarctica.

Trying on polar outfits for size on Friday were China's chief climate negotiator Xie Zhenhua, veteran U.S. climate envoy Dan Reifsnyder, and environment ministers Hilary Benn of Britain and Carlos Minc Baumfeld of Brazil.

Later, at dinner, the heavyweights heard from smaller or poorer nations about the trials they face as warming disrupts climate, turns some regions drier, threatens food production in poor African nations.

Jose Endundo, environment minister of Congo, said he recently visited huge Lake Victoria in nearby Uganda, at 80,000 square kilometers (31,000 square miles) a vital source for the Nile River, and learned the lake level had dropped 3 meters (10 feet) in the past six years — a loss blamed in part on warmer temperatures and diminishing rains.

In the face of such threats, "the rich countries have to give us a helping hand," the African minister said.

But it was Stern, former chief World Bank economist, who on Saturday laid out a case to his stranded companions in sobering PowerPoint detail.

If the world's nations act responsibly, Stern said, they will achieve "zero-carbon" electricity production and zero-carbon road transport by 2050 — by replacing coal power plants with wind, solar or other energy sources that emit no carbon dioxide, and fossil fuel-burning vehicles with cars running on electric or other "clean" energy.

Then warming could be contained to a 2-degree-Celsius (3.4-degree-Fahrenheit) rise this century, he said.

But if negotiators falter, if emissions reductions are not made soon and deep, the severe climate shifts and sea-level rises projected by scientists would be "disastrous."

It would "transform where people can live," Stern said. "People would move on a massive scale. Hundreds of millions, probably billions of people would have to move if you talk about 4-, 5-, 6-degree increases" — 7 to 10 degrees Fahrenheit. And that would mean extended global conflict, "because there's no way the world can handle that kind of population move in the time period in which it would take place."

Melting ice, rising seas, dwindling lakes and war — the stranded ministers had a lot to consider. But many worried, too, that the current global economic crisis will keep governments from transforming carbon-dependent economies just now. For them, Stern offered a vision of working today on energy-efficient economies that would be more "sustainable" in the future.

"The unemployed builders of Europe should be insulating all the houses of Europe," he said.

After he spoke, Norwegian organizers announced that the forecast looked good for Stern and the rest to fly south on Sunday to further ponder the future while meeting with scientists in the forbidding vastness of Antarctica."

Friday, February 20, 2009

Why does Volcker seem to be on the outside?

Volcker sees crisis leading to global regulation
Friday February 20, 6:29 pm ET
By Eileen Aj Connelly, AP Business Writer
Volcker sees greater international cooperation on regulations growing from economic crisis

NEW YORK (AP) -- "Even the experts don't quite know what's going on."

Speaking to a number of those experts Friday, Paul Volcker, a top economic adviser to President Barack Obama, cited not only the lack of understanding of the global financial meltdown but the "shocking" speed with which it had spread across the world.

"One year ago, we would have said things were tough in the United States, but the rest of the world was holding up," Volcker told a conference featuring Nobel laureates, economists and investors at Columbia University in New York. "The rest of the world has not held up."

In fact, the 81-year-old former chairman of the Federal Reserve said, "I don't remember any time, maybe even the Great Depression, when things went down quite so fast."

He noted that industrial production is falling in countries across the globe faster than in the U.S., one result of the decline caused by the breakdown of unbridled financial markets that operated on a global scale.

"It's broken down in the face of almost all expectation and prediction," he noted.

Volcker didn't offer specifics on how long he thinks the recession will last or what will help start a recovery. But he predicted there will be some lasting lessons from the experience.

"I don't believe it will be forgotten ... and we will revert to the kind of financial system we had before the crisis," he said.

While he assured his audience of his confidence that capitalism will survive, Volcker said stronger regulations are needed to protect the world economy from such future shocks.

And he said he is concerned about the amount of power central banks, treasuries and regulatory agencies have acquired while trying to contain the meltdown.

