Today's Stories

May 8-10, 2009

Paul Wolf
Obama's Axis of Obedience

Neve Gordon
Jailed for Caring

May 7, 2009

Paul Craig Roberts
Criminalizing Criticism of Israel

Chris Floyd
A Full-Court Press for Pakistan War

Andy Worthington
Mixed Messages on Torture

Alan Farago
No Place Like Home: a Stress Test for Land Use, Not Just Banks

Ray McGovern
Deux ex Machina on Torture?

Dave Lindorff
Stain Removal: Impeaching the Torture Judge

Eric Toussaint /
Damien Millet
Why is There Rampant Famine in the 21st Century?

Ana M. Malinow, MD
Why We Need a Single-Payer Health Care System

Jeff Armstrong
Freeing Leonard Peltier: What Would Warren Harding Do?

Norman Solomon
A Green New Deal

Website of the Day
The End of Lake Mead?

May 6, 2009

Doug Peacock
The Fate of the Yellowstone Grizzly

Patrick Cockburn
Afghans to Obama: Get Out, Take Karzai With You

Richard Neville
The Torturer's Apprentice

Manuel Garcia, Jr.
To Power a Nation: Nuclear Bombs or Sunshine?

Winslow T. Wheeler
Of Pork and Baloney: Obama's Defense Budget

Deepak Tripathi
Pakistan in Crisis

Stephen Soldz
A "Natural Reaction": APA Ethics Policy-Maker Endorses Torture

Reuven Kaminer
Nice is Not Enough: Obama vs. Netanyahu and Lieberman

David Macaray
The Chrysler-UAW Deal

Kevin Zeese
Why We Were Arrested at the Senate Finance Committee Hearings

Marjorie Cohn
Stanford Antiwar Alums Call for War Crimes Investigation of Condoleezza Rice

Coalition for an Ethical Psychology
Investigate Psychologist and Health Provider Complicity in Torture

Website of the Day
Who's Behind the Financial Meltdown?

May 5, 2009

William Blum
Torture and Mr. Obama

Uri Avnery
Netanyahu's Plan

Steven Higgs
Autism and Toxic Pollution

Dean Baker
Why Economists Should Learn Arithmetic

Daniel Wolff
The Education of Rachel Carson

Sibel Edmonds
The Broken Congress

Carole King Klein
A New Chance to Save the Northern Rockies

Fidel Castro
Giving One's All

Belén Fernández
Oil and Aguardiente in the Ecuadoran Elections

Dan Bacher
Schwarzenegger's Big Lie About Fish vs. Jobs

Website of the Day
"I Married Isis on the Fifth Day of May"

May 4, 2009

James G. Abourezk
The AIPAC Spy Case

Jeff Leys
Obama's War Budget

Patrick Cockburn
Afghan Ayatollahs Press Marital Rape Law

Andy Worthington
A Start on Guantánamo, But Not Enough

Jaime Avilés
Mexico's Plague-Bringers

David Swanson
An Even Worse Bybee Memo

Paul Craig Roberts
Working with Jack Kemp

P. Sainath
Celeb Crusades and the Death of Politics

Eugenia Tsao
Canada's Obama and the Cult of the Prof

Benjamin Dangl
Protest and Rubber Bullets in Paraquay

Sami Al-Arian
Mourning William Moffitt

Website of the Day
"Soldiers Are Cutting Us Down": Kent State, May 4, 1970

May 1 - 3, 2009

Alexander Cockburn
Game-Changers: Specter Jumps, Souter Quits

Gary Leupp
Dropping the AIPAC Spying Case

Peter Linebaugh
The Key to the Bastille

Jeffrey St. Clair /
Joshua Frank:
Half Life of a Toxic War: Iraq's Wrecked Environment

C. G. Estabrook
Minion of the Long War

Patrick Cockburn
Kabul's New Elite

Mike Whitney
Economy on the Ropes

Pierre Sprey /
Winslow Wheeler
What "Sweeping Overhaul" of the Pentagon?

