Monday, December 31, 2007

Democrats are close to enacting a suppressive police state

BRUCE FEIN, WASHINGTON TIMES - Congress is perched to enact the "Violent Radicalization and Homegrown Terrorism Prevention Act of 20007" Act, probably the greatest assault on free speech and association in the United States since the 1938 creation of the House Un-American Activities Committee. Sponsored by Rep. Jane Harman, California Democrat, the bill passed the House of Representatives on Oct. 23 by a 404-6 vote under a rule suspension that curtailed debate. To borrow from House Speaker Nancy Pelosi, California Democrat, the First Amendment should not distract Congress from doing important business. The Senate companion bill, sponsored by Susan Collins, Maine Republican, has encountered little opposition. Especially in an election year, senators crave every opportunity to appear tough on terrorism. Few if any care about or understand either freedom of expression or the Thought Police dangers of S. 1959. Former President John Quincy Adams presciently lamented: "Democracy has no forefathers, it looks to no posterity, it is swallowed up in the present and thinks of nothing but itself."

Denuded of euphemisms and code words, the act aims to identify and stigmatize persons and groups who hold thoughts the government decrees correlate with homegrown terrorism, for example, opposition to the Patriot Act or the suspension of the great writ of habeas corpus.

The act will inexorably culminate in a government listing of homegrown terrorists or terrorist organizations without due process; a complementary listing of books, videos, or ideas that ostensibly further "violent radicalization;" and a blacklisting of persons who have intersected with either list.

Political discourse will be chilled and needed challenges to conventional wisdom will flag. There are no better examples of sinister congressional folly.

The act inflates the danger of homegrown terrorism manifold to justify creating a marquee National Commission on the Prevention of Violent Radicalization and Ideologically Based Violence . . . Since September 11, 2001, no American has died from homegrown terrorism, while about 120,000 have been murdered. . .

The commission's Big Brother task is to discover ideas and political associations, including connections to non-U.S. persons and networks, that promote "violent radicalization, homegrown terrorism, and ideologically based violence in the United States." And "violent radicalization" is defined as "the process of adopting or promoting an extremist belief system for the purpose of ideologically based violence to advance political, religious, or social change."

Under the Act, William Lloyd Garrison would have been guilty of promoting "violent radicalization" for publishing the anti-slavery Liberator in 1831, which "facilitated" John Brown. Susan B. Anthony and Elizabeth Cady Stanton would have been condemned for assailing laws disenfranchising women and creating an intellectual atmosphere receptive to violence. And Martin Luther King, Jr. would have fallen under the Act's suspicion for denouncing Jim Crow and practicing civil disobedience, which "facilitated" H. Rap Brown. . .

Lengthy lists of persons, organizations and thoughts to be shunned will be compiled. Portions of the Holy Koran are likely to be taboo. The lives of countless innocent citizens will be shattered. That is the lesson of HUAC and every prior government enterprise to identify "dangerous" people or ideas — for example, the 120,000 innocent Japanese-Americans herded into concentration camps during World War II.

Bruce Fein is a constitutional lawyer with Bruce Fein & Associates and Chairman of the American Freedom Agenda.

Related article:
Fascism doesn't have to announce itself

RAY MCGOVERN, CONSORTIUM NEWS - "There was not a single example of energetic defense, of courage or principle. There was only panic, flight, and desertion. In March 1933 millions were ready to fight the Nazis. Overnight they found themselves without leaders...At the moment of truth, when other nations rise spontaneously to the occasion, the Germans collectively and limply collapsed. They yielded and capitulated, and suffered a nervous breakdown.... The result is today the nightmare of the rest of the world."

These are the words of Sebastian Haffner (pen name for Raimund Pretzel), who as a young lawyer in Berlin during the 1930s experienced the Nazi takeover and wrote a first-hand account. His children found the manuscript when he died in 1999 and published it the following year as Geschichte eines Deutschen (The Story of a German). The book became an immediate bestseller and has been translated into 20 languages – in English as Defying Hitler. . .

In his journal Sebastian Haffner decries what he calls the "sheepish submissiveness" with which the German people reacted to a 9/11-like event, the burning of the German Parliament (Reichstag) on Feb. 27, 1933. Haffner finds it quite telling that none of his acquaintances "saw anything out of the ordinary in the fact that, from then on, one's telephone would be tapped, one's letters opened, and one's desk might be broken into.". . .

In the elections of March 4, 1933, shortly after the Reichstag fire, the Nazi party garnered only 44 percent of the vote. Only the "cowardly treachery" of the Social Democrats and other parties to whom 56 percent of the German people had entrusted their votes made it possible for the Nazis to seize full power. Haffner adds:

"It is in the final analysis only that betrayal that explains the almost inexplicable fact that a great nation, which cannot have consisted entirely of cowards, fell into ignominy without a fight."

The Social Democratic leaders betrayed their followers – "for the most part decent, unimportant individuals." In May they sang the Nazi anthem; in June the Social Democratic party was dissolved.

The middle-class Catholic party Zentrum folded in less than a month, and in the end supplied the votes necessary for the two-thirds majority that "legalized" Hitler's dictatorship. . .

Thursday, December 27, 2007

The Great American Lock-Up

We Are All Prisoners Now


"They're locking them up today
They're throwing away the key
I wonder who it'll be tomorrow, you or me?"

The Red Telephone (LOVE, 1967)

At Christmas time it has been my habit to write a column in remembrance of the many innocent people in prisons whose lives have been stolen by the US criminal justice (sic) system that is as inhumane as it is indifferent to justice. Usually I retell the cases of William Strong and Christophe Gaynor, two men framed in the state of Virginia by prosecutors and judges as wicked and corrupt as any who served Hitler or Stalin.

This year is different. All Americans are now imprisoned in a world of lies and deception created by the Bush Regime and the two complicit parties of Congress, by federal judges too timid or ignorant to recognize a rogue regime running roughshod over the Constitution, by a bought and paid for media that serves as propagandists for a regime of war criminals, and by a public who have forsaken their Founding Fathers.

Americans are also imprisoned by fear, a false fear created by the hoax of "terrorism." It has turned out that headline terrorist events since 9/11 have been orchestrated by the US government. For example, the alleged terrorist plot to blow up Chicago's Sears Tower was the brainchild of a FBI agent who searched out a few disaffected people to give lip service to the plot devised by the FBI agent. He arrested his victims, whose trial ended in acquittal and mistrial.