"It is evident in the United States, and not just in the United States, the central bank is taking on a role that is way beyond what a central bank should be taking," he said.

Volcker stressed the importance of international cooperation in creating a new regulatory framework, particularly for major banks that operate across national boundaries -- the reverse of what's happened in recent years.

"The more international agreement we have on where we want to get to, the better off we'll be," Volcker said.

And while major banks should be more tightly controlled and less able to make the sort of risky bets that led to their current debacle, Volcker said there should also be more oversight of some kind for hedge funds, equity funds and the remaining investment banks.

He scoffed at the notion that those entities must be free to innovate -- stating that financial "innovations" like asset backed securities and credit default swaps have brought few benefits. The most important "innovation" in banking for most people in the last 20 or 30 years, he maintained, is the automatic teller machine.

Proof it's Friday.

Bank Failure #14 in 2009: Silver Falls Bank, Silverton, Oregon

Thursday, February 19, 2009

What Social Security Crisis?

The following from Angry Bear -- because his guest says it better than I can.

Thursday, February 19, 2009
No crisis in sight

guest post by Coberly

A few years ago the Social Security Trustees began publishing a warning that went something like this: "After the year 2040 Social Security will only be able to meet 75% of promised benefits."

You may have gotten this message in the mail, or heard it while waiting to talk to Social Security on the telephone. But look at what it really says.

If Social Security can meet 3/4 of promised benefits with the existing tax, it could meet ALL promised benefits with a 33% tax raise. 3/4 times 4/3 equals One.

But the current tax is 6.2% of payroll. 33% of 6.2 is 2.1. So a 2% raise in the payroll tax would enable Social Security to meet all promised benefits.

Current average income is 700 dollars per week. 2% of 700 is 14 dollars. (For a low wage worker, the tax increase would be about 7 dollars per week.)

Projected average income in 2040 is 1000 dollars per week. 2% of 1000 is 20 dollars per week.

So Social Security can be "saved" by a 20 dollar increase in tax on an income that has increased by 300 dollars by the time the raise is needed. The reason the raise will be needed is to pay for the six extra years of life expectancy those future tax payers will have compared to us. The 20 dollar raise will preserve their benefits at current replacement value and allow them to retire at the normal age.

This is not a crisis.

I can say a great deal more about this. But this is enough for lesson one. Except to point out that Peter Peterson has convinced everyone, including some bi-partisan experts and possibly Barack Obama that 20 dollars times 2 (boss's share) times 52 weeks times 200 million taxpayers times 75 years is an "Unfunded Deficit of 31 Trillion Dollars!!" Which of course it is. He hopes you will not do the arithmetic and realize it is still only 20 dollars a week. Or realize that it is "unfunded" because we don't need to pay for it in advance.
guest post by Coberly.

Back in "Olden Times"

Back in "olden times", in the late 80's and 90's I sold cars. I sold American cars -- Oldsmobile and Cadillac to be exact.

My father owned more Oldsmobiles than any other car -- he did have a 1951 Chrysler, a 64 Chevrolet and a 70 something Caddy (he wanted one before he died).

I sold Oldsmobiles and believed in them -- after all, we actually bought them.

When Olds was falling, I would joke that I'd tell my grandkids I once sold Oldsmobiles -- and they would look at me with pity.

When GM killed Olds it was the oldest continually operating marque in the world. I thought killing Olds was a very bad move -- especially because some of the new models were really nice cars. I was always of the opinion that GM would release new models -- with flaws -- then improve, improve, and improve -- until, just before they cancelled the model, it was near perfect -- but, that's just my opinion.

GM pioneered so many things -- auto trans, air conditioning, etc. They developed world class engines, solid, reliable vehicles. After all, it was the USA that turned the automobile from a plaything, or a rich man's status symbol, into an appliance. The Ford Model T was an appliance, a tool. Other manufacturers followed.

