The cost of this presidency, put in dollars and cents through today, is $32 trillion dollars. That’s a 150% increase in exposure ...

Obligations Ignored | BY Scott Horton | PUBLISHED December 18, 2007
...
So here it is, an obscure speech delivered by an obscure person, with a message that no one wants to hear:

For the 11th year in a row, the U.S. Government Accountability Office (GAO) was prevented from expressing an opinion on the consolidated financial statements of the U.S. government–other than the Statement of Social Insurance–because of serious material weaknesses affecting financial systems, fundamental recordkeeping, and financial reporting.
...
Overall, however, Walker was not satisfied. In a speech today at the National Press Club, he said, “If the federal government was a private corporation and the same report came out this morning, our stock would be dropping and there would be talk about whether the company’s management and directors needed a major shake-up.” Walker urged greater transparency and accountability over the federal government’s operations, financial condition, and fiscal outlook.

Despite improvements in financial management since the U.S. government began preparing consolidated financial statements more than a decade ago, three major impediments prevent the U.S. government from obtaining a clean opinion: (1) serious financial management problems at the Department of Defense, (2) the federal government’s inability to adequately account for and reconcile intragovernmental activity and balances between federal agencies, and (3) the federal government’s ineffective process for preparing the consolidated financial statements.

“Until the problems outlined in our audit report are adequately addressed, they will continue to have adverse implications for the federal government and American taxpayers,” Walker said in a letter to the President and Congress. “The federal government’s fiscal exposures totaled approximately $53 trillion as of September 30, 2007, up more than $2 trillion from September 30, 2006, and an increase of more than $32 trillion from about $20 trillion as of September 30, 2000,” Walker said. “This translates into a current burden of about $175,000 per American or approximately $455,000 per American household.”

Now the essence of the word “conservative” lies in the art of preservation. Holding on to that which is useful from the past. Recognizing an obligation to the next generation. Time was, when publications like the Wall Street Journal would lambaste the government for its fiscal irresponsibility, and broadcasters like Fox News would chime in. Of course, they kept this steady drone during the Clinton era. And the truth was that during the Clinton presidency, the American Government was a modern model of fiscal responsibility, actually producing a series of surplus years, and starting the process of taking down the national debt.

With the arrival of George W. Bush, all proper stewardship of the economy has been thrown to the winds in favor of a quick joy ride for a team of power-crazy leaders. The cost of this presidency, put in dollars and cents through today, is $32 trillion dollars. That’s a 150% increase in exposure since the reins of office were handed to George W. Bush. ...

supposedly independent watchdogs—this time government banking regulators, no less—are funded by those they regulate

Letting Sleeping Watchdogs Lie | The business press rediscovers regulators | By Dean Starkman Thu 20 Dec 2007 03:20 PM
...

“Paulson attacks ‘shameful’ lenders,” The Financial Times reported in October.

[Paulson] said the conduct of some mortgage market participants had been ‘shameful’ and called for consideration of a nationwide licensing and monitoring system for mortgage brokers.

...

The USA Today story also says that Sheila C. Bair was “frustrated” at the “slow pace” of loan restructuring for subprime borrowers.

‘Washington needs to push hard on this,’ she said. ‘Our message is, “Prioritize these folks, if they can convert” (to fixed-rate loans). That will free up more time to deal with some of the more challenging cases.

That’s fine, except Bair heads the Federal Deposit Insurance Corporation.

She is “Washington.”

...

One of its chief merits is that it reveals even more about Alan Greenspan’s failure to act on urgent private warnings. In one passage, he seems paralyzed by his own ideology as he explains why he had parried pleas as early as 2001, from the late Fed governor Edward Gramlich and the FDIC’s Bair, to use powers the Fed already had.

‘I got the impression that there were a lot of very questionable practices going on,’ he said. ‘The problem has always been, what basically does the law mean when it says deceptive and unfair practices? Deceptive and unfair practices may seem straightforward, except when you try to determine by what standard.’

The Times makes a point that has appeared elsewhere but is one that nonetheless bears re-emphasizing: supposedly independent watchdogs—this time government banking regulators, no less—are funded by those they regulate.

...

As The New York Times reported in December of that year:

State officials and consumer groups have opposed the [OCC’s -- [part of Treasury Department]] move to override state laws aimed at protecting consumers, including those to curb ‘predatory’ lending practices.

These lending abuses include exorbitant fees and interest rates and
payments for undisclosed insurance products.

But the comptroller has the power to override state banking laws.
‘Federal pre-emption is not unprecedented,’ a spokesman, Bob Garsson, said.

And remember, the OCC wasn’t just fighting Spitzer. Actually, it was Michigan that challenged OCC preemption in a case that went to the U.S. Supreme Court, and attorneys general from all fifty states filed amicus briefs in support.

Business-news organizations covered the dispute between federal and state officials as a power struggle, a tit-for-tat fight. But something must have seemed odd even at the time. For one thing, The Wall Street Journal editorial page threw its federalist principles overboard and became a champion of federal regulation—seriously. In retrospect, the editorials are howlers.

The OCC has a large staff of economists whose only job is to perform the sort of sophisticated statistical modeling needed to discover relevant disparities between loan approvals and denials or in pricing. Any red flags are followed up with in-depth examinations of loan files. The agency also has staff members on-site at large banks to monitor lending practices.

And get this:

If the OCC hasn’t had a huge number of enforcement actions, one reason is because it has a chance to monitor behavior before it becomes a problem.

And the punch line:

It’s a shame more federal agencies haven’t taken their responsibilities as seriously as the OCC. (3)

That’s an embarrassment.

current account deficit: 5.4% of GDP: $2000 per worker per year to finance: 3.3M manufacturing jobs lost ...

December 18, 2007 | While the Bush Administration Dallies, the Crisis Deepens | The Consequences the Trade Deficit | By PETER MORICI

Yesterday, the Commerce Department reported the third quarter current account deficit was $178.5 billion, down from $188.9 billion in the second quarter. The deficit exceeded 5.4 percent of GDP.
...
In the third quarter, the United States had a $26.5 surplus on trade in services and a $20.5 billion surplus on income payments. This was hardly enough to offset the massive $199.7 billion deficit on trade in goods, and net unilateral transfers to foreigners equal to $25.8 billion.
...
To finance the current account deficit, Americans are borrowing and selling assets at a pace of $700 billion a year. U.S. foreign debt exceeds $6 trillion, and the debt service comes to about $2000 a year for every working American.
...
Manufacturers are particularly hard hit by this subsidized competition. Through recession and recovery, the manufacturing sector has lost 3.3 million jobs since 2000. Following the pattern of past economic recoveries, the manufacturing sector should have regained about 2 million of those jobs, especially given the very strong productivity growth accomplished in durable goods and throughout manufacturing.
...
Peter Morici is a professor at the University of Maryland School of Business and former Chief Economist at the U.S. International Trade Commission

Credit crisis worsens as Alan Greenspan says the Fed is powerless

From The Times | December 13, 2007 | Credit crisis worsens as Alan Greenspan says the Fed is powerless | Tom Bawden

Fallout from the sub-prime mortgage crisis wreaked further havoc yesterday as Bank of America, Wachovia and PNC all said that investment write-downs would be worse than forecast as the credit crunch worsened.

Bank of America, which said last month that it may need to write down the value of its mortgage bond portfolio by about $3 billion (£1.4 billion) this quarter, conceded that the losses would probably be considerably higher. Wachovia, separately, doubled its provision for fourth-quarter loan losses to about $1 billion, while PNC, in Pennsylvania, said that it would take a $110 million fourth-quarter charge, most of it relating to residential mortgages. Meanwhile, shares in Sallie Mae fell by 13 per cent, the most in 14 years, after America’s largest student lender cut its profit forecast for 2008 by 17 per cent. ...

Report Says That the Rich Are Getting Richer Faster, Much Faster

Report Says That the Rich Are Getting Richer Faster, Much Faster | By DAVID CAY JOHNSTON | Published: December 15, 2007

The increase in incomes of the top 1 percent of Americans from 2003 to 2005 exceeded the total income of the poorest 20 percent of Americans, data in a new report by the Congressional Budget Office shows.

The poorest fifth of households had total income of $383.4 billion in 2005, while just the increase in income for the top 1 percent came to $524.8 billion, a figure 37 percent higher.
...
“A lot of people justifiably feel they are working harder and smarter, they are baking a bigger and better pie, and yet their slice is not growing much at all,” Mr. Bernstein said. “It is meaningless to middle- and low-income families to say we have a great economy because their economy looks so much different than folks at the top of the scale because this is an economy that is working, but not working for everyone.” ..

the [Bush extra] interest we are paying, year after year ... $200B -- two Iraq wars a years forever ...

The Economic Consequences of Mr. Bush | by Joseph E. Stiglitz December 2007

The next president will have to deal with yet another crippling legacy of George W. Bush: the economy. A Nobel laureate, Joseph E. Stiglitz, sees a generation-long struggle to recoup.

When we look back someday at the catastrophe that was the Bush administration, ... The damage done to the American economy does not make front-page headlines every day, but the repercussions will be felt beyond the lifetime of anyone reading this page.