Andy Worthington
Al-Marri's Plea Deal: Dictatorial Powers Unchallenged

Mairead Maguire
Stand Up to Israeli Apartheid: a Letter to Obama From a Nobel Peace Prize Laureate

Nadia Hijab
The Israel Boycott is Biting

Diane Farsetta
Life, Death and Water Policy

Michael Calderón-Zaks
The Déjà Vu Flu: Why Much of the Discussion About Swine Flu is Racist

Richard Rhames
When Piggies Come Home to Roost: Swine Flu and the Industrial Meat Gulags

Russell Mokhiber
Inside the Beltway Baucus

Ramzy Baroud
Clinton's Unpromising Start

Rannie Amiri
Understanding Lebanon's June Elections

Deb Reich
No Talking, Dammit!

Steven Higgs
Indiana Criminalizes Dissent: Roadblocks on the NAFTA Highway

Brian Cloughley
Malice in Blunderland

David Michael Green
The Party's Over

Farzana Versey
Sex, Swat and Susan Boyle

Jim Goodman
Think Before You Eat: Agriculture and the Environment

Carl Finamore
New Prescription for a Healthy Union Movement

Christopher Brauchli
The Sounds of Silence: the Texas Option

Susie Day
The Real Cause of Unemployment: Employees!

David Yearsley
Nuts Over Beethoven

Lorenzo Wolff
Three Minutes of Perfection

Peter Stone Brown
Dancing with Dylan

Poets' Basement Dominguez, Orloski and Springate

Website of the Weekend
May Day Europe

April 30, 2009

Ellen Cantarow
Obama and "Two States": Seamless Continuity From Bush Time

Dana L. Cloud
The McCarthyism That Horowitz Built

Paul W. Lovinger /
Jeannette Hassberg
A Nation of Laws

Binoy Kampmark
Swine at the Trough: the Business of Pandemics

Brian Downing
The Perils of Modernization in Afghanistan

Frank Snepp
Tortured by the Past

David Swanson
The Wrong Torture Question

Conn Hallinan
The Coming Asian Storm

Ron Jacobs
Not Dead Yet: an Interview with Jerry Gordon on the State of the Antiwar Movement

John Goekler
The Only Path to a Middle East Picnic?

Jasmine L. Tyler /
Anthony Papa
An End to Crack/Powder Cocaine Sentencing Disparity?

Website of the Day
Emergency Petition: Stop Coal Industry Intimidation of Activists

April 29, 2009

Joann Wypijewski
Death at Work in America

Patrick Cockburn
The Taliban's Roads to Kabul

Andy Worthington
Cheney's Twisted World

Chris Floyd
The Specter Diversion

Dave Lindorff
No More Excuses: a Specter is Haunting the Democrats

Jeremy Scahill
The Nuremberg Truth and Reconciliation Commission?

Doug Henwood
Zionist Lobby Targets Another Tenured Professor: an Interview with William Robinson

Michael Hudson
Will Iceland be Handed Over to a New Gang of Kleptocrats?

Russell Mokhiber
My Ron Pollack Problem--And Yours

Eric Toussaint
Ecuador at the Crossroads

Website of the Day
An Interview with Leslie and Andrew Cockburn on "American Casino"

April 28, 2009

Uri Avnery
A Little Red Light: On Israeli Fascism

Jeremy Scahill
Obama's Iraq: the Picture of Dorian Gray

Dean Baker
The Perfect Gift for Wall Street: a Financial Transactions Tax

Michael D. Yates
At the Factory Gate

Conn Hallinan
Georgian Plots? Saakavili's "Order No. 2"

John Stauber
Beyond MoveOn

Tom Barry
The Failed Border Security Initiative

Harvey Wasserman
Who Pays for America's Chernobyl Roulette?

