Workers Cut Fed Black Fiber, Black SUVs Arrive Moments Later

This part happens all the time: A construction crew putting up an office building in the heart of Tysons Corner a few years ago hit a fiber optic cable no one knew was there.This part doesn’t: Within moments, three black sport-utility vehicles drove up, a half-dozen men in suits jumped out and one said, “You just hit our line.”

Whose line, you may ask? The guys in suits didn’t say, recalled Aaron Georgelas, whose company, the Georgelas Group, was developing the Greensboro Corporate Center on Spring Hill Road. But Georgelas assumed that he was dealing with the federal government and that the cable in question was “black” wire — a secure communications line used for some of the nation’s most secretive intelligence-gathering operations.

“The construction manager was shocked,” Georgelas recalled. “He had never seen a line get cut and people show up within seconds. Usually you’ve got to figure out whose line it is. To garner that kind of response that quickly was amazing.”

Black wire is one of the looming perils of the massive construction that has come to Tysons, where miles and miles of secure lines are thought to serve such nearby agencies as the Office of the Director of National Intelligence, the National Counterterrorism Center and, a few miles away in McLean, the Central Intelligence Agency. After decades spent cutting through red tape to begin work on a Metrorail extension and the widening of the Capital Beltway, crews are now stirring up tons of dirt where the black lines are located.

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US jobless at 26-year high

President Obama said that America was showing signs of economic recovery, even as the country's unemployment rate hit a near-26-year high.

Employers made 539,000 workers redundant in April, according to US Labour Department statistics - the fewest job cuts in six months and far better than the 620,000 reduction that economists had expected.

Mr Obama said that there was a “long way to go before we can put this recession behind us”, but added: “The gears of our economic engine do seem to be slowly turning once again.”

The figures were boosted by a spate of hiring by the Government, which took on 66,000 part-time workers to conduct next year's census.
Related Links

* US will begin recovery this year, says Fed chief

* US inflation negative for first time in 54 years

However, the newly unemployed continued to struggle to find new jobs, pushing the unemployment rate from 8.5 per cent to 8.9 per cent, the highest level since late 1983.

When the number of job-seekers who gave up their search for work or took part-time jobs was included, the unemployment rate hit 15.8 per cent.

About 5.7million Americans have lost their jobs since the recession started in December 2007.

Ben Bernanke, the US Federal Reserve Chairman, said this week that he expected the country to emerge from recession by the end of this year, but warned that the job market would remain sluggish because employers would take time to regain confidence and resume hiring.

Paul Ashworth, senior US economist at Capital Economics, had reservations about the figures because job-loss estimates earlier in the year have since been revised upwards.

In March, companies made 699,000 workers redundant, a figure that had been revised up from 663,000, while 681,000 workers lost their jobs in February, up from a previous estimate of 651,000. “Revisions to previous months increased the net job losses in February and March by a total of 66,000,” he said. “April's decline could eventually turn out to have been much bigger than it looks now.”

Real Unemployment at 15.8%: Highest Level Since ADA Began Tracking

WASHINGTON - May 8 - The real unemployment rate released today by the Bureau of Labor Statistics is 15.8%, nearly 7 points higher than the rate officially reported.

The real rate includes marginally attached workers which the BLS reports “are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past. Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not looking currently for a job. Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.”

Since April 2008, 6 million people have lost their job. ADA’s Real Rate of Unemployment represents a staggering 23 million people who are unemployed or underemployed.

The increase of another 563,000 jobless claims for April 2009 was the smallest rise in 6 months, providing some evidence that government stimulus is working but underscoring the urgent need to put more government dollars to work motivating the private sector to begin hiring laid-off workers.

ADA National Director, Amy Isaacs, said: “While the Republican Party of No is looking backwards, rather than coming up with new ideas to help America’s working families, President Obama and Democrats in Congress are moving forward with a bold agenda. There is still much to do as record lay-offs continue and economic challenges abound, but we share the optimism of leading economists who believe the worst is behind us.”
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ADA is America's most experienced independent liberal lobbying organization. In the spirit of the New Deal and ADA founders Eleanor Roosevelt, renowned economist John Kenneth Galbraith, and former Senator and Vice President Hubert Humphrey we lobby through coalition partnerships, through direct advocacy, and through the media.

US Jobless At 26 Year High

President Obama said that America was showing signs of economic recovery, even as the country's unemployment rate hit a near-26-year high.

Employers made 539,000 workers redundant in April, according to US Labour Department statistics - the fewest job cuts in six months and far better than the 620,000 reduction that economists had expected.

Mr Obama said that there was a “long way to go before we can put this recession behind us”, but added: “The gears of our economic engine do seem to be slowly turning once again.”

The figures were boosted by a spate of hiring by the Government, which took on 66,000 part-time workers to conduct next year's census.
Related Links

* US will begin recovery this year, says Fed chief

* US inflation negative for first time in 54 years

However, the newly unemployed continued to struggle to find new jobs, pushing the unemployment rate from 8.5 per cent to 8.9 per cent, the highest level since late 1983.

When the number of job-seekers who gave up their search for work or took part-time jobs was included, the unemployment rate hit 15.8 per cent.

About 5.7million Americans have lost their jobs since the recession started in December 2007.

Ben Bernanke, the US Federal Reserve Chairman, said this week that he expected the country to emerge from recession by the end of this year, but warned that the job market would remain sluggish because employers would take time to regain confidence and resume hiring.

Paul Ashworth, senior US economist at Capital Economics, had reservations about the figures because job-loss estimates earlier in the year have since been revised upwards.

In March, companies made 699,000 workers redundant, a figure that had been revised up from 663,000, while 681,000 workers lost their jobs in February, up from a previous estimate of 651,000. “Revisions to previous months increased the net job losses in February and March by a total of 66,000,” he said. “April's decline could eventually turn out to have been much bigger than it looks now.”

Fed Sees Up to $599 Billion in Bank Losses

The federal government projected that 19 of the nation's biggest banks could suffer losses of up to $599 billion through the end of next year if the economy performs worse than expected and ordered 10 of them to raise a combined $74.6 billion in capital to cushion themselves.

The much-anticipated stress-test results unleashed a scramble by the weakest banks to find money and a push by the strongest ones to escape the government shadow of taxpayer-funded rescues.

Interactives: Compare Banks Tested

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Bank by Bank Findings

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• More interactive graphics and photos

The Federal Reserve's worst-case estimates of banks' total losses and capital shortfalls were smaller than some had feared. Optimists interpreted the Fed's findings as evidence that the worst is over for the industry. But questions remain about the stress tests' rigor, in part since the Fed scaled back some projected losses in the face of pressure from banks.

The government's tests measured potential losses on mortgages, commercial loans, securities and other assets held by the stress-tested banks, ranging from giants Bank of America Corp. and Citigroup Inc. to regional institutions such as SunTrust Banks Inc. and Fifth Third Bancorp. The government's "more adverse" scenario includes two-year cumulative losses of 9.1% on total loans, worse than the peak losses of the 1930s.

Treasury Secretary Timothy Geithner said Thursday that he is "reasonably confident" that banks will be able to plug the capital holes through private infusions, alleviating the need for Washington to further enmesh itself in the banking system.

Banks also said they will consider selling businesses or issuing new stock to meet the toughened capital standards.

The information provided by the stress tests will "make it easier for banks to raise new equity from private sources," Mr. Geithner said. Still, he added, "We have a lot of work to do...in repairing the financial system."

Some of the banks told to add capital raced to accomplish that by tapping public markets. On Thursday, Wells Fargo & Co., which the Fed said needed to raise $13.7 billion, laid plans for a $6 billion common-stock offering. Morgan Stanley, facing a $1.8 billion deficit, said it will sell $2 billion of stock and $3 billion of debt that isn't guaranteed by the U.S. government.

If successful, the offerings "should be a meaningful step in restoring a modicum of confidence to the banks," said David A. Havens, a managing director at Hexagon Securities. "It indicates that even the big messy banks are able to attract private capital."

Shares of more than a dozen stress-tested banks rose in after-hours trading as the government's announcement soothed jitters about the industry's immediate capital needs. Bank of America shares climbed 3.6% to $13.99, while Citigroup was up 6.3% to $4.05. Fifth Third jumped 19% to $6.35. SunTrust fell 2.5% to $18.05, and Wells Fargo slipped 0.9% to $24.54.

No Need to Stress Over Bank Stress Tests

2:14

WSJ's Dave Kansas tells you what to do if your bank has failed the government's stress tests.

Stress Test: Complete Coverage

• Banks Race to Raise New Capital
• Heard on the Street: U.S. Banks' Not-So-Stressful Test
• How Tests Stopped the Market Bleeding
• Raising Capital After Stress Tests
• Results Overview | Compare 19 banks
• Test of Transparency | Where Do Markets Go?
• Statements: Bernanke | Geithner
• Updated: Inside the Fed's Balance Sheet
• Q&A: What If My Bank Fails The Stress Test?
• WSJ.com/Finance: More stress test news

Vote and Discuss

• Do the stress test results paint an accurate picture of the financial industry? Weigh in at WSJ.com/Community

Nine of the stress-tested banks -- including titans like J.P. Morgan Chase & Co. and Wall Street's Goldman Sachs Group Inc. as well as several regional institutions -- have adequate capital. That finding essentially represents a seal of approval from the Fed.