... Unemployment stands at a respectable 4.6 percent. Well, fine. But the other side of the ledger groans with distress: a tax code that has become hideously biased in favor of the rich; a national debt that will probably have grown 70 percent by the time this president leaves Washington; a swelling cascade of mortgage defaults; a record near-$850 billion trade deficit; oil prices that are higher than they have ever been; and a dollar so weak that for an American to buy a cup of coffee in London or Paris—or even the Yukon—becomes a venture in high finance.

And it gets worse. After almost seven years of this president, the United States is less prepared than ever to face the future. We have not been educating enough engineers and scientists, people with the skills we will need to compete with China and India. We have not been investing in the kinds of basic research that made us the technological powerhouse of the late 20th century. And although the president now understands—or so he says—that we must begin to wean ourselves from oil and coal, we have on his watch become more deeply dependent on both.
...
But the Bush administration had its own ideas. The first major economic initiative pursued by the president was a massive tax cut for the rich, ... Together these tax cuts, when fully implemented and if made permanent, mean that in 2012 the average reduction for an American in the bottom 20 percent will be a scant $45, while those with incomes of more than $1 million will see their tax bills reduced by an average of $162,000.
..
... Inequality is now widening in America, and at a rate not seen in three-quarters of a century. A young male in his 30s today has an income, adjusted for inflation, that is 12 percent less than what his father was making 30 years ago. Some 5.3 million more Americans are living in poverty now than were living in poverty when Bush became president. America’s class structure may not have arrived there yet, but it’s heading in the direction of Brazil’s and Mexico’s. ...
...
The Bankruptcy Boom
...
Agricultural subsidies were doubled between 2002 and 2005. Tax expenditures—the vast system of subsidies and preferences hidden in the tax code—increased more than a quarter. Tax breaks for the president’s friends in the oil-and-gas industry increased by billions and billions of dollars. ...
...
All of this spending made the economy look better for a while; the president could (and did) boast about the economic statistics. But the consequences for many families would become apparent within a few years, when interest rates rose and mortgages proved impossible to repay. The president undoubtedly hoped the reckoning would come sometime after 2008. It arrived 18 months early. As many as 1.7 million Americans are expected to lose their homes in the months ahead. For many, this will mean the beginning of a downward spiral into poverty.

Between March 2006 and March 2007 personal-bankruptcy rates soared more than 60 percent. As families went into bankruptcy, more and more of them came to understand who had won and who had lost as a result of the president’s 2005 bankruptcy bill, which made it harder for individuals to discharge their debts in a reasonable way. ...
Reckoning

It is natural to wonder, What would this money have bought if we had spent it on other things? U.S. aid to all of Africa has been hovering around $5 billion a year, the equivalent of less than two weeks of direct Iraq-war expenditures. ...

The soaring price of oil is clearly related to the Iraq war. The issue is not whether to blame the war for this but simply how much to blame it. ...
...
The Way Forward
...
Some portion of the damage done by the Bush administration could be rectified quickly. A large portion will take decades to fix—and that’s assuming the political will to do so exists both in the White House and in Congress. Think of the interest we are paying, year after year, on the almost $4 trillion of increased debt burden—even at 5 percent, that’s an annual payment of $200 billion, two Iraq wars a year forever. ...

Greenspan: Give Homeowners Financial Aid

Greenspan: Give Homeowners Financial Aid | KEVIN FREKING | December 16, 2007 05:30 PM EST | AP

WASHINGTON — Alan Greenspan, former chairman of the Federal Reserve, suggested Sunday that a tax break or other government financial help for homeowners facing the mortgage crunch would be the best political fix for the economy.

He cautioned against meddling with home prices or interest rates to address the housing problem.

Greenspan did not specifically call for a tax cut. Instead, he called for the government to apply money to the severe housing market slump. Such a cash infusion would typically come through a tax break or a new government spending program.

"Cash is available and we should use that in larger amounts, as is necessary, to solve the problems of the stress of this," Greenspan said during an appearance on ABC's "This Week." ...

Health coverage? Schools? New Orleans? flushing whole generations worth of cash into the bottomless pit of a failed and endless war ...

Now and Forever | By BOB HERBERT | Published: December 4, 2007

Most of the time we pretend it’s not there: The staggering financial cost of the war in Iraq, which continues to soar, unchecked, like a rocket headed toward the moon and beyond.

Early last year, the Nobel-Prize-winning economist Joseph Stiglitz estimated that the “true” cost of the war would ultimately exceed $1 trillion, and maybe even $2 trillion.

Incredibly, that estimate may have been low.

A report prepared for the Democratic majority on the Joint Economic Committee of the House and Senate warns that without a significant change of course in Iraq, the long-term cost of the wars in Iraq and Afghanistan could head into the vicinity of $3.5 trillion. The vast majority of those expenses would be for Iraq.

Priorities don’t get much more twisted. A country that can’t find the money to provide health coverage for its children, or to rebuild the city of New Orleans, or to create a first-class public school system, is flushing whole generations worth of cash into the bottomless pit of a failed and endless war. ...

... there are not enough American engineers and scientists. For mysterious reasons Americans prefer to be waitresses and bartenders ... [NOT !]

The Shortage Myth | The Lies at the End of the American Dream | By Paul Craig Roberts

12/04/07 "ICH" -- -- Last June a revealing marketing video from the law firm, Cohen & Grigsby appeared on the Internet. The video demonstrated the law firm's techniques for getting around US law governing work visas in order to enable corporate clients to replace their American employees with foreigners who work for less. The law firm's marketing manager, Lawrence Lebowitz, is upfront with interested clients: "our goal is clearly not to find a qualified and interested US worker."

If an American somehow survives the weeding out process, "have the manager of that specific position step in and go through the whole process to find a legal basis to disqualify them for this position--in most cases there doesn't seem to be a problem."
...
University of California computer science professor Norm Matloff, who watches this issue closely, said that Cohen & Grigsby's practices are the standard ones used by hordes of attorneys, who are cleaning up by putting Americans out of work.

The Cohen & Grigsby video was a short-term sensation as it undermined the business propaganda that no American employee was being displaced by foreigners on H-1b or L-1 work visas. Soon, however, business organizations and their shills were back in gear lying to Congress and the public about the amazing shortage of qualified Americans for literally every technical and professional occupation, especially IT and software engineering.

Everywhere we hear the same droning lie from business interests that there are not enough American engineers and scientists. For mysterious reasons Americans prefer to be waitresses and bartenders, hospital orderlies, and retail clerks.
...
I also receive numerous responses from American engineers and IT workers who have managed to hold on to jobs or to find new ones after long intervals when they have been displaced by foreign hires. Their descriptions of their work environments are fascinating.

For example, Dayton, Ohio, was once home to numerous American engineers. Today, writes one surviving American, "I feel like an alien in my own country--as if Dayton had been colonized by India. NCR and other local employers have either offshored most of their IT work or rely heavily on Indian guest workers. The IT department of National City Bank across the street from LexisNexis is entirely Indian. The nearby apartment complexes house large numbers of Indian guest workers filling the engineering needs of many area businesses."

I have learned that Reed Elsevier, which owns LexisNexis, has hired a new Indian vice president for offshoring and that now the jobs of the Indian guest workers may be on the verge of being offshored to another country. The relentless drive for cheap labor now threatens the foreign guest workers who displaced America's own engineers.

One software engineer wrote to me protesting the ignorance of Thomas Friedman for creating a false picture of American engineers being outdated and for "denouncing American engineers and other workers as 'xenophobes' for opposing their displacement by foreign guest workers." The engineer also took exception to the "willful ignorance or cynicism of Bruce Bartlett and George Will" who he described as "bootlicks for pro-outsourcing lobbies."
...
Among the interest groups that benefit from the false portrait are universities, which gain graduate student enrollments and inexpensive postdocs to conduct funded lab research. Employers gain larger profits from lower paid scientists and engineers, and immigration lawyers gain fees by leading employers around the work visa rules.

Using the biomedical research sector as an example, Teitelbaum explained to the congressmen how research funding creates an oversupply of scientists that requires ever larger funding to keep employed. Teitelbaum made it clear that it is nonsensical to simultaneously increase the supply of American scientists while forestalling their employment with a shortage myth that is used to import foreigners on work visas.

Teitelbaum recommends that American students considering majors in science and engineering first investigate the career prospects of recent graduates.

Integrity is so lacking in America that the shortage myth serves the interests of universities, funding agencies, employers, and immigration attorneys at the expense of American students who naively pursue professions in which their prospects are dim. Initially it was blue-collar factory workers who were abandoned by US corporations and politicians. Now it is white-collar employees and Americans trained in science and technology. Princeton University economist Alan Blinder estimates that there are 30 to 40 million American high end service jobs that ultimately face offshoring. ...

Bush regularly leaves out is his own role in exacerbating the problem, using the AMT to hide the real cost of his reckless tax cuts,

How Bush Helped Create the AMT Problem | Submitted by Bill Scher on December 4, 2007 - 6:32pm.

President Bush is continuing to attack Congress for not yet passing legislation to prevent the Alternative Minimum Tax from making millions of Americans unfairly pay a greater than necessary share in taxes. He raised the issue three times in the last four days.

