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Today's
Stories
March 20, 2008
Mike Whitney
Winding
Up Bear
March 19, 2008
Patrick Cockburn
A
War of Lies
Robert Fisk
The Little Men and the Inferno
Jeff Taylor
Five Years of War in Iraq
Ed Ruggero
From Pinkville to Iraq: the Dark Anniversary of My Lai
Ron Jacobs
Who'll Stop the Rain?
Christopher
Fons
Obama Takes the Race Bait
Sherwood Ross
In Defense of Rev. Wright
Cynthia McKinney
An Urgent Crisis: Confronting America's Racial Disparities
Joshua Frank
The Kool-Aid That Kills
Robert Weissman
Monsanto's Genetic Food Gamble
Walter Brasch
It's a Welfare State--If You're Rich
Yifat Susskind
Iraqi Women Resist the Occupation
Andrew Wimmer
War Demands Its Due
Website of
the Day
Glimpses of Nature
March 18, 2008
David Price
The
Military "Leveraging" of Cultural Knowledge
Paul Craig
Roberts
The
Collapse of American Power
Tim Wise
Of National Lies and Racial America: Jeremiah Wright, Barack
Obama and the Unacceptability of Truth
Patrick Cockburn
One of the Most Disastrous Wars Ever Fought
Conn Hallinan
Afghanistan, a River Running Backward
James T. Phillips
Monsters: Past, Present and Wannabe
Uri Avnery
The Killing in Bethlehem
David Macaray
Could Wal-Mart Revive the Labor Movement?
Marjorie Cohn
Beware an Attack on Iran
Peter Zinn
Obama in New Orleans
Dan La Botz
The Economic Crisis, Labor and the Left
Monica Benderman
Where are We Going?
March 17, 2008
Pam Martens
The
Fed's Wall Street Dilemma
Sasan Fayazmanesh
The US, Iran and the Policy of Dual Containment
Nelson P. Valdés
The Imperial Branding of Simon Bolivar and the Cuban Revolution
Peter Morici
The Corrosive Consequences of the Trade Deficit
Wajahat Ali
Disrobing the Nine: a Conversation with Jeffrey Toobin on the
Supreme Court Since 9/11
Ronnie Cummins
Beyond Progressive Malpractice: Taking Down Big Pharma
Shaun Harkin
Saint Patrick's Day in Fortress America
Ali Khan
No Pardon for Musharraf
Robert Jensen
Beyond Peace
P. Sainath
Oh, What a Lovely Waiver!
Greg Moses
Jeremiah was a Bullhorn
Dr. Susan Block
Advice for Eliot Spitzer
Website of the Day
No Cowboys
March 15 /
16, 2008
Patrick Cockburn
How
to Destroy a Country in Five Years
Mike Whitney
Bearly
Alive: Investment Giant Rushed to ICU by Panicky Fed Chief
Ralph Nader
Of
Laws and Men
Robert Pollin
It's Still the Economy, Stupid
Diane Christian
The Poetics of Perversity: From Boccaccio to Spitzer
Wajahat Ali
Faking the Hood: a Conversation with Ishmael Reed
Tom Wright
/
Therese Saliba
Rachel Corrie's Case for Justice
Alan Farago
Back to Florida: Where Bushtime Began
Greg Moses
Raiding the Family Room in Texas
Michael Hudson
A Grand Global Bargain?
Martha Rosenberg
Why Hillary's Favorite Chicken Company is Eying China
John Goekler
Fourth Generation Warfare in a Fifth Generation Conflict
Uzma Aslam
Khan
A Letter to Barack Obama: Where's the Change, Barack?