Jeff Nygaard
Pirates, Profits and Propaganda

Frederico Fuentes
Why the U.S. Still Hates Cuba

Website of the Day
The Man Behind the Hood

April 27, 2009

Pam Martens
The Far Right's Plot to Capture New Hampshire

Patrick Cockburn
Torture? It Probably Killed More Americans Than 9/11

Andrew J. Bacevich Guardian of the Status Quo: Obama's Sins of Omission

Mitu Sengupta
The Bloodbath in Sri Lanka

Franklin Lamb
Hillary Does Beirut: The 165-Minute Swoop-In

Firmin DeBrabander
Crimes of Economic Madness

Dave Lindorff
Wide Open to Pandemic?

Russell Mokhiber
How Corrupt is That?

Mike Whitney
Pinter's Message to Obama

Mark Weisbrot
Overhauling the IMF

Rev. José M. Tirado
Iceland's New Dawn: How the Right Got Trounced

Website of the Day
American Casino

April 24-26, 2009

Alexander Cockburn
Putting the Bush Years on Trial

Marjorie Cohn
Torture Used to Try to Link Saddam with 9/11

Andy Worthington
Who Ordered the Torture of Abu Zubaydah?

Jeremy Scahill
Are Leading Democrats Afraid of a Special Prosecutor to Investigate Torture?

Chris Floyd
Top of the Heap: the Democrats' Teachable Moment on Torture

Mike Whitney
A Housing Crash Update

Anthony DiMaggio
Obama and the Housing Crisis

Chris Kromm
Democratic Lobbyists Key to Fight Against Employee Free Choice Act

Saul Landau
Seventeen Months in "the Hole:" an Interview with the Leader of the Cuban Five

Dave Lindorff
Free John Walker Lindh

Greg Moses
The Debt Looters

Joshua Frank
Calling for a Coal Moratorium: an Interview with Ted Nace

Fred Gardner
Collective Farming and the Lynch Case

Manuel Garcia, Jr.
Homework, Testing and Stealth Apartheid in Education

David Michael Green
Of Tea Parties and Teleprompters

Ramzy Baroud
Middle East Spies: a New Front in Gaza's Conflict

Rannie Amiri
Mubarak's Expanding Enemies List

Laura Carlsen
Mr. President, Calderon is Not Mexico

Richard Morse
The Haitian People Need a Lobbyist

Nikolas Kozloff
Protecting the Bald Eagle: a Task Now Falling to ... Hugo Chavez?

Kent Peterson
The Fight to Save Mexico's Mangroves

Robert Bryce
The Ethanol Scammers Rent a General

Niranjan Ramakrishnan The Financial Experts

Ron Jacobs
Torture is More Than Just "Harsh Tactics"

Richard Rhames
Roman Legends, Book Burning and History's Hunt

Stephen Martin
Wherefore Art Thou American Dream?

David Yearsley
Rodgers, Hammerstein, Michener and Nostalgia's Clammy Embrace

Poets' Basement
Khalil and Mankh

Website of the Weekend
Doug and Andrea Peacock on Grizzlies and Edward Abbey

April 23, 2009

Eamonn Fingleton
How the Wall Street Journal and the New York Times Buried the Madoff Scandal for at Least Four Years

Ray McGovern
Obama Plays Hamlet on Torture

Michael Ratner
The Torture Commission Trap

Alan Farago
The Quicksand Economy

Rob Larson
Business Gets Carded

Nadia Hijab
The Real Heroes of Durban

Fawzia Afzal-Khan
Deconstructing the Taliban

Dave Lindorff
Are Members of Congress Being Blackmailed?