What Bush regularly leaves out is his own role in exacerbating the problem, using the AMT to hide the real cost of his reckless tax cuts, and expanding those affected in 2007 from 10 million taxpayers to more than 20 million.

On Friday, the Center for Budget and Policy Priorities reminded folks of recent history: (emphasis original)

... To the contrary, lawmakers not only anticipated the AMT’s explosive growth, they counted on it to mask the cost of the 2001 tax cuts. The Administration and congressional tax writers were well aware that the legislation they pushed in 2001 would force millions more taxpayers to pay the AMT, which would take back part or all of their tax cuts and thereby reduce the 2001 tax bill’s apparent cost. More than two thirds of the cost of this year’s AMT patch is due to actions taken by Congress and the Administration in designing the 2001 (and 2003) tax cuts.

As Charles Grassley, [R-Iowa,] then Chairman of the Senate Finance Committee, said in 2001, “President Bush’s plan [will] bring millions more Americans into the AMT process; the Joint Tax Committee estimates that the Bush tax plan will nearly double the number of American taxpayers affected by the AMT.”

All of Bush's current spin is to block the House bill, which dares to responsibly offset the cost of temporarily fixing the AMT by closing the ridiculous loophole that basically says hedge fund managers should pay less taxes than folks in every other occupation. ...

The home mortgage meltdown ... beginning to hammer wealthy and middle class Chicago neighborhoods

Middle class and out of a home in Chicago | Poorer neighborhoods hit hardest, but wealthy, middle class also squeezed | December 4, 2007 | BY ART GOLAB Staff Reporter/agolab@suntimes.com

The home mortgage meltdown isn’t just gutting the poorer parts of town.

It’s beginning to hammer wealthy and middle class Chicago neighborhoods like Lincoln Park, Lincoln Square, Irving Park, Portage Park and Mt. Greenwood — all areas where home mortgage foreclosures have shot up by 100 percent or more from 2006 to 2007.
...
Poverty stricken West Englewood, for example, had 348 foreclosures, or 111 per square mile — yet that was just a 58 percent increase over the previous year. ...

what has really undermined trust is the fact that nobody knows where the financial toxic waste is buried

Innovating Our Way to Financial Crisis | By PAUL KRUGMAN | Published: December 3, 2007
...
How bad is it? Well, I’ve never seen financial insiders this spooked — not even during the Asian crisis of 1997-98, when economic dominoes seemed to be falling all around the world.

This time, market players seem truly horrified — because they’ve suddenly realized that they don’t understand the complex financial system they created.
...
But liquidity has been drying up. Some credit markets have effectively closed up shop. Interest rates in other markets — like the London market, in which banks lend to each other — have risen even as interest rates on U.S. government debt, which is still considered safe, have plunged.
...
Behind the disappearance of liquidity lies a collapse of trust: market players don’t want to lend to each other, because they’re not sure they’ll be repaid.
...
But what has really undermined trust is the fact that nobody knows where the financial toxic waste is buried. Citigroup wasn’t supposed to have tens of billions of dollars in subprime exposure; it did. Florida’s Local Government Investment Pool, which acts as a bank for the state’s school districts, was supposed to be risk-free; it wasn’t (and now schools don’t have the money to pay teachers). ...
...
The bottom line is that policy makers left the financial industry free to innovate — and what it did was to innovate itself, and the rest of us, into a big, nasty mess.

Toxic loan packages: bankers argue, buyers of such securities are sophisticated and understand the risks ...[ but clearly didn't !]

Wary of Risk, Bankers Sold Shaky Mortgage Debt | By JENNY ANDERSON and VIKAS BAJAJ | Published: December 6, 2007

As the subprime loan crisis deepens, Wall Street firms are increasingly coming under scrutiny for their role in selling risky mortgage-related securities to investors.

Many of the home loans tied to these investments quickly defaulted, resulting in billions of dollars of losses for investors. At the same time, many of the companies that sold these securities, concerned about a looming meltdown in the housing market, protected themselves from losses.

One big bank that saw the trouble coming, Goldman Sachs, began reducing its inventory of mortgages and mortgage securities late last year. Even so, Goldman went on to package and sell more than $6 billion of new securities backed by subprime mortgages during the first nine months of this year. ...
...
The Wall Street banks that foresaw problems say they hedged their mortgage positions as part of their fiduciary duty to shareholders. Indeed, some other companies, particularly Citigroup, Merrill Lynch and UBS, apparently did not foresee the housing market collapse and lost billions of dollars, leading to forced resignations of their chief executives.

In any case, the bankers argue, buyers of such securities — institutional investors like pension funds, banks and hedge funds — are sophisticated and understand the risks.

Wall Street officials maintain that the system worked as it was supposed to. Underwriters, they say, did not pressure colleagues on trading desks or in research departments to promote securities blindly.

Nevertheless, the loans that many banks packaged are proving to be increasingly toxic. ...

Despite "No Child Left Behind" law: U.S. fourth-graders have lost ground in reading ability compared with kids around the world

US 4th-graders losing ground on literacy | NANCY ZUCKERBROD | AP News | Nov 28, 2007 17:55 EST

US Students Post Flat Reading Scores, Outperformed by 10 Other Nations or Jurisdictions

U.S. fourth-graders have lost ground in reading ability compared with kids around the world, according to results of a global reading test.

Test results released Wednesday showed U.S. students, who took the test last year, scored about the same as they did in 2001, the last time the test was given — despite an increased emphasis on reading under the No Child Left Behind law.

Still, the U.S. average score on the Progress in International Reading Literacy test remained above the international average. Ten countries or jurisdictions, including Hong Kong and three Canadian provinces, were ahead of the United States this time. In 2001, only three countries were ahead of the United States.

The 2002 No Child Left Behind law requires schools to test students annually in reading and math, and imposes sanctions on schools that miss testing goals. ...

Like a ticking time bomb, the national debt ... expanding by about $1.4 billion a day _ or nearly $1 million a minute ...

National Debt Grows $1 Million a Minute | TOM RAUM | December 3, 2007 05:37 PM EST

WASHINGTON — Like a ticking time bomb, the national debt is an explosion waiting to happen. It's expanding by about $1.4 billion a day _ or nearly $1 million a minute.

What's that mean to you?

It means almost $30,000 in debt for each man, woman, child and infant in the United States.

Even if you've escaped the recent housing and credit crunches and are coping with rising fuel prices, you may still be headed for economic misery, along with the rest of the country. That's because the government is fast straining resources needed to meet interest payments on the national debt, which stands at a mind-numbing $9.13 trillion. ...
...
The national debt _ the total accumulation of annual budget deficits _ is up from $5.7 trillion when President Bush took office in January 2001 and it will top $10 trillion sometime right before or right after he leaves in January 2009. ...
...
For now, large U.S. trade deficits with much of the rest of the world work in favor of continued foreign investment in Treasuries and dollar-denominated securities. After all, the vast sums Americans pay _ in dollars _ for imported goods has to go somewhere. But that dynamic could change.

"The first day the Chinese or the Japanese or the Saudis say, `we've bought enough of your paper,' then the debt _ whatever level it is at that point _ becomes unmanageable," said Collender. ...

much of this crisis traced to lenders’ failure to vet borrowers and the government’s failure to regulate ... now increasing foreclosures, CRIME ...

Spreading the Misery | Article Tools Sponsored By | Published: November 29, 2007
...
In the third quarter, there were 635,000 foreclosure filings, a 30 percent increase from the previous quarter and nearly double from a year ago, according to RealtyTrac, a national real estate information service. That works out to one for every 196 households. Michigan and Ohio, which were hit early and hard by a combination of economic weakness and reckless lending, continue to reel. Foreclosures rose last year in Colorado, Georgia and Texas and are now surging in California, Nevada, Arizona and Florida. In those states unsustainable mortgages are at the root of the problem.
...
The Bush administration has been far too slow to respond, with some officials apparently worried that helping today’s troubled borrowers might encourage future borrowers to take on too much debt. That misses a critical point: much of this crisis can be traced to lenders’ failure to vet borrowers and the government’s failure to regulate the industry. And it misses an even bigger point: unless something is done quickly, whole communities, not just people who lose their homes, will suffer.

Foreclosed properties damage the value of nearby homes and the tax bases of municipalities. There is also a strong correlation between foreclosures and crime. For every one percentage point increase in a neighborhood’s foreclosure rate, violent crime rises 2.3 percent, according to a recent study by Dan Immergluck of the Georgia Institute of Technology and Geoff Smith of Woodstock Institute, a research and advocacy organization in Chicago. ...

Without ability to borrow abroad, Washington cannot conduct its wars of aggression, and Americans cannot continue to consume $800B more than produces

Impending Destruction of the US Economy | By Paul Craig Roberts

11/28/07 "ICH" -- --- Hubris and arrogance are too ensconced in Washington for policymakers to be aware of the economic policy trap in which they have placed the US economy. If the subprime mortgage meltdown is half as bad as predicted, low US interest rates will be required in order to contain the crisis. But if the dollar’s plight is half as bad as predicted, high US interest rates will be required if foreigners are to continue to hold dollars and to finance US budget and trade deficits.