The others need to raise anywhere from about $600 million for PNC Financial Services Group Inc. to $33.9 billion for Bank of America. In between are several other regional lenders: Fifth Third, which needs to raise $1.1 billion; KeyCorp, $1.8 billion; Regions Financial Corp., $2.5 billion; and SunTrust, $2.2 billion.

Experts warn that the tests could have a serious unintended consequence: Loans could be harder to come by for consumers and businesses. That's because the government's intense focus on thicker capital cushions might prompt banks to hoard cash and further curtail lending, said Jim Eckenrode, banking research executive at TowerGroup, a financial consulting firm. He said banks will have less room to offer consumers low interest rates, while corporate customers may have a tougher time getting financing for commercial real-estate and property development.

That would undercut a key goal of the Obama administration, which has been pushing banks to lend more in order to jump-start the economy.

The test results were vigorously contested by some banks, which argued they were superficial and didn't reflect significant differences in the health of various banks' loan portfolios.

In a news release Thursday, Regions publicly criticized the testing process. The Birmingham, Ala., bank said the Fed's loss assumptions were "unrealistically high." Regions said it "questions whether it should be required to raise additional capital now to provide for a two-year adverse economic scenario," given recent hints that the economy may have hit bottom.

With the tests complete, Washington's effort to clean up the banking system now shifts into a new, potentially messy phase. While most of the banks that need capital are likely to be able to find it, analysts and bankers say a few others are likely to end up being largely owned by the U.S. government due to their inability to raise capital from private investors.

Meanwhile, the tests don't address a sea of problems confronting many midsize and smaller banks.

Federal officials have repeatedly vowed to support the 19 banks, which essentially have been labeled too big to fail. Those reassurances have propelled the companies' shares to their highest levels in months. The White House, Treasury Department and Fed hope that by restoring confidence in the industry, private investors will help troubled banks shore up their finances, eliminating the need for taxpayer-financed rescues.

There are some encouraging signs. In recent weeks, a handful of healthy banks -- ranging from giants like Goldman Sachs to Denver's 34-branch Guaranty Bancorp -- have raised money by selling stock in public offerings. That represents a seismic shift from earlier this year, when many investors refused to touch any bank stocks.

"What we're starting to hear from investors is a view that these companies were oversold and, although things are bad, they're not as bad as was baked into the assumptions," said Brian Sterling, co-head of investment banking at Sandler O'Neill & Partners in New York.

Some Fed-blessed banks are likely to pursue public equity or debt offerings to flex their financial muscles and help pay back the funds that the government invested in them.

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Associated Press

Comptroller of the Currency John Dugan, left, Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke gathered in Geithner's office at Treasury on Thursday.

State Street Corp. Chairman and Chief Executive Ronald E. Logue said the government's conclusion that the Boston company needs no additional capital puts it "in a position to consider repayment of the TARP preferred stock and warrants under the appropriate circumstances."

State Street, one of the largest managers of index funds, got a $2 billion taxpayer-funded infusion under the Troubled Asset Relief Program, or TARP. On Wednesday, The Wall Street Journal incorrectly reported that State Street had been told to come up with more capital.

Bankers acknowledge that investors' appetites are limited. Investors say not enough private funds are available to fill the big banks' financial holes.

"I think there is some demand in the market to raise a certain amount, but whether you could find $60 billion of capital in the next couple of months is highly unlikely," said Joshua Siegel, managing principal at StoneCastle Partners LLC, a New York firm that invests in banks.

Banks that can't coax private investors have some other options. They can sell assets or business lines, a strategy already under way at Bank of America and Citigroup. They can push investors to swap so-called preferred shares for common stock, padding a measure of capital known as tangible common equity.

During a Thursday conference with investors, Bank of America Chief Executive Kenneth Lewis said, "Our game plan is designed to help get the government out of our bank as quickly as possible," and vowed to abandon a loss-sharing agreement with the U.S. on $118 billion in assets.

But bankers and analysts say at least a few lenders are in a vise. Too weak to lure investors, and lacking a large pool of privately held preferred stock, these banks likely will have to turn to Washington for help. Fifth Third and Regions both said in statements Thursday that they hope to raise private funds.

The 19 tested banks, which all have at least $100 billion in assets, accounted for most of the industry's total loans. But the companies represent a sliver of the roughly 8,000 banks nationwide.

Among that vast field, many banks -- from regional institutions to tiny community lenders -- are holding huge portfolios of rapidly souring loans. Unlike their larger rivals, these banks lack the diverse income streams to overcome the brutal operating environment.

Analysts at RBC Capital Markets estimate that 60% of the top 100 U.S. banks that weren't included in the stress tests would need to raise new capital based on the Fed's loss assumptions.

—Jane J. Kim contributed to this article.

Looking Back on the Greatest Depression

On average, world trade fell 31 percent in January 2009. To varying degrees, recession and depression gripped globally.

“The outlook for global consumption remains bleak. Exports are likely to remain lackluster until global consumers regain their appetite for consumption,” wrote Jing Ulrich, managing director at JPMorgan in Hong Kong, in response to the dire data.

	If it was an economic Pearl Harbor, the enemies were Fannie Mae, Freddie Mac, A.I.G., Countrywide, Bank of America, Merrill Lynch, Citigroup, Bear Stearns, and all the other banks, brokerages, speculators, insurance companies, hedge funds and leverage buyout specialists that had launched the sneak attack on the American economy.

To track and make practical use of trends requires critical analysis of not only the data but also of the interpretations arising from the data. This becomes particularly essential when interpretations express a virtual media consensus. “Whenever you find that you are on the side of the majority, it is time to pause and reflect,” advised Mark Twain.

A case in point: On the surface, Ms. Ulrich’s assessment above does not seem unreasonable. It is a theme expressed, with minor variations, by a majority of economic analysts reported by the media. But that assessment rests upon a set of false or questionable assumptions.

The first assumption was that all consumers need to do is “regain their appetites” for exports. But it has nothing to do with “appetites.” Consumers were broke. They were no less hungry for products – they just didn’t have the money to buy them.

The second assumption was that once consumers started consuming again exports would regain luster. Implicit in this statement was that as exports grew, economies would rebound and everything would go back to normal. This “normal” refrain was endlessly repeated, not only by economic analysts, but by politicians and business leaders.

Unquestioned was not only the inevitability, but also the virtue and desirability of a return to “normal.” What was normal?

Normal, prior to “The Greatest Depression,” meant unchecked over consumption and over development made possible by the availability of cheap money and easy credit.

On the consumer end, “normal” was a death wish, “shop ‘til you drop” – an obsessive compulsion by the profligate many to spend money they didn’t have but had to borrow. The spending spree extended to buying expensive new cars rather than affordable used ones. It had people building extensions and making home improvements when neither were necessary. It meant buying a McMansion when a Cape Cod would do. Splurging on expensive vacations, elaborate weddings and extravagant bar-mitzvahs to impress family and friends.

Borrowed money financed a major lifestyle upgrade that otherwise could not have ever been imagined, but that corresponded to what most people considered the “American Dream.” Borrow to the limit now, and pay sooner or later was “normal.”

On the commercial/financial end, “normal” was also the obsessive compulsion to endlessly acquire, not merely upgrade. Borrowed billions, lots of leverage and little collateral provided financiers and developers with the power to acquire ever more money, assets and prestige – through mergers and acquisitions, building developments, equity market speculation and predatory business practices that gobbled up or drove out the competition.

Give or take a bit of regulation and self-restraint, this was the “normal” the popular new President promised to return to.

Which brings us to the third assumption, and arguably the most important which was that the crisis – inability of banks to lend and businesses to borrow – was mainly responsible for the economic disaster. As President Obama put it, “Our goal is to quicken the day when we restart lending to the American people and American business, and end this crisis once and for all.”

He said, “You see, the flow of credit is the lifeblood of our economy. The ability to get a loan is how you finance the purchase of everything from a home to a car to a college education; how stores stock their shelves, farms buy equipment, and businesses make payroll.”

Sounds positive, doesn’t it? Ease the “flow of credit.” Make it easier “to get a loan.”

But what the President meant and did not say was … take on more debt, borrow more money.

Sound familiar? Turn back the clock. Remember the advertisements at the start of the decade encouraging Americans to take out home equity loans, to buy new cars, to move up from a starter home into the dream house? With interest rates at 46 year lows and credit flowing, the public were suckered into betting on their futures with borrowed money they could only pay back as long as they had jobs, could make payments and the economy didn’t collapse.

But when they lost their jobs, they couldn’t make payments and the economy began to collapse. Total unemployment (including discouraged workers and those with part time jobs looking for full time) was nearing 15 percent. In the fourth quarter of 2008, the net worth of American households fell by the largest amount in more than a half-century of record keeping. By February 2009, the foreclosure rate was up 30 percent from February 2008.

