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PAUL CRAIG ROBERTS ON HOW THE 'FREE TRADE' CASE FOR OFFSHORING AMERICA'S JOBS HAS COME UNGLUED Roberts on the sensational exposure of the faked "gains" and phantom stats of the free traders. Who was America's most anti-imperialist president? Try Grover Cleveland! JoAnn Wypijewski on the unlikely hero of Hawai'i's restoration movement. Alexander Cockburn reports on evangelical Christians in crisis amid fresh onslaughts by forces of darkness. The Warbler's Parable: Rosa Miriam Elizalde on the black-masked visitors to Cuba defying the US economic blockade.
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Today's Stories June 30 / July 1, 2007 Alan
Farago Robert
Fisk Judith
Siers-Poisson June 29, 2007 St.
Clair / Frank Brian
Cloughley Patrick
Cockburn Gilad
Atzmon Dave
Lindorff Jennifer
Matsui / Kevin
Zeese Daniel
Klimek David
Michael Green John
Chuckman Website
of the Day
June 28, 2007 Bill
Quigley Vijay
Prashad Margaret
Kimberley Winslow
T. Wheeler Philip
Rizk D.
K. Wilson Bill
Williams Mahmoud
El-Yousseph Richard
Rhames Paul
Krassner Website
of the Day
Marjorie
Cohn Dr.
Susan Rosenthal, MD Alan
Farago Carla
Blank Matthew
Abraham Sunsara
Taylor Russell
D. Hoffman Robert
Weissman Sen.
Russ Feingold Paul
Buchheit Website
of the Day
June 26, 2007 Jonathan
Cook Ralph
Nader Corporate
Crime Reporter Ron
Jacobs Martha
Rosenberg John
Chuckman Denny
Haldeman Anthony
DiMaggio Stephen
Fleischman William
S. Lind Website
of the Day
Paul
Craig Roberts Jennifer
Loewenstein Bob
Anderson Robert
Pollin Patrick
Cockburn Eva
Liddell Dan
Bacher Larry
Atkins Mark
Brenner James
Rothenberg Website
of the Day June 23 / 24, 2007 Alexander
Cockburn Jeff
Taylor Oren
Ben-Dor Gary
Leupp Robert
Fisk David
Rosen Russell
Mokhiber Alison
Weir Robert
Fantina D.
K. Wilson Nicole
Colson Stephen
Soldz, Steven Reisner and Brad Olson Dave
Lindorff Benjamin
Dangl Michael
Dickinson Poets'
Basement Website
of the Weekend
June 22, 2007 Andy
Worthington Sherwood
Ross Eliana
Monteforte Robert
Weissman Richard
Rhames Christopher
Brauchli Ramzy
Baroud Ehud
Krinis, David Shulman and Neve Gordon David
Michael Green Kathryn
Webber Website
of the Day
June 21, 2007 Peter
Linebaugh Natsu
Saito Ron
Jacobs Saree
Makdisi John
Stauber Scott
Liebertz Tom
Clifford Robert
Jensen Michael
J. Smith Jeb
Sprague Website
of the Day
Omar
Barghouti Andy
Worthington Margaret
Kimberley Robert
Weissman Russell
D. Hoffman Rannie
Amiri Stephen
Lendman Dave
Lindorff David
Swanson Anne
Dachel Website
of the Day
June 19, 2007 Ralph
Nader Dr.
Shepherd Bliss Bill
and Kathleen Christison Jeff
Leys Dave
Zirin Chris
Floyd Ben
Terrall Anthony
Papa VIPS Linda Flores Website
of the Day
John
Ross Paul
Craig Roberts Martha
Rosenberg Norman
Solomon Don
Santina Isabella
Kenfield James
Brooks Eva
Liddell Sam
Husseini Akiva
Eldar Website
of the Day
Alexander
Cockburn John
Halle Robert
Fisk Andy
Worthington Uri
Avnery Fred
Gardner Saul
Landau P.