Many Europeans regard 9/11 itself as an orchestrated event. Former cabinet members of the British, Canadian and German governments and the Chief of Staff of the Russian Army have publicly expressed their doubts about the official 9/11 story. Recently, a former president of Italy, Francesco Cossiga, said in an interview with the newspaper, Corriere della Sera (November 30, 2007), that "democratic elements in America and Europe, with the Italian center-left in the forefront, now know that the 9/11 attack was planned and executed by the American CIA and Mossad in order to blame the Arab countries, and to persuade the Western powers to undertake military action both in Iraq and Afghanistan."

It is unclear whether Cossiga was being sarcastic about the opinion of skeptics or merely reporting what people think. I have written to him asking for clarification and will report any reply that I receive. Apparently, the Italian media has not offered a clarification.

Cossiga's statement has not been reported by a US newspaper or TV channel. Raising doubts among Americans about the government is not a strong point of the corporate media. Americans live in a world of propaganda designed to secure their acquiescence to war crimes, torture, searches and police state measures, military aggression, hegemony and oppression, while portraying Americans (and Israelis) as the salt of the earth who are threatened by Muslims who hate their "freedom and democracy."

Americans cling to this "truth" while the Bush regime and a complicit Congress destroy the Bill of Rights and engineer the theft of elections.

Freedom and democracy in America have been reduced to no-fly lists, spying without warrants, arrests without warrants or evidence, permanent detention despite the constitutional protection of habeas corpus, torture despite the prohibition against self-incrimination--the list goes on and on.

In today's fearful America, a US Senator, whose elder brothers were:

(1) a military hero killed in action,

(2) a President of the United States assassinated in office,

(3) an Attorney General of the United States and likely president except he was assassinated like his brother, can find himself on the no-fly list.

Present and former high government officials, with top secret security clearances, cannot fly with a tube of toothpaste or a bottle of water despite the absence of any evidence that extreme measures imposed by "airport security" makes flying safer.

Elderly American citizens with walkers and young mothers with children are meticulously searched because US Homeland Security cannot tell the difference between an American citizen and a terrorist.

All Americans should note the ominous implications of the inability of Homeland Security to distinguish an American citizen from a terrorist.

When Airport Security cannot differentiate a US Marine General recipient of the Medal of Honor from a terrorist, Americans have all the information they need to know.

Any and every American can be arrested by unaccountable authority, held indefinitely without charges and tortured until he or she can no longer stand the abuse and confesses.

This predicament, which can now befall any American, is our reward for our stupidity, our indifference, our gullibility, and our lack of compassion for anyone but ourselves.

Some Americans have begun to comprehend the tremendous financial costs of the "war on terror." But few understand the cost to American liberty. Last October a Democrat-sponsored bill, "Prevention of Violent Radicalism and Homegrown Terrorism," passed the House of Representatives 404 to 6.

Only six members of the House voted against tyrannical legislation that would destroy freedom of speech and freedom of assembly and that would mandate 18 months of congressional hearings to discover Americans with "extreme" views who could be preemptively arrested.

What better indication that the US Constitution has lost its authority when elected representatives closest to the people pass a bill that permits the Bill of Rights to be overturned by the subjective opinion of members of an "Extremist Belief Commission" and Homeland Security bureaucrats? Clearly, Americans face no greater threat than the government in Washington.

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:


The Islamist-extremist bastards got her.

The Associated Press is reporting that Benazir Bhutto has been murdered.

After speaking at a rally in Rawalpindi, Pakistan an attacker fired a weapon at her as she was leaving the rally, then blew himself up, killing 20 others and his target - the uppity woman who didn't know her place.

"At 6:16 p.m. she expired," said Wasif Ali Khan, a member of Bhutto's party who was at Rawalpindi General Hospital, where she was taken after the explosion.

A senior military official, who spoke on condition of anonymity because he was not authorized to comment, confirmed that Bhutto had died.

Updates will follow as details emerge, but my fear is that the political volcano that is Pakistan will erupt into violence now.

Wednesday, December 26, 2007

A Favorite Christmas Song

The Rebel Jesus

All the streets are filled with laughter and light

And the music of the season

And the merchants’ windows are all bright

With the faces of the children

And the families hurrying to their homes

As the sky darkens and freezes

They’ll be gathering around the hearths and tales

Giving thanks for all God’s graces

And the birth of the rebel Jesus


Well they call him by the prince of peace

And they call him by the savior

And they pray to him upon the seas

And in every bold endeavor

As they fill his churches with their pride and gold

And their faith in him increases

But they’ve turned the nature that I worshipped in

From a temple to a robber’s den

In the words of the rebel Jesus


We guard our world with locks and guns

And we guard our fine possessions

And once a year when Christmas comes

We give to our relations

And perhaps we give a little to the poor

If the generosity should seize us

But if any one of us should interfere

In the business of why they are poor

They get the same as the rebel Jesus


But please forgive me if I seem

To take the tone of judgment

For I’ve no wish to come between

This day and your enjoyment

In this life of hardship and of earthly toil

We have need for anything that frees us

So I bid you pleasure

And I bid you cheer

From a heathen and a pagan

On the side of the rebel Jesus.

Jackson Brown

Right Wing Nuts Celebrate Destruction of CIA Torture Tapes

By Jillian , Sadly No!
Posted on December 25, 2007

It will be interesting to see if this idea manages to gain legs.

Gavin brought up the idea not too long ago that for the people who inhabit what passes for "the Right" nowadays, the concept, "argument in good faith" might as well be a text written in Minoan Linear A. Keep that in mind while we take a look at Linda Chavez's argument here.

Destroying CIA Tapes Deserves a Thank You
By Linda Chavez
His name isn't yet familiar to most Americans, but I expect it will be by the end of 2008: Jose A. Rodriguez Jr. He is the man, according to recent press reports, who ordered the destruction of interrogation tapes made by the CIA, which allegedly show the effects of waterboarding and other "enhanced interrogation techniques" used against terrorists Abu Zubaydah and Abd al-Rahim al-Nashiri. In the next few months, his name will likely be dragged through the mud, and he will be vilified as a rogue official engaged in a massive cover-up. I think he deserves a medal.

[emphasis added]

There. See what I mean? This isn't about honest argumentation. This is about taking reality and standing it on its head. This is about being as verbally shocking as possible, in order to confuse and muddy the issue as much as possible. This is beyond even the Overton window; this is about shouting "nigger" in a crowded theater. People who cover up evidence of America violating international war crimes laws are actually good people, not bad people, because when America does things that would have gotten government officials brought before Nuremburg tribunals sixty years ago, that's a good thing, not a bad thing.