What Mr. Obama promised as the solution was, and had been, the problem. The country was already overwhelmed with debt … debt that it couldn’t pay back. In what way could incurring more debt “end this crisis once and for all”?

It was a plain fact; the flow of easy credit produced a torrent of debt. In 2009, private sector credit market debt was 174 percent of GDP. Household debt-service ratio was at an all-time high. US households had 39 percent more debt than income. (In 1962, consumers had 37 percent less debt than income. To promote policies encouraging people to take out more loans and sink still deeper into debt was abnormal, not “normal.” The abnormal had been renamed the normal.

Instead of encouraging people to live within their means, cut back, save money, and distinguish between “wants” and real needs, the official policy was to turn on the credit tap and flood the world with more debt.

The sanity of the policy was never in question. Arguments raged only over the quickest and most effective way to turn on the money spigot.

Everyone was looking for someone, somewhere, for rescue, and most eyes were turned to the United States. Even though the US was blamed for the flagrant economic abuses that brought on the crisis, given its economic clout and Superpower status, America was still looked to for the leadership needed to pave the way to recovery.

With its globally popular new president, hopes ran high that American know-how would know how to fix the problem … as though it were an intellectual exercise that could be solved by applying the correct economic formula.

No such formula existed. Yet so desperate was the world that it placed its hopes on the very people responsible for the deregulation of the financial industry largely blamed for the crisis. The deregulators now occupied key positions within the cabinet of that globally popular new President.

Billionaire investor Warren Buffett added a military dimension, dubbing the meltdown an “economic Pearl Harbor.” Buffett called on Congress to unite behind President Barack Obama, comparing the economic crisis to a military conflict that needed a commander-in-chief. “Patriotic Americans will realize this is a war,” he said.

If it was an economic Pearl Harbor, the enemies were Fannie Mae, Freddie Mac, A.I.G., Countrywide, Bank of America, Merrill Lynch, Citigroup, Bear Stearns, and all the other banks, brokerages, speculators, insurance companies, hedge funds and leverage buyout specialists that had launched the sneak attack on the American economy.

It had nothing to do with patriotism, unless being a “Patriotic American” meant appeasing and rewarding the enemy with trillions of dollars of taxpayer money and not being allowed to know where the money went.

Fed Refuses to Release Bank Data,
Insists on Secrecy

March 5, 2009 (Bloomberg) – The Federal Reserve Board of Governors receives daily reports on bailout loans to financial institutions and won’t make the information public, the central bank said in a reply in a Bloomberg News lawsuit.

The Fed refused yesterday to disclose the names of the borrowers and the loans, alleging that it would cast “a stigma on recipients of more than $1.9 trillion of emergency credit from US taxpayers and the assets the central bank is accepting as collateral.

The public had been cozened into believing:

• That disclosing the identities of the recipients would poorly reflect upon their public image and therefore their ability to function. Secrecy, on the other hand, allowed them to continue making disastrous decisions, while bamboozling clients who would not know they were dealing with incompetents – who stayed in business only because of huge taxpayer-financed infusions of corporate welfare.

• The “too big to fail” had to be bailed out by taxpayers in order to keep “the credit markets from seizing up.” But the consequences of seized up credit were rarely if ever spelled out.

Many financial analysts no less “expert” than those pushing through the bailouts were convinced that allowing the credit markets to seize up would, in the long run, prove far less costly than endlessly printing money and pouring it down a plush-lined sink hole. Buffett was wrong. It wasn’t a “war” at all. It was a criminal case, or should have been, but the accused took a financial Fifth Amendment – the right to remain silent, since any statement made could be used as evidence against them – and got away with it.

When, at a hearing before the Senate Budget Committee, Fed Chairman Ben Bernanke was asked, “Will you tell the American people to whom you lent $2.2 trillion of their dollars?” He answered, “No.”

Regards,

Gerald Celente

World Bank president warns economic crisis poses “human calamity”

The head of the World Bank warned over the weekend that the deepening global economic crisis threatens to unleash “a human and developmental calamity.”

World Bank President Robert Zoelick issued the warning in the context of a meeting of the bank and the International Fund in Washington that came on the heels of meetings by G7 and G20 finance ministers in the US capital.

Zoelick said that developing countries will see “especially serious consequences with the crisis driving more than 50 million people into extreme poverty, particularly women and children.”

The IMF and World Bank warned Sunday that global unemployment is set to rise from 5.3 percent to 8.5 percent, leaving some 90 million more people “trapped in extreme poverty.” He added: “The number of chronically hungry people is expected to climb to over 1 billion this year.” These stark warnings stood in stark contrast to the relatively sanguine assessment adopted by the finance ministers from the G7 and G20 groups of leading nations in their meeting last Friday. Despite this more optimistic tone, the ministers neither offered any new policies nor resolved any of the issues that divided the previous G20 summit.

While the G7 communiqué begins by noting that the meeting takes place during the deepest and most widespread economic downturn and financial stress witnessed in decades, the G7 ministers present a markedly rosy assessment of the future trajectory of the world economy.

Their communiqué states, “Economic activity should begin to recover later this year amid a continued weak outlook, and downside risks persist.” The group added, “Recent data suggest that the pace of decline in our economies has slowed, and some signs of stabilization are emerging.”

The relatively optimistic tone of the document flies in the face of reports issued last week by the IMF. The organization's Global Financial Stability Report, published last Tuesday, predicted that total credit write-downs worldwide may reach over $4 trillion, and that the world banking system was close to insolvency.

The following day, the IMF published its World Economic Outlook, sharply reducing the estimates of world growth it had made in January. The bank said that it expects the world economy to shrink by 1.3 percent in 2009, and that the world economy would grow at a rate of only 1.9 percent in 2010. The advanced economies, including those represented in the G7, are expected to see no growth next year

The US financial system, given huge infusions of government cash and ever-more lax regulatory standards, has in fact returned to profitability, prompting White House officials to proclaim that the economy may be nearing recovery. Favorable borrowing rates have led to increased refinancing activity, generating an uptick in profits.

But the crisis in the real economy has only gotten worse. The UK economy contracted in the first quarter faster than anticipated, while German Central Bank President Axel Weber said that the German economy may have contracted by as much as 3 percent in the first quarter, which would be the highest on record.

Following the release of the communiqué, the Financial Times Monday warned against any overly optimistic view of the world economy, noting that at least twice in [Japan's] “lost decade,” fleeting signs of recovery yielded to the reality that the economy had not yet overcome a crisis emanating from its burst bubble at the start of the 1990s.

Conflicts between the US and Europe continued to simmer under the relatively placid tone of the communiqué. There are sharp divisions on all major questions, including the amount of stimulus to be provided by each country, and whether there is to be any international regulation and restrictions on financial speculation.

The IMF had previously recommended that G20 countries allocate 2 percent of their gross domestic products as stimulus spending. While the IMF said on Sunday that, on aggregate, this figure has been reached, there are severe disparities in the amount of stimulus spending various national governments have been willing to undertake

The United States has pressed for countries to adopt a rigorous and intensive stimulus, while Euro Zone members argued that 2 percent of GDP was too much. On Sunday, the IMF released its estimates of the total stimulus levels for the G20 countries. Russia had the highest government stimulus of 4.1 percent, while Japan's stimulus program amounted to 2.4 percent of its GDP. The US package was an even 2 percent of output.

The other G7 member countries pledged significantly lower amounts of stimulus funds. France's stimulus plans amounted to only 0.7 percent of GDP, while Germany allocated 1.6 percent and Britain 1.4 percent.

As in the G20 Summit three weeks ago, sharp divisions surfaced on the question of world financial regulation. Christine Lagarde, the French finance minister, told the Financial Times, “I have this concern that as things pick up...a lot of people will want to go back to the old games. Go back to making money and exploiting [regulatory] systems as much as they can.” These comments referred implicitly to the United States, which has resisted any international restrictions on its financial system.

Guido Mantega, the Brazilian finance minister, said that the overriding issue was cleaning up the global financial system. “If the United States and other countries that have banks with toxic assets do not clean up their financial system, this crisis will last for a long time,” he said.

The Obama Administration has challenged the IMF's bleak picture of bank balance sheets, claiming that the US banking system is fundamentally sound. The IMF said last week that write-offs at US banks could total $2.7 trillion.

The communiqué stressed the need to repair bank balance sheets in order for recovery to proceed. “All the experience we have of past banking crises...is that you never recover before you complete the cleaning up of the balance sheet of the financial sector,” it said. “You can postpone it. At the same time, you postpone the recovery.”

There were difficulties even raising the funds pledged by the G20 summit to the IMF. The G20 pledged an additional $500 million at its meeting 3 weeks ago. Thus far, however, only $375 billion have been raised, and Friday's meeting ended without new pledges.

The communiqué issued by the G7 pledged to abstain from protectionist measures. The resolution of the G20 conference in London made a similar solemn pledge, but according to Bloomberg.com, the US, UK, Germany, France and Italy have all introduced protectionist measures since then.