Helen Redmond
Selling Out Single-Payer: the "Public Option" Con

Adam Federman
The Battle Over New York's Marcellus Shale

Website of the Day
An Interactive Map of Vanishing Employment Across the Country

April 22, 2009

Chris Floyd
The Fatal Thread: Torture, War and the Imperial Project

Joanne Mariner
Torture Evidence and Terror Blacklists

Vijay Prashad
Obama's Afghan Plan: Fracturing the Antiwar Movement

Gareth Porter
U.S. Lacks Capacity to Win Over Afghans

Dean Baker
The Tyranny of Bad Economics

Peter Morici
Housing Sales and Fixing the Economy

Winslow T. Wheeler
Eliminating Bad Pentagon Habits

Barucha Calamity Peller
The Battle to Take Back the New School

Harvey Wasserman
Chernobyl Could Happen Here

Aisha Brown /
Dedrick Muhammad
White Privilege in the Americas

Teo Ballvé
Obama's Feel Good Meeting with Colombia's Uribe

Website of the Day
Ahmedinejad's Durban Speech: What He Actually Said

April 21, 2009

Randy Rowland
Lindy Blake's Great Escape

Dave Lindorff
Jay Bybee's Conspiracy to Torture

Fidel Castro
The Secret Summit

George McGovern
Pull Out of Iraq This Year

Greg Moses
The Unemployment Channel

Benjamin Dangl
Argentina Remembers

Sonia Nettnin
Saving Lives in Gaza

Frank Barat
The Death of Bassem: a Shooting at the Wall in Bil'n

Binoy Kampmark
Legal Purgatory and John Demjanjuk

John V. Walsh
Code Red for Single Payer

David Macaray
SAG Should be Praised, Not Assailed

Website of the Day
Bonus Man: For Executive Assholes Everywhere

April 20, 2009

Mike Whitney
Housing Bust Comes Roaring Back, Worse Than Ever

Andrea Peacock
Histrionics and Legalisms in Missoula

Henry A. Giroux
Ten Years After Columbine: the Tragedy of Youth Deepens

Liaquat Ali Khan
Drone Attacks on Pakistan's Indigenous Tribes

Fred Gardner
Obama's DoJ Backs Prosecution of Medical Marijuana Providers

Stephen Soldz
Obama, Blair, Panetta and the Torture Memos: Praising Moral Cowards, Ignoring Real Heroes

Nadia Hijab
Obama's Multi-Polar Middle East

Dave Lindorff
The Meeting in Trinidad

P. Sainath
India's Press Nixes "R" Word

Nelson P Valdés
A Modest (Transition) Proposal to Obama

Mark Engler
American Empire Foreclosed?

Belén Fernández
The FARC Can't Dance

Website of the Day
Dear Mr. Buffett...

Weekend Edition
May 8-10, 2009

Depression Interruptus

Has Bernanke Pulled the Economy Back From the Brink?

By MIKE WHITNEY

Fed chief Ben Bernanke's understanding of financial crises may have kept the country from sliding into another Great Depression. That doesn't mean that he's fixed the credit system, removed the non-performing loans from the banks, or stopped housing prices from crashing. It simply means that pumping liquidity into the system -- via huge increases in the money supply, zero-percent interest rates, and multi-trillion dollar lending facilities -- has either slowed or reversed the rate of decline in many sectors of the economy. Monetary stimulus works. Manufacturing, industrial output, world trade and global stock markets had all been falling faster than during the Great Depression. Bernanke changed that. His aggressive monetary policy helped to stabilize the financial system and pull the economy back from the brink.

In April, retail sales rose slightly as did consumer spending. The service industries contracted less than expected and manufacturing (ISM) showed modest gains. There are also signs that housing prices are flattening out although future price declines are still expected to be somewhere in the range of 10 to 20 per cent. (Housing prices have already slipped 29 per cent since their peak in 2006) The underlying problems in the economy have not been fixed, but green shoots are popping up

Wall Street has taken these first signs of recovery and turned them into an impressive 8 week rally. The S&P 500 has soared 35 per cent in the last two months while the Dow is up nearly 30 per cent. Traders have shrugged off grim earnings reports and myriad other distress signals and joined in the festivities. On CNBC, the financial channel, they're calling it the TARP Rally. The $700 billion bank bailout bill is now credited with lifting the market out of the doldrums and sending stocks higher. It should be renamed the "Bernanke Rally”; without the Fed chief's quantitative easing and toxic asset lending programs the Dow would be  languishing in the 6,000 range.

On the topic of the the bank stress test results, Bloomberg reports:

"The Federal Reserve determined that 10 U.S. banks need to raise a total of $74.6 billion in capital, a finding that Chairman Ben Bernanke said should reassure investors about the soundness of the financial system.