Which will Washington sacrifice, the domestic financial system and over-extended homeowners or its ability to finance deficits?

The answer seems obvious. Everything will be sacrificed in order to protect Washington’s ability to borrow abroad. Without the ability to borrow abroad, Washington cannot conduct its wars of aggression, and Americans cannot continue to consume $800 billion dollars more each year than the economy produces.

A few years ago the euro was worth 85 cents. Today it is worth $1.48. This is an enormous decline in the exchange value of the US dollar. Foreigners who finance the US budget and trade deficits have experienced a huge drop in the value of their dollar holdings. The interest rate on US Treasury bonds does not come close to compensating foreigners for the decline in the value of the dollar against other traded currencies. Investment returns from real estate and equities do not offset the losses from the decline in the dollar’s value.

China holds over one trillion dollars, and Japan almost one trillion, in dollar-denominated assets. Other countries have lesser but still substantial amounts. As the US dollar is the reserve currency, the entire world’s investment portfolio is over-weighted in dollars.

No country wants to hold a depreciating asset, and no country wants to acquire more depreciating assets. In order to reassure itself, Wall Street claims that foreign countries are locked into accumulating dollars in order to protect the value of their existing dollar holdings. But this is utter nonsense. The US dollar has lost 60% of its value during the current administration. Obviously, countries are not locked into accumulating dollars. ...

Energy prices are at all time highs. The US is deeply in debt and dependent on foreign creditors.

November 26, 2007 | America's Days of Reckoning | Good-Bye to All That | By PAUL CRAIG ROBERTS

Pat Buchanan is too patriotic to come right out and say it, but the message of his new book, Day of Reckoning, is that America as we have known her is finished. Moreover, Naomi Wolf agrees with him. These two writers of different political persuasions arrive at America's demise from different directions.

Buchanan explains how hubris, ideology, and greed have torn America apart. A neoconservative cabal with an alien agenda captured the Bush administration and committed American blood, energy, and money to aggression against Muslim countries in the Middle East, while permitting America's domestic borders to be overrun by immigrants and exporting the jobs that had made the US an opportunity society. War and offshoring have taken a savage economic toll while open borders and diversity have created social and political division.
...
The Bush administration has been a catastrophe. Its failures are unprecedented. Energy prices are at all time highs. The US is deeply in debt and dependent on foreign creditors. The dollar has lost 60 per cent of its value against other tradable currencies, and its reserve currency status, the basis of American power, is in doubt. The US has lost millions of middle class jobs which have been replaced with low paid domestic service jobs. Except for the very rich, Americans have experienced no gains in real income in the 21st century. As the ladders of upward mobility are dismantled and the middle class struggles and fails, America is left with a few rich and many poor. America's reputation and credibility are damaged perhaps beyond repair. Congress and the press have enabled the executive branch's disregard of the Constitution and civil liberty. The US is mired in two lost wars which are pushing Lebanon and nuclear-armed Pakistan into deepening political crises.

As Buchanan concludes, "Our day of reckoning is at hand."

[is] the American superpower is also experiencing a terminal illness, with its decline marked by the dollar's downward drift

Michael Hirsh | In the Realm of the Dying Dollar | The plunging greenback threatens to cripple U.S. power. Why are the candidates ignoring this critical issue? | Nov 23, 2007 | Updated: 3:50 p.m. ET Nov 23, 2007

Great powers die slowly. It took years before the world realized that Great Britain was an imperial corpse, sapped of its strength by two world wars. The funeral finally occurred on Feb. 21, 1947, a freezing winter day in bomb-torn, bedraggled London, when the British wrote their own epitaph. ...

One has to wonder now whether the American superpower is also experiencing a terminal illness, with its decline marked by the dollar's downward drift. ... Yet the signs of imperial decadence are unmistakable. The world is losing confidence in the dollar, in no small part because it has lost confidence in America's strategic judgment and in its sustainability as a great power in the face of record budget and trade deficits, which are forcing the United States to borrow ever more money from future rivals like China and Russia. ...

... The irony for George W. Bush, of course, is that more than anything else he began as a president who wanted to build up American power, which he presumed to have been frittered away by Bill Clinton. ...

[India tech] shortage means something feared here: higher wages [+quality problems] ... [but static / declining wages in US ...ergo NO SHORTAGE?! ed.]

India High-Tech Industry Out of Workers | Apr 7, 12:13 AM (ET) | By TIM SULLIVAN [eWeek]
...
Nearly two decades into India's phenomenal growth as an international center for high technology, the industry has a problem: It's running out of workers.

There may be a lot of potential - Indian schools churn out 400,000 new engineers, the core of the high-tech industry, every year - but as few as 100,000 are actually ready to join the job world, experts say.
...
On the most basic level, it's a problem of success. The high-tech industry is expanding so fast that the population can't keep up with the demand for high-end workers.
...
A shortage means something feared here: higher wages.
...
India has technical institutes that seldom have electricity, and colleges with no computers. There are universities where professors seldom show up. Textbooks can be decades old. ...

most benefits from the H-1B visa program are not technology companies such Microsoft, IBM, ... but Indian outsourcing firms ...

H-1B Scramble Hits Fever Pitch | By Deborah Perelman | March 31, 2007 [eWeek]

The yearly rough and tumble for H-1B temporary workers' visas is in full swing this weekend, as the first day of the filing season is Monday, April 2. The year's allotment of 65,000 slots is anticipated to be exhausted in record time.
...
Yet, a BusinessWeek report, published Feb. 7, shed light on the fact that the companies that reap the most benefits from the H-1B visa program are not technology companies such Microsoft, IBM, Intel, Oracle and Sun Microsystems, which are usually associated with a large number of H-1B workers, but Indian outsourcing firms.

In reviewing visa data for the 2006 fiscal year, the report found that seven of the top 10 applicants were Indian companies that provided services to U.S. companies from India, from technology support to back-office processing. In fact, Infosys Technologies and Wipro took the top two spots for the second year in a row. Cognizant Technology Solutions, based in Teaneck, N.J., but operating mostly in India, took third place. The only other U.S. companies in the top 10 were Deloitte & Touche, an accounting and consulting firm, and Accenture, a consultancy, taking seventh and ninth place, respectively.

"brightest kids worrying about their jobs being outsourced. ... serious problems with the quality of bachelors from India, China ...

Study: There Is No Shortage of U.S. Engineers | By Deborah Perelman | April 4, 2007 [eWeek]

A commonly heard defense in the arguments that surround U.S. companies that offshore high-tech and engineering jobs is that the U.S. math and science education system is not producing a sufficient number of engineers to fill a corporation's needs.

However, a new study from Duke University calls this argument bunk, stating that there is no shortage of engineers in the United States, and that offshoring is all about cost savings.

This report, entitled "Issues in Science and Technology" and published in the latest National Academy of Sciences magazine further explores the topic of engineering graduation rates of India, China and the United States, the subject of a 2005 Duke study.
...
Duke's 2005 study corrected a long-heard myth about India and China graduating 12 times as many engineers as the United States, finding instead that the United States graduates a comparable number.
...
"You had the brightest kids worrying about their jobs being outsourced. We thought, if kids at Duke were worried, then let's do a study about what's going on in education," Vivek Wadhwa, executive in residence at Duke University's master's in engineering management program and a co-author of the study, told eWEEK at the time.

"The first thing you do in a study is you look at the facts. But we couldn't find any facts. The more we dug, the more we looked, the more we discovered there were no facts," said Wadhwa.

However, Duke's 2005 study reported serious problems with the quality of Indian and Chinese bachelor-level engineering graduates, and predicted both shortages in India and unemployment in China. The current report finds these predictions to be accurate, with China's National Reform Commission reporting that the majority of its 2006 graduates will not find work. There are also oft-heard whisperings of a engineering shortage in India, though private colleges and "finishing schools" are going far to make up for the Indian deficiencies, the report said. ...

At least 17 percent of computer programming, software engineering and data entry jobs were likely to be offshored ...

Report: IT Service Jobs to Take Biggest Offshoring Hit | By Deborah Perelman | February 12, 2007 [eWeek]

Updated: Over the next seven years, service offshoring is expected to have a relatively small impact on the overall U.S., but a sharply felt one on IT-concentrated metropolitan regions, finds a new report.
...
It was metropolitan areas with high concentrations of IT jobs, however, that were expected to be the hardest hit by service offshoring. Between 2005 and 2015, these IT-focused areas were expected to lose 2.6 percent of their jobs to offshoring, 2.4 percent in metropolitan areas that specialize in back-office services but only 1.9 percent of jobs in other metropolitan areas.

At least 17 percent of computer programming, software engineering and data entry jobs were likely to be offshored in these IT-concentrated metropolitan areas, including Bergen-Passaic and Newark in New Jersey; Boston; Boulder, Colo.; Danbury, Stamford and Hartford in Connecticut; Minneapolis; Orange County, San Francisco and San Jose in California and Wilmington, Del. ...

United States spent nearly $1 trillion on security in fiscal year 2007 ... not just the $463B for the DoDefense ...