Global Research Articles by Andre Damon

Profits mask coming storm

Contrary to surface appearances such as the recent stock market rally and "glowing" first quarter profitability statements from certain Wall Street banks, multipronged risks for renewed, considerable turmoil in the US financial sector are mounting.

The recent six-week rally on Wall Street, led mostly by banking and other financial shares, isn't based on any concrete turnaround in the deeply worrying fundamentals of the financial sector.

Instead, it is based largely on the fact that the new administration has trotted out into public view multiple and very large government programs aimed at cleansing the banks' balance sheets of huge sums of toxic assets, unlocking the persistently seized credit
markets, stemming the swiftly mounting foreclosure rate, creating jobs, and otherwise stimulating an early economic revival.

None of these aims and goals has been accomplished yet, not even in part, but investors were heartened by the raft of government programs that has been announced, and they have responded by bidding up banking and other shares on Wall Street, hoping that the bottom of the crisis in the financial sector has already been reached.

However, that bottom hasn't been reached, and is still nowhere in sight, despite the recent quarterly profit reports by a few of the largest US banks. It should come as no surprise that Wall Street financial institutions that have been in receipt of massive sums of bailout money and have been targeted by varied "liquidity" operations from the government are suddenly able to report a "profit".

Additionally, much of the "profit" reported for the first quarter resulted from one-off events that have little or no chance of seeing a repeat. In these most recent quarterly statements, the accounting and reporting methods have been altered so as to put a better face on their operations and fiscal position. Their already notoriously "fuzzy" math, which permitted banks to arbitrarily designate which assets are included in their profit statements and which ones are not, now also conveniently permits them to arbitrarily decide which losses are "temporary" and can be excluded from the statement altogether. Consequently, "fuzzy" has now gotten even fuzzier. Why? And, why now?

Wall Street financial institutions have suffered a gross loss of investor confidence in this crisis and have seen their share values ravaged as a result. Hence, there is a concerted and vigorous effort underway on their part to bolster that collapsed confidence, with the aim of driving the value of their shares back up.

Remember, these big institutions all participated in one way or another in the grossly deceptive schemes and practices that created and artificially inflated fundamentally risky investment assets, grossly overstated their creditworthiness, and sold them on to unsuspecting investors - the massive swindle that brought us into this crisis in the first place, a crisis that emerged right on Wall Street itself.

Hence, it is nothing for such firms and their accounting and credit rating accomplices to engage once again in spin, deceptively cooking the numbers to make their position look much better than it really is, so as to attract investors and drive up share prices. Sovereign wealth funds around the globe, having suffered huge losses on their investments in US banks, can be described by the adage "once bitten, twice shy". Many have decided to largely divest themselves of their holdings in US financial shares. Why? They no longer trust the banks to disclose their true financial position fully, accurately and honestly. The savvy investor will keep such facts very close in mind.

Now, with the May 4 deadline for releasing the government stress test results bearing down on us, Wall Street institutions have much greater reason and motive for spinning their financial position (propagandizing investors) - none of Wall Street's big banks wants to take a renewed hit as a result of being portrayed by the stress tests as being in a less-than-desirable financial condition.

Therefore, the Wall Street spin machines are operating at full speed, striving to portray the 19 banks involved in the stress tests as profitable, stable, healthy and vibrant. They are doing everything they can to maintain, and bolster, the fundamentally frail investor confidence they have regained in the past six weeks, and they are trying to position themselves to massively capitalize on the release of the stress test results if they can, or at least to minimize their potential ill effects.

The entire idea of the stress tests has come under fire as a bone-headed scheme that was aimed at restoring confidence but will almost certainly accomplish the exact opposite. If the results paint a rosy picture for all 19 banks, then investors will pan the stress tests as having no credibility, and their suspicions and fears that the banks and the government are lying about their true condition will probably skyrocket. If any of the 19 banks get less than flying colors in the stress test results, then those banks will likely see their shares take a renewed pounding as investor confidence collapses again.

There may well be depositor runs on such banks, depleting their capital and bringing on a renewed crisis. If the government and/or the banks themselves do not release meaningful data on May 4, then investors will conclude that the results were too grim, and a new crisis of confidence will result. But if too much information is released, then the same thing could likely be the result because a number of respected experts warn that the US banking system is fundamentally insolvent.

The government and the banks do not want investors at large to see hard data that only bolsters that dismal assessment. The Barack Obama administration has thus painted itself into a potentially very grim corner with the stress tests. Almost no matter what is done on May 4, the risks of a new crisis of confidence in the US financial sector are significantly rising.

Why such a bleak assessment here of the current fiscal position of the US financial sector?

First, as noted above, the US financial sector is not providing a clear and true picture of its fiscal position. Instead, it is seeking to paper over its fundamental insolvency with quarterly reports that are long on spin and short on hard, uncooked data. Why? The answer is quite simple. Full disclosure of its true position would not be in the interests of reviving America's fundamentally flawed model of "securitization", which has experienced a massive collapse and to this day has not been revived. Can it be revived? At what cost?

Remember that there are two fundamental camps with respect to the answer to the question of what lies at the root of the present crisis. One camp holds that America's new generation of financial assets that resulted from the recently invented financial process known as "securitization" are fundamentally sound in value, and that an over-reaction on the part of investors to the subprime crisis has resulted in a panic-induced collapse in their valuations.

This camp believes that the securitization model can and should be revived, and that when investor confidence is restored in financial assets now seen as "toxic", then all will be well again, almost magically, as toxic assets become valuable and attractive once again. All that need be done, it is believed, is for the government to work with Wall Street to jump-start securitization, a model this camp vehemently denies has failed, even though many trillions of dollars both spent and committed already have so far failed to get securitization's heartbeat going again.

The other camp believes that the toxicity is inherent in the very nature of the newly developed financial assets themselves, and that once investors recognized this fact, then that is why their values collapsed. This camp sees the securitization model as fundamentally flawed, based as it is upon artificial inflation of assets, the shortsighted growth of serial asset bubbles created by an unholy de facto alliance of government, big Wall Street banks and credit-rating agencies whose credibility and integrity were profoundly compromised, and unsustainable negative real interest rates (the creation of a massive credit excess), without which the securitization model simply won't run.

This camp sees no future for assets that have gone toxic. It sees the collapse that began in late July 2007 with the emergence of the subprime crisis as one that massively discredits the model itself. This camp believes that a revival of securitization will come at the cost of a dollar crisis only a moderate distance down the road, and that even if the model is revived, it won't be able to avoid a second, massive crash.

The US government and Wall Street are laboring feverishly to get securitization's heart beating again. That is fundamentally what is behind all their efforts. Crucial to this task, they believe, is restoring investor confidence in the model itself and in the innovative financial markets and modern financial assets it has created. Much like producers and sellers of tainted wine who've been found out and who've watched their product prices collapse as buyers shun the wine for its toxic risks, they're in cooperation again, minimizing the taint and trying to sell the sparkle as they did before this crisis broke. It is unlikely to succeed in attracting investors on the scale needed to revive securitization. But even if it does, the currency is being set up for a massive collapse when the proverbial bill soon comes due.

Therefore, essentially, on the level of the model itself, the US financial sector is headed for a more massive collapse than we've seen already, even if revival efforts were to somehow succeed in breathing life into the sector temporarily.

The second reason that this assessment here of the current fiscal position of the US financial sector is so bleak is because real events on the ground, occurring as we speak, demand such realism.

Many times I have drawn attention to the simple concept of the self-reinforcing downward spiral that has come to life within this ongoing crisis, a downward spiral that encompasses both the financial and economic sectors. Turmoil in the financial sector creates both a seizure of credit and higher costs for credit of all kinds, which feeds directly and indirectly down the line into the economic sector, translating into losses for business and individuals.

Those losses result in rising business failures, job losses, foreclosures and bankruptcies, and collapsing spending, investment and asset prices. These developments feed back, in turn, into the financial sector as banks and other institutions suffer greater losses and as the list of their toxic assets grows by leaps and bounds.

This, in turn, causes the credit seizure to persist and to tighten, which feeds directly down the line into the economic sector again, and the downward spiral continues and gains momentum. Though simple in nature, this downward spiral has been profoundly resistant to all the trillions of dollars thrown at it so far in an effort to break its grip. Additionally, its dramatic influence over where we're headed is too often minimized or forgotten altogether, until unfolding events bring a painful reminder.

In this respect, the first-quarter results of the Bank of America, announced on Monday, April 20, contain such a reminder - despite showing a "profit", credit losses are swiftly mounting as the quality of credit continues to deteriorate rapidly, without any reprieve. The Dow lost nearly 300 points that day, led by a fall in financial shares.

Just ahead, there exist strong indications of the real possibility of renewed, much deeper turmoil in the financial sector, in addition to what we're already seeing. The upcoming release of the stress test results may well provide a trigger for such renewed turmoil, which will feed once again down the line into the real economy, the economic sector, and only strengthen the downward spiral that exists between those two sectors.