Sainath Missy
Comley Beattie Alan
Gregory Walter
Brasch Website
of the Weekend
June 15, 2007 Alan
Farago Andy
Worthington Michael
Simmons Franklin
Lamb Gary
Leupp John
Ross Website
of the Day
June 14, 2007 Michael
Donnelly
Faisal
Kutty Harry
Browne Charles
Jonkel Steven
Higgs Bruce
Dixon Bruce
K. Gagnon
Website
of the Day June 13, 2007 Glen Ford Marjorie Cohn Bill Christison Charles Jonkel Silvia Cattori Richard Gott Firmin DeBrabander William S. Lind Keith Rosenthal Website of the Day June 12, 2007 Jeffrey St.
Clair Paul Craig
Roberts P. Sainath Ralph Nader Omar Waraich Dave Lindorff Harvey Wasserman Malini Johar
Schueller Ramzy Baroud Website of
the Day
June 11, 2007 Patrick Cockburn Paul Craig
Roberts Uri Avnery Norman Solomon Eva Liddell Rannie Amiri Rachel Voss Christopher
Brauchli D. K. Wilson Website of
the Day
Alexander Cockburn George Ciccariello-Maher Saul Landau Robert Fisk Brian Cloughley Ron Jacobs Ward Boston Conn Hallinan Leonard Peltier Lawrence Davidson John Ross Kate Allan Fred Gardner Stephen Fleischman Monica Benderman Geoff Bailey Missy Beattie Patrick Dyer Tim Lengerich James Irani
Gary Leupp Michael Tillery Michael Simmons Poets' Basement Website of the Weekend
June 8, 2007 Serge Halimi Patrick Cockburn Jeffrey St. Clair
Paul Craig Roberts William Blum Joshua Frank Lance Selfa Dave Lindorff Lawrence Ferlinghetti Website of the Day
Marjorie Cohn Soldz, Reisner
and Olson: Soldz, Reisner
Paul Craig Roberts Bill Quigley Silvia Cattori Carl G. Estabrook Ellen Taylor Corporate Crime
Reporter Brenda Norrell D. K. Wilson Kevin Zeese Website of
the Day
Alain Gresh Gary Leupp Steven Sherman Bruce Dixon Corporate Crime Reporter Brian M. Downing Ron Jacobs George Bisharat Nicole Colson Bruce K. Gagnon Website of the Day
June 5, 2007 Michael Neumann Jonathan Cook David Vest Robert Fantina Hoffman, Parsneau and Chowdhury John V. Walsh Richard Cretan Adam Engel William S. Lind Myles Hoenig Jim Minick Website of
the Day
Nizar Latif Diana Johnstone Gregory Wilpert Paul Watson Susan Rosenthal,
MD Richard Ward Eva Liddell Zahi Khouri Evelyn Pringle China Hand Karyn Strickler Website of the Day
June 2 / 3, 2007 Alexander Cockburn Marc Levy Martin Smith Diana Johnstone John Ross Uri Avnery Sunsara Taylor Richard Neville P. Sainath Missy Comley
Beattie Nisrine Abiad Rannie Amiri Margot Pepper Eric Stewart Ralph Nader Dan Bacher Shaun Harkin Richard Rhames Frederick Hudson Poets' Basement Website of the Weekend
Dave Marsh Saul Landau David Phinney Robert Jensen Stanley Heller Yifat Susskind Robert Weissman Paul Buchheit William S.