“The results showed that losses at the banks under ‘more adverse’ economic conditions than most economists anticipate could total $599.2 billion over two years. Mortgage losses present the biggest part of the risk, at $185.5 billion. Trading accounts were the second-largest vulnerability, with potential losses of $99.3 billion.

"Regulators have determined that Bank of America Corp. requires about $34 billion in new capital, the largest need among the 19 biggest U.S. banks subjected to stress tests, said a person with knowledge of the matter. Bank of America fell 9 percent in trading before U.S. exchanges opened.

“Citigroup’s requirement for deeper reserves to offset potential losses over the coming two years is about $5 billion, people with knowledge of that bank’s results said. Wells Fargo requires about $15 billion, while GMAC’s need is $11.5 billion, one person said.”

The stress tests are a public relations ploy designed to build confidence in the banking system and to fend off demands that insolvent banks be taken into conservatorship by the government. The market will decide whether Geithner's tests are credible or not; the jury is still out. Initial results indicate significantly smaller losses than estimates by the IMF and the vast number of economists. So, who is right; Geithner or the IMF?

If Geithner is right--and the banks are in such great shape -- then why is the taxpayer being asked to provide up to $2 trillion through the Term Asset-backed Securities Loan Facility (TALF) and the Public Private Investment Partnership (PPIP) to purchase the banks garbage assets?

Regardless of the stress tests, the banking system is underwater and the problems are not going away. The Treasury has given the failing banks 6 months to submit a plan of action for addressing their capital needs. It's a "win-win" situation for the banksters who believe that the recession will be over by then and their mortgage-backed securities will have regained much of their lost value. It's a pipe-dream. More likely, unemployment and foreclosures will continue to rise through 2010, putting greater pressure on banks balance sheets and forcing government intervention. The only alternative is raising capital from private lenders, but that will be a daunting task. The Saudis and China are no longer investing in failing US financial institutions. The capital faucet has been turned off. Obama will have to go to Congress for another multi-billion dollar bailout.

According to author F. William Engdahl:

"Five US banks, according to data in the just-released Federal Office of Comptroller of the Currency's Quarterly Report on Bank Trading and Derivatives Activity, hold 96 per cent of all US Bank derivatives positions in terms of nominal values, and an eye-popping 81 per cent of the total net credit risk exposure in event of default.

“The top three are, in declining order of importance: JPMorgan Chase, which holds a staggering $88 trillion in derivatives; Bank of America with $38 trillion, and Citibank with $32 trillion. Number four in the derivatives sweepstakes is Goldman Sachs, with a mere $30 trillion in derivatives; number five, the merged Wells Fargo-Wachovia Bank, drops dramatically in size to $5 trillion. Number six, Britain's HSBC Bank USA, has $3.7 trillion." (Geithner's Dirty Little Secret, F. William Engdahl, Asia Times)

The derivatives meltdown could have been avoided if Glass Steagall had not been repealed. Instead, the biggest banks have become the most reckless speculators creating trillions of dollars in poison assets which will eventually be dumped the taxpayer. Even worse, the banks have used their political influence to transform the FDIC (the agency which guarantees bank deposits) into the primary funding-mechanism for the purchase of toxic assets through the Treasury's Public Private Investment Program (PPIP)   Bernanke helped Geithner launch the PPIP  and was part of the Greenspan-led deregulatory movement which created the very problems he's now trying to resolve. Neither Bernanke nor Geithner have made any effort to restore the regulatory regime that preceded the crisis.

Bernanke made this  gloomy statement to Congress on May 5:

"The U.S. economy has contracted sharply since last autumn, with real gross domestic product (GDP) having dropped at an annual rate of more than 6 per cent in the fourth quarter of 2008 and the first quarter of this year. Among the enormous costs of the downturn is the loss of some 5 million payroll jobs over the past 15 months.... we are likely to see further sizable job losses and increased unemployment in coming months.

“... A number of factors are likely to continue to weigh on consumer spending, among them the weak labor market and the declines in equity and housing wealth that households have experienced over the past two years. In addition, credit conditions for consumers remain tight.