We may see Wall Street rallies like the one that began six weeks ago, but they won't resolve the fundamentally grim picture for the US, which is firmly in the grip of forces that it unleashed upon itself. The US government and its Wall Street accomplices lack the insight, power, ability and integrity to break the downward spiral anytime soon. Thus, it will run its own course, just as it has been doing for many months already.


W Joseph Stroupe is a strategic forecasting expert and editor of Global Events Magazine online at www.globaleventsmagazine.com

Economy On The Ropes

The economy continued to shrink in the first quarter of 2009 at an annual pace of 6.1 percent, making it the worst recession in more than 50 years. Gross Domestic Product slipped into negative territory from January to March for back-to-back quarters of negative 6 percent growth. The news of falling GDP was preceded on Tuesday by a dismal housing report which showed that housing prices have continued their historic downward plunge with only modest improvement. Since their peak in July 2006, housing prices have dropped 31 percent, falling 18.6 percent in the last year alone. The rate of decline has decelerated slightly but--on their present trajectory--prices are on target to tumble 45 to 50 percent from their 2006 highs. Another 20 percent loss in home equity means another $4 trillion loss for US homeowners.

The news on the employment-front is equally bleak. In the week ending April 25, initial jobless claims increased by another 631,000, bringing the 4-week moving average to 637,000. Ongoing unemployment claims are now at 6.27 million, an all time record.

According to the Associated Press:

Unemployment rates rose in all of the nation's largest metropolitan areas for the third straight month in March... The Labor Department reported Wednesday all 372 metropolitan areas tracked saw jobless rates move higher last month from a year earlier."

Consumer spending also fell more than forecast with purchases decreasing 0.2 percent in March and wages and benefits rising at the slowest pace in three decades.

GDP is falling, unemployment is soaring and business and residential investment are at their nadir. Even so, the stock market has continued its 7 week surge on signs that the market may be bottoming.

Although the bad news continues to mount, Northern Trust economists Asha Bangalore and Paul Kasriel have issued a report "US Economic and Interest Rate Outlook" asserting that the worst is over and that the huge quarterly contractions to GDP should gradually improve ending in positive growth by the forth quarter of this year. Kasriel is a first-rate economist and his work should be taken seriously. Still, whether there is a uptick in business activity in the near-term or not, deeper economic problems persist and are likely to get worse before they get better. There is no doubt, however, that Fed chief Ben Bernanke's massive injections of liquidity have had an effect on stabilizing the financial system and reviving the sluggish economy. The Fed chief has committed or loaned $13 trillion in public funds to avoid an impending disaster and to restart speculation in the equities markets. Barron's Randall W. Forsyth provides an original account of Bernanke's intervention:

"THE FEDERAL RESERVE has been roundly castigated in some quarters -- even former high officials of the central bank -- for its aggressive and unprecedented steps to combat the credit crisis.

But data just released by the Bank for International Settlements suggest that, if anything, the expansionary measures taken by the Fed (and in concert with the Treasury) were dwarfed by the record contraction in the global banking system brought on by the crisis. According to the BIS, which acts as a central bank for central banks, total bank claims shrank by $1.8 trillion in the fourth quarter, or 5.4%, to $31 trillion. This was the largest decline ever recorded.

In other words, there never was a global run on the banking system such as the one seen in the final three months of 2008, which followed the bankruptcy of Lehman Brothers and the near-collapse of American International Group in September. The numbers serve to confirm the extent of the tsunami the swept through the world's financial system....

...Unlike in the 1930s, when central banks actually aided and abetted the collapse of the banking system, today's leaders responded to the unprecedented crisis in the fourth quarter with equally unprecedented force.....

To be sure, banks, including the I-banks, have benefited from the actions of the Fed and the Treasury. But that is separate from the question of the macroeconomic impact of their actions.

Those who contend that the expansion of central bank balance sheets is inflationary ignore the contraction of balance sheets in the banking system, as well as the so-called shadow banking system of assets and liabilities not recorded on banks' books. This analysis is very different from arguments that appeal to the "output gap," the difference between the economy's potential output and actual production. That analysis effectively says that high unemployment will hold down wages and prices, which manifestly did not happen in the stagflationary 'Seventies.

Inflation, as Milton Friedman taught, is always and everywhere a monetary phenomenon. Yet the current central-bank expansion is offsetting the contraction in the banking system -- which Friedman criticized the Fed for failing to do in the 1930s.The new BIS data bear out the justification for the Fed's actions, notwithstanding the critics' claims." ("Fed Fights a Record Global Bank Run", Randall W. Forsyth, Barrons)

Whether one approves of the Fed's price-fixing, market-distorting, business-friendly policies or not; Bernanke's emergency actions probably pulled the financial system back from the brink of annihilation, thus, preventing a full-blown meltdown. Bernanke has spared no expense to save Wall Street and the banking cartel. The Fed's bias is clear by the amount of money it has devoted to fixing the financial system as opposed to relieving unemployment, slowing foreclosures or providing debt relief. The Fed's loyalties have never really been in doubt.

While Bernanke may have avoided a global bank-run, the bleeding continues in housing, business investment, manufacturing, industrial capacity, and global trade. Every sector is falling precipitously with no end in sight. Even worse, nothing has been done to remove the trillion dollars of toxic assets from the banks balance sheets which is causing credit to tighten even more. Treasury Secretary Timothy Geithner has failed to take advantage of the uptick in investor confidence to resolve the problem of underwater banks. Instead, he has stubbornly stuck with his Public Private Investment Program (PPIP) which has made less than $6 billion in transactions so far. Unless the banks are restored to health and their balance sheets repaired, a sustainable recovery will not be possible. According to Bloomberg, 6 of the 19 largest banks (which contain 75% of the system's total assets) are insufficiently capitalized:

Bloomberg: "At least six of the 19 largest U.S. banks require additional capital, according to preliminary results of government stress tests, people briefed on the matter said. While some of the lenders may need extra cash injections from the government, most of the capital is likely to come from converting preferred shares to common equity, the people said. The Federal Reserve is now hearing appeals from banks, including Citigroup Inc. and Bank of America Corp., that regulators have determined need more of a cushion against losses." (Bloomberg)

Geithner continues to nibble at the edges, using unreliable accounting maneuvers instead of addressing the problem head-on and forcing a debt-to-equity swap that would recapitalize the banks by giving bond holders a haircut. Geithner thinks that if he stalls long enough, the rotten assets will regain their original value and the banks will be fine. He's ignoring the fact that many of the mortgage-backed securities (MBS) are collateralized with fraudulent loans to borrowers who have no way of paying the money back. The losses need to be accounted for and written down while there's still a glimmer of optimism in the market. The IMF believes that the losses on securitized assets may reach $4 trillion by the end of 2010 and that banks will be on the hook for roughly 61% of the writedowns. Nonperforming loans at the big banks are skyrocketing. "Bank of America Corp. bad assets increasing 229 percent to $25.7 billion. Problem assets at New York-based Citigroup Inc. rose 128 percent to $27.4 billion, and San Francisco-based Wells Fargo & Co.’s jumped 180 percent to $12.6 billion." (Bloomberg) There's no way to sweep losses of this magnitude under the rug.

In an article in the Financial Times, economics editor Martin Wolf fleshes-out the projected costs of the financial system bailout in eye-popping detail:

"These are not the only sums required. Governments have so far provided up to $8,900bn in financing for banks, via lending facilities, asset purchase schemes and guarantees. But this is less than a third of their financing needs. On the assumption that deposits grow in line with nominal GDP, the IMF estimates that the “refinancing gap” of the banks – the rollover of short-term wholesale funding, plus maturing long-term debt – will rise from $20,700bn in late 2008 to $25,600bn in late 2011, or a little over 60 per cent of their total assets. This looks like a recipe for huge shrinkage in balance sheets. Moreover, even these sums ignore the disappearance of securitised lending via the so-called “shadow banking system”, which was particularly important in the US." (Fixing bankrupt systems is just the beginning", Martin Wolf, Financial Times)

Fixing the banking system will be a continual drain on public resources ensuring that any rebound will be slow and any recovery weak. Even if the equities markets show signs of life, the real economy will stumble listlessly from one quarter to the next unable to make up the losses from unemployment and under-consumption. Working people will feel as if they are in the grips of another Great Depression whether GDP shows marginal gains or not. Housing prices will stay flat for a decade or more, plundered 401ks will force elderly workers to stay on at their jobs longer than they planned, and reduced credit-availability will force consumers to set aside more of their wages in savings accounts. 10% unemployment and 10% personal savings is the nightmare scenario that economists dread. The 10-10 combo will send the economy into a deflationary tailspin regardless of "green shoots" in the stock market or other fleeting signs of hope. In a bifurcated system, where most of the public resources go to the banks and investor class, the underlying economy is bound to slip into severe inertia. The Fed has become the guarantor of investor class entitlement while the working stiff gets table-scraps.

This is from an article "Income Gaps hit record levels in 2006, new data show":

"New data from the Congressional Budget Office (CBO) show that in 2006, the top 1 percent of households had a larger share of the nation’s after-tax income, and the middle and bottom fifths of households had smaller shares, than in any year since 1979, the first year the CBO data cover. As a result, the gaps in after-tax incomes between households in the top 1 percent and those in the middle and bottom fifths were the widest on record.