According to information that has already leaked out about the investigations into the CIA tapes, Rodriguez, who was head of the agency's clandestine operations at the time, made the decision to destroy the videos in November 2005. The tapes themselves were made in 2002, just months after the United States experienced the most devastating foreign attack against American civilians in our nation's history.
Looking back, it's very easy to condemn the extraordinary measures our government took to try to save lives in the wake of 9/11. And, of course, the media and members of Congress have perfect 20/20 hindsight, but the rest of us should show a little restraint when it comes to judging past decisions in light of contemporary misgivings.
A collective amnesia seems to have set in on what conditions were like in 2002 when those CIA interrogations took place. Most Americans fully expected that the attacks on the World Trade Center and Pentagon were just the beginning of a terrorist war on American civilians. After all, we were being told by nearly everyone in a position to know that the question was not if we would suffer another major terrorist attack, but when.

There's no collective amnesia here. As someone who lived close enough to the WTC to have spent several months of my professional life helping people deal with the aftermath, as someone who lost people she knew professionally (but thankfully, no one she was particularly close to) on that day, I can tell you that whatever fears I may have had of "a terrorist war" were officially over by September 12, 2001. And the only reason anyone was particularly worried about another terrorist attack is because dishonest, mendacious little shits were busy lying through their teeth and saying anything at all to advance their personal vision of American government -- which is exactly what Chavez is doing here. Gotta give them points for consistency.

So what exactly did we expect the CIA to do when they captured high-level al-Qaida operatives? Read them their Miranda rights, provide them with free lawyers and place them in a cell with cable TV?

No, you blathering, drooling, crapulous sack of dishonesty -- we expected them to not torture people. It's the sort of basic expectation your average sane person has of their government. I know you don't hear people say it very often, but that's because it is such a bare-bones expectation of what a government will do that verbalizing it feels a little crazy. It's like how when people get married, they promise to love and honor, but you never hear people promising to, say, never use the living room carpet as a toilet. We just automatically assume that sane people will never do these things. Alas, when it comes to the Bush wing of the Republican party, our first mistake was in assuming they operate by the same definitions of civilization and sanity as the rest of us.

We don't know exactly what the captured al-Qaida operatives told interrogators -- thankfully -- but we do know that there hasn't been another al-Qaida attack in the United States in more than six years. We also know that congressional leaders, at least initially, made no objections to the use of waterboarding when they were informed about it in September 2002. (Speaker Pelosi now claims that she did object later.) We also know that by the time Rodriguez reportedly gave instructions to destroy the CIA tapes, America's reputation had been severely damaged by the release of other tapes entirely unconnected to the CIA's or any U.S. efforts to obtain intelligence from captured prisoners. In April 2004, CBS's newsmagazine "60 Minutes" had aired a handful of inflammatory videos made by out-of-control, low-level American military guards at Abu Ghraib prison.

And look -- now we see the Abu Ghraib narrative being repackaged. It is no longer "just a few pranks" or "the equivalent of fraternity hazing." It is an accident, caused solely by "out of control, low level American military guards" and not a direct result of policy decisions coming from the top of this administration and filtering their way down, as these things always do. So it's now okay to call Abu Ghraib horrible, because it's not the fault of anyone who actually matters. Abu Ghraib is a separate matter, unrelated to our government's position on rendition, or torture by proxy, or the indefinite imprisonment of children without representation or the right of habeas corpus.

Except, of course, that it is related. It is related because we currently have an administration which seems to believe that the world is divided into two groups -- "us" and "them" -- and that anything done to those in the "them" group is acceptable because "they" are not "us." It is a reversal of every principle upon which civilized governments have laid their foundations for the last two thousand years, and it is far, far closer to the heart of what fascism is about than eating granola for breakfast is.

It is difficult to imagine what harm might have come from the release of the CIA interrogation tapes -- but there is no doubt that had they continued to exist, at some point they would have become public. The tapes' release would have jeopardized sources and methods used by the CIA, the most serious category of risk to American intelligence. And their release might have led to assassinations of CIA operatives, greater risk for our captured soldiers, and international hand-wringing by our putative allies.
Rodriguez's lawyer says that his client sought and received legal clearance to destroy the tapes. Even though he is likely to become a scapegoat, what he did was right. He protected not just his men but all of us. I, for one, thank him.

Look at what Chavez is actually saying here. The problem with the release of the torture tapes -- I won't call them interrogation tapes, because that simply is not what they are -- is that releasing them would have hurt us. It might, perhaps, have hurt us in substantive ways, but it definitely would have hurt our reputation, and that's what really matters. It would have led to "international hand-wringing" by our "putative allies." These other countries are not "with us" unless they support everything we do -- they are "putative" allies. If they choose to criticize us in any way at all, they hurt us -- and when they hurt us, they stop being with "us" and start being with "them". It's not like this is a secret, after all; our president has openly declared this to be the case. It's just important to remember that once you choose to side with 'them,' all rules of conduct can and will be thrown out the window. This is the real message of Abu Ghraib and Guantanamo. And this is exactly what makes these people evil.

I'm really curious to see if this particular spin on reality manages to catch hold. The wingnut brigade throws a lot of rhetorical spaghetti at the walls because they know that not all of it will stick. So far, the only other person I've seen putting this one forth is Tony Blankley -- but then again, I'd expect this and worse from him. The question is: Can they make this bit of Newspeak stick? I'd expect to see this meme surfacing somewhere on Fox News in the next three weeks or so -- especially if the rumors about other CIA torture tapes that haven't been destroyed turns out to have any substance.

Oh, and for anyone wondering why so many of us don't think it worth the effort to engage seriously with people on the other side at this point: Does this answer your question? Or do you still want us to have long, serious, meaningful conversations with people who think it is more important to defend Americans who might be guilty of torture from all possible prosecution than it is to take the steps necessary to insure that Americans aren't torturing people? What's the etiquette for a conversation like that, anyway? Will there be scones and tea? Inquiring minds want to know.

Jillian is a regular blogger for Sadly No!

© 2007 Independent Media Institute. All rights reserved.
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Saturday, December 22, 2007

Cafeteria workers strike against poverty wages

Published Dec 20

Every day since Nov. 12, a group of cafeteria workers have held an energetic picket line outside the New York Life Insurance building in Manhattan. Employees of Aramark, they are demanding a 70-cent per hour pay hike.

It’s a pittance for Aramark, a food services contractor that raked in $11.6 billion in sales last year and paid its CEO $16.2 million.

Most of the workers have been employed by Aramark for 20 years and earn $10 to $14 per hour, which comes out to less than $500 per week, said Floridalma Mayen, an 18-year veteran of the company. “Everything goes up but our wages,” she added.