Today, we get into our cars or trucks, turn the key -- and drive off. No warmup. No pumping the gas pedal exactly 3.5 times, then sitting in the car, revving it, to make sure it's going. Now even if it's zero F. we start it up, put it in drive, and move off -- cursing if it even stalls once.

We do not realize how refined today's cars are -- all we can do is complain -- and, in spite of all the dealers closing shop -- we are STILL sure that salesman ripped us off.

I always thought otherwise sensible people parked their brains outside the dealership before walking in.

I hope everyone realizes Toyota, Honda, and Nissan will go through the exact same decline in the coming years. Replaced by who knows what from China, or India, Korea, Indonesia, etc., etc., etc. There will be the same sort of folks tsk-tsking about how Toyota lost its way, how we should let them fail, how they became "fat-cats" -- and, how we have to destroy any power the working men have -- because "it's all the fault of the union".

That's really a crock, when you stop to think about it.

Wednesday, February 18, 2009

Nobody knows how dry we are

The following is from -- it's one of a series of articles about some of the problems the world is facing. It seems we have painted ourselves into so many corners we might not survive.

Please follow the link to the original - and go back to read more as it's posted.

Burning Questions
What Does Economic "Recovery" Mean on an Extreme Weather Planet?
By Tom Engelhardt

It turns out that you don't want to be a former city dweller in rural parts of southernmost Australia, a stalk of wheat in China or Iraq, a soybean in Argentina, an almond or grape in northern California, a cow in Texas, or almost anything in parts of east Africa right now. Let me explain.

As anyone who has turned on the prime-time TV news these last weeks knows, southeastern Australia has been burning up. It's already dry climate has been growing ever hotter. "The great drying," Australian environmental scientist Tim Flannery calls it. At its epicenter, Melbourne recorded its hottest day ever this month at a sweltering 115.5 degrees, while temperatures soared even higher in the surrounding countryside. After more than a decade of drought, followed by the lowest rainfall on record, the eucalyptus forests are now burning. To be exact, they are now pouring vast quantities of stored carbon dioxide, the greenhouse gas considered largely responsible for global warming, into the atmosphere.

In fact, everything's been burning there. Huge sheets of flame, possibly aided and abetted by arsonists, tore through whole towns. More than 180 people are dead and thousands homeless. Flannery, who has written eloquently about global warming, drove through the fire belt, and reported:

"It was as if a great cremation had taken place… I was born in Victoria, and over five decades I've watched as the state has changed. The long, wet and cold winters that seemed insufferable to me as a boy vanished decades ago, and for the past 12 years a new, drier climate has established itself… I had not appreciated the difference a degree or two of extra heat and a dry soil can make to the ferocity of a fire. This fire was different from anything seen before."

Australia, by the way, is a wheat-growing breadbasket for the world and its wheat crops have been hurt in recent years by continued drought.

Meanwhile, central China is experiencing the worst drought in half a century. Temperatures have been unseasonably high and rainfall, in some areas, 80% below normal; more than half the country's provinces have been affected by drought, leaving millions of Chinese and their livestock without adequate access to water. In the region which raises 95% of the country's winter wheat, crop production has already been impaired and is in further danger without imminent rain. All of this represents a potential financial catastrophe for Chinese farmers at a moment when about 20 million migrant workers are estimated to have lost their jobs in the global economic meltdown. Many of those workers, who left the countryside for China's booming cities (and remitted parts of their paychecks to rural areas), may now be headed home jobless to potential disaster. A Wall Street Journal report concludes, "Some scientists warn China could face more frequent droughts as a result of global warming and changes in farming patterns."

Globe-jumping to the Middle East, Iraq, which makes the news these days mainly for spectacular suicide bombings or the politics of American withdrawal, turns out to be another country in severe drought. Americans may think of Iraq as largely desert, but (as we were all taught in high school) the lands between the Tigris and Euphrates Rivers, the "fertile crescent," are considered the homeland of agriculture, not to speak of human civilization.