Taken together with prior research, the new data suggest greater income concentration at the top than at any time since 1929."

Among the CBO's findings was that "The average after-tax income of the top 1 percent of the population more than tripled, from $337,000 to over $1.2 million. (An increase 256 percent) while "The average after-tax income of the poorest fifth of the population rose only from $14,900 to $16,500" (an increase of 11 percent.)

The CBO shows that the same inequality thrives in the tax system which is blatantly regressive:

"Households in the bottom fifth of the income spectrum received tax cuts averaging $20" whereas "within the top 1 percent, those with incomes exceeding $1 million received tax cuts averaging $118,000." ("New data show the rich-poor gap tripled between 1979 and 2006." Center on Budget and Policy priorities, Arlen Sherman) http://www.cbpp.org/cms/?fa=view&id=2789

Growing inequality--now more flagrant than ever given the humongous government bailouts and preferential treatment of financial institutions--is feeding the anger which is spreading nationwide. Timothy Geithner has become the face of a thoroughly corrupted system run by money-grubbing speculators, avaricious banksters and shyster fund managers. He has become a lightening-rod for all manner of criticism which should be directed at the inherent flaws of a system which provides obscene riches to crafty tycoons and securities fraudsters while the people who shine their limousines or build their homes find themselves perusing the want ads the end of an unemployment line. Every day Geithner stays in office, is another triumph for the people who want deep-structural change to the system. His presence at Treasury fuels the public rage.

The current recession is first and foremost a debt crisis brought on by a collapse in private financial intermediation. The breakdown in securitization was triggered by the meltdown in subprime mortgages which led to multi-trillion dollar asset deflation and rising unemployment. The bottom line is that credit will continue to be tight, the economy will drift sideways for longer than expected, and America's decades-long consumption binge will end. Digging out will be a Herculean task.

POLICYMAKERS ARE AT A LOSS

Despite the 7-week bear market rally and the slight deceleration in home prices, the stagnation of the broader economy--in terms of under-consumption, unemployment and overcapacity--will persist until the massive system-wide deleveraging process abates and personal debt is again reduced to a manageable level. The Fed's loose monetary policy coupled with the banks' off-balance sheets operations, created an torrent of credit which was not backed by sufficient reserves to withstand the shock of a slumping market. When subprime mortgages began to default in the tens of thousands, the secondary market for mortgage-backed securities (MBS) froze creating a break in the chain which had been converting the gigantic capital inflows from foreign banks and investors into debt-instruments. This process of securitization--transforming pools of loans into bonds--enriched the bankers and hedge fund managers while providing more than 40 percent of the credit flowing into the economy. That process is now in ruins and beyond repair. The meltdown in subprime loans has shown that MBS and other structured debt is worth considerably less than originally believed due to the weakness of the underlying collateral. (The risks of AAA MBS are accurately reflected in current market prices which estimate that similar bonds are worth roughly $.30 cents on the dollar.) Without securitization, asset values will continue to plunge because the main cog in the credit-generating mechanism no longer functions. Bernanke can prop up the financial system with trillion dollar lending facilities and zero percent interest rates, but if the credit markets aren't working properly the economy will continue to contract and the recession will progressively deepen.

Personal consumption is ebbing just as savings have begun to grow and a new spirit of thriftiness has overtaken the country. The culture is changing. Conspicuous consumption is out. A new ethos is emerging from a generation now facing chronic joblessness, dwindling equity and grueling scarcity.

There's no way that the economy can reduce its credit by 40 percent and launch a sustained recovery. Unless the Fed and the Treasury continue to provide massive fiscal and monetary stimulus on an ongoing basis; consumption will flag, investment will shrivel, global trade will remain sluggish, and the nation will slide into a protracted downturn. And as the administration pumps more stimulus into the economy, the dual-deficits will soar and either US Treasuries will rise or the dollar will fall, one or the other. There's no free lunch. In the next year the US will have to sell $1.8 trillion of US Treasuries to fund its deficits. Only $500 billion of that sum will be sold to foreign central banks and investors. The world is capital-starved and doesn't have the money to spare. So, the dollar will fall. The dollar now faces its biggest challenge as the world's reserve currency. As goes the dollar, so goes the empire.

The Fed's quantitative easing (QE) has increased the likelihood of a disorderly run on the dollar and an extended period of currency market turmoil. There's no way to avoid the turbulence dead-ahead.

The Federal Reserve and Treasury are now staking the country's future on the belief that they will be able to revive securitization and reflate the bubble economy through complex taxpayer-funded programs (TALF and PPIP) which no one completely understands. If they succeed, then the toxic assets on the banks balance sheets will regain their original value and GDP will grow in a low interest, easy credit environment. It all depends on whether the Treasury's lavish inducements (94% government funding on non recourse loans) are enough to entice investors to purchase risky financial instruments for which there is currently no market.

The more probable scenario, is that the equities markets will periodically rally in response to good news or the Fed's liquidity injections, while deflationary pressures continue to push down asset prices, swell the unemployment lines, and further shatter consumer confidence. The real economy is sinking fast and, with it, any hope for a quick recovery. Policymakers are completely at a loss. The public knows that things are far worse than they are being told.

Mike Whitney is a frequent contributor to Global Research. Global Research Articles by Mike Whitney

Leaked Agenda: Bilderberg Group Plans Economic Depression

Elitists divided on whether to quickly sink economy and replace it with new world order, or set in motion long, agonizing depression

On the eve of the 2009 Bilderberg Group conference, which is due to be held May 14-17 at the 5 star Nafsika Astir Palace Hotel in Vouliagmeni, Greece, investigative reporter Daniel Estulin has uncovered shocking details of what the elitists plan to do with the economy over the course of the next year.

The Bilderberg Group meeting is an annual confab of around 150 of the world’ s most influential powerbrokers in government, industry, banking, media, academia and the military-industrial complex. The secretive group operates under “Chatham House rules,” meaning that no details of what is discussed can ever be leaked to the media, despite editors of the world’s biggest newspapers, the Washington Post, the New York Times and the Financial Times, being present at the meeting.

According to Estulin’s sources, which have been proven highly accurate in the past, Bilderberg is divided on whether to put into motion, “Either a prolonged, agonizing depression that dooms the world to decades of stagnation, decline and poverty … or an intense-but-shorter depression that paves the way for a new sustainable economic world order, with less sovereignty but more efficiency.”

The information takes on added weight when one considers the fact that Estulin’s previous economic forecasts, which were based on leaks from the same sources, have proven deadly accurate. Estulin correctly predicted the
housing crash and the 2008 financial meltdown as a result of what his sources inside Bilderberg told him the elite were planning based on what was said at their 2006 meeting in Canada and the 2007 conference in Turkey.

Details of the economic agenda were contained in a pre-meeting booklet being handed out to Bilderberg members. On a more specific note, Estulin warns that Bilderberg are fostering a false picture of economic recovery, suckering investors into ploughing their money back into the stock market again only to later unleash another massive downturn which will create “massive losses and searing financial pain in the months ahead,” according to a Canada Free Press report.

According to Estulin, Bilderberg is assuming that U.S. unemployment figures will reach around 14% by the end of the year, almost doubling the current official figure of 8.1 per cent.

Estulin’s sources also tell him that Bilderberg will again attempt to push for the enactment of the Lisbon Treaty, a key centerpiece of the agenda to fully entrench a federal EU superstate, by forcing the Irish to vote again
on the document in September/October despite having rejected it already, along with other European nations, in national referendums.

“One of their concerns is addressing and neutralizing the anti-Lisbon treaty movement called “Libertas” led by Declan Ganley. One of the Bilderberger planned moves is to use a whispering campaign in the US media suggested that Ganley is being funded by arms dealers in the US linked to the US military,”reports CFP.

Daniel Estulin, Jim Tucker, and other sources who have infiltrated Bilderberg meetings in the past have routinely provided information about the Bilderberg agenda that later plays out on the world stage, proving that
the organization is not merely a “talking shop” as debunkers claim, but an integral planning forum for the new world order agenda.

Indeed, just last month Belgian viscount and current Bilderberg-chairman Étienne Davignon bragged that Bilderberg helped create the Euro by first introducing the policy agenda for a single currency in the early 1990’s. Bilderberg’s agenda for a European federal superstate and a single currency likely goes back even further. A BBC investigation uncovered documents from the early Bilderberg meetings which confirmed that the European Union was a brainchild of Bilderberg.

In spring 2002, when war hawks in the Bush administration were pushing for a summer invasion of Iraq, Bilderbergers expressed their desire for a delay and the attack was not launched until March the following year.

In 2006, Estulin predicted that the U.S. housing market would be allowed to soar before the bubble was cruelly popped, which is exactly what transpired.

In 2008, Estulin predicted that Bilderberg were creating the conditions for a financial calamity, which is exactly what began a few months later with the collapse of Lehman Brothers.

Bilderberg has routinely flexed its muscles in establishing its role as kingmaker. The organization routinely selects presidential candidates as well as running mates and prime ministers.