Mayen stood outside the building on a frigid Monday afternoon as the strike went into its fifth week. In addition to the 50 workers at the New York Life building, 36 Aramark employees at 55 Water St. are also on strike. The workers, members of UNITE HERE Local 100, have been without a contract for the past year.

Aramark is offering them only a 50-cent per hour increase and refusing to make the increase retroactive. Mayen said that in the last three years they’ve had a mere 55-cent per hour raise.

The cafeteria workers are not alone in the struggle. “We have a lot of support from the customers,” Mayen said. New York Life employees have boycotted the cafeteria and refused to renew enrollment in a pretax dining plan until the strike is over. And on Dec. 11 civil rights leader Jesse Jackson showed up to offer his support. Jackson, who had a previously planned meeting with the chairman of New York Life, joined the workers afterwards and told them he had spoken on their behalf to Aramark and the head of New York Life.

Aramark employees at other sites are also prepared to battle for better wages as their collective bargaining agreements with the company expire at cafeterias around the city. UNITE HERE said Aramark food service workers at the Fashion Institute of Technology, Bank of New York and Citigroup have already voted to authorize a strike at their locations. The union said that if Aramark does not raise their living standards, workers at cafeterias at CBS, Goldman Sachs, JP Morgan Chase and the United Nations could join the strike as their contracts expire.

The food service giant has a long record of poverty wages and poor working conditions. Earlier this year, the U.S. Department of Labor found that Aramark failed to pay proper wages and benefits to some food service employees at Los Alamos National Laboratory. New Mexico Business Weekly reported in an April 12 article that following the investigation, Aramark paid $153,440 in back wages and fringe benefits to 72 employees. In 2004, the Baltimore Wage Commission found that Aramark, which operated food services at the Baltimore Convention Center, violated the city’s overtime laws for two years. The Baltimore Sun reported that the company subsequently paid 283 workers $131,000 in back pay.

UNITE HERE and the Service Employees International Union have compiled information on Aramark’s mistreatment of workers at the Web site

Aramark employees, meanwhile, are fighting to bring more workers into the union. Last month Aramark workers at PriceWaterhouseCooper on Madison Avenue submitted a petition to their employers asking for a fair process to decide whether to organize a union. Crains New York Business reported Dec. 11 that seven of the 20 food service workers at Citigroup’s executive dining room at 53rd Street and Lexington Avenue were suspended for two days after they submitted a petition to Citigroup chairman Robert Rubin stating their desire to unionize.

In a quarterly report filed with the Securities and Exchange Commission June 29, Aramark said that approximately 37,000 employees in its U.S. operations are represented by unions and covered by collective bargaining agreements. Noting that unions are seeking to increase the representation of its workforce, Aramark stated: “We have always respected our employees’ right to unionize or not to unionize. However, the unionization of a significantly greater portion of our workforce could increase our overall costs at the affected locations and affect adversely our flexibility to run our business in the most efficient manner to remain competitive or acquire new business.”

Aramark workers in Manhattan and around the country won’t allow Aramark to continue to grow its profits by paying them poverty wages. “We’ll stay on strike until the company gives us retroactive pay and 70 cents [more per hour],” Mayen said.

Articles copyright 1995-2007 Workers World. Verbatim copying and distribution of this entire article is permitted in any medium without royalty provided this notice is preserved.

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Venezuela warms up the South Bronx

Published Dec 20, 2007

For the third winter in a row, the Bolivarian Republic of Venezuela is providing heating oil to poor people in the United States. At a Dec. 14 news conference held in a South Bronx oil terminal, Venezuelan ambassador Bernardo Alvarez announced plans to help 250,000 families in more than 20 states this season.

“This is a gift coming from the heart of the Venezuelan people,” said CITGO President Alejandro Granados. CITGO, which is owned by the Venezuelan government, is donating 45 million gallons of heating oil.

Former U.S. Rep. Joe Kennedy gladly accepted the oil on behalf of his nonprofit group. He pointed out that only 16 percent of families eligible for federal heating oil assistance get it.

Kennedy, whose father Robert was assassinated in 1968, said that he wrote to every oil company for help. Only CITGO responded. Among those that refused was ExxonMobil, which made a $39.5 billion profit last year.

Dozens of people attended this news conference. They included community organizers Vicente “Panama” Alba and Nellie Hester Bailey, director of the Harlem Tenants Council.

For information on this program, which provides a one-time delivery of 100 gallons of heating oil, call 1-877-JOE-4-OIL.

—Report and photo by Stephen Millies

Articles copyright 1995-2007 Workers World. Verbatim copying and distribution of this entire article is permitted in any medium without royalty provided this notice is preserved.

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Rape Victim Testifies Before House Judiciary Committee About Halliburton/KBR [VIDEO]

By Cliff Schecter, Cliff Schecter's Blog
Posted on December 20, 2007
Video Here

Just listen to what Jamie Leigh Jones has to say about what happened to her in The Green Zone. Perhaps she would have been safer unarmed on a street in Baghdad than she was around her "co-workers."

This is so disgusting, so vile....Not just the incident, but response to it. I don't even know what to say. Just watch the video...

Cliff Schecter blogs at Brave New Films.

© 2007 Independent Media Institute. All rights reserved.
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Amphetamines, capitalism's first 'performance enhancing' drug

Published Dec 20, 2007

Performance enhancers may have been used in almost all competitive sports since the first Olympics in ancient Greece. But the rise of the capitalist profit system and the giant pharmaceutical monopolies changed performance enhancement into its opposite. The most important enhancement has become the performance of the corporations’ profits.

Yu-Hsuan Lee at Harvard has documented that there are records of the use of performance enhancing drugs going as far back as ancient times. Lee cites, “The Greek physician, Galen, is reputed to have prescribed ‘the rear hooves of an Abyssinian ass, ground up, boiled in oil, and favored with rose hips and rose petals’ to improve performance.”

Lee then adds, “Ancient Olympic athletes attempted to boost testosterone (the hormone that anabolic steroids are designed to produce) by eating sheep testicles, a prime source for testosterone.”

Modern chemistry introduced the possibility of more concentrated forms of enhancers, now commonly called drugs and steroids. A Romanian chemist in Berlin synthesized amphetamines from the stimulating herb Ma Huang in 1887. Nothing much came of it.

Drug profits fueled
performances at the
1936 Nazi Olympics.