Oren Ben-Dor
The Silencing of Gilad Atzmon
David Underhill
Mammon, Morals and the Mobile Tanker Deal
Fred Gardner
The Education of Eliot Spitzer
David Michael
Green
Why Spitzer Should Have Resigned (and Why He Shouldn't Have)
Rev. William E. Alberts
Jesus, Entombed in Heaven
Gail Dines
It's All About the John: Prostitution and Male Power
David Yearsley
Conducting, Anarchy and the Problem of When to Begin
Chris Clarke
Walking with Zeke: the Luckiest of Dogs
Poets' Basement
Anderson, Lodge & Subiet
Website of
the Day
Deviant Art
March 14, 2008
Paul Craig
Roberts
Watching
the Dollar Die
Don Santina
Vichy
Democrats: Pelosi and the Politics of Collaboration
Patrick Cockburn
Iraqi
Mother Vows Revenge on US: How She Lost Her Husband and Her Sons
Tim Rinne
StratCom
Rules! The Next War Will Start in Nebraska
Robert Fantina
In
Torture We Trust
Saul Landau
Letter
to the Presidents-in-Waitings
David Macaray
Common
Myths About Labor Unions
Franklin Lamb
Is
the Bush Administration Switching Horses in Lebanon
Michael Neumann
The
One State Illusion: Reply to My Critics
March 13, 2008
Paul Craig
Roberts
Republicans
and "Free Market" Zealots Bring Disaster to America
Mike Whitney
Meltdown
Looms Larger As Credit Markets Freeze
Assaf Kfoury
"One-State
or Two State?"- Sterile Debate on False Alternatives
Andy Worthington
Afghan
Hero Who Died in Guantánamo: The Background to the Story
Adam Federman
From
Autopia to Autogeddon: Cars Reach the End of the Road
March 12, 2008
Dave Lindorff
Bringing
Down Spitzer: It's the Big Brother Who Should Bother US
R.F. Blader
The
Spitzer Backlash
Yonatan Mendel
How
to be an Israeli Journalist. Never Write "Murder" or
"Palestine"
Jonathan Cook
One
State or Two? Neither. The Issue is Zionism
Bill and Kathy
Christison
Fallon
and Gates -- At Least One Cheer
James J. Brittain
Was
the U.S. Involved in Killing the FARC-EP Leaders
Ron Jacobs
"All
the Money You Make Will Never Buy Back Your Soul"
March 11, 2008
Paul Craig
Roberts
How
to End the Subprime Crisis
Ed O'Loughlin
How
Israeli Troops Invade Homes in Gaza, Brutalize, Smash and Steal
Ramzy Baroud
'Unwavering
Commitment' to Inequality
Kathy Christison
One
State or Two? The Debate Over Israel and Palestine
China Hand
PRC
Plays it Cool, as U.S. Tries to Amp Up Pressure on Iran
John Joslin
Thank
You, Nafta! Welcome to Weirton, Home of the Discount Cigarette
Mike Averko
Serb
Politics, Kosovo and the Moscow-Washington Divide
Ben Rosenfeld
Gavin
Newsom's Kneejerk Plan
Thierry Paquot
High
Rise, Low Spirits:The Curse of the Tower Block
March 10, 2008
Uri Avnery
"Kill
A Hundred Turks and Rest": The Five-Day War in Gaza
Col. Dan Smith
Scoring
the "Surge" and What Lies Beyond
R.F. Blader
Why
"Lock Them Up and Throw Away the Key" is Losing its
Sheen
Michael Neumann
The
One-State Illusion: More is Less
Bob Fitrakis
and Harvey Wasserman
Did
the Republicans Give Hillary Her Victory in Ohio?
James J. Brittain
Anti-Uribe
Protests in Colombia and the World
Missy Comley
Beattie
The
Passion of John McCain
March 8-9,
2008 Weekend Edition
JoAnn Wypijewski
The
Only Way to Fight the Clintons
Mike Whitney
Sorting
Through the Rubble in Post Bubble America
Peter Morici
Fed
and Treasury Fiddle as Economy Plummets
Ralph Nader
The
Silent Violence of Gaza's Suffering that Candidates Ignore
Jonathan Cook
The
Meaning of Gaza's Shoah
Steve Niva
Behind
the Israeli Escalation in Gaza
Bill and Kathy
Christison
Crisis
over Teheran's Alleged Nuclear Plans Nearing Climax
Hervé
Do Alto and Franck Poupeau
Bolivia:
Morales is Checked
Eric Walberg
To
Leave and Stay at the Same Time: Putin to Medvedev to…?
Scott Johnson
City
of A Thousand Foreclosures
Mark Scaramella
James
Brown's Gate
Bill Clinton
President
Clinton's Remarks on Naming William M. Daley as NAFTA Task Force
Chairman
Poet's Basement
St.
Thomasino, Engel, Davies and Willson
Website of
the Weekend
Hillary
Blackens Barack
March 7, 2008
Patrick Cockburn
Why
Iraq Could Blow-Up in John McCain's Face
Robin Blackburn
Question
for Barrack Obama: Why Afghanistan is the 'Right War'?