Bill Clinton and Tony Blair were both groomed by the secretive organization in the early 1990’s before rising to prominence.

Barack Obama’s running mate Joe Biden was selected by Bilderberg luminary James A. Johnson, and John Kerry’s 2004 running mate John Edwards was also anointed by the group after he gave a glowing speech at the conference in 2004. Bilderberg attendees even broke house rules to applaud Edwards at the end of a speech he gave to the elitists about American politics. The choice of Edwards was shocking to media pundits who had fully expected Dick Gephardt to secure the position. The New York Post even reported that Gephardt had been chosen and “Kerry-Gephardt” stickers were being placed on campaign vehicles before being removed when Edwards was announced as Kerry’s number two.

A 2008 Portuguese newspaper report highlighted the fact that Pedro Santana Lopes and Jose Socrates attended the 2004 meeting in Stresa, Italy before both going on to become Prime Minster of Portugal.
Several key geopolitical decisions were made at last year’s Bilderberg meeting in Washington DC, again emphasizing the fact that the confab is far more than an informal get-together.

As we reported at the time, Bilderberg were concerned that the price of oil was accelerating too fast after it hit $150 a barrel and wanted to ensure that “oil prices would probably begin to decline”. This is exactly what
happened in the latter half of 2008 as oil again sunk below $50 a barrel. We were initially able to predict the rapid rise in oil prices in 2005 when oil was at $40, because Bilderberg had called for prices to rise during that
year’s meeting in Munich. During the conference in Germany, Henry Kissinger told his fellow attendees that the elite had resolved to ensure that oil prices would double over the course of the next 12-24 months, which is
exactly what happened.

Also at last year’s meeting, former U.S. Secretary of State Condoleezza Rice formalized plans to sign a treaty on installing a U.S. radar base in the Czech Republic with Czech Foreign Minister Karel Schwarzenberg.

Rice was joined at the meeting by Defense Secretary Robert Gates, who reportedly encouraged EU globalists to get behind an attack on Iran. Low and behold, days later the EU threatened Iran with sanctions if it did not suspend its nuclear enrichment program.

There was also widespread speculation that Hillary Clinton and Barack Obama’s “secret meeting,” which was accomplished with the aid of cloak and dagger tactics like locking journalists on an airplane to keep them from tracking the two down, took place at the Bilderberg meeting in DC.

It remains to be seen what kind of mainstream media press coverage Bilderberg 2009 will be afforded because, despite the proven track record of Bilderberg having a central role in influencing subsequent geopolitical and financial world events, and despite last year’s meeting being held in Washington DC, the U.S. corporate media oversaw an almost universal blackout of reporting on the conference, its attendees, and what was discussed.

Once again, it will be left to the alternative media to fill the vacuum and educate the people on exactly what the globalists have planned for us over the coming year.

Global Research Articles by Paul Joseph Watson

Poverty and Food Insecurity in the Developing World: For Us, Tolls the Bell

Senator Lugar and others [Senators John Kerry, Susan Collins, Robert Casey, Richard Durbin and Thomas Harkin] of the US Senate have introduced ‘Global Food Security Act’ [GFSA, No. S384] to be administered by the USAID. [1] ‘The bill was read twice and referred to the Committee on Foreign Relations.’ Although it seems to have a humanitarian purpose, GFSA is as sinister as the two pending bills HR875 and S425. I say this because not one US regulatory authority has successfully regulated industries in the interest of the people at least in the last ninety-odd years. Monopolies have been protected and cartels continue to kill in the US and across the world. And the second reason is that USAID is actually an arm of the US-Department of Defense; it serves US foreign policy interest which has little to do with humanitarianism.

There are reasons to suspect that this triad of bills when they become Acts will be misused against the weak and the poor, hence the need to evaluate the purpose of the bill.

Blaming food insecurity and hunger on poverty [essentially, inability to earn sufficient cash to buy food] has been the official position of most governments and of international institutions like UN-FAO, World Bank, IMF, and CGIAR. Unfortunately such notions serve powerful economic and political interests that perpetuate hunger, malnutrition, diseases, illiteracy, ignorance, urban slums and filth and rural poverty globally.

Those who influence the developmental agenda of governments seldom pause to think that farmers and gardeners can always grow enough food to stave off hunger and malnutrition from less than 200 square meters of land; with about 2000 square meters they can feed themselves quite well with some surplus.

For rural Asians, Africans and South American farmers growing food has been a way of life. Yet the irony is that they are facing food shortage, hunger, under-nutrition, and poor health.

Sir Albert Howard, sent by the British Government to diagnose the causes of famine, hunger and deaths in India, after three decades of research, said this: “The agricultural practices of the Orient have passed the supreme test--they are almost as permanent as those of the primeval forest, of the prairie or of the ocean. The small-holdings of China, for example, are still maintaining a steady output and there is no loss of fertility after forty centuries of management.” [2] The three unique characteristics of farming in India and China were cultivation of rice, mixed crops including legumes, and a balance between livestock and crops. Lesser known feature was inter and intra- community cooperation and efficient management of common pool resources like grazing lands, water sources, rivers, forests and seeds. However, the compulsions of 2009 are different from those of the 1900s to 40s, Howard’s time, because of population growth, stressed ecosystems, and the desire of the ruling elite to keep the world in a state of perpetual socio-economic chaos and mayhem.

Agriculture will continue to remain the backbone of the developing countries. Growing food remains the main occupation for the majority who still know what it takes to grow food. And that is why, left alone, they can’t starve but they are starving. Industrial economy can’t absorb all able hands in the less developed countries [LDCs] in the present scenario of resource depletion. No economy can sustain 100% employment in modern industries; it has never happened in any non-war industrial economy. Small farms could have supported households everywhere yet independent farmers around the world are finding it hard to survive; LDCs are no exception.

Industrial farming method, especially in the US, is based on mono-cropping, use of hybrids and genetically engineered seeds, fertilizers and lethal pesticides, and fuel guzzling farm machinery. It is true that at current wage rate, an average American can buy a full meal with about an hours’ wage but this ‘cheap food’ is actually horrendously costly.

Eating industrially grown foods actually means eating fossil fuels, eating less nutrition and more calories, falling ill more frequently, suffering from degenerative diseases, spewing greenhouse gases and dying young. [3] A wit summarized the present situation succinctly that for the first time in the history of civilization, parents will be burying their children. Why? Because the American citizens are chemically modified humans, now being destroyed at genetic level. Unnatural biological stresses intensify over space and time.

Basis of GFSA-2009

And yet, instead of addressing issues of nutrition and health, ‘connecting the dots’ as Michael Pollan says, the US Congress is hell bent on introducing laws with global reach that would destroy the very basis of people’s food security and food sovereignty. That is what the two pending legislations HR875 in the House of Representatives and S425 in the Senate, essentially seek. [4] The latest in the bouquet of legislations is the ‘Global Food Security Act of 2009’ with global implication.

Senator Lugar is peddling the bill on the basis of thirteen observations [Section II: Findings] including that over a billion people worldwide suffer from food insecurity, according to UN-World Food Programme 9.125 million people die each year from malnutrition related causes [25,000 per day], and 50% of food insecure people live in sub-Saharan region.

The macro-economic reason for intervention is agriculture can be powerful engine for growth. It further cites a UN-Hunger Task Force report that three out five small farmers suffer from hunger.

It also accepts that a ‘diverse and secure food supple has health benefits including increasing child survival, improving cognitive and physical development of children, especially those under two years of age, increasing immune system function including resistance to HIV/AIDS, and improving human performance.’

Given these facts, it says that ‘a comprehensive approach to long-term food security should encompass improvements in nutrition, education, agricultural infrastructure and productivity, finance and markets, safety net programs, job creation, household incomes, research and technology, and the environment.’ [sic]

The bill hopes to mitigate global food insecurity with a Congressional appropriation of US$7.5 billion over five years to 2014 [about $1.5b per year] and assigns the responsibility to the US Agency for International Development [USAID] as the administrator.

China’s agriculture budget this year is about US$ 57.35 billion [391.7 billion yuan] and the Ministry of Agriculture in India spent over 2.35 billion dollars per year over 2002-07. They are still struggling to eliminate food insecurity in their respective countries.

Causes of food insecurity

The main causes for food insecurity and consequential widespread malnutrition in the developing countries is not inability to grow enough food. Farmers have been led to believe that: (i) they must earn cash to raise their standard of living; (ii) in order to earn cash they must produce for the market, (iii) earn cash income and (iv) use the cash to buy food and other services from enforced market economy. In the US a farmer is fortunate to get a net return of 5% on revenue; in the LDCs the entire household must work, including women and children, to earn a subsistence or starvation wage.

Farmers have been duped by seed, fertilizer and pesticide firms ever since the Green Revolution started. Market forces entice farmers to grow cash crops that are raw materials for food, feed and fibre industries controlled by global cartels. They are lured by promises of higher income but it falls when there is bumper crop and it falls when yields drop. And there can be a variety of reasons, some manmade and market manipulated; others due to unforeseen circumstances like vagaries of local climatic conditions. So long as farmers remain fixated to the promises of cash income, there will be food insecurity in the LDCs and the GFSA can’t mitigate that problem.