Lind Sherwood Ross Stephen Lendman Website of the Day
Robert Bryce Patrick Cockburn Gary Leupp Kathy Kelly Marjorie Cohn Chris Kutalik
Corporate Crime Reporter Dave Lindorff Website of the Day
May 30, 2007 James Ridgeway Franklin Lamb Terrence E. Paupp Uri Avnery Alan Maass Rock and Rap
Confidential Ralph Nader Nirmal Ghosh Jean Daniels Tom Barry Website of the Day
Stephen Soldz Eliza Ernshire Ron Jacobs Dave Lindorff Evelyn Pringle Mike Whitney David Swanson John Holt Cynthia McKinney Martha Rosenberg Website of the Day
Bill Quigley Col. Dan Smith Cindy Sheehan Dr. Susan Block Jeeni Criscenzo Douglas Valentine Website of the Day 
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Weekend
Edition A Subprime Chernobyl?The Fed's Role in the Bear Stearns MeltdownBy MIKE WHITNEY The Bank for International Settlements issued a warning last week that the Federal Reserve's monetary policies have created an enormous equity bubble which could lead to another "Great Depression". The UK Telegraph says that, "The BIS--the ultimate bank of central bankers--pointed to a confluence a worrying signs, citing mass issuance of new-fangled credit instruments, soaring levels of household debt, extreme appetite for risk shown by investors, and entrenched imbalances in the world currency system." The IMF and the UN have issued similar warnings, but they've all been ignored by the Bush administration. Neither Bush nor the Federal Reserve is interested in "course correction". They plan to stick with the same harebrained policies until the end. The "easy credit" which created the subprime crisis in mortgage lending has now spread to the hedge fund industry. The troubles at Bear Stearns prove that Secretary of the Treasury Henry Paulson's assurance that the problem is "contained" is pure baloney. The contagion is swiftly moving through the entire system taking down home owners, mortgage lenders, banks, rating agencies, and hedge funds. We are just at the beginning of a system-wide breakdown. The problem originated at the Federal Reserve when Fed-chief Alan Greenspan lowered the Feds Fund Rate to 1% in June 2003 and kept rates perilously low for more than 2 years. Trillions of dollars flowed into the economy through low interest loans creating a massive equity bubble in real estate which drove up housing prices and triggered a speculative frenzy. The Feds' "easy money" policy has disrupted the "debt-to-GDP" balance which maintains the integrity of the currency. By expanding circulation debt via low interest rates; Greenspan put the country on the path to hyperinflation and, very likely, the collapse of the monetary system. The problems at Bear Stearns are the logical upshot of Greenspan's policies. The over-leveraged hedge funds are a good example of what happens during a "credit boom". Liquidity flows into the markets and raises the nominal value of all asset classes but, at the same time, GDP continues to shrink. That's because the wages of working class people have stagnated and not kept pace with productivity. When workers have less discretionary income, consumer spending"which accounts for 70% of GDP"begins to decline. That's why this quarters earnings reports have fallen short of expectations. The American consumer is "tapped out". The current rise in stock prices does not indicate a healthy economy. It simply proves that the market is awash in cheap credit resulting from the Fed's increases in the money supply. Consumer spending is a better indicator of the real state of the economy than stocks. When consumer spending drops off; it is a sign of overcapacity, which is deflationary. That means that growth will continue to shrivel because maxed-out workers can no longer purchase the things they are making. The underlying problem is not simply the Fed's reckless increases to the money supply, but the growing "wealth gap" which is undermining solid economic growth. If wages don't keep pace with productivity; the middle class loses its ability to buy consumer items and the economy slows. The reason that hasn't happened yet in the US is because of the extraordinary opportunities to expand personal debt. The Fed's low interest rates have created a culture of borrowing which has convinced many people that debt equals wealth. It's not; and the collapse in the housing market will prove how lethal that theory really is. To large extent, the housing bubble has concealed the systematic destruction of America's industrial and manufacturing base. Low interest rates have lulled the public to sleep while millions of high-paying