Well, not so fertile these days, it seems. The worst drought in at least a decade and possibly a farming lifetime is expected to reduce wheat production by at least half; while the country's vast marshlands, once believed to be the location of the Garden of Eden, have been turned into endless expanses of baked mud. That region, purposely drained by dictator Saddam Hussein to tame rebellious "Marsh Arabs," is now experiencing the draining power of nature.

Nor is Iraq's drought a localized event. Serious drought conditions extend across the Middle East, threatening to exacerbate local conflicts from Cyprus and Lebanon to Gaza, the West Bank, and Israel where this January was reported to have been the hottest and driest in 60 years. "With less than 2 months of winter left," Daniel Pedersen has written at the environmental website Green Prophet, "the region has received only 6%-50% of the annual average rainfall, with the desert areas getting 30% or less."

Leaping continents, in Latin America, Argentina is experiencing "the most intense, prolonged and expensive drought in the past 50 years," according to Hugo Luis Biolcati, the president of the Argentine Rural Society. One of the world's largest grain exporters, it has already lost five billion dollars to the drought. Its soybeans -- the country is the third largest producer of them -- are wilting in the fields; its corn -- Argentina is the world's second largest producer -- and wheat crops are in trouble; and its famed grass-fed herds of cattle are dying -- 1.5 million head of them since October with no end in sight.

Dust Bowl Economics

In our own backyard, much of the state of Texas -- 97.4% to be exact -- is now gripped by drought, and parts of it by the worst drought in almost a century. According to the New York Times, "Winter wheat crops have failed. Ponds have dried up. Ranchers are spending heavily on hay and feed pellets to get their cattle through the winter. Some wonder if they will have to slaughter their herds come summer. Farmers say the soil is too dry for seeds to germinate and are considering not planting." Since 2004, in fact, the state has yoyo-ed between the extremities of flood and drought.

Meanwhile, scientists predict that, as global warming strengthens, the American southwest, parts of which have struggled with varying levels of drought conditions for years, could fall into "a possibly permanent state of drought." We're talking potential future "dust bowl" here. A December 2008 U.S. Geological Survey report warns: "In the Southwest, for example, the models project a permanent drying by the mid-21st century that reaches the level of aridity seen in historical droughts, and a quarter of the projections may reach this level of aridity much earlier."

And talking about drought gripping breadbasket regions, don't forget northern California which "produces 50 percent of the nation's fruits, nuts and vegetables, and a majority of [U.S.] salad, strawberries and premium wine grapes." Its agriculturally vital Central Valley, in particular, is in the third year of an already monumental drought in which the state has been forced to cut water deliveries to farms by up to 85%.

Observers are predicting that it may prove to be the worst drought in the history of a region "already reeling from housing foreclosures, the credit crisis, and a plunge in construction and manufacturing jobs." January, normally California's wettest month, has been wretchedly dry and the snowpack in the northern Sierra Mountains, crucial to the state's water supplies and its agricultural health, is at less than half normal levels.

Northern California, in fact, offers a glimpse of the havoc that the extreme weather conditions scientists associate with climate change could cause, especially when combined with other crises. In a Los Angeles Times interview, new Secretary of Energy Steven Chu offered an eye-popping warning (of a sort top government officials simply don't give) about what a global-warming future might hold in store for California, his home state. Interviewer Jim Tankersley summed up Chu's thoughts this way:

"California's farms and vineyards could vanish by the end of the century, and its major cities could be in jeopardy, if Americans do not act to slow the advance of global warming... In a worst case... up to 90% of the Sierra snowpack could disappear, all but eliminating a natural storage system for water vital to agriculture. 'I don't think the American public has gripped in its gut what could happen,' [Chu] said. 'We're looking at a scenario where there's no more agriculture in California.' And, he added, 'I don't actually see how they can keep their cities going' either."