November 14, 2007 by MinutemanMedia.org | Here’s What America Really Spends on Security | by Christopher Hellman

Back in February 2006, the Bush administration requested, and Congress later approved, roughly $463 billion in funding for the Defense Department. But when it comes to what American taxpayers really spend on national security, this is just the tip of the iceberg. All told, the United States spent nearly $1 trillion on security in fiscal year 2007, which ended on September 30.

In addition to the money allocated to the Pentagon each year as part of the Defense Department’s “base budget,” hundreds of billions of dollars are spent on other federal programs that are a direct result of the United States supporting and maintaining its military.

For example, the United States spent $173 billion last year on the wars in Iraq and Afghanistan and other costs the Pentagon says are related to the “Global War on Terror.” ...

The government also spent $43 billion on homeland security, not including $17 billion funded through the Defense Department budget. ...

The White House further revealed that it spent $43 billion on intelligence-related activities last year. ...

Veterans’ benefits accounted for $73 billion in federal spending last year to provide for those who’ve served their country in the past. ...

And the list goes on. According to the White House, the government paid $433 billion in interest on the national debt, and a conservative estimate puts the cost of past military spending attributable to this debt at $99 billion annually. ...

New JEC Report Reveals Total Economic Costs of War Could Exceed $3.5 Trillion if U.S. Stays the Course

New JEC Report Reveals Total Economic Costs of War Could Exceed $3.5 Trillion if U.S. Stays the Course

November 13: Senate Majority Leader Harry Reid (D-NV) and House Majority Leader Steny Hoyer (D-MD) will join Joint Economic Committee (JEC) Chairman Charles E. Schumer (D-NY), and JEC Vice Chair Carolyn Maloney (D-NY) today released a new report exposing the hidden costs of the war in Iraq. The Joint Economic Committee report investigates the costs of the war in Iraq that are not included in direct budgetary appropriations, including long term veteran’s health care, foregone investment, oil market disruptions and interest payments on borrowed war funding. The JEC estimates these costs could total in the trillions of dollars. ...

83 percent of crushing federal debt is a product of past three GOP presidents

September 12, 2007 | Contact: Israel Klein | (202) 224-5171 | NEW ANALYSIS BY JOINT ECONOMIC AND HOUSE BUDGET COMMITTEES: 83 PERCENT OF CRUSHING FEDERAL DEBT IS A PRODUCT OF PAST THREE GOP PRESIDENTS

Schumer and Maloney Urge White House to Stop Loading Future Generations with Backbreaking Debt

Washington, D.C. – Senator Charles E. Schumer, Chairman of the Joint Economic Committee (JEC) and Rep. Carolyn B. Maloney, Vice Chair of the JEC released a new JEC and House Budget Committee analysis of total national and public debt incurred under the past five administrations. The analysis highlights a proven track record of fiscal responsibility under Democratic administrations, and conversely a sharp increase in debt under Republican administrations.

The great majority of our national debt has been incurred by the past three Republican administrations. Over the past thirty years, those administrations have borrowed an average of $233 billion each year from the public. In contrast, under Democratic administrations the Federal government has borrowed an average of $26 billion each year, just one-ninth as much. ...

wars in Iraq and Afghanistan have thus far cost the average U.S. family of four more than $20,000

'Hidden Costs' Double Price Of Two Wars, Democrats Say | By Josh White | Washington Post Staff Writer | Tuesday, November 13, 2007; Page A14

The economic costs to the United States of the wars in Iraq and Afghanistan so far total approximately $1.5 trillion, according to a new study by congressional Democrats that estimates the conflicts' "hidden costs"-- including higher oil prices, the expense of treating wounded veterans and interest payments on the money borrowed to pay for the wars.

That amount is nearly double the $804 billion the White House has spent or requested to wage these wars through 2008, according to the Democratic staff of Congress's Joint Economic Committee. Its report, titled "The Hidden Costs of the Iraq War," estimates that the wars in Iraq and Afghanistan have thus far cost the average U.S. family of four more than $20,000. ...
...
The report argues that war funding is diverting billions of dollars away from "productive investment" by American businesses in the United States. It also says that the conflicts are pulling reservists and National Guardsmen away from their jobs, resulting in economic disruptions for U.S. employers that the report estimates at $1 billion to $2 billion. ...

Why Americans Don’t Study Science—It Doesn’t Pay ... pursuing an advanced degree in these fields is a bad investment.

February 15, 2005 | National Data, By Edwin S. Rubenstein | Why Americans Don’t Study Science—It Doesn’t Pay
...
There they go again. Claiming they can’t find enough skilled Americans, the high-tech industry has browbeaten Congress into allowing them to bring in another 20,000 foreign workers. The little-noticed legislation, inserted into an appropriations bill required for the government to continue normal operations, expands the number of foreign workers eligible for H-1b visas from 65,000 to 85,000 in 2005.
...

But native enrollment in graduate S&E programs peaked at 330,148 in 1993. Not coincidentally, 1993 was also the year in which S&E unemployment spiked at 3.5 percent. And, although unemployment fell during the 1990s boom, salaries in S&E occupations lagged those of other professional fields.

The reason Americans hesitate to study science and engineering is simple: pursuing an advanced degree in these fields is a bad investment.

For PhDs for example, the salary premium is not high enough to compensate for the five or more years of foregoing an industry salary while pursuing graduate study.

For U.S. citizens a doctorate in science or engineering causes a net lifetime LOSS in earnings.

For foreigners, of course, an American S&E degree remains attractive—relative to their options at home.

Allowing the importation of cheaper foreign workers is simply a form of corporate welfare for the high-tech industry—and it’s a solution that, by flooding the S&E market and discouraging potential native-born students, makes the problem worse.

Edwin S. Rubenstein (email him) is President of ESR Research Economic Consultants in Indianapolis.

Engineer Shortage? Duke Study Says No ... real issue is cheap overseas labor

Engineer Shortage? Duke Study Says No | Listen Now [3 min 43 sec] add to playlist

Morning Edition, April 30, 2007 · Why are so many engineering jobs being sent overseas? Leaders of tech companies say the United States does not produce enough engineers. But a Duke University study says the real issue is cheap overseas labor. Vivek Wadhwa discusses his study's findings.

US’ education system produces a supply of qualified STEM graduates in much greater numbers than jobs available ...less attractive career opportunities

Globalization of R&D and Innovation: Implications for U.S. STEM Workforce and Policy | Testimony before the U.S. House Subcommittee on Technology and Innovation

Author(s): Harold Salzman

Other Availability: PDF | Printer-Friendly Page

Posted to Web: November 06, 2007

Permanent Link: http://www.urban.org/url.cfm?ID=901129

Dr. Harold Salzman tells a House subcommittee on innovation and technology that new perspectives on competition and new routes for sharing knowledge freely across borders have prompted firms and universities to globalize. Salzman argues that globalization is not prompted by any deficiencies in the domestic supply of trained workers, and that "techno-nationalist" policies of the past are outdated and ineffective.
...
science, technology, engineering, and mathematics (STEM) workforce ...
...
The available data indicate that the United States’ education system produces a supply of qualified STEM graduates in much greater numbers than jobs available. If there are shortages, it is most likely a demand-side problem of STEM career opportunities that are less attractive than career opportunities in other fields. However, standard labor market indicators do not indicate any shortages.
...
The standard education measures indicate there are enough students with the requisite skills to succeed in science and engineering courses of study, and managers we have interviewed rarely if ever note a lack of technical skills among their STEM workers.
...
Supply and Demand for STEM workers
Common to many policy reports is a call for large increases in the STEM workforce, and improvement in K-12 math and science as the means of achieving this increase.4 The data do not reflect the claim that U.S. students show declining interest in science and engineering fields, either in college or in entering the workforce.
...
From 1985 to 2000, the United States graduated about 435,000 S&E students annually with bachelor’s, master’s, and doctoral degrees—that total includes only U.S. citizens and permanent residents (about 72 percent of STEM workers hold a bachelor’s, 20 percent a master’s, and 7 percent a doctorate degree). Over the same period, the net change in STEM occupational employment ran about 150,000 annually, such that the average ratio of all STEM graduates to net employment change was about three to one.
...
... However, there is a surprisingly low rate of STEM retention for the 1993 to 2001 cohorts of STEM graduates.
...
For example, in a bid to increase visa caps, a number of high-tech CEOs discussed the demand their companies had for U.S.-based science and engineering workers to a Wall Street Journal reporter in June, 2006:

• Mr. McNealy says Sun does 75% to 80% of its research and development in the U.S. Craig Barrett, chairman of Intel Corp., says his company also employs most of its researchers in the U.S. and wants to keep it that way. The reasons? … “If engineering is happening here in the U.S., I think my children will have a richer work environment.” (Wall Street Journal 2006)

However, college graduates might have been influenced by an announcement Sun made to Wall Street analysts in May 2005:

• Sun Microsystems Inc. has chosen four of its facilities around the world to take the place of its Silicon Valley office as the research and development hub…. “We are over-invested in high-cost geographies like the U.S., and underinvested in low-cost geographies like India,” … the company's senior vice president of global engineering told reporters in Bangalore. [He] said the company will not lay off programmers in the U.S.—but won't hire many, either.… The company has reduced its staff to about 30,000, from roughly 43,000 four years ago. (Associated Press 2005; emphasis added)

One can imagine that companies who are offshoring would have hiring problems even with an adequate labor market supply in the United States. Similarly, IT executives calling for greatly increasing, or even completely removing, numerical caps on foreign worker visas (e.g. the H-1B) may be sending strong signals to students and current workers about diminished career opportunities. Human capital is a long-term investment and potential STEM students read all the tea leaves before investing. We have conducted interviews with current managers and engineers who believe that there is little future in entry-level engineering jobs in many industries, and IT in particular. Not only will it be difficult to fill mid-level and higher-level positions from an inexperienced workforce that never had an entry-level position, but several future generations of workers, currently in school, are developing their work interests and career aspirations based on their perceptions about the future state of labor markets. A range of public policies, such as immigration policy and corporate practices such as offshoring R&D, affect the career choices of current workers and future generations as well.