“... The available indicators of business investment remain extremely weak. Spending for equipment and software fell at an annual rate of about 30 per cent in both the fourth and first quarters, and the level of new orders remains below the level of shipments, suggesting further near-term softness in business equipment spending. ... surveyed firms are still reporting net declines in new orders and restrained capital spending plans. Our recent survey of bank loan officers reported further weakening of demand for commercial and industrial loans. The survey also showed that the net fraction of banks that tightened their business lending policies stayed elevated, although it has come down in the past two surveys.

“Conditions in the commercial real estate sector are poor. Vacancy rates for existing office, industrial, and retail properties have been rising, prices of these properties have been falling, and, consequently, the number of new projects in the pipeline has been shrinking.
   
“We continue to expect economic activity to bottom out, then to turn up later this year....An important caveat is that our forecast assumes continuing gradual repair of the financial system; a relapse in financial conditions would be a significant drag on economic activity and could cause the incipient recovery to stall.

“Even after a recovery gets under way, the rate of growth of real economic activity is likely to remain below its longer-run potential for a while, implying that the current slack in resource utilization will increase further. We expect that the recovery will only gradually gain momentum and that economic slack will diminish slowly. In particular, businesses are likely to be cautious about hiring, implying that the unemployment rate could remain high for a time, even after economic growth resumes.

In this environment, we anticipate that inflation will remain low."

In other words, “the economy stinks and unemployment is going up. People have lost a bundle on their homes and they can count on losing even more. Business is slow, the banks aren't lending and demand has fallen off a cliff. Things might get better, but if we have another Lehman-type blow up, all bets are off. The recovery will be weak and high-unemployment will persist into the foreseeable future, but at least inflation won't be a problem. We think. If there's a problem we hadn't anticipated; please call.  Yours, Ben B.”

The economy is now in a downward spiral. Tightening in the credit markets has made it harder for consumers to borrow or businesses to expand. Overextended financial institutions are forced to shed assets at firesale prices to meet margin calls from the banks. Asset deflation is ongoing with no end in sight. Price declines in housing have reached 30 per cent already and are accelerating on the downside. Unemployment is at a 40 year high and headed higher. There are no jobs; home equity and retirement funds are shrinking and prospects for a quick recovery are nil.

The stock market surge doesn't help working people who get paid by the hour and don't have the extra money to bet on equities. They can't move numbers from one ledger to another and magically show a profit. They have to balance their check books, show up on time. For these people -- the bulk of working Americans -- the future has never been grimmer and less certain. They're afraid for their jobs, their standard of living and their kids. They aren't covered under the bailout, don't have a powerful constituency, and the recovery probably won't include them. There are no green shoots for working stiffs.

Personal debt-to-income has skyrocketed in the last decade. The average American has never been so underwater. Troubles in the credit markets have forced banks to cut credit lines and tightened lending standards are further exacerbating the problem. Consumers have cut back on spending fearing that the recession will deepen or they'll lose their job. At the same time, homeowner equity is vanishing at a record pace, leaving millions on the brink of bankruptcy. An article in Barron's sums it up like this::

“The complacent reaction among the investment cognoscenti is that the credit markets are wildly oversold. More likely... it has something to do with the fact that “an overwhelming portion of some $8 trillion in mortgage debt (or 80 per cent of the total) is teetering on the edge of, or in some state of, negative equity.

“As to the Fed’s claim that the equity of homeowners as a group stands at 43 per cent, she (Stephanie Pomboy) points out that what the Fed neglects to tell you is that roughly a third of them have their houses free and clear. Lo and behold, some basic arithmetic reveals that 67 per cent of homeowners with mortgages have equity of less than 15%. That, Stephanie comments dryly, suggests the ‘destruction priced into the credit markets hardly seems out of whack with potential reality.’