Saul Landau
The
Stupid Economy
Binoy Kampmark
When
Competition is Good: McCain and the Muddled Democrats
Chris Floyd
Crushing
the Ants: Admiral Fallon and His Empire
Andy Worthington
Spanish
Drop "Inhuman" Extradition Request for Guantánamo
Britons
Will Potter
Before
the Smoke Even Clears in Seattle: Bringing Out the T Word
March 6, 2008
March 6, 2008
Vincent Navarro
The
Next Failure of Health Reform
Forrest Hylton
High Stakes in the Andes: Colombia's Cornered President
Peter Morici
Why the Dollar is So Cheap
George Ciccariello-Maher
Counter-Attack of the Bureaucrats
John Ross
Taxi! Taxi! The Dark Side of the Oscars
Jacob Hornberger
No Standing to Lecture on Justice
Paul Watson
Illegal Japanese Whaling by the Numbers
Dan Bacher
Off the Deep End
Website of the Day
A Katrina Reader Online
March 5, 2008
Cockburn /
St. Clair
A
Great Day for John McCain (and Maybe Nader)
Joanne Mariner
After Guantanamo
Fidel Castro
The Raid on Ecuador: Underestimating Rafael Correa
Christopher
Brauchli
The Turkish Invasions
Steven Sherman
Obama and the Prospects for a Renewal of the Left
Dave Lindorff
Busting Bush & Co. in New England
James Murren
Bombing Somalia
Adam Engel
Necropolis Now
Website of Day
Remember Song
March 4, 2008
Wajahat Ali
Mumbo
Jumbo: Naming Names with Ishmael Reed
William Blum
How Could Hillary Have Known?
Bill Quigley
The Cleansing of New Orleans
Ralph Nader
The Prince Harry Solution
Patrick Irelan
Oil and Health in Venezuela
James J. Brittain
/
R. James Sacouman
Uribe's Colombia is Destabilizing a New Latin America
Norman Solomon
The War Election
Jacob Hornberger
Hillary in Waco: the Missing Apology
Andy Worthington
Guantánamo and the European Parliament
Mike Averko
Kosovo and the Press
Website of the Day
Tex-Mex Primary
March 3, 2008
Jennifer Loewenstein
Gazan Holocaust
Alan Farago
American Politics and the Faltering Economy
Richard Gott
Colombian Deaths in Ecuador
Wajahat Ali
Who Speaks for a Billion Muslims? Analyzing the World Gallup
Poll with John Esposito
Paul Craig Roberts
The Mukasey Conspiracy: a Bi-Partisan Attack on the Constitution
Robert Weissman
When Multinationals Say Adieu
Uri Avnery
Good Morning, Hamas
Martha Rosenberg
When Your Meat is a Downer
Eva Liddell
Leave the Next Dance for Bill
Michael Donnelly
Will Ferrell Does Flint
Website of the Day
Muddy Waters: Train Fare Home Blues
March 1 / 2,
2008
Alexander Cockburn
The
Race Card
Paul Craig
Roberts
The
Political Trial of Don Siegelman
Kathleen and Bill Christison
Nader the Best Antidote to American Imperialism
Nelson P. Valdés
Cuba After Fidel
Christopher Brauchli
Meet Mr. Nursultan Nazarbayev: Friend of Bill, George and Dick
Ron Jacobs
Inside the Secret City: Bomb Making at Oak Ridge
John Ross
The New Conquistadores: Spain's Reconquest of Mexico
Robert Fantina
Posturing Over Patriotism: Obama and Those Lapel Pins
Robert Weissman
Hidden in Plain Sight: Human Rights Hypocrisy
Mohammed Omer
Fear in Gaza
Remi Kanazi
Barack Obama and the Politics of Xenophobia
Bob Jackson
Why is Yellowstone Destroying Its Bison Herd?
Richard Rhames
Casual Threats: Loaded with Mercury
Franklin Lamb
Lebanon Awaits the Arrival of the USS Cole
Rannie Amiri
Showboat Diplomacy: US Warships Steam Toward Lebanon
David Michael
Green
The Three Faces of Hillary: the Politics of Flim-Flam
Conn Hallinan
Notes from the Southern Cone
Faheem Hussain
Prince Harry of Afghanistan and the Meaning of Normalcy
Poets' Basement
Gibbons, Orloski, Gardner and Ford
Website of
the Weekend
The Palestine Chronicle Needs (and Deserves) Your Help!
February 29,
2008
Matt Gonzalez
The
Obama Craze
Jonathan Cook
Academic Freedom? Not for Arabs in Israel
Joshua Frank
Obama and Israel
Anthony DiMaggio
The Unilateral Presidency: Signing Statements and the Rollback
of American Law
Linn Washington, Jr.
Cop Abuse in America
Binoy Kampmark
Hubris and Nemesis
Robert Bryce
Energy Efficiency May be a Good Thing, But It Won't Cut Energy
Use
Sonja Karkar
Australia's Government Continues Its Love Affair with Israel
Dave Lindorff
A Manchurian Candidate in the White House? Obama or Bush?