Then in the 1930s the U.S. pharmaceutical company Smith, Kline & French (now GlaxoSmithKline) started marketing it as Benzedrine. Officially it was sold as a medical treatment for narcolepsy. Unofficially it was one of the first drugs being pushed as a performance enhancer. German athletes in the 1936 Olympics were given amphetamine injections, as was Adolph Hitler.

“In the 1936 Olympic Games films, Hitler can be seen moving his hands back and forth on his upper legs in a way that’s consistent with the ‘stereotypical behavior,’ of heavy amphetamine use,” says a report on “Meth in the military.” (

The online Science Encyclopedia says that amphetamine use was widespread in World War II. “Soldiers on both sides were given large amounts of amphetamines as a way of fighting fatigue and boosting morale. The British issued 72 million tablets to the armed forces. Records also show that Japanese Kamikaze pilots—who crashed their bomb-laden planes into enemy ships—and German Panzer troops were given large doses of the drug to motivate their fighting spirit. Hitler’s own medical records show that he received eight injections a day of methamphetamine, a drug known to create paranoia and unpredictable behavior when administered in large dosages.” (

Hitler is not the only government head known to have regularly used amphetamines. John F. Kennedy also received injections from his physician.

After World War II, Smith, Kline & French emerged as a key player in the military-industrial complex, making a killing in the drugs it sold to the military. After the war, new markets were created for this “performance enhancer,” which was being pushed to workers throughout industry—from steelworkers facing fatigue on their grueling shifts, to auto workers on the assembly line, to long-distance truck drivers.

Then during the Vietnam War, the U.S. troops were flooded with easily available amphetamines, though by that time the drug had become an allegedly controlled substance because its destructive effects were well established.

It is now known that all too frequently the war crimes committed by U.S., German, British and Japanese troops during World War II were the result of the maniacal effects of drugs like the amphetamines. The same is true for the U.S. troops in the Korean and Vietnam Wars.

The soldiers were being given drugs that were destroying both their bodies and their minds, but kept them going as fighting machines.

The real crime was committed by GlaxoSmithKline and the other capitalist pharmaceutical conglomerates, which pushed the drugs and later the steroids that raised their profit line while destroying so many lives.

None of this will change until the system is changed to make medicines and drugs that are only to meet peoples' needs, not pharmaceutical company profits.

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'Performance enhancing drugs' fact of life in schools

Published Dec 20, 2007

Much attention has been paid to the use of “performance-enhancing drugs” by athletes. But such substances flow all throughout our society. Take a day in the life of an average working-class youth.

Working-class youths arise early in the morning, sometimes as early as 4 or 5 a.m. In order to fully awaken a substance is often consumed. Perhaps it is merely coffee. Perhaps it is a can of Red Bull or Jolt. Perhaps it is some caffeine pills called speed. These substances get the heart beating at a high speed. Suddenly these youths get an artificial awake feeling as they go off to school.

Caffeine is known to be addictive. Young people may find themselves having to take this drug every day to just to feel normal. Caffeine is also known to hurt short-term memory and have many other dangerous side effects.

Once at school, the youth will sit at uncomfortable desks and listen to a teacher. Often children have difficulty sitting still in class. This is enhanced by the lack of physical education and elimination of even recesses in many schools.

Three percent to 7 percent of the children in this country are diagnosed with Attention Deficit Disorder or Attention Deficit Hyperactivity Disorder. They are given drugs such as Ritalin to keep them “under control” and at an activity level that is acceptable to their teachers and parents.

A 2005 University of Texas study suggests that Ritalin may be carcinogenic. Of the 12 children they gave Ritalin, every single one had an increase in chromosome abnormalities, which have been linked to heightened cancer risk. ( But the Food and Drug Administration continues to approve its use, and many schools are now mandating parents to put their children on such drugs.

Ten percent of males ages 6 to 18 are currently using Ritalin or other psychotropic drugs. (News Blaze, Nov. 20) Parents are told that their children need such drugs to get good grades and test scores. Young people are constantly being pushed to succeed, something that grows ever harder with the state of the U.S. economy.

Meanwhile, a drug known as Adderall is now being abused by 7 percent of U.S. college students. This drug was made to treat ADD and ADHD, but it is now being used by all kinds of youths who feel it will enhance their studying and focus skills. The drug also causes insomnia, paranoia and an increased heart rate. Too much of the substance can even cause a heart attack or a stroke. According to all reports, the drug is growing in popularity among college and high school students who are looking for anything they can to get an extra edge in the world of competitive academics. (, Nov. 30)

After school, youths often find themselves going directly to a job. The education they require to achieve their goals will cost a huge amount of money. Perhaps they need another kick of energy to do this job efficiently after working hard all day at school.

After finally finishing with their job or their extracurricular activities, the young people will come home. They will be tired and worn out, but their hearts will still be pumping. They will need to unwind. They may require a sleeping pill to get to sleep. The market is loaded with drugs that will put them to sleep after they have loaded themselves up with stimulants all day.

Perhaps they will unwind with some of the “youth” programming on MTV and VH1, which dazzle with images of the super-rich. Programs like “Cribs” and “Rags to Riches” keep the young in this desperate crusade, with images of huge estates, diamond-covered iPods, and the “good life” that a slim minority of the U.S. population actually lives.

But it’s always possible, the TV promises, if they just continue to endure the torture of “American” life. Perhaps they will take anti-depressants or anti-anxiety medications to deal with the stress of trying to get to the top or just get by in this world where so few do. Forty-four percent of people in the United States currently take prescription drugs; 16 percent are currently taking three or more substances prescribed by a doctor. (Badger Herald, Dec. 11)

Perhaps they will crack like so many have before. Incidents like those at Virginia Tech and Columbine should remind us that not all youth are able to withstand this lifestyle.

In “Economic and Philosophical Manuscripts,” Karl Marx writes about how “labor not only produces commodities, but the worker himself as a commodity.” Marx also wrote, “The only wheels [capitalist] political economy puts in motion are greed, and war among the greedy.”

This is what human beings, especially the youth, have been reduced to. We are rewarded not for our intelligence or hard work, but for our usefulness as a commodity. How good an employee will we be at a job? How much profit can we turn for some boss down the road? This is what is learned by our academic performance.

This is the world of 21st century capitalism, where everyone in my class is my rival, where I am expected to step on others to succeed, where millions of youths go mad in pursuit of a good life, where just to get by in this society young people need to take potentially deadly chemicals.

This system where human beings are milked for all their worth to make profits for a few until it drives them mad should be abolished.

Articles copyright 1995-2007 Workers World. Verbatim copying and distribution of this entire article is permitted in any medium without royalty provided this notice is preserved.

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Wednesday, December 19, 2007

Why Did Harry Reid Pull the Telecom Bill?