The second major reason is the huge subsidy that the US and European Commission provide to its biggest farmers [not their own small farmers, please note] that allows the cartel backed by their respective governments to manipulate global agricultural commodity prices exactly as they want.

‘The top 10% of the biggest agricultural producers [in the USA] received more than 72% of its $23 billion subsidy programs in 2005. Meanwhile, 60% of all US farmers do not collect any government subsidies.’ [5]

Take rice, which is staple food for nearly 3.7 billion Asians. The US Government provided about one billion dollar subsidy to just three rice growers in the US over 1995 to 2006: $526 million to Riceland Foods, $314 million to Producers Rice Mill and $146 million to Farmers Rice Cooperative.] [6]

Similarly the European Commission data show that in 2004, US$36 billion (€28.2bn) of direct subsidies was paid out of a total Common Agricultural Policy (CAP) budget of $58bn (€45.6bn) – and the 7% of Europe’s primary food producers received more than 50% of these payments. The biggest 2,460 farmers in Europe received on average $667,000 (€524,000) each, totalling $1.7bn (€1.3bn). [7]

The sops totaled over 140 billion dollars over 1995-06 in the US alone and covered cotton, canola, soy, sorghum, among other agriculture commodities.

To put this into perspective, there are an estimated 149 million farming households in India. If this sort of subsidy had been given by the Indian government, it would amount to US$ 940 per household or 78 dollars per year per household or Rs 3900 per household per year at current exchange rate of one dollar to fifty rupees. Assuming each household spends a dollar a day on food, that amount would be sufficient to buy food for 76 days.

Simply put: American taxpayers could have fed 745 million Indians two meals a day for 76 days on the year, every year, for twelve years since 1995. That could itself have wiped out malnutrition of India’s rural populace. Or, almost entirely in Sub-Saharan Africa.

That money could have prevented much misery in the US itself. ‘About 11 percent of poor households in the US had difficulty at some time during the year providing enough food for all their members due to a lack of money and other resources. Most food-insecure households obtained enough food to avoid hunger, using a variety of coping strategies, such as eating less varied diets, participating in Federal food assistance programs, or getting emergency food from community food pantries or emergency kitchens…. But 3.5 percent of U.S. households were food insecure to the extent that one or more household members was hungry, at least some time during the year, because the household could not afford enough food.’ [8]

Far more important is for the American taxpayers to realize that they could have had access to nutritious food, all year round, for every man, woman and child if 140 billion dollars had been transferred to small independent farmers who grow nutrition and provide invaluable ecological services. Instead, their money was used to enrich a handful of commercial farmers, decimate third world farmers and depress agricultural investments worldwide.

This huge subsidy allows food cartels to lift wheat and rice and other food staples at a pittance to dominate global food market. The unsold surplus is palmed off to Government run schools in the US that is further destroying children’s health.

Agriculture plays multi-functional role

Agriculture has always performed multifunctional role within traditional farming communities. They perform too many tasks, often synergistically that are not appreciated by the current official thinking that borders on lunacy.

IAASTD has acknowledged this fact and uses the term multifunctionality to ‘express the inescapable interconnectedness of agriculture’s different roles and functions. The concept of multifunctionality recognizes agriculture as a multi-output activity producing not only commodities (food, feed, fibers, agrofuels, medicinal products and ornamentals), but also non-commodity outputs such as environmental services, landscape amenities and cultural heritages.’ [9] These services can’t be measured in money terms, or even equated with the amount of money a farmer needs to buy food which he grows in the first place.

Unpaid environmental services of small farmers

Industrial agriculture compares efficiency of land use solely in terms of crop yield, NEVER ever in terms of the wider environmental services of the small holder or peasant. The environmental services of the peasantries include: soil management, prevention of erosion, animal husbandry, maintaining farm-level bio-diversity [vital for food security], water resource management, farm and village level rainwater harvesting [much of traditional methods have fallen into disuse because even small holders rely on diesel driven water pumps], maintaining common pool resources [forests and grassland], to name a few. The peasantries have never been adequately compensated in any country for the broader environmental services of traditional farming methods.

A proponent of radical farming method says, ‘it takes commercial [aka industrial] agriculture 22,000 to 42,000 square feet to grow all the food for one person for one year, while bringing in large inputs from other areas. At the same time, commercial agricultural practices are causing the loss of approximately six pounds of soil for each pound of food produced.’ [10] ‘Modern mechanized agriculture contributes about 60% of anthropogenic emissions of CH4 and about 50% of N20 emissions. Inappropriate fertilization has led to eutrophication and large dead zones in a number of coastal areas, e.g., Gulf of Mexico, and some lakes, and inappropriate use of pesticides has led to groundwater pollution, and other effects, for example loss of biodiversity.’ [11]

Had it not been for the poor, famished independent farmers of the less developed countries, the oceans would already have turned muddy and air un-breathable. But we are all headed that way.

Growing nutrition

Although one of the core strategies of GFSA is to address malnutrition, the said bill is silent on growing nutrition.

About twenty years ago, a series of field trials were conducted in Thailand, Indonesia and Malaysia on very small kitchen gardens following a successful experiment carried out by Thailand Outreach Programs of Kasetsart University [Kamphaeng Saen, Nakhon Pathom, Thailand] from November 10, 1988 to February 15, 1989. The total garden area was 50 square metres or about 475 square feet and it met 80% of recommended daily allowance [RDA], a huge success in combating malnutrition. The total yield obtained from the garden under normal operating condition was 63.9 kg without using radical methods. The home garden supplied significant percentage of protein, calcium, iron, vitamins A and C of the RDA for a family of 5 and supplied vitamins A and C more than the family requirement. In terms of economic returns, growing vegetables proved to be profitable as well.

This sort of decentralized, household level initiative to grow nutrition has never been adequately supported by either FAO or CGIAR. [11] Even the WHO is more concerned about mass distribution of iron and folic acid tablets. Both the UNICEF and the UN-World Food Program have pushed mass produced corn and soy blend as supplements to combat malnutrition. Since it well known that much of corn and soy crops grown in the US are genetically modified and these foods can cause unknown illnesses, no one knows the long term consequences of these strategies.

There is a simple equation developed by Steve Solomon. He says health = nutrition/energy. Nutrition can be measured in terms of minerals, vitamins and protein and energy in terms of calories. If one eats equal proportion of nutrition and energy, health would equal 1. If one eats more energy [or calories] health would be fraction of the ideal 1. [12]

Senator Lugar and his friends in the Senate should seriously study the economic, social and humanitarian disaster in the United States itself from malnutrition. The US-FDA has forced unlabelled Genetically Engineered foods on them without proper biosafety assessment and they are eating nutrition deficient food. One doesn’t need rocket science know the impact: just watch the explosive growth of obesity in the streets. Malnutrition is far more serious problem in the US than anywhere else and that is causing cancer, heart diseases, diabetes, and other degenerative diseases. [13] And that has happened because the US Government doesn’t care for its own citizens’ health. Can we, the rest of the world, rely on Lugar promise? A Luger on our dinner table appears to be a more environment friendly option, not this bill.

Mr. Lugar and other law makers in the US have been multi-functional at a different, perhaps more esoteric, level that has little to do with basic philosophy of growing food and living with honour and much personal freedom.

Notes

[1] Full draft of GFSA, S384, here:
http://www.govtrack.us/congress/bill.xpd?bill=s111-384

[2] Sir Howard, A. 1943. ‘An Agricultural Testament”; Oxford University Press; pages 11, 13 and 14.

[3] Michael Pollan in conversation with Bill Moyers.
http://www.pbs.org/moyers/journal/11282008/watch.html

[4] Shrivastava, A. 2009. For whom the bell tolls; www.Globalresearch.ca/

[5] http://farm.ewg.org/farm/top_recips.php?fips=00000&progcode=total&page=1

[6] Ibid

[7] http://www.oxfam.org/en/news/pressreleases2006/pr060711_wto

[8] http://www.ers.usda.gov/AmberWaves/April05/DataFeature/

[9] Executive Summary. 2008. International Assessment of Agricultural Knowledge, Science and Technology for Development [IAASTD].

[10] Jeavons, J. 1995. Cultivating our garden, Context Institute, Page 34.

[11] IAASTD Summary for Decision Makers of the Global Report; April, 2008.

[12] UN-FAO is the specialized institution on agriculture issues. It maintains a vast data base on all agriculture related information. Consultative Group on International Agriculture Research [CGIAR] is jointly funded by many UN agencies including the industry.

[13] Solomon, S.; please do visit his e-library here:
www.soilandhealth.org/

Steve is a well know farmer and gardener and author of many books. His recent bestseller is ‘Gardening when it counts: growing food in hard times.’ The quote is from a personal discussion.

[14] WHO; Department of Measurement and Health Information; 2004

Arun Shrivastava is a frequent contributor to Global Research. Global Research Articles by Arun Shrivastava