jobs have been outsourced. The rise in housing prices has created the illusion of prosperity but, in truth, we are only selling houses to each other and are not making anything that the rest of the world wants. The $11 trillion dollars that was pumped into the real estate market is probably the greatest waste of capital investment in the nations' history. It hasn't produced a single asset that will add to our collective wealth or industrial competitiveness. It's been a total bust. The Federal Reserve produces all the facts and figures related to the housing industry. They knew that trillions of dollars were being diverted into a speculative bubble, but they did nothing to stop it. Instead, they kept interest rates low and endorsed the lax lending standards which paved the way for millions of defaults. Now the effects of their "cheap money" policies have spread to the hedge fund industry where hundreds of billions of dollars in pensions and savings are in jeopardy. Alan Greenspan played a major role in the housing boondoggle. On February 26, 2004, he said, "American consumers might benefit if lenders provide greater mortgage product alternatives to the traditional fixed rate mortgage. To the degree that households are driven by fears of payment shocks but willing to manage their own interest-rate risks, the traditional fixed-rate mortgage may be an expensive method of financing a home." Greenspan tacitly approved the whacky financing which produced all manner of untested loans"including ARMs, piggyback loans, "no doc" loans, "interest only" loans etc. These loans are a break from traditional financing and have contributed to the increase in bankruptcies. Millions of people who were hoodwinked into buying homes with "interest-only", "no down" loans will now either lose their homes or be shackled to an asset of decreasing value for the next 30 years. They've been tricked into a life of indentured servitude. A recent article in the Wall Street Journal revealed the extent of Greenspan's involvement in the housing fiasco. Here's an excerpt from the article:
So, Greenspan had the chance to "crack down on predatory lending" and he refused. Now millions of low income people are saddled with payments they have no reasonable prospect of paying off. How much of the present carnage could have been avoided if he had Greenspan done the right thing? The "Not So Great" Depression An article appeared this week in the UK Telegraph by Ambrose Evans-Pritchard which supports the theory that Greenspan's "loose monetary policy" fueled a huge credit bubble, which is pushing the global economy towards a "1930s-style slump."
But today we face "worrying signs" of another economic meltdown. The BIS said that they were "starting to doubt the wisdom of letting asset bubbles build up on the assumption that they could safely be cleaned up' afterwards". (Greenspan's method) and that, "while cutting interest rates in such a crisis may help, it has the effect of transferring wealth from creditors to debtors and sowing the seeds for more serious problems further ahead.'" "The bank said it was far from clear whether the US would be able to ignore the consequences of its latest imbalances, ($800 billion per year) citing a current account deficit running at 6.5% of GDP, a rise in US external liabilities by over $4 trillion from 2001 to 2005, and an unprecedented drop in the savings rate. The dollar clearly remains vulnerable to a sudden loss of private sector confidence."' The BIS referred to the toxic effect of the "$470 billion in collateralized debt obligations (CDO), and a further $524 billion in "synthetic" CDOs which have spread through hedge funds industry. These CDOs are the loans (many sub primes) which were bundled off to Wall Street and turned into securities which are highly leveraged in hedge funds for maximum profitability. As Bear Stearns is discovering, these CDOs are like roadside bombs; exploding without notice whenever the stock market suddenly dips. The BIS also cautioned about the excess of "leveraged buy-outs (mergers) which touched $753bn, with an average debt/cash flow ratio hitting a record 5.4--. Sooner or later the credit cycle will turn and default rates will begin to rise.'" The central banks around the world are increasingly worried that the Bush administration's profligate spending and irrational monetary policies will trigger a global depression. The recent volatility in the stock market suggests that the credit boom is just about over. Once the liquidity dries up---stocks will fall sharply.