By Jane Hamsher, Firedoglake
Posted on December 18, 2007

I'd like to believe that Harry Reid pulled the telecom bill yesterday because members of the Senate actually did realize how shameless and horrifying their soliloquies on behalf of the poor beleaguered telecos made them sound, but I'm skeptical.

As I listened to Barb "Ma Kettle" Mikulski (D-LCD) on the floor of the Senate pining for the days when "blackberries wuz sumpin' yew put on yer breakfast cereal," I didn't pick up an iota of self awareness that might clue her into the fact that having such an intellectually shiftless luddite as a sitting US Senator, charged with making tech policy, was an international embarrassment.

Of course she reached the conclusion the telecoms were great patriots who were only doing their civic duty. She's thick as a brick.

But it doesn't appear that the Washington Post is any brighter. This morning, they faithfully reported that Reid spokesman Jim Manley says "the decision had nothing to do with the efforts of Dodd and his allies."

Who do I look like, Barbara Mikulski?

Marcy Wheeler:

Manley is, of course, full of shit. At the very least, Reid did the math to see that Dodd could filibuster this issue until the Christmas break, and since Reid intended to get funding done before the break, he was faced with postponing the break or punting the appropriations bills to the next year. So whatever else caused Reid to pull the bill, Dodd's demonstration that he was willing to hold the Senate floor was one factor (apparently, Dodd only left the floor once during yesterday's debate).

As Marcy notes, the Post's rather superficial analysis of the situation also leaves out the subject of the Feinstein Amendment -- and that may have been a poison pill which split the Senate into three factions and made the passage of a bill that Bush would not veto impossible. Since Reid is very much committed to passing a bill that will be in place when the old FISA bill sunsets on February 1, that probably posed a real problem for him.

Feinstein said she'd have a tough time voting for immunity without her amendment, and according to Marcy, it appears that this amendment "would have required the FISA Court to review the authorizations the telecoms received, to see whether they were legal, before the telecoms got immunity. If the FISA Court determined that those authorizations were not adequate under the law, then the telecoms would not get immunity."

This seems to have damn near sent Orrin Hatch into apoplexy, who -- after he got done sputtering about blogs with an "irrational fear of government" (a little Ron Paul-itis, perhaps?) -- said that Feinstein's amendment might be "a poison pill for him--and presumably the other Republicans following Dick Cheney's orders dutifully."

As Marcy notes:

[Feinstein's] amendment would introduce the very real possibility that the FISA Court would rule that the White House Counsel could not legally authorize the telecoms to wiretap, and that therefore the wiretapping that occurred immediately after March 10, 2004--precisely the time period when the AG and the Acting AG determined that the wiretapping was not legal--was not legal. DiFi's amendment was poison for Hatch because it threatens to hold the telecoms responsible for continuing the wiretap program during the period when the AG refused to authorize the program. And, of course, it therefore threatens to certify in a court that Bush's actions following the hospital confrontation were illegal. In other words, DiFi's amendment threatens to scuttle the real intent of the immunity provision, protecting Bush from any legal consequences for wiretapping illegally.

But the Post article also does not delve into the fact that Chris Dodd's filibuster threatened to shine a bright light on how craven the other Democratic presidential hopefuls looked when they chose to stay in Iowa and promote themselves rather than come back to Washington DC and defend the constitution. No doubt the telecoms, the Bush administration and their Democratic allies will have plenty of time to regroup and the fight will resume in January at a much more fevered pitch, but the delay may also pull the Senate presidential hopefuls back into the debate -- who have thus far given lukewarm pledges of support to Dodd.

And Glenn Greenwald brings up another aspect of the battle that the Post seems blissfully unaware of, and that is about how the whole notion of one man taking a stand on this issue came to pass. I first asked Dodd in early October on Air America if he would commit to filibuster retroactive telecom immunity, and he said at the time "Well, may have to do that....Hope it doesn't come to that."

But it did. And on October 18, when the deal that Jello Jay Rockefeller and Dick Cheney made to give the telecoms immunity in exchange for...well, virtually nothing... was announced, an outcry rose up on the liberal blogs:

[T]here was an email exchange between a relatively small group of bloggers and a couple of representatives from grass-roots organizations in which the same idea arose: finding a Senator who would be willing to place a "hold" on the Rockefeller immunity bill. Earlier that morning, Big Tent Democrat noted that Chris Dodd had issued a strongly worded statement against Jay Rockefeller's bill, and he urged Dodd to announce he would lead a filibuster against the bill. Based on all of that, it was quickly recognized, both in comments and in that email group, that the obvious choice to target for a "hold" was Dodd, who had made constitutional and oversight issues the centerpiece of his presidential campaign.
Within literally a matter of minutes, numerous blogs began urging their readers to contact the Dodd campaign to ask Dodd to place a "hold" on any bill containing immunity. Blog readers deluged the Dodd campaign by the thousands, tying up their telephones and overflowing their email boxes.
It was exclusively in response to that blog-based outpouring of citizen passion that Dodd -- within a matter of a few hours -- emphatically vowed that he would do something he has almost never done during his 24-year Senate career: place a "hold" on this bill and, if necessary, lead a filibuster against it on the floor of the Senate. Dodd's responsiveness, and the all-too-rare leadership he displayed, prompted an outpouring of support for his campaign from citizens hungry for any sort of Democratic leadership, as he raised $200,000 in small donations over the next 24 hours alone, exceeding the total he had raised for the preceding many months.

Reid may be going out of his way to deny that Dodd and his allies had any effect on what happened yesterday, and the Washington Post may be fooled, but nobody else is. It's a hollow and pride-filled retort of a man who responded with high-handed arrogance and was resoundingly beaten. As Margaret Mead once said, "never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has." Reid lost sight of that fact.

But Harry Reid is a man with a lot to worry about -- he's up for reelection in 2010, his poll numbers in Nevada are terrible and there are two words that have to be keeping him up at night: Tom Daschle.

Maybe his political instincts are getting a little rusty. Maybe it's time for him to give up the Senate leadership to someone else.

Someone like...Chris Dodd.

Jane Hamsher is the founder of FireDogLake. Her work has also appeared on the Huffington Post, Alternet and The American Prospect.

© 2007 Independent Media Institute. All rights reserved.
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Tuesday, December 18, 2007

World Food Stocks Dwindling Rapidly, UN Warns

by Elisabeth Rosenthal

ROME - In an “unforeseen and unprecedented” shift, the world food supply is dwindling rapidly and food prices are soaring to historic levels, the top food and agriculture official of the United Nations warned Monday.1218 08

The changes created “a very serious risk that fewer people will be able to get food,” particularly in the developing world, said Jacques Diouf, head of the UN Food and Agriculture Organization.

