Posts Tagged ‘US economy’

War Dominated US Foreign Policy Is Destroying the Economy and National Security

December 9, 2010

Join Peace Vet-Led Protest at White House on December 16th

by Kevin Zeese, Dissident Voice,  December 9th, 2010

The White House is in the midst of a strategic review of Afghanistan. This review is coming at a time when the reality is hard to ignore: Afghanistan cannot be won, the cost is escalating at a time when the U.S. economy is in collapse and the war is undermining U.S. national security and the rule of law.  It is time to end the war-based foreign policy of the United States.

Opposition to war is growing. Sixty-one House members wrote president Obama last month calling for an end to the Afghan war. The letter was co-signed by 57 Democrats and 4 Republicans.  They wrote: “This has become the longest war in US history. The rate of casualties is at an all-time high. And we have already spent $365 billion on this unwinnable war.”  This reflects the views of Americans.  A recent poll conducted by Quinnipiac University found that 50 percent of those surveyed said the United States should not be involved in Afghanistan, compared to 41 percent who opposed the war in September.

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Barack Obama will close the torture jail of Bush and Cheney

November 17, 2008

Obama ‘will close Guantanamo Bay’

By Leonard Doyle in Washington | The Independent, Nov 17, 2008

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In his first major interview since polling day, President-elect Barack Obama said last night that upon taking office he would close Guantanamo Bay and ban torture by the American military. He also said it would be “a disaster” if the US car industry were to collapse in the midst of today’s economic crisis.

Mr Obama provided America with a glimpse of both the problems his administration will face and the bipartisan tone he intends to adopt once he takes office. The President-elect, joined by his wife, Michelle, discussed his priorities and the impact of the election on his family.

His first priority, he said, was appointing a new national security team to ensure a smooth transition to power. But the wide-ranging interview focused largely on the threats to the US economy. “It’s my belief that we need to provide assistance to the auto industry,” Mr Obama told CBS’s 60 minutes, adding “But I think that it can’t be a blank check.”

The Senate, which he resigned from yesterday, is expected to vote this week on emergency loans to the beleaguered car industry, despite stiff opposition from Republicans.

Mr Obama meets his defeated rival, John McCain, today for the first time since crossing swords in the debates that punctuated their occasionally ill-tempered election battle. The meeting in Chicago is billed as an attempt to usher in a new era of bipartisanship, a frequent refrain of Mr Obama’s on the campaign trail.

Unlike Mr Obama’s other former rival, Hillary Clinton, who is among the top contenders for Secretary of State, Senator McCain is not being considered for a formal role in the administration. Advisers say he will be asked for help on issues where they share common ground, including climate change, ethics reform, immigration and torture.

That bipartisan mood between the former rivals may be tested if Mr McCain opposes a taxpayer bailout of Detroit. The new bill would allow some of the $700bn (£350bn) fund to bail out the financial services industry to be used to rescue the car industry.

Mr Obama said he wants the aid to ensure there is a sustainable car industry, “so that we are creating a bridge loan to somewhere as opposed to a bridge loan to nowhere. And that’s, I think, what you haven’t yet seen.”

On the broader economy he said “the challenges that we’re confronting are enormous, and they’re multiple. And so there are times during the course of a given a day where you think, ‘Where do I start in terms of moving – moving things forward?’

“And part of this next two months is to really get a clear set of priorities, understanding we’re not going be able to do everything at once, making sure the team is in place, and moving forward in a very deliberate way and sending a clear signal to the American people that we’re going to be thinking about them and what they’re going through.”

Mr Obama published a farewell letter to newspapers in Illinois to accompany his formal resignation of his Senate seat. He compared himself with Abraham Lincoln, “another son of Illinois” who had left for Washington, “a greater man who spoke to a nation far more divided”.

The US Empire will Survive Bush

October 30, 2008

Two Parties, One Imperial Mission

By ARNO MAYER| Counterpunch, Oct 29, 2009

The United States may emerge from the Iraq fiasco almost unscathed. Though momentarily disconcerted, the American empire will continue on its way, under bipartisan direction and mega-corporate pressure, and with evangelical blessings.It is a defining characteristic of mature imperial states that they can afford costly blunders, paid for not by the elites but the lower orders. Predictions of the American empire’s imminent decline are exaggerated: without a real military rival, it will continue for some time as the world’s sole hyperpower.