Website of
the Day
Olduvai George
February 28,
2008
Patrick Cockburn
"Iraq"
Falls Apart
Fred Gardner
The Birth of NAFTA
Michael Levitin
The Crisis in Kosovo is Just Beginning
William S.
Lind
The Fake State of Kosovo
David Macaray
A Ray of Hope for Organized Labor
Stephen Fleischman
Nader's Latest Run: Monkey Wrench or Cattle Prod?
George Wuerthner
The Myths of Forest Health: Why Ecological Logging is an Oxymoron
Laura Carlsen
The North American Union Farce
Carl Finamore
Why the Delta-Northwest Deal Hasn't Taken Off
Michael Dickinson
The Day I Bombed the House of Commons
Website of the Day
Plane Stupid
February 27,
2008
David Rosen
Playing
the Race Card: Obama, Love Across the Color Line and Political
Dirty Tricks
Vijay Prashad
Bomber John: McCain and the 100 Year War
Harvey Wasserman
Incident at Turkey Point: Did Florida Go to the Radioactive Brink?
Andy Worthington
Guantánamo's Shambolic Trials: Pentagon Boss Resigns,
Ex-Prosecutor Joins Defense
Wajahat Ali
Pakistan for Sale: an Interview with Ayesha Siddiqa on Pakistan's
Military Economy
Peter Morici
The Auction-Rate Securities Fiasco: a Drama of Greed and Betrayal
Stephen Philion
Conspiracy Theory, Fears of Betrayal and Today's Anti-War Movement
Michael Donnelly
Obama by Unanimous Decision
Erica Rosenberg /
Janine Blaeloch
After the Land Deals: Will There
be Any Wilderness Left to Protect?
Website of
the Day
Dress Blues
February 26,
2008
Debbie Nathan
Confessions
of a Gitmo Guard
Alan Dershowitz
v. Frank Menetrez
On Finkelstein
Harvey Wasserman
How Ohio Got Nuked
Michael Colby
Ralph Nader vs. the Fundamentalist Liberals
Gary Leupp
Condi vs. Putin on Bullying Belgrade
David Orchard
The New Conquistadors: Canada in Afghanistan
Martha Rosenberg
The Big HRT
Fran Shor
The Electoral Circus and Nader's Sideshow
Serge Halimi
The Dom Perignon Socialist Manifesto: Bernard Henri-Levy's Plan
for the French Left
Global Balkans
Neo-Liberalism and Protectorate States in the Post-Yugoslav Balkans:
an Interview with Tariq Ali
Website of
the Day
Texistentialism
February 25,
2008
Roger Morris
A
Death in Damascus
Anthony DiMaggio
Military
Bases, the Media and the Democrats
Ralph Nader
Why I'm Running
Patrick Cockburn
Iraq Broils
Paul Craig Roberts
Kosovo and the Empire Crazies
Peter Morici
Bernanke's Failing Policies: a Long Recession Looms
Dave Lindorff
General Welch's Whitewash: What We Still Don't Know About That
Minot Nuke Incident
Saul Landau
/
Farrah Hassen
Fanatics, Mountebanks and Drillers: a Bloody Oil Film
Heather Gray
James Orange, Civil Rights Legend
Robert Weitzel
Accomodating Torture
John Halle
Kucinich Goes Down
Website of the Day
Do the Trunk Monkey!
February 23 / 4, 2008
Alexander Cockburn
The
Mushrooming Clouds That Hang Over McCain
Paul Craig
Roberts
Obama
and Global Trade
Wajahat Ali
Omissions of the Commission: an Interview with Phillip Shenon
on the 9/11 Commission
Ralph Nader
Neutering the FDA
Jürgen
Vsych
"What Was Ralph Nader Thinking?"
Fidel Castro
Watching the US Presidential Campaign from Havana
Andy Worthington
Britain's Guantánamo
David Macaray
Unions Under Assault
Jeremy Scahill
The Real Story Behind Kosovo's Independence
David Krieger
Stanley Sheinbaum
Caging the Cold War Monster
Ron Jacobs
Building for the Future
Michael Garrity
The Last, Best Hope for the Northern Rockies
Brian McKenna
Higher Ed's "Civic Engagements" Get Dumbed Down
Missy Beattie
Over the Hill with John McCain
Fred Gardner
American College of Physicians Takes Pro-Cannabis Stand (Mostly)
Boris Kagarlitsky
The Growth of the Russian Labor Movement
Mike Ferner
Kick That Barrel
Dan Bacher
On the Trail with the Border Angels
Christopher
Ketcham
Hillary Goes Where Obama Fears to Tread
Poets' Basement
Davies and Buknatski
Website of
the Weekend
Obama
Mariachi
February 22,
2008
Mike Whitney
The
Bonfire of Capital
Jason Hribal
Elephants and the Circus: The Story of Janet
Liaquat Ali Khan
Arresting Musharraf
Joshua Frank
That Obama Glow: the Nuclear Industry's Golden Child
Dave Lindorff
Vicki's John: Ask Not What She Did for Him, Ask What He Did for
Her!