...
Current policy is driven by the twin perceptions of a labor market shortage of scientists and engineers and of a pool of qualified students that is small in number and declining in quality. Math and science education are viewed as the primary policy levers to increase labor market supply, supplemented by increased immigration. But the data show little evidence to support those positions, and, in fact, indicate an ample supply of students whose preparation and performance has been increasing over the past decades. We are concerned that the consensus prescriptions are based on some misperceptions about efficient and sustainable strategies for economic and social prosperity. ...

80% of H1-B visas going to Indian-owned outsourcing companies last year .. [supposed to help US companies get short skills !!]

Indian outsourcing companies take the lion's share of U.S. H-1B visas | 16 April 2007
...
Many other individuals and companies also expected to fulfill one of the key reasons for the program: to bring needed skills to the United States. Companies send representatives around the world to recruit the best and the brightest that they can find.

But something unusual happened last year and this year.

In past years a large percentage of H-1B visas have been granted to citizens of India. Only 7.5% of H-1B's were granted to Indian nationals in 1992, but that had jumped to about 40% in 2005 and then to 43,167 (66.5%) of the 65,000 in 2006. The trend has been strongly toward Indian companies obtaining the H-1B visas, with eight of every ten visas going to Indian-owned outsourcing companies last year.

In 2005 it was four in ten.

Alone, that statistic is a little bit surprising. After all, the program is intended to benefit U.S. companies in need of critical skills.

In fact, by definition, the visas granted are not supposed to displace American workers.

But what has happened is that the vast majority of H-1B visas appear to be going to Indian outsourcing companies. ...

cannot use the H-1B visa as a "cheap labor" program: evidence that Indian IT companies seeking H-1B visas may have paid lower wages than US companies

Visa program may aid foreign companies | By Ed Frauenheim, News.com | Published on ZDNet News: Jan 14, 2004 8:44:00 PM
...
The H-1B visa program has been a hot topic in the tech industry for several years. The issue is boiling over again because of a dramatic rise in overseas outsourcing, which is costing thousands of U.S. workers their jobs, and the presidential election campaign.
...
H-1B visas are supposed to be gap fillers, allowing companies to find well-educated employees when they run into trouble hiring qualified U.S. workers. Critics have charged, however, that some companies are using them on a constant basis to cut costs. Also, the visas are intended to help U.S. employers stay competitive, but Hira said his research shows their use by foreign-based companies has accelerated the shift of tech work abroad.
...
Hira surmised that Infosys, Satyam and Wipro all fit the category of "H-1B dependent" employers based on their public statements. Organizations with at least 51 full-time employees in the United States were defined as H-1B dependent if 15 percent or more of their workers were holders of that visa.
...
Miller found nothing inherently wrong with a high proportion of H-1Bs at the Indian companies. "There's nothing in the law, that I'm aware of, that says a company can't have 100 percent" of their employees on H-1B visas, he said. The key, he said, is that the employer cannot use the H-1B visa rules as a "cheap labor" program.

Hira, though, presents evidence that Indian IT companies seeking H-1B visas may have paid lower wages than U.S. counterparts. For example, for the year ending Sept. 30, 2001, Wipro requested a total of 3,120 H-1Bs, and pledged to pay a total of $158 million in wages, for an average annual wage of $50,648, Hira found. EDS requested a total 452 H-1Bs and pledged to pay $32 million in wages, for an average annual wage of $71,251, according to the study. ...

Oil: trading on exchanges like the New York Mercantile Exchange, or Nymex, is contributing “enormously” to high prices ... India’s petroleum secretary

India’s Solution for Oil Prices: Ban Speculation by Banning Trading | By HEATHER TIMMONS | Published: November 8, 2007

NEW DELHI, Nov. 7 — As oil approaches the $100-a-barrel milestone, M. S. Srinivasan, India’s petroleum secretary, has an unorthodox recommendation for cooling overheated prices: halt trading of crude oil on commodity exchanges.

There are “no supply constraints right now, and demand has not escalated out of control,” Mr. Srinivasan said in a recent interview in his New Delhi office. Rather, trading on exchanges like the New York Mercantile Exchange, or Nymex, is contributing “enormously” to high prices, he said.

If crude was eliminated from the commodities traded on Nymex, Mr. Srinivasan predicted, the world would “see a drastic reduction in the price.” The benchmark price of crude touched $98.10 on Nymex on Wednesday, a new record, before retreating to $96.37.

Mr. Srinivasan’s idea is based on a widely held belief that investors are artificially driving up oil prices. Hedge funds, banks and pension funds have poured capital into oil trading in recent years, betting that demand will increase. Analysts say these bets have become self-fulfilling prophecies, helping to push prices higher.

What analysts cannot agree on is how much of the increase is attributable to the investors — estimates vary from $10 a barrel to over $30 a barrel — and what, if anything, should be done about it. ...

underpinnings of the Bush economy are terrible : Median income stagnant, purchases up 18% ... How? Tons of debt

The Worst Economy Of Our Lifetime, pt. II | Posted November 5, 2007
...

Yet last week the economic news was upbeat. The U.S. economy grew 3.9 percent and the economy added 166,000 jobs. Shouldn't people be happy about those developments?

The answer is no they shouldn't. As I noted in the first installment in this series, job and wage growth for this expansion is poor at best. Simply put, if you hadn't had a meaningful raise for the duration of "greatest story never told" you'd be frustrated, too. But that poor job and pay growth only tell part of the story. The bottom line is the underpinnings of the Bush economy are terrible -- and they are starting to come home to roost in a big way.
...

Notice how the median national income has stagnated? Yet over the duration of this expansion, personal consumption expenditures have increased 18.34 percent in chained (inflation-adjusted) dollars. So, at the beginning of this expansion people were already spending everything they made on a weekly basic. Over the last seven years income has stagnated, yet people have increased their purchases by 18.34 percent. Where did all this new money come from?

Tons of debt. Here is a chart compiled from information from the Federal Reserve's Flow of Funds Report.
...

Let's put some figures on that chart. In the fourth quarter of 2001, total household debt outstanding totaled $7.680 trillion dollars. In the second quarter of 2007, total household debt outstanding increased to $13.331 trillion -- a 73.56 percent increase.

Let's place those figures in perspective.

In the fourth quarter of 2001, total household debt was 75.10 percent of GDP. In the second quarter of 2007 it was 96.82 percent
...
The problem with this debt is we have now partially crippled our economy going forward. ...

Elites need to stop denying the breadth and reach of economic pain caused by America's integration with a much poorer global economy

The pain of globalisation | 11/09/07 "Guardian" | By Jared Bernstein and Josh Bivens

For years Americans have been told that they all benefit from trade with poorer countries - yet many now find they are worse off.

These poll results, however, should not surprise anyone who understands the economics of trade. Chapter one of the trade textbook was essentially written by David Ricardo, and it does indeed teach that trade, on the basis of comparative advantage, typically boosts a nation's average income. ...

Sadly, both for American workers and the quality of the trade debate, the textbook has other chapters. One of them explains the Stolper-Samuelson Theorem (SST), which points out that when the US exports insurance services and aircraft while importing apparel and electronics, we are implicitly selling capital - physical and human - for labour. This exchange bids up capital's price (profits and high-end salaries) and bids down wages for the broad working and middle-class, leading to rising inequality and downward wage pressure for many Americans.

Note that this is not just a story about laid-off factory workers, who obviously suffer the toughest losses. Rather, all workers in the US economy who resemble import-displaced workers in terms of education, skills, and credentials are affected. Landscapers won't lose their jobs to imports, but their wages are lowered through competition with those import-displaced factory workers.
...
Lastly, we - and "we" here refers to the economic elites in both parties playing guard-dog for the trade status quo - need to stop denying the breadth and reach of economic pain caused by America's integration with a much poorer global economy. The polls are telling us something pretty ironic: the people have read ahead of us in the trade textbook. We'd better catch up.
...