The Housing Slump Yesterday's housing data, shows that sales are still weak while inventory continues to grow. Existing home sales dropped 3% while prices dropped another 2.1%. Falling prices mean that cash-strapped home owners will not be able to tap into their home's equity for other expenses. Last year, mortgage equity withdrawals (MEWs) accounted for $600 billion of consumer spending. This year, the amount will be negligible at best. The media and the Fed continue to mislead the public about the magnitude of the housing bubble. Fed chief Bernanke assures us that the sub prime calamity hasn't "spread to other parts of the economy" (tell that to Bear Stearns) and the media keeps cheerily reiterating that a "turnaround" or "soft landing" is just ahead. These claims are ridiculous. Apart from the 80 or more sub-prime lenders that have gone "belly-up" in the last few months, the rickety collateralized debt obligations (CDOs) and mortgage backed securities (MBSs) are steamrolling their way through the stock market bowling down everything their path. Bear Stearns is just the first on the casualties list. There'll be many more before the storm is over. Fed-chairman Bernanke knows what's going on. He was given a full rundown by "John Burns Real Estate Consulting that the national sales information for both new and existing homes, is "misleading and covering up a deep plunge of the housing sector." The housing market is freefalling. Existing-home sales are down 22% in May and mortgage applications have fallen a whopping 18%....In Florida home sales are down 34%, not 28% as NAR reported; Arizona sales are down 38%, not 28%; and California's down 37%, not 24% as NAR reports." Down 37% in California!?! It's a landslide. As the defaults continue to pile up; the hedge funds will take a bigger and bigger pounding. It can't be avoided. That's what happens when bankers abandon traditional lending standards and lend trillions of thousands of dollars to people who have bad credit and lie on their loan applications. Thousands of these same shaky sub primes loans have been wrapped up like the Crown Jewels and sold off to Wall Street as CDOs. Now they are ripping through the hedge fund industry like a tornado in a trailer park. The media has tried to downplay the damage, but its not hard to see what is really going on. According to Reuters:
"$2.6 trillion"! That's enough to bring down the whole economy. And, as Bear Stearns proves, the whole mess is beginning to unwind pretty quickly. "Foreign investors have been the dominant buyers of these exotic debt instruments in recent years, owing to their insatiable demand for yield. If investors start dumping them, oh boy, watch out for some massive credit widening," said Dan Fuss, Vice Chairman at Loomis Sayles. (Reuters) If the hedge fund industry follows the downward slide of the housing bubble, foreign investors will run for the exits. In fact, this may already being happening. China sold $5.8 billion in US Treasuries in May; the first time they have dumped USTs on the market. This may be the first sign of "capital flight"---foreign investment fleeing the US for more promising markets in Asia and Europe. The greenback's survival now depends on the generosity of foreign bankers. If they refuse to recycle our $800 billion current account deficit by purchasing US bonds and securities, then the dollar will sink like a stone and lose its place as the world's reserve currency.
Last Friday, the stock market took a 185-point nosedive on the news that Bear Stearns was trying to raise $3.2 billion to rescue its battered hedge fund. According to the New York Times, however, Bear was only able to came up with "$1.6 billion in secured loans to bail out one of the 2 hedge funds". The funds are the latest victim of the sub-prime meltdown which Bernanke and Paulson assured us was "largely contained". In fact, Paulson even said, "We have had a major housing correction in this country," and "I do believe we are at or near the bottom." Anyone who believes Paulson should take a look this chart It illustrates that how loan "resets" will continue to pound the housing market for at least another year and a half getting steadily worse as inventory grows. The disaster is so bad that even the realtors are beginning to tell the truth. As one agent noted, "It's a bloodbath." But the debacle in housing is only the first part of a much larger problem"a global liquidity crisis. Banks and mortgage lenders have already begun to tighten up their lending practices and many have abandoned sub prime loans altogether. (20% of the housing market in 2006 was sub prime) Now the focus has shifted to the stock market, where banks are beginning to see that "risk" has not been properly calculated. That means that if more hedge funds collapse, the banks may not be able to cover the losses. The Bear Stearns fiasco has had a chilling affect