But though they endure, overextended empires suffer injuries to their power and prestige. In such moments they tend to lash out, to avoid being taken for paper tigers. Given Washington’s predicament in Iraq, will the US escalate its intervention in Iran, Syria, Lebanon, Afghanistan, Pakistan, Sudan, Somalia or Venezuela? The US has the strongest army the world has ever known. Preponderant on sea, in the air and in space (including cyberspace), the US has an awesome capacity to project its power over enormous distances with speed, a self-appointed sheriff rushing to master or exploit real and putative crises anywhere on earth.

In the words of the former secretary of  defense, Donald Rumsfeld: “No corner of the world is remote enough, no mountain high enough, no cave or bunker deep enough, no SUV fast enough to protect our enemies from our reach.”       The US spends more than 20% of its annual budget on  defense, nearly half of the spending of the rest of the world put together. It’s good for the big US corporate arms manufacturers and their export sales. The Gulf states, led by Saudi Arabia, purchase billions of dollars of state-of-the-art ordnance.

Instead of establishing classic territorial colonies, the US secures its hegemony through some 700 military, naval and air bases in over 100 countries, the latest being in Bulgaria, the Czech Republic, Poland, Rumania, Turkmenistan, Kyrgyzstan, Tajikistan, Ethiopia and Kenya. At least 16 intelligence agencies with stations the world over provide the ears and eyes of this borderless empire.

The US has 12 aircraft carriers. All but three are nuclear-powered, designed to carry 80 planes and helicopters, and marines, sailors and pilots. A task force centerd on a supercarrier includes cruisers, destroyers and submarines, many of them atomic-powered and equipped with offensive and defensive guided missiles. Pre-positioned in global bases and constantly patrolling vital sea lanes, the US navy provides the new model empire’s spinal cord and arteries. Ships are displacing planes as chief strategic and tactical suppliers of troops and equipment. The navy is now in the ascendant over the army and the air force in the Pentagon and Washington.

The US military presence in the Eastern Mediterranean, Red Sea, Persian Gulf and Indian Ocean from 2006 to 2008 shows how the US can flex its muscles half-way around the globe (and deliver humanitarian relief at gunpoint for political advantage). At least two carrier strike groups with landing craft, amphibious vehicles, and thousands of sailors and marines, along with Special Operations teams, operate out of Bahrain, Qatar and Djibouti. They serve notice that, in the words of the current  defense secretary, Robert Gates, speaking in Kabul in January 2007, the US will continue to have “a strong presence in the Gulf for a long time into the future”.

Continued . . .

Government of Thieves

October 18, 2008

When Greed is Rewarded

By PAUL CRAIG ROBERTS | Counterpunch, Oct 17 / 20, 2008

Just as the Bush regime’s wars have been used to pour billions of dollars into the pockets of its military-security donor base, the Paulson bailout looks like a Bush regime scheme to incur $700 billion in new public debt in order to transfer the money into the coffers of its financial donor base. The US taxpayers will be left with the interest payments in perpetuity (or inflation if the Fed monetizes the debt), and the number of Wall Street billionaires will grow. As for the US and European governments’ purchases of bank shares, that is just a cover for funneling public money into private hands.

The explanations that have been given for the crisis and its bailout are opaque. The US Treasury estimates that as few as 7% of the mortgages are bad. Why then do the US, UK, Germany, and France need to pour more than $2.1 trillion of public money into private financial institutions?

If, as the government tells us, the crisis stems from subprime mortgage defaults reducing the interest payments to the holders of mortgage backed securities, thus driving down their values and threatening the solvency of the institutions that hold them, why isn’t the bailout money used to address the problem at its source? If the bailout money was used to refinance troubled mortgages and to pay off foreclosed mortgages, the mortgage backed securities would be made whole, and it would be unnecessary to pour huge sums of public money into banks. Instead, the bailout money is being used to inject capital into financial institutions and to purchase from them troubled financial instruments.

It is a strange solution that does not address the problem. As the US economy sinks deeper into recession, the mortgage defaults will rise. Thus, the problem will intensify, necessitating the purchase of yet more troubled instruments.

If credit card debt has also been securitized and sold as investments, as the economy worsens defaults on credit card debt will be a replay of the mortgage defaults. How much debt can the Treasury bail out before its own credit rating sinks?