Alternative Tax Showdown: Their defense of the [private equity] morally indefensible tax breaks is tawdry. ... contributed $11.8 million to candidate

Alternative Tax Showdown | Published: November 8, 2007
...
Under current tax law, 23 million taxpayers will owe the alternative tax for 2007, up from 4 million last year. The tax was originally intended to apply to multimillionaires. But most of this year’s alternative taxpayers make between $100,000 and $500,000 and about a third make less than $100,000. They all have good cause to feel rooked and to expect help from Congress. ...
...
The House tax committee met the challenge, drafting a bill that provides the needed tax relief and plugs the resulting budget gap, mainly by raising taxes on private equity partners and hedge fund managers. The bill is good policy. The tax relief assuages justifiably aggrieved taxpayers. Tax increases on private equity firms and hedge funds rectify outdated rules that have allowed the very wealthiest to enjoy tax rates lower than those paid by middle-income Americans and, in some cases, to defer taxes indefinitely.
...
But key Democratic senators, among them New York’s Charles Schumer, who is the main fund-raiser for Senate Democrats, are balking. They know they must provide alternative tax relief, but they don’t want to tax private equity and hedge funds to pay for it. Their defense of the industries’ morally indefensible tax breaks is tawdry. As The Washington Post reported yesterday, in the first nine months of 2007, as pressure built to dismantle the tax breaks, investment firms and hedge funds contributed $11.8 million to candidates, party committees and leadership political action committees. That’s more than was given in 2005 and 2006 combined. More than two-thirds of that money went to Democrats. ...

“wealth creating” components of the economy have been subordinated to a finance-driven model which suddenly derailed due to abusive expansion of debt

Welcome to Year 27 of the Reagan Revolution | by Mike Whitney / November 8th, 2007
...
Why do the banks need such a huge infusion of credit if they are as “rock solid” as Bernanke says?

As most people now realize, the mortgage industry is on life-support. ...
...
Additionally, the banks are holding an estimated $200 billion in mortgage-backed securities and derivatives for which there is currently no market. This is compounded by $350 billion in “off balance sheets” operations — which are collateralized with dodgy long-term mortgage-backed securities — that provide funding for “short-term” asset-backed commercial paper. ASCP has shriveled by $275 billion in the last 10 weeks leaving the banks with gargantuan liabilities. ...
...
The news is bleak. The systemic rot is appearing everywhere presaging ongoing losses for the financial giants and a long-downward spiral for the markets. The banks are currently under-regulated, over-leveraged and under capitalized. ...
...
Former Fed chief Paul Volcker summarized the overall economic situation last week at the second annual summit of the Stanford Institute for Economic Policy Research. In his speech he said:

Altogether, the circumstances seem as dangerous and intractable as I can remember. Boomers are spending like there is no tomorrow. Homeownership has become a vehicle for borrowing and leveraging as much as a source of financial security.. As a Nation we are consuming about 6 per cent more than we are producing. What holds it all together? - High consumption - high leverage - government deficits - What holds it all together is a really massive and growing flow of capital from abroad. A flow of capital that today runs to more than $2 billion per day.” The nation is facing “huge imbalances and risks.

Volcker is right. The country is in a bigger pickle than any time in its 230 year history. ...
...
The biggest losers of all, however, are the financial giants that created most of the abstruse, debt-instruments that are now devouring the system from within. The productive and “wealth creating” components of the economy have been subordinated to a finance-driven model which suddenly derailed due to the abusive expansion of debt. Inevitably, some of the banks that took the greatest risks will be shuttered and trillions of dollars in market capitalization will disappear. ...
...
... The pervasive “free market” ideology rejects the notion of supervision or oversight, and as a result, the markets have become increasingly opaque and unresponsive to rules that may assure their continued credibility or even their ability to function properly.

The “supply side” avatars of deregulation have transformed the world’s most vital and prosperous markets into a huckster’s shell-game. All regulatory accountability has vanished along with trillions of dollars in foreign investment. What’s left is a flea-market for dodgy loans, dubious over-leveraged equities and “securitized” Triple A-rated garbage.

Let’s hear it for the Reagan Revolution. ...

Federal Liabilities Now Equal $175,000 for Every American

Federal Liabilities Now Equal $175,000 for Every American | By Terence P. Jeffrey | CNSNews.com Editor in Chief | November 08, 2007

(CNSNews.com) - Deficit spending and promised benefits for federal entitlement programs have put every man, woman, and child in the United States on the hook for $175,000, says a new report by David Walker, comptroller general of the United States. ...

The damage done to the American economy ...repercussions will be felt beyond the lifetime of anyone reading this page

The Economic Consequences of Mr. Bush | by Joseph E. Stiglitz December 2007

The next president will have to deal with yet another crippling legacy of George W. Bush: the economy. A Nobel laureate, Joseph E. Stiglitz, sees a generation-long struggle to recoup.

When we look back someday at the catastrophe that was the Bush administration, we will think of many things: the tragedy of the Iraq war, the shame of Guantánamo and Abu Ghraib, the erosion of civil liberties. The damage done to the American economy does not make front-page headlines every day, but the repercussions will be felt beyond the lifetime of anyone reading this page.

I can hear an irritated counterthrust already. The president has not driven the United States into a recession during his almost seven years in office. Unemployment stands at a respectable 4.6 percent. Well, fine. But the other side of the ledger groans with distress: a tax code that has become hideously biased in favor of the rich; a national debt that will probably have grown 70 percent by the time this president leaves Washington; a swelling cascade of mortgage defaults; a record near-$850 billion trade deficit; oil prices that are higher than they have ever been; and a dollar so weak that for an American to buy a cup of coffee in London or Paris—or even the Yukon—becomes a venture in high finance.

And it gets worse. After almost seven years of this president, the United States is less prepared than ever to face the future. We have not been educating enough engineers and scientists, people with the skills we will need to compete with China and India. We have not been investing in the kinds of basic research that made us the technological powerhouse of the late 20th century. And although the president now understands—or so he says—that we must begin to wean ourselves from oil and coal, we have on his watch become more deeply dependent on both. ...
...
... A budget surplus of 2.4 percent of gross domestic product (G.D.P.), which greeted Bush as he took office, turned into a deficit of 3.6 percent in the space of four years. The United States had not experienced a turnaround of this magnitude since the global crisis of World War II.

Agricultural subsidies were doubled between 2002 and 2005. Tax expenditures—the vast system of subsidies and preferences hidden in the tax code—increased more than a quarter. Tax breaks for the president’s friends in the oil-and-gas industry increased by billions and billions of dollars. ... In a nutshell, money was being spent everyplace except where it was needed. During these past seven years the percentage of G.D.P. spent on research and development outside defense and health has fallen. Little has been done about our decaying infrastructure—be it levees in New Orleans or bridges in Minneapolis. ...
...
... You’ll still hear some—and, loudly, the president himself—argue that the administration’s tax cuts were meant to stimulate the economy, but this was never true. The bang for the buck—the amount of stimulus per dollar of deficit—was astonishingly low. ... Credit was shoveled out the door, and subprime mortgages were made available to anyone this side of life support. Credit-card debt mounted to a whopping $900 billion by the summer of 2007. ...

... The president undoubtedly hoped the reckoning would come sometime after 2008. It arrived 18 months early. As many as 1.7 million Americans are expected to lose their homes in the months ahead. ...
...
America’s budget and trade deficits have grown to record highs under President Bush. To be sure, deficits don’t have to be crippling in and of themselves. If a business borrows to buy a machine, it’s a good thing, not a bad thing. During the past six years, America—its government, its families, the country as a whole—has been borrowing to sustain its consumption. Meanwhile, investment in fixed assets—the plants and equipment that help increase our wealth—has been declining.
...
In short, there’s a momentum here that will require a generation to reverse. Decades hence we should take stock, and revisit the conventional wisdom. Will Herbert Hoover still deserve his dubious mantle? I’m guessing that George W. Bush will have earned one more grim superlative.
...

103,000 of [the new jobs], before seasonal adjustment — were added by the statisticians, not reported by employers

November 2, 2007, 11:12 am | Making Up Jobs

Today’s employment report is mediocre at best. But to understand that, you have to look past the headline numbers.

Those numbers say that the government’s survey of employers showed a gain of 130,000 private sector jobs, on a seasonally adjusted basis, in October. That seems to be better than in recent months.

I don’t believe it. Most of those jobs — 103,000 of them, before seasonal adjustment — were added by the statisticians, not reported by employers. (It should be noted that, before seasonal adjustment, there were 201,000 jobs added, so this is just more than half.)

Why add jobs? It is an effort to include jobs created by new companies not surveyed, less an estimate for jobs lost at companies that went out of business and therefore did not respond to the survey.

Of those 103,000 jobs, 14,000 were in the construction industry, and 25,000 were in finance. Does anyone believe that all those new companies are being created in those industries now? (You can see the government’s explanation for this here.) ...

Fears of dollar collapse as Saudis take fright

Fears of dollar collapse as Saudis take fright | By Ambrose Evans-Pritchard, International Business Editor | Last Updated: 10:14pm BST 21/09/200

Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East.

"This is a very dangerous situation for the dollar," said Hans Redeker, currency chief at BNP Paribas.

"Saudi Arabia has $800bn (£400bn) in their future generation fund, and the entire region has $3,500bn under management. They face an inflationary threat and do not want to import an interest rate policy set for the recessionary conditions in the United States," he said. ...