Liliana Segura
When Torture is Old News: McCain's Blonde Diversion
Robert Fantina
Castro, Bush and Cuba: a Fiasco Waiting to Happen?
Yifat Susskind
The ABCs of Death: Bush vs. Africa's Women
Norm Kent
Pushing 60 with Pot
Website of
the Day
Bush Gets Down in Liberia
February 21,
2008
Saul Landau
Fidel
Steps Aside
Elizabeth Schulte
Left Behind, With No End in Sight: America's Long-Term Unemployed
Helen Redmond
Health Care as a Human Right
Benjamin Dangl
Undermining Bolivia
Michael Levitin
Kosovo's Dilemma
Liam Leonard
Fear and Loathing on the Emerald Isle
Patrick Irelan
Land and Food in Venezuela
Linn Cohen-Cole
Poor Ohio: a Second Letter to Hillary on Her Ties to Monsanto
Michael Simmons
Daydream Believer: John Stewart, the Miles Davis of Folk Music
CounterPunch
News Service
A Message from the Women of Okinawa to US GIs
Website of the Day
Cop Abuse in Shreveport
|
March
20, 2008
Paulson's Gift
to His Bankster Buddies
Winding
Up Bear
By MIKE WHITNEY
One picture tells the whole story. It's
a photo of five grim looking men in gray suits staring ahead
blankly like they were in the dock with Saddam awaiting sentencing.
Every one of them looks downcast and dejected; shoulders rounded
and jaws set. This is what desperation looks like, which is why
the photo was kept off the front pages of the leading newspapers.
The group took no questions
and, as far as the media was concerned, the meeting never happened.
But it did happen; and it happened on Monday at the White House
at 2PM. That's when President Bush convened the Working Group
on Financial Markets, also known as the Plunge Protection Team,
to explain their strategy for dealing with deteriorating conditions
in the financial markets. The details of the meeting remain unknown,
but judging by the sudden (and irrational) recovery in the stock
market on Tuesday; their plan must have succeeded.
The Plunge Protection Team
is a panel that includes Fed Chairman Ben Bernankee, Treasury
Secretary Henry Paulson, Securities and Exchange Commission Chairman
Christopher Cox, and acting Commodity Futures Trading Commission
head Walter Lukken. According to John Crudele of the New York
Post, the Plunge Protection Team's (PPT) objective is to redirect
the stock market by ""buying market averages in the
futures market, thus stabilizing the market as a whole.""
In the event of a terrorist attack or a natural disaster, the
group's activities could play an extremely positive role in saving
the market from an unnecessary meltdown. However, direct intervention
into supposedly "free markets" is less defensible when
it is merely a matter of saving an over-leveraged banking system
from its inevitable Day of Reckoning. And, yet, that appears
to be the reason for the White House confab; to buy a little
more time before the final explosion.
The psychology behind the PPT's
activities is explained in greater detail by Robert McHugh
Ph.D. who provides a description of how it works in his essay
""The Plunge Protection Team Indicator"":
The PPT decides markets need
intervention, a decline needs to be stopped, or the risks associated
with political events that could be perceived by markets as highly
negative and cause a decline, need to be prevented by a rally
already in flight. To get that rally, the PPT's key component
-- the Fed -- lends money to surrogates who will take that fresh
electronically printed cash and buy markets through some large
unknown buyer's account. That buying comes out of the blue at
a time when short interest is high. The unexpected rally strikes
blood, and fear overcomes those who were betting the market would
drop. These shorts need to cover, need to buy the very stocks
they had agreed to sell (without owning them) at today's prices
in anticipation they could buy them in the future at much lower
prices and pocket the difference. Seeing those stocks rally above
their committed selling price, the shorts are forced to buy --
and buy they do. Thus, those most pessimistic about the equity
market end up buying equities like mad, fueling the rally that
the PPT started. Bingo, a huge turnaround rally is well underway,
and sidelines money from Hedge Funds, Mutual funds and individuals'
rushes in to join in the buying madness for several days and
weeks as the rally gathers a life of its own. (Robert McHugh
Ph.D., "The Plunge Protection Team Indicator")
The powers of the PPT are greatly exaggerated; eventually the
liquidity they provide has to be drained from the system. The
popular myth that the Fed simply creates as much money as it
chooses and spreads it around like confetti; is pure rubbish.