The contribution of credit default swaps to the financial crisis has not been made clear. These swaps are bets that a designated financial instrument will fail. In exchange for “premium” payments, the seller of a swap protects the buyer of the swap from default by, for example, a company’s bond that the swap buyer might not even own. If these swaps are also securitized and sold as investments, more nebulous assets appear on balance sheets.

Normally, if you and I make a bet, and I welsh on the bet, it doesn’t threaten your solvency. If we place bets with a bookie and the odds go against the bookie, the bookie will fail, as apparently happened to AIG, necessitating an $85 billion bailout of the insurance company, and to Bear Stearns resulting in the demise of the investment bank.

Credit default swaps are a form of unregulated insurance. One danger of the swaps is that they allow speculators to purchase protection against a company defaulting on its bonds, without the speculators having to own the company’s bonds. Speculators can then short the company’s stock, driving down its price and raising questions about the viability of the company’s bonds. This raises the value of the speculators’ swaps which can be sold to holders of the company’s bonds. By ruining a company’s prospects, the speculators make money.

Another danger is that swaps encourage investors to purchase riskier, higher-yielding instruments in the belief that the instruments are insured, but the sellers of swaps have not reserved against them.

Double-counting of assets is also possible if a bank purchases a company’s bonds, for example, then purchases credit default swaps on the bonds, and lists both as assets on its balance sheet.

The $85 billion Treasury bailout of AIG is small compared to the $700 billion for the banks, and the emphasis has been on banks, not insurance companies. According to news reports, the sums associated with credit default swaps are far larger than the subprime mortgage derivatives. Have the swaps yet to become major players in the crisis?

The behavior of the stock market does not necessarily tell us anything about the bailout. The financial crisis disrupted lending and thus comprised a threat to non-financial firms. This threat would reflect in the stock market. However, the stock market is also predicting a recession and declining earnings. Thus, people sell stocks hoping to get out before share prices adjust to the new lower earnings.

The bailout package is a result of panic and threats, not of analysis and understanding. Neither Congress nor the public knows the full story. If the problem is the mortgages, why does the bailout leave the mortgages unaddressed and focus instead on pouring vast amount of public money into private financial institutions?

The purpose of regulation is to restrain greed and to prevent leveraged speculation from threatening the wider society. Congress needs to restore financial regulation, not reward those who caused the crisis.

Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He was Associate Editor of the Wall Street Journal editorial page and Contributing Editor of National Review. He is coauthor of The Tyranny of Good Intentions. He can be reached at: PaulCraigRoberts@yahoo.com

ECONOMY-US: Bailout for Who?

September 27, 2008


By Adrianne Appel | Inter-Press Service


BOSTON, Sep 26 – U.S. lawmakers and the George W. Bush administration are continuing their closed-door meetings through the weekend to try and fashion a softer 700-billion-dollar deal for Wall Street that will appeal to citizens angry at the prospect of the mega-corporate bailout.

Treasury Secretary Henry Paulson brought the plan to Congress on Sep. 19 in a three-page outline, and said it was necessary to prevent the collapse of the finance market due to complex trades involving subprime mortgages.

The plan would have allowed Paulson, a former CEO of Goldman Sachs, complete control of the massive payout with no oversight, no auditing and no plan of a payback to the taxpayer.

ACORN president Maude Hurd captured the nation’s sentiment when she hinted at the potential electoral fallout in a speech this week: “There is a palpable populist revolt rolling through towns and cities across the country, and if Main Street doesn’t get any real help with the mortgage out of this deal, the American people only have to wait a few weeks for a constructive outlet for their anger.”

ACORN is the nation’s largest grassroots community organisation of low- and moderate-income people, with over 400,000 member families in 110 cities across the country.

At the Capitol, members of Congress attempted to convince taxpayers — and voters — that they had their best interests in mind, and that meant a big bailout for Wall Street.

“Hundreds of billions of dollars that Americans invested in retirement accounts and mutual funds have evaporated,” and more surely would, warned Democrat Chris Dodd, Senate Banking Committee chairman, while giving the impression that the income security of average people is at stake.

This couldn’t be further from the truth, say those who study stock ownership. The average U.S. citizen owns very little or no stock, and wouldn’t be helped directly by an up-market.