on lending. In fact, the New York Times reported on 6-26-07 that "After years of supersize private equity deals--the buyout boom may be about to hit a bump--Rising interest rates and tougher terms from investors may signal that private equity players will soon be struggling to continue reaping the outsize returns that have made the buyout business so lucrative." (Private Equity Investors Hint at Cool Down" NY Times) Liquidity is drying up in the private equity business. The troubles at Bear Stearns has changed the credit-landscape overnight. Bankers are nervous, money is getting tighter, and liquidity is vanishing. "We know that these holdings are not unique to Bear Stearns," said Professor Joseph R. Mason, co-author of a recent study warning of dangers in securities backed by home loans to high-risk borrowers. "It would be hard to find a Wall Street firm that hasn't created similar funds." That's right; the industry is waist-deep in these sub-prime time-bombs. Shaky loans and rising foreclosures threaten to knock the foundation blocks out from under the stock market and set off a wave of panic selling. Could it have been avoided? Perhaps, if there were better regulations on rating bonds and restricting leverage. Consider this: one of Bear Stearns hedge funds took a $600 million investment and leveraged it 10 times its value to $7 billion. Their portfolio was chock-full of dicey CDOs and "illiquid assets" such as timber holdings in foreign countries and toll roads. These assets are difficult to price and nearly impossible to quickly auction off if the market suddenly takes a downturn. It looked like Merrill Lynch & Co., was going to auction off $850 million of Bear Stearns CDOs this week, but backed off at the last minute. (They were reportedly only offered 30 cents on the dollar!) Once the hedge funds start selling these CDOs, then everyone will know how little they're worth. That could trigger a wave of selling that could bring down the stock market. Even if that scenario doesn't play out, the Bear Stearns incident ensures that CDOs in other hedge funds will be face a substantial downgrading that could take a big chunk out of their bottom line. And, there's a bigger fear on Wall Street than the fact that 2 hedge funds are headed into bankruptcy, that is, that a sudden tightening of credit will send the over-leveraged stock market into a downward spiral. The market is particularly sensitive to any rise in interest rates or tougher lending standards. It's become addicted to cheap credit and any break in the chain will cause equities to plummet. Economist Henry C K Liu sums it up like this:
In other words, the "virtual" wealth of Wall Street is a chimera which was created by the Fed's inexorable expansion of debt. It can vanish in a flash if the sources of liquidity are cut off. Puru Saxena draws the same conclusion in his article "A Gradual Transition":
Code Red: Subprime Chernobyl We expect that the mounting losses in CDOs and the continuing defaults in the housing industry will precipitate a "severe credit crunch" which will end in a stock market crash. A report which appeared yesterday in the UK Telegraph appears to agree with this analysis. Lombard Street Research predicted that: "Excess liquidity in the global system will be slashed. Banks Capital is about to be decimated, which will require calling in a swathe of loans. This is going to aggravate the US hard landing"' ("Banks set to call in swathe of loans" UK Telegraph 6-26-07) Three of the main hoses which provide liquidity for the market, have either been cut off or severely damaged. These are "securatized" subprime CDOs, corporate mega-mergers and hedge fund leveraging. Without these instruments for expanding debt; liquidity will dry up and stocks will fall. The period of "easy credit" will end in disaster. We should now be able to see the straight line that connects the Fed's low interest rates to the impending stock market meltdown. The problems began at the central bank. Presidential candidate Rep. Ron Paul (R-Texas) summed it up best when he said:
Mike Whitney lives in Washington state. He can
be reached at: fergiewhitney@msn.com  |
CounterPunch Books of the Crossroads: HOW THE IRISH INVENTED SLANG By Daniel Cassidy  Click Here to Buy! How the Press Failed The Gang's All Here: Judy Miller, Bob Woodward, Rupert Murdoch, Bill O'Reilly...End Times Leaves No Reputation Unstained!  Buy End Times Now! CounterPunch Books! Saul Landau's Bush and Botox World with a Foreword by Gore Vidal  Click Here to Order!  Michael Neumann's Devastating Rebuttal of Alan Dershowitz Grand Theft Pentagon: Tales of Greed and Profiteering in the War on Terror by Jeffrey St. Clair           The Occupation by Patrick Cockburn   Humanitarian Imperialism By Jean Bricmont               CITY BEAUTIFUL By Tennessee Reed        Bruce Springsteen On Tour By Dave Marsh                   |