The Fed has very definite balance constraints. The system is
not quite as rigged as many people imagine. According to Bloomberg
News, the Fed has already depleted most of its resources:
The Fed has committed as much
as 60 percent of the $709 billion in Treasury securities on its
balance sheet to providing liquidity and opened the door to more
with yesterday's decision to become a lender of last resort for
the biggest Wall Street dealers." ("Bernanke May Run
Low on Ammunition for Loans, Rates", Bloomberg)
The troubles in the credit
markets and real estate are bigger than the Fed or the PPT; and
they know it. The next step is massive government intervention;
mortgage-rate freezes, bailouts and fiscal stimulus. Big government
is back; Reaganism has gone full-circle. That doesn't mean that
the PPT cannot have an important psychological affect in soothing
jittery markets or stalling a system-wide collapse. It just
means, that markets will eventually correct regardless of what
anyone does to stop them. The sharp downturn in the financial
markets is the result of unsustainable credit expansion that
can't be fixed by the parlor tricks of the PPT. The rate at which
financial institutions are deleveraging and destroying capital
will inevitably trigger an economic crisis equal to the Great
Depression. What is needed is strong leadership and a re-commitment
to transparency, not "more of the same" low interest
crack and financial hanky-panky. It's time to come clean with
the public and admit we have a problem.
"Sucker rallies",
like Tuesday's 400 point surge on Wall Street just helps
to conceal the deeply rooted problems that need to be addressed
before investor confidence can be restored. Blogger
Rick Ackerman summed it up succinctly in last night's entry:
These psychotic, 400-point
rallies in the Dow do not augur renewed confidence. They are
being driven almost entirely by short-covering, and even the
otherwise clueless news anchors are starting to dismiss them
as meaningless. One of these days, moments after the last surviving
bear's short position has been liquidated, stocks are going to
fall so steeply that even the Plunge Protection Team will call
for back-up. Then, the financial collapse that so many have been
expecting will unfold in just a few days, with enough power to
leave the global economy in ruins for a generation." (Rik's
Piks Rick Ackerman)
Whether Ackerman's dire predictions
materialize or not, there's no denying that the situation is
getting worse by the day. In the last week alone, two major financial
institutions, Carlyle Capital and Bear Stearns have either gone
under or been bailed out wiping out tens of billions in market
capitalization. These flameouts have increased the rate of the
deflation adding to the already-prodigious losses from housing
foreclosures, delinquent credit card debt, defaulting car loans,
and the deleveraging in the hedge fund industry. Fortress
America has sprung a leak, and capital is escaping in a torrent.
"One thing is for certain,
we're in challenging times," Bush opined on Monday after
meeting with his top economic aides. ""But we are on
top of the situation."
That's comforting. Bush is
all over it.
Tuesday's 75 basis point rate
cut by the Fed is another sign of desperation. The Fed Funds
rate is now 2 percentage points below the rate of inflation;
a obvious attempt on Bernanke to reflate the equity bubble at
the expense of the dollar. Is that why Wall Street was so jubilant;
another savage blow to the currency?
The Fed's statement was as
bleak as any they have ever released sounding more like passages
from the Book of the Dead than minutes of the Federal Open Market
Committee:
Recent information indicates
that the outlook for economic activity has weakened further.
Growth in consumer spending has slowed and labor markets have
softened. Financial markets remain under considerable stress,
and the tightening of credit conditions and the deepening of
the housing contraction are likely to weigh on economic growth
over the next few quarters.
Inflation has been elevated,
and some indicators of inflation expectations have risen ....
uncertainty about the inflation outlook has increased. It will
be necessary to continue to monitor inflation developments carefully.
Today's policy action..should
help to promote moderate growth over time and to mitigate the
risks to economic activity. However, downside risks to growth
remain.
Wall Street rallied on the
cheery news.
Also, on Tuesday, the battered
investment banks began posting first quarter earnings which turned
out to be better than expected. Goldman Sachs Group Inc.
and Lehman Brothers Holdings Inc. beat estimates which added
to the stock market giddiness. Unfortunately, a careful reading
of the reports, shows that things are not quite as they
seem. The jubilation is unwarranted; it's just more smoke and
mirrors.