Shouldn't We Talk About... Manufacturing Jobs? ... net job loss last month (including 47,000 lost manufacturing jobs),

Shouldn't We Talk About... Manufacturing Jobs? | Posted September 20, 2007
...
But we've heard nothing more than whispers about jobs so far. With an unsettled market, a mortgage and housing mess, massive trade deficits, and net job loss last month (including 47,000 lost manufacturing jobs), that should change -- and change soon. We need a national strategy to grow jobs, spur domestic innovation, and strengthen our manufacturing base.

We need to jumpstart the talk about jobs. That's why the Alliance for American Manufacturing (AAM) has partnered with actor John Ratzenberger (of Cheers fame and Travel Channel's Made in America show) to host a national series of seven "Keep It Made In America" Town Hall meetings this fall. ...

When half of our population trying to make it on 12 percent of the nation's payroll can no longer meet the interest payments, ... happy doomsday ...

October 30, 2007 (web only) | Give Us This Day Our Daily Debt | Nicholas von Hoffman

It was almost 100 years ago that Henry Ford startled the world by giving his workers a raise without being asked. He explained that if they didn't have money they could not buy Ford automobiles.

From then on, his self-evident bit of common sense was accepted decade after decade. But in recent years it got lost and forgotten. The big boys have stopped giving us little folks enough to buy the big boys' stuff.

Get this from the Wall Street Journal: "The wealthiest 1% of Americans earned 21.2% of all income in 2005, according to new data from the Internal Revenue Service. That is up sharply from 19% in 2004, and surpasses the previous high of 20.8% set in 2000, at the peak of the previous bull market in stocks. The bottom 50% earned 12.8% of all income, down from 13.4% in 2004 and a bit less than their 13% share in 2000."
...
Should we reach the point where the half of our population trying to make it on 12 percent of the nation's payroll can no longer meet the interest payments, we shall have a crisis where all the choices are worse than awful. And a happy doomsday to you, too.

The dollar has plummeted in value, more so in Bush's term than during any comparable period of U.S. history. ...

Sinking Currency, Sinking Country | By Patrick J. Buchanan

11/04/07 -- -- - The euro, worth 83 cents in the early George W. Bush years, is at $1.45.

The British pound is back up over $2, the highest level since the Carter era. The Canadian dollar, which used to be worth 65 cents, is worth more than the U.S. dollar for the first time in half a century.

Oil is over $90 a barrel. Gold, down to $260 an ounce not so long ago, has hit $800.

Have gold, silver, oil, the euro, the pound and the Canadian dollar all suddenly soared in value in just a few years?

Nope. The dollar has plummeted in value, more so in Bush's term than during any comparable period of U.S. history. Indeed, Bush is presiding over a worldwide abandonment of the American dollar.
...
In 2006, that U.S. trade deficit hit $764 billion. The current account deficit, which includes the trade deficit, plus the net outflow of interest, dividends, capital gains and foreign aid, hit $857 billion, 6.5 percent of GDP. As some of us have been writing for years, such deficits are unsustainable and must lead to a decline of the dollar.
...
The oil-producing and exporting nations, with trade surpluses, like China, have also begun to take the stash of dollars they have and stuff them into sovereign wealth funds, and use these immense and growing funds to buy up real assets in the United States -- investment banks and American companies.

Nor is there any end in sight to the sinking of the dollar. For, as foreigners demand more dollars for the oil and goods they sell us, the trade deficit will not fall. And as the U.S. government prints more and more dollars to cover the budget deficits that stretch out -- with the coming retirement of the baby boomers -- all the way to the horizon, the value of the dollar will fall. And as Ben Bernanke at the Fed tries to keep interest rates low, to keep the U.S. economy from sputtering out in the credit crunch, the value of the dollar will fall.

The chickens of free trade are coming home to roost.

insisting that she be paid in almost any currency but the U.S. dollar

Supermodel Bundchen Joins Hedge Funds Dumping Dollars (Update3) | By Bo Nielsen and Adriana Brasileiro | Nov. 5 (Bloomberg) --

Gisele Bundchen wants to remain the world's richest model and is insisting that she be paid in almost any currency but the U.S. dollar.

Like billionaire investors Warren Buffett and Bill Gross, the Brazilian supermodel, who Forbes magazine says earns more than anyone in her industry, is at the top of a growing list of rich people who have concluded that the currency can only depreciate because Americans led by President George W. Bush are living beyond their means. ...

"the CEOs of Exxon, Texaco, and Shell for figuring out how to quadruple the price of oil over a seven-year period without an actual shortage."

October 30, 2007 5:37 p.m. PT | Be honest about gas gouging | By ROBERT WEINER AND JOHN LARMETT | GUEST COLUMNISTS

Gasoline prices are poised to explode again. Oil companies are setting up the framework for higher prices because of fears of a Turkish invasion of Kurdish-controlled northern Iraq and administration saber rattling about Iran. Crude oil, at $29.59 a barrel when President Bush took office in January 2001, is now pushing toward $100. Washington state's current gasoline cost of $3.09 per gallon, double Seattle's 2001 price of $1.52, is now second only to California in the 48 contiguous states.

Jay Leno joked on "The Tonight Show" Oct. 17, "The Nobel Prize for economics was awarded to three people -- the CEOs of Exxon, Texaco, and Shell for figuring out how to quadruple the price of oil over a seven-year period without an actual shortage."
...
... Oil companies raised gas prices 24 cents a gallon in the 24 hours after Katrina. The FTC reported increases "not substantially attributable to increased costs." It was pure fear mongering.
...
However, there is no "violation" if the price charged is "substantially attributable to local, regional, national, or international market conditions." The House is saying it is not gouging if the public will bear it. The oil companies could still charge whatever they want -- a loophole big enough for a gas-guzzling Mack truck. ...

Workers' retirement-plan participation declines ... drops from 44% in 2000 to 40% in 2006 ...

Workers' retirement-plan participation declines | By Andrea Coombes, MarketWatch | Last Update: 5:31 PM ET Nov 1, 2007

SAN FRANCISCO (MarketWatch) -- Thanks in part to fewer employers enrolling their workers in traditional pensions, the portion of employees participating in a retirement plan dropped in 2006, the Employee Benefit Research Institute said Thursday.

The decline was steepest -- a drop of 2 percentage points -- among the full-time, full-year workers who are considered most strongly connected to the work force and likeliest to participate in an employer-sponsored retirement plan, according to the report.
...
Looking at all workers, including part-timers, the percentage participating in an employment-based retirement plan decreased to about 40% in 2006, from 41% in 2005, but that drop was largely fueled by the decrease among the full-time group. In 2000, the level topped 44% of all workers, a recent high. ...

Homes targeted by some sort of foreclosure activity from July to September, up 100.1 percent from a year-ago ...

Foreclosure filings soar in 3rd quarter | Number of US Homes Facing Foreclosure Doubles in Third Quarter | ALEX VEIGA | AP News | Nov 01, 2007 05:34 EDT
...
A total of 446,726 homes nationwide were targeted by some sort of foreclosure activity from July to September, up 100.1 percent from 223,233 properties in the year-ago period, according to Irvine-based RealtyTrac Inc.

The current figure was 33.9 percent higher than the 333,731 properties in foreclosure in the second quarter of this year. ...

Is U.S. Stuck in Internet's Slow Lane? ... low levels of investment by the big telecom companies and regulatory failure.?

Is U.S. Stuck in Internet's Slow Lane? | Oct 30, 4:41 PM (ET) | By PETER SVENSSON

NEW YORK (AP) - The United States is starting to look like a slowpoke on the Internet. Examples abound of countries that have faster and cheaper broadband connections, and more of their population connected to them.
...
The Organization for Economic Co-operation and Development - a 30-member club of nations - compiles the most often cited international comparison. It puts the U.S. at 15th place for broadband lines per person in 2006, down from No. 4 in 2001.
...
But the OECD numbers are in line with other international measures. Figures from the British research firm Point-Topic Ltd. put the U.S., with 55 percent of its households connected, in 17th place for adoption rates at the end of June (excluding some very small countries and territories like Macau and Hong Kong).

"We're now in the middle of the pack of developed countries," said Dave Burstein, telecom gadfly and the editor of the DSL Prime newsletter, during a sometimes tense debate at the Columbia Business School's Institute for Tele-Information.

Burstein says the U.S. is lagging because of low levels of investment by the big telecom companies and regulatory failure.

Several of the European countries that are doing well have forced telephone companies to rent their lines to Internet service providers for low fees. The ISPs use them to run broadband Digital Subscriber Lines, or DSL, often at speeds much higher than those available in the U.S.
...
Part of the problem may be that people don't see fast Internet access as an essential part of modern life, and may need more of a push to get on. The U.S. does have wider income disparities than many of the countries that are outdoing it in broadband, and people in poverty may have other priorities for their money.

Dan Correa, research analyst at the Information Technology and Innovation Foundation, believes the U.S. needs a more "proactive" broadband policy, and compares the lack of government involvement in the field with the situation in other utilities, which are mostly heavily regulated.

"In the 1930s, we recognized that electricity was essential. We're not quite at that level in broadband," Correa said. ...

The U.S. Federal Communications Commission went down this regulatory road a few years ago, but legal challenges from the phone companies forced it to back away. ...