The agency’s food price index rose by more than 40 percent this year, compared with 9 percent the year before - a rate that was already unacceptable, he said. New figures show that the total cost of foodstuffs imported by the neediest countries rose 25 percent, to $107 million, in the last year.

At the same time, reserves of cereals are severely depleted, FAO records show. World wheat stores declined 11 percent this year, to the lowest level since 1980. That corresponds to 12 weeks of the world’s total consumption - much less than the average of 18 weeks consumption in storage during the period 2000-2005. There are only 8 weeks of corn left, down from 11 weeks in the earlier period.

Prices of wheat and oilseeds are at record highs, Diouf said Monday. Wheat prices have risen by $130 per ton, or 52 percent, since a year ago. U.S. wheat futures broke $10 a bushel for the first time Monday, the agricultural equivalent of $100 a barrel oil. (Page 16)

Diouf blamed a confluence of recent supply and demand factors for the crisis, and he predicted that those factors were here to stay. On the supply side, these include the early effects of global warming, which has decreased crop yields in some crucial places, and a shift away from farming for human consumption toward crops for biofuels and cattle feed. Demand for grain is increasing with the world population, and more is diverted to feed cattle as the population of upwardly mobile meat-eaters grows.

“We’re concerned that we are facing the perfect storm for the world’s hungry,” said Josette Sheeran, executive director of the World Food Program, in a telephone interview. She said that her agency’s food procurement costs had gone up 50 percent in the past 5 years and that some poor people are being “priced out of the food market.”

To make matters worse, high oil prices have doubled shipping costs in the past year, putting enormous stress on poor nations that need to import food as well as the humanitarian agencies that provide it.

“You can debate why this is all happening, but what’s most important to us is that it’s a long-term trend, reversing decades of decreasing food prices,” Sheeran said.

Climate specialists say that the vulnerability will only increase as further effects of climate change are felt. “If there’s a significant change in climate in one of our high production areas, if there is a disease that effects a major crop, we are in a very risky situation,” said Mark Howden of the Commonwealth Scientific and Industrial Research Organization in Canberra.

Already “unusual weather events,” linked to climate change - such as droughts, floods and storms - have decreased production in important exporting countries like Australia and Ukraine, Diouf said.

In Southern Australia, a significant reduction in rainfall in the past few years led some farmers to sell their land and move to Tasmania, where water is more reliable, said Howden, one of the authors of a recent series of papers in the Procedings of the National Academy of Sciences on climate change and the world food supply.

“In the U.S., Australia, and Europe, there’s a very substantial capacity to adapt to the effects on food - with money, technology, research and development,” Howden said. “In the developing world, there isn’t.”

Sheeran said, that on a recent trip to Mali, she was told that food stocks were at an all time low. The World Food Program feeds millions of children in schools and people with HIV/AIDS. Poor nutrition in these groups increased the risk serious disease and death.

Diouf suggested that all countries and international agencies would have to “revisit” agricultural and aid policies they had adopted “in a different economic environment.” For example, with food and oil prices approaching record, it may not make sense to send food aid to poorer countries, but instead to focus on helping farmers grow food locally.

FAO plans to start a new initiative that will offer farmers in poor countries vouchers that can be redeemed for seeds and fertilizer, and will try to help them adapt to climate change.

The recent scientific papers concluded that farmers could adjust to 1 degree Celsius (1.8 degrees Fahrenheit) to 3 degrees Celsius (5.4 degrees) of warming by switching to more resilient species, changing planting times, or storing water for irrigation, for example.

But that after that, “all bets are off,” said Francesco Tubiello, of Columbia University Earth Institute. “Many people assume that we will never have a problem with food production on a global scale, but there is a strong potential for negative surprises.”

In Europe, officials said they were already adjusting policies to the reality of higher prices. The European Union recently suspended a “set-aside” of land for next year - a longstanding program that essentially paid farmers to leave 10 percent of their land untilled as a way to increase farm prices and reduce surpluses. Also, starting in January, import tariffs on all cereal will be eliminated for six months, to make it easier for European countries to buy grain from elsewhere. But that may make it even harder for poor countries to obtain the grain they need.

In an effort to promote free markets, the European Union has been in the process of reducing farm subsidies and this has accelerated the process.

“It’s much easier to do with the new economics,” said Michael Mann a spokesman for the EU agriculture commission. “We saw this coming to a certain extent, but we are surprised at how quickly it is happening.”

But he noted that farm prices the last few decades have been lower than at any time in history, so the change seems extremely dramatic.

Diouf noted that there had been “tension and political unrest related to food markets” in a number of poor countries this year, including Morocco, Senegal and Mauritania. “We need to play a catalytic role to quickly boost crop production in the most affected countries,” he said.

Part of the current problem is an outgrowth of prosperity. More people in the world now eat meat, diverting grain from humans to livestock. A more complicated issue is the use of crops to make biofuels, which are often heavily subsidized. A major factor in rising corn prices globally is that many farmers in the United States are now selling their corn to make subsidized ethanol.

Mann said the European Union had intentionally set low targets for biofuel use - 10 per cent by 2020 - to limit food price rises and that it plans to import some biofuel. “We don’t want all our farmers switching from food to biofuel,” he said.

Related articles:

Population Growth: The crisis that dares not speak its name

ELECTRIC POLITICS recently featured a low keyed discussion of an extremely hot button subject: population growth. The guest was Al Bartlett, professor of physics emeritus at the University of Colorado, who has been working on sustainability issues for decades. It is an issue that we raise from time to time, get a few letters accusing us of being racists or eugenicists and then move on to easier topics. But if what people like Bartlett are saying is true? Then much of we believe about economics and the environment may eventually seem extraordinarily short-sighted or just plain wrong. Nothing we do about the environment, for example, will matter if the world population continues to grow because that presumes an ever larger depletion of the natural resources of the earth. Interestingly, we avoid the issue even more than we did 35 years ago when a national commission issued some important suggestions on dealing with the matter. Some insights follow.



In March of 1970, President Nixon signed a bill establishing the Commission on Population Growth and the American Future, known as the Rockefeller Commission, for it chairman, John D. Rockefeller 3rd. In 1972, the Commission released, its recommendations, including:

- In view of the important role that education can play in developing an understanding of the causes and consequences of population growth and distribution, the Commission recommends enactment of a Population Education Act to assist school systems in establishing well-planned population education programs so that present and future generations will be better prepared to meet the challenges arising from population change.