As for East Africa and the Horn of Africa, under the pressure of rising temperatures, drought has become a tenacious long-term visitor. For East Africa, the drought years of 2005-2006 were particularly horrific and now Kenya, with the region's biggest economy, a country recently wracked by political disorder and ethnic violence, is experiencing crop failures. An estimated 10 million Kenyans may face hunger, even starvation, this year in the wake of a poor harvest, lack of rainfall, and rising food prices; if you include the drought-plagued Horn of Africa, 20 million people may be endangered, according to the International Federation of Red Cross and Red Crescent Societies.

Recently, climatologist David Battisti and Rosamond Naylor, director of Stanford University's Program on Food Security and the Environment, published a study in Science magazine on the effect of extreme heat on crops. They concluded, based on recent climate models and a study of past extreme heat waves, that there was "a 90% chance that, by the end of the century, the coolest temperatures in the tropics during the crop growing season would exceed the hottest temperatures recorded between 1900 and 2006." According to the British Guardian, under such circumstances Battisti and Naylor believe "[h]alf of the world's population could face severe food shortages by the end of the century as rising temperatures take their toll on farmers' crops... Harvests of staple food crops such as rice and maize could fall by between 20% and 40% as a result of higher temperatures during the growing season in the tropics and subtropics."

Not surprisingly, it's hard to imagine -- perhaps I mean swallow -- such an extreme world, and so most of us, the mainstream media included, don't bother to. That means certain potentially burning questions go not just unanswered but unasked.

The Grapes of Wrath (Updated)

Mind you, what you've read thus far represents an amateur's eye view of drought on our planet at this moment. It's hardly comprehensive. To give but one example, Afghanistan has only recently begun to emerge from an eight-year drought involving severe food shortages -- and, as journalist Christian Parenti writes, it would need another "five years worth of regular snowfall just to replenish its aquifers." Parenti adds: "As snow packs in the Himalayan and Hindu Kush ranges continue to recede, the rivers flowing from them will diminish and the economic situation in all of Central Asia will deteriorate badly."

Nor is this piece meant to be authoritative, exactly because I know so relatively little. Think of it as a reflection of my own frustration with work not done elsewhere -- and, by the way, thank heavens for Google University. Yes, Googling leaves you on your own, can be time-consuming, and tends to lead to cul-de-sacs ("Nuggets end 17-year drought in Orlando"), but what would we do without it? Thanks to good ol' G.U., anyone can, for instance, check out the National Oceanic and Atmospheric Administration's Drought Information Center or its U.S. Drought Monitor, or the National Weather Service's Climate Prediction Center and begin a self-education.

Now let me explain why I even bothered to write this piece. It's true that, if you're reading the mainstream press, each of the droughts mentioned above has gotten at least some attention, several of them a fair amount of attention (as well as some fine reporting), and the Australian firestorms have been headlines globally for weeks. The problem is that (the professional literature, the science magazines, and a few environmental websites and blogs aside) no one in the mainstream media seems to have thought to connect these dots or blots of aridity in any way. And yet it seems a no-brainer that mainstream reporters should be doing just that.

After all, cumulatively these drought hotspots, places now experiencing record or near-record aridity, could be thought of as representing so many burning questions for our planet. And yet you can search far and wide without stumbling across a mainstream American overview of drought in our world at this moment. This seems, politely put, puzzling, especially at a time when University College London's Global Drought Monitor claims that 104 million people are now living under "exceptional drought conditions."

Scientists generally agree that, as climate change accelerates throughout this century (and no matter what happens from here on in, nothing will evidently stop some form of acceleration), extreme weather of every sort, including drought, will become ever more the planetary norm. In fact, experts are suggesting that, as the Washington Post reported recently, "The pace of global warming is likely to be much faster than recent predictions, because industrial greenhouse gas emissions have increased more quickly than expected and higher temperatures are triggering self-reinforcing feedback mechanisms in global ecosystems."