"Lehman Brothers Holdings
Inc. reported a 57% drop in fiscal first-quarter net income amid
weakness in its fixed-income business, though results topped
analysts' expectations." (Wall Street Journal)
The same was true of financial
giant Goldman Sachs:
"Goldman Sachs Group Inc.'s
fiscal first-quarter net income dropped 53% on $2 billion in
losses on residential mortgages, credit products and investments
...The biggest Wall Street investment bank by market value reported
net income of $1.51 billion, or $3.23 a share, for the quarter
ended Feb. 29, compared to $3.2 billion, or $6.67 a share, a
year earlier....Results included $1 billion in losses on residential
mortgage loans and securities, and nearly $1 billion in losses
on credit products and investment losses ..." (Wall Street
Journal)
The bottom line is that both
companies first quarter earnings dropped by more than a half
in just one year alone while, at the same time, they booked heavy
losses. That's hardly a reason for celebration. The major investment
banks remain on the critical list because of the billions of
dollars of toxic debt they still carry on their balance sheets.
Consider industry leader Goldman Sachs, for example, which
is sitting on a backlog of bad paper from the subprime/securitization
debacle as well as an unknown amount of LBOs (Leveraged buyouts)
and commercial real estate deals (CREs) that are heading south
fast. Market analyst, Mark Gongloff, sheds a bit of light
on the real condition of the big financials in his article ""Crunch
Proves A Test of Faith For Street Strong"":
"All of the brokerage
houses are highly leveraged, with a high ratio of assets to shareholders'
equity, a sign they have used debt heavily to build up positions
in hope of greater returns. Morgan Stanley, which will report
Wednesday, had a leverage ratio of 32.6-to-1 at the end of last
year, nearly as high as Bear's 32.8-to-1. Lehman was leveraged
30.7-to-1, and Merrill Lynch 27.8-to-1. And the would-be rock,
Goldman? It was leveraged 26.2-to-1.""(""Crunch
Proves A Test of Faith For Street Strong", WSJ)
Remember, Carlyle Capital was
leveraged 32 to 1 ($22 billion equity) and went ""poof""
in a matter of days when it couldn't scrape together a measly
$400 million for a margin call. How vulnerable are these other
maxed-out players now that the credit bubble has popped and the
whole system is quickly unwinding?
Not very safe, at all. As Gongloff
points out:
"Based in part on numbers
reported at the end of Bear's fourth quarter, estimated that
Bear Stearns had $35 billion in liquid assets and borrowing capacity,
enough to operate for 20 months. Turns out it had enough for
three days.""
That's right; three days and
it was over. Why would anyone think it will be different with
these other equally-exposed banks? These institutions are basically
insolvent now. The Federal Reserve is just trying to prop them
up to maintain appearences. But it's a hopeless cause. As
hyper-inflated assets are downgraded; structured investments
and arcane hedges against default will continue to disintegrate
and these profligate institutions will be crushed by a
stampede of panicking investors. The flight to safety has already
begun. Cash is king.
Look what has transpired just
since Monday.
"Crude oil, copper and
coffee led the biggest decline ever in commodities
on speculation that a U.S. recession will stall demand for raw
materials." (Bloomberg) All asset classes fall in a deflationary
spiral, even commodities which many people thought would be spared.
Not so. In fact, even gold has begun to retreat as hedge funds
and other market participants are forced to relinquish their
positions.
In other news, Reuters reports:
"The yield on U.S. 3-month
Treasury bills fell below 1 percent on Monday to levels not seen
in 50 years prompted by intense safety bids for cash spurred
by the ongoing global credit crunch...Investors were pulling
money out of stocks and even the booming commodity market even
after the Federal Reserve conducted a fresh round of measures
over the weekend to alleviate the credit crisis."
Here's another example of the "flight
to safety" as investors recognize the warning signs of deflation.
This trend is likely to intensify even though the Fed
will continue to cut rates and real earnings on Treasuries will
go negative. In another report from Reuters:
""The Chicago Board
Options Exchange Volatility Index or VIX on Monday surged to
its highest level in nearly two months as a fire sale of Bear
Stearns and an emergency Federal Reserve cut in the discount
rate reignited credit fears."
Fear is higher now than it
has been in a long time. Option traders are loading up on index
puts in the Standard & Poor's 500 index. The "Fear Gage,
as it is called, is soaring to new heights as credit problems
continue to mount and business begins to slow to a crawl.
And, perhaps most important
of all:
"The cost of borrowing
in dollars overnight rose by the most in at least seven years
after the Federal Reserve's emergency cut in the discount interest
rate stoked concern that credit losses are deepening....The London
interbank offered rate, or Libor climbed 81 basis points to 3.86
percent, the British Bankers' Association said today. It was
the biggest increase since at least January 2001. The comparable
pound rate rose 28 basis points to 5.59 percent, the largest
gain since Dec. 31, 2007." (Bloomberg)
This may sound like technical
gibberish geared for market junkies, but it is critical for
understanding the gravity of what is really going on. The Fed's
rate cuts are not normalizing the lending between banks.