“And while, thanks to ‘ transfer of toxic assets to taxpayers’ and the magic of accounting legerdemain, the scarred financials to some significant extent may be spared further pain, the same can’t be said for the nonfinancial sector. Little recognized, she insists, is how much the extraordinary gains in domestic nonfinancial profits from the low in 2001 to the peak in 2006 — a stunning rise of 388 per cent — owed to the housing bubble." (Shotgun Wedding, Alan Abelson, Barrons)

Those gigantic gains have been wiped out leaving the average homeowner with a mere 15 per cent equity stake in his home. If prices continue to fall, the vast majority of homeowners will be at or near destitution. If the Fed's plan was to shift the nation's wealth from homeowners to the investor class via the housing bubble; they may have achieved their goal.   

The Obama administration has done little to help struggling homeowners even though the incidents of predatory lending are widespread and overwhelmingly directed at poor people of color. The New York Times  lashed out at Obama for not pushing cram-down legislation through congress even though he gave the bill lip-service during his presidential campaign. From the New York Times editorial:

“The Obama administration sat by last week as 12 Senate Democrats joined 39 Senate Republicans to block a vote on an amendment that would have allowed bankruptcy judges to modify troubled mortgages.

Senator Obama campaigned on the provision. And President Obama made its passage part of his antiforeclosure plan. It would have been a very useful prod to get lenders to rework bad loans rather than leaving the modification to a judge.

But when the time came to stand up to the banking lobbies and cajole yes votes from reluctant senators — the White House didn’t. When the measure failed, there wasn’t even a statement of regret. " (New York Times)

It would have been easy for Obama to twist a few arms in the Senate and push through the legislation, but he didn't lift a finger. Instead, he's focused on expanding the war in Pakistan and pushing through his pay-your-own-way health care boondoggle. Obama's pattern of backing-away from his campaign promises suggests that he'll cave in when the critical union organizing bill, The Employee Free Choice Act (EFCA) comes up for a vote. Obama, no friend of labor, will be AWOL once again.

Bernanke may have saved the country from another Great Depression, but he'll have a tough time putting the economy back on track. The Fed's ideological bias keeps it from addressing the root problem of flagging demand. What's needed are policymakers who understand that the endless debt-expansion is not sustainable, and that maintaining a healthy economy requires higher wages and a narrowing of the income gap. Inequality leads to falling demand and boom-and-bust cycles. Fiscal stimulus can take up the slack in demand on a temporary basis, but eventually, wages and compensation need to be increased to rebalance the system. The economist James K. Galbraith made these observations on the state of affairs in a recent interview with The Texas Observer:

"As a matter of economics, public spending substitutes for private spending. It provides jobs, motivates useful activity, staves off despair. But it is not self-sustaining in the absence of a viable private credit system. The idea that we will be on the road to full recovery and returning to high employment in a year or so therefore seems to me to be an illusion. And for this reason, the emphasis on short-term, ‘shovel-ready’ projects in the expansion package, while understandable, was a mistake. As in the New Deal, we need both the Works Progress Administration, headed by Harry Hopkins, to provide employment, and the Public Works Administration, headed by Harold Ickes, to rebuild the country.

“The desire for a return to normal is very powerful. It motivates both the ritual confidence of public officials and the dry numerical optimism of business economists, who always see prosperity just around the corner. The forecasts of these people, like those of official agencies such as the Congressional Budget Office, always see a turnaround within a year and a return to high employment within four or five years. In a strict sense, the belief is without foundation. Liquidation of excessive debt is now, and will remain for a time, the highest priority of American households. That is in part because for the moment they want to hold on to cash, and therefore they do not wish to borrow, and in part because with the collapse of house values, they no longer have collateral to borrow against. And so long as that is the case, there can be no strong recovery of private spending or business investment. ("Causes of the Crisis", James K. Galbraith: The Texas Observer)

Digging out of the current recession won't be easy. The wholesale credit system will have to be rebuilt, just as the financial system will have to be re-regulated and reset at a lower level of economic activity. That means higher unemployment, smaller GDP, and falling demand. Debts will have to be written-down or paid off. Deleveraging takes time. The fireworks in the stock market are premature. Recovery is still a long way off.

Mike Whitney lives in Washington state. He can be reached at fergiewhitney@msn.com

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