- Recognizing the importance of human sexuality, the Commission recommends that sex education be available to all, and that it be presented in a responsible manner through community organizations, the media, and especially the schools.

- The Commission recommends that the Congress and the states approve the proposed Equal Rights Amendment and that federal, state, and local governments undertake positive programs to ensure freedom from discrimination based on sex.

- The Commission recommends that (1) states eliminate existing legal inhibitions and restrictions on access to contraceptive information, procedures, and supplies; and (2) states develop statutes affirming the desirability that all persons have ready and practicable access to contraceptive information, procedures, and supplies.

- The Commission recommends that states adopt affirmative legislation which will permit minors to receive contraceptive and prophylactic information and services in appropriate settings sensitive to their needs and concerns.

- In order to permit freedom of choice, the Commission recommends that all administration restrictions on access to voluntary contraceptive sterilization be eliminated so that the decision be made solely by physician and patient.

- With the admonition that abortion not be considered a primary means of fertility control, the Commission recommends that present state laws restricting abortion be liberalized along the lines of the New York statute, such abortion to be performed on request by duly licensed physicians under conditions of medical safety.

- The Commission recommends that this nation give the highest priority to research on reproductive biology and to the search for improved methods by which individuals can control their own fertility.

- Recognizing that our population cannot grow indefinitely, and appreciating the advantages of moving now toward the stabilization of population, the Commission recommends that the nation welcome and plan for a stabilized population.

- The Commission recommends the creation of an Office of Population Growth and Distribution within the Executive Office of the President.

- The Commission recommends the immediate addition of personnel with demographic expertise to the staffs of the Council of Economic Advisers, the Domestic Council, the Council on Environmental Quality, and the Office of Science and Technology.

- In order to provide legislative oversight of population issues, the Commission recommends that Congress assign to a joint committee responsibility for specific review of this area.


Loss of biodiversity and natural habitats, depletion of the aquifers, air and water pollution, our eventual inability to grow sufficient food or to generate sufficient energy are all problems cause by a large and rapidly growing human population. Not
only is it the primary cause of these problems, but no solution exists to solving these problems as long as the population continues to grow.

Populations cannot grow indefinitely in a finite environment. The United States population is currently growing at a 1% annual rate, and the worldwide population is growing at a 1.3% rate per year; rates that are fairly low compared to historic levels. If the world's population continued to grow at 1.3% for approximately 800 years, there would be 1 person for every 1 square meter of the earth's surface, and if it could continue growing at this rate for approximately 2200 years, the mass of
humanity would equal the mass of the earth. Clearly before this happens we will reach a zero population growth level if we are lucky, and if we are not lucky we will have a period of enormous decrease in the population, whether by famine, disease or some other natural or man-made catastrophe.

Why was Dennis Kucinich not allowed to debate while Alan Keyes was?

Countdown: Senator Chris Dodd On The FISA Victory

Play (371)

Democratic presidential candidate, Senator Chris Dodd, appeared on Tuesday’s Countdown to discuss his victory on the Senate floor yesterday, by forcing an amendment to the FISA legislation that would have given retroactive immunity to telecom companies that spied on Americans without warrants, to be tabled till next January - or February.

Senator Dodd showed the same passion and leadership talking with guest host Alison Stewart as he did last night on the Senate floor, vowing once again to filibuster the bill in January if immunity is still included and saying that to do so would be pretending like these crimes never happened. Dodd, unlike most of the Democratic leadership, shows no fear of President Bush, excoriating him for trampling all over our Constitution.

Dodd: “…The president said he’d veto the legislation if that immunity were not in the bill. Imagine this, passing a bill that would allow us to get better information about those who would do us harm and protect our rights. He’d squander all of that to protect a few phone companies. I’m not going to stand for it, I’ll go back and filibuster it if I have to. [snip]

“I’ve been asked, what’s the first thing I’d do as president in the year 2009, and January 20th. And I’m going to give you back your Constitution, because this administration has gone out of it’s way to do just the opposite and the Constitution does not belong to a political party or a candidate and they’ve been trampling all over it.”

Sadly, the New York Times followed much of the liberal media and buried the story of Dodd’s historic fight on page A29.

The Collapse of the Modern Day Banking System

Staring Into the Abyss


Via CounterPunch

Stocks fell sharply last week on news of accelerating inflation which will limit the Federal Reserves ability to continue cutting interest rates. On Tuesday the Dow Jones Industrials tumbled 294 points following the Fed's announcement of a quarter point cut to the Fed Funds rate. On Friday, the Dow dipped another 178 points when government figures showed consumer prices had risen 0.8 per cent last month after a 0.3 per cent gain in October. The stock market is now lurching downward into a "primary bear market". There has been a steady deterioration in retail sales, commercial real estate, and the transports. The financial industry is going through a major retrenchment, losing more than 25 per cent in aggregate capitalization since July. The real estate market is collapsing. California Gov. Arnold Schwarzenegger announced on Friday that he will declare a "fiscal emergency" in January and ask for more power to deal with the $14 billion budget shortfall from the meltdown in subprime lending.

Economists are beginning to publicly acknowledge what many market analysts have suspected for months; the nation's economy is going into a tailspin.
Morgan Stanley's Asia Chairman, Stephen Roach, made this observation in a New York Times op-ed on Sunday:

This recession will be deeper than the shallow contraction earlier in this decade. The dot-com-led downturn was set off by a collapse in business capital spending, which at its peak in 2000 accounted for only 13 percent of the country's gross domestic product. The current recession is all about the coming capitulation of the American consumer - whose spending now accounts for a record 72 percent of G.D.P.

Most people have no idea how grave the present situation is or the disaster the country will face if trillions of dollars of over-leveraged bonds and equities begin to unwind. There's a widespread belief that the stewards of the system - Bernanke and Paulson - can somehow steer the economy through this "rough patch" into calm waters. But they cannot, and the presumption shows a basic misunderstanding of how markets work. The Fed has no magical powers and will not allow itself to be crushed by standing in the path of a market-avalanche. As foreclosures and bankruptcies increase; stocks will crash and the fed will step aside to safety.

In the last few weeks, Bernanke and Paulson have tried a number of strategies that have failed. Paulson concocted a plan to help the major investment banks consolidate and repackage their nonperforming mortgage-backed junk into a "Super SIV" to give them another chance to unload their bad investments on the public. The plan was nothing more than a public relations ploy which has already been abandoned by most of the key participants. Paulson's involvement is a real black eye for the Dept of the Treasury. It makes it look like he's