In fact, the situation is actually deteriorating quite quickly.
When banks don't lend to each other (because they are worried
about getting their money back) the wheels of capitalism grind
to a halt. The banks are the essential conduit for providing
credit to the broader economy. If there's a slowdown in traffic, economic
growth begins to slow immediatly. Presently, the banks
are hoarding cash to cover the losses on their mortgage-backed investments
and to shore up their skimpy capital reserves. As a result, consumer
spending is sluggish and GDP is beginning to shrink.
"We know we're in a sharp
(decline), and there's no doubt that the American people know
that the economy has turned down sharply"," said Henry
Paulson on NBC television on Sunday. "There's turbulence
in our capital markets and it's been going on since August. We're
looking for ways to work our way through it."
No kidding. But Paulson is
clearly out of his depth. He's simply not the man to deal
with a crisis of this magnitude. His only concern is bailing
out his rich friends in the banking industry. The interests of
workers and consumers are just brushed aside. Has anyone from
the Dept of the Treasury (or the Fed) suggested a bailout for
the 14,000 Bear Stearns employees who just lost not only their
jobs but the entire retirement when the company was purchased
by JP Morgan?
Of course, not. Because both
Paulson and Bernanke take a class oriented approach to the problem
that narrows their range of vision and limits their ability to
pose viable remedies. They are unable to see the whole playing
field. For example, Bernanke assumes that if he keeps cutting
rates, he can reflate the equity bubble by stimulating consumer
spending. But that is not going happen. First of all,
the banks are not passing on the savings to customers. And, second,
the banks are only lending to applicants with a flawless credit
history. In other words, the Fed's cuts may be good for Bernanke
and Paulson's buddies, but they do nothing for either the consumer
or the broader economy. Also, as Michael Hudson notes in his
latest article "Save the Economy,
Dismantle the Empire" (counterpunch.org) the banks are taking
the money they borrow from the Fed and investing it elsewhere:
"This week the Fed tried
to reverse the plunge in asset prices by flooding the banking
system with $200 billion of credit. Banks were allowed to turn
their bad mortgage loans and other loans over to the Federal
Reserve at par value (rather at just 20% "mark to market"
prices). The Fed's cover story is that this infusion will enable
the banks to resume lending to "get the economy moving again."
But the banks are using the money to bet against the dollar.
They are borrowing from the Fed at a low interest rate, and buying
foreign euro-denominated bonds yielding a higher interest rate--and
in the process, making a currency gain as the euro rises against
dollar-denominated assets. The Fed thus is subsidizing capital
flight, exacerbating inflation by making the price of imports
(headed by oil and other raw materials) more expensive. These
commodities are not more expensive to European buyers, but only
to buyers paying in depreciated dollars.""
The banksters are "buying
foreign euro-denominated bonds" during an economic crisis
in America? Whoa. Now there's an interesting take on patriotism.
The Fed's strategy has even
failed to lower mortgage rates which are pinned to the 30-year
Treasury and which has actually gone up since Bernanke began
slashing rates. This inability to pass on the Fed's rate cuts
to potential mortgage applicants ensures that the housing meltdown
will continue unabated well into 2009 and, perhaps, 2010.
In the last few days, the Fed
has provided $30 billion to buy up the least-liquid speculative
debts of a privately-owned investment bank, Bear Stearns, which
was leveraged at 32 to 1 and which will remain unsupervised by
federal regulators. How does that address the underlying issues
of the credit crunch? Are Bernanke and Paulson really trying
to put the financial markets back on solid footing again or are
they merely expressing their bank-centered bias?
That question was answered
in an article on Tuesday in the Wall Street Journal which explained
the real reasons behind the Bear bailout:
"The illusion was shattered
Saturday morning, when Mr. Paulson was deluged by calls to his
home from bank chief executives. They told him they worried the
run on Bear would spread to other financial institutions. After
several such calls, Mr. Paulson realized the Fed and Treasury
had to get the J.P. Morgan deal done before the markets in Asia
opened on late Sunday, New York time.
"It was just clear that
this franchise was going to unravel if the deal wasn't done by
the end of the weekend," Mr. Paulson said in an interview
yesterday.'" ("The Week that Shook Wall Street",
Wall Street Journal)
So all it took was a little
nudge from his banking cohorts for Paulson to swing
into action and firm up the deal. That says it all. The interests
of the American people were never even considered. It was
all choreographed to bail out the financial industry. No
wonder so many people believe that the Federal Reserve and
the US Treasury are merely an extension of the banking establishment.
The Bear bailout proves it.
Mike Whitney lives in Washington state. He can
be reached at: fergiewhitney@msn.com
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