“I think the middle class are not going to be very affected at all by a bailout. It’s something that is going to affect the very wealthy. Changes in the stock market won’t make much difference to the middle class,” Edward Wolff, a New York University economist, told IPS.

“It’s just a political gambit to help the rich recover from the stock market collapse. If you claim that everyone is suffering, it’s easier to get a bailout from Washington,” Wolff said.

In 2001, the richest 10 percent of families owned 85 percent of all outstanding stocks, about 85 percent of all financial securities and 90 percent of all business assets, according to Wolff.

As for the rest of the country, only 32 percent of households owned more than 10,000 dollars of stock, and only 25 percent of households owned more than 25,000 dollars worth of stock, Wolff said.

A 2007 report by the Government Accountability Office found that in 2004, just 36 percent of workers had any savings at all in a retirement account. Most U.S. citizens will depend on Social Security in retirement, the government programme that provides 30-40 percent of what was earned in their lifetimes.

The bad practices of the mortgage lending industry targeted people of colour and the elderly, in particular, according to a report by United for a Fair Economy.

Only 11 percent of subprime loans went to first-time buyers last year. The vast majorities were refinancing that caused borrowers to owe more on their homes under the guise that they were saving money. Many borrowers were talked into refinancing their homes to gain additional cash for things like medical bills, the report says.

African American borrowers will lose between 71 billion and 92 billion dollars, and Latino borrowers will lose between 75 billion and 98 billion dollars as a result of bad subprime loans, according to the report.

“A couple decades of deregulation have allowed people at the top of the financial food chain to benefit from millions of people, through unscrupulous mortgage lending practices,” Michael Lapham of United for a Fair Economy told IPS.

“Who are we most concerned about helping? Homeowners facing foreclosure or people who’ve made millions and billions on subprime lending?” Lapham asked.

The U.S. public seems especially peeved at the idea of helping companies that pay exorbitant salaries to their bosses, at a time when many people have seen a decline in their standard of living.

According to the Institute for Policy Studies, CEOs of large U.S. companies last year made an average of 10.5 million dollars, while the top 50 private equity and hedge fund managers pocketed an average of 588 million dollars each.

The institute notes that draft proposals floated by the chairs of both the House and Senate banking committees would allow Paulson to determine what qualifies as “inappropriate or excessive” executive compensation under the bailout plan.

“Secretary Paulson amassed a personal stock stash worth over three-quarters of a billion dollars as the CEO at Goldman Sachs,” said analyst Sarah Anderson. “He hardly strikes us as the appropriate arbiter of what’s excessive and what’s not.”

In a statement, Anderson said the nation needs clear and strict limits on CEO pay “so that taxpayers won’t have to worry about their money flooding into the pockets of top executives and encouraging another round of reckless behaviour.”

On Thursday, unions, and anti-poverty and peace groups took to the streets, staging large demonstrations on Wall Street and in many cities chanting, “No bailouts for billionaires.”

At the end of the day Thursday, it was hard-line Republicans, including Sen. Richard Shelby and Rep. Spencer Bachus, who stood firm against the bailout. Bachus told reporters that the Republicans do not want the U.S. to buy the bad debts of the companies, but instead to loan the companies money.

Their argument that the market could do more to fix itself was bolstered later Thursday evening, when troubled Washington Mutual bank, riddled with bad mortgages, was bought by J.P. Morgan Chase.

The Democrats want the bailout, one that would meter out the billions in installments and somewhat restrict the pay of CEOs, Dodd said.

“I don’t understand why the Democrats in particular didn’t feel they have the leverage to get more out of this deal. Congress has squandered an opportunity to actually help homeowners facing foreclosure,” Brenda Muniz, legislative director for ACORN, told IPS.

According to an analysis of U.S. Census data by the Centre for Budget and Policy Priorities, 18 percent of U.S. children lived in poverty in 2007.

The willingness of Congress to consider a 700-billion-dollar payout makes clear that Congress could budget other large sums to help end homelessness and hunger, and improve public education.

“When people go to Congress to ask for more affordable housing funds and are told there isn’t money, then along comes Wall Street and they say, ‘Oh sure we have 700 billion dollars for your bailout.’ It definitely makes you question our nation’s priorities,” Lapham said.


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