Now, no one can claim beyond all doubt that global warming is the cause of any specific drought, or certainly the only cause anyway. As with the Texas drought, a La Niña weather pattern in the Pacific is often mentioned as a key causal factor right now. But the crucial point is what the present can tell us about the impact of a global pattern of extreme weather, especially extreme drought, on what will surely be a more extreme planet in the relatively near future.

If global temperatures are on the rise and more heat means lower crop yields, then you're talking about more Kenyas, and not just in Africa either. You're probably also talking about desperation, upheaval, resource conflicts, and mass out-migrations of populations, even -- if scientists are right -- from the American Southwest. (And in case you don't think such a thing can happen here, remember Steinbeck's The Grapes of Wrath or think of any of Dorothea Lange's iconic photos of the "Okies" fleeing the American dustbowl of the 1930s.)

Burning Questions

Right now, the global economic meltdown has massively depressed fuel prices (key to farming, processing, and transporting most crops to market) and commodity prices have generally fallen as well, including food prices. Whatever the future economic weather, however, that is not likely to last.

So here's a burning question on my mind:

We're now experiencing the extreme effects of economic bad "weather" in the wake of the near collapse of the global financial system. Nonetheless, from the White House to the media, speculation about "the road to recovery" is already underway. The stimulus package, for instance, had been dubbed the "recovery bill," aka the American Recovery and Reinvestment Act, and the question of when we'll hit bottom and when -- 2010, 2011, 2012 -- a real recovery will begin is certainly in the air.

Recently, in a speech in Singapore, Dominique Strauss-Kahn, head of the International Monetary Fund, suggested that the "world's advanced economies" -- the U.S., Western Europe, and Japan -- were "already in depression," and the "worst cannot be ruled out." This got little attention here, but President Obama's comment at his first press conference that delay on his stimulus package could lead to a "lost decade," as in Japan in the 1990s (or, though it went unmentioned, the U.S. in the 1930s), made the headlines.

If, indeed, this is "the big one," and does result in a "lost decade" or more, here's what I wonder: Could the sort of "recovery" that everyone assumes lies just over a recessive or depressive horizon not be there? What if our lost decade lasts long enough to meet an environmental crisis involving extreme weather -- drought and flood, hurricanes, typhoons, and firestorms of unprecedented magnitude -- possibly in some of the breadbasket regions of the planet? What will happen if the rising fuel prices likely to come with the beginning of any economic "recovery" were to meet the soaring food prices of environmental disaster? What kind of human tsunami might that result in?

Once we start connecting some of today's drought dots, wouldn't it make sense to try to connect a few of the prospective dots as well? After all, if you begin to imagine what the worst might look like, you can also begin to think about what might be done to mitigate it. Isn't that more sensible than looking the other way?

If the kinds of hits regional agriculture is now taking from record-setting drought became the future norm, wouldn't we then be bereft of our most reassuring formulations in bad times? For example, the president spoke at that press conference of our present moment as "the worst economic crisis since the Great Depression." On an extreme planet, no such comforting "since the..." would be available, nor would there be any historical road map for what was coming at us, not if we had already run out of history.

Maybe the world we knew but scarce months ago is already, in some sense, long gone. What if, after a lost decade, we were to find ourselves living on another planet?

Feel free, of course, to ignore my burning questions. After all, I'm only an amateur with the flimsiest of credentials from Google U. Still, I do keep wondering when the media pros will finally pitch in, and what they'll tell us is on that distant horizon, the one with the red glow.

Tom Engelhardt, co-founder of the American Empire Project, runs the Nation Institute's He is the author of The End of Victory Culture, a history of the American Age of Denial. He also edited The World According to TomDispatch: America in the New Age of Empire (Verso, 2008), a collection of some of the best pieces from his site and an alternative history of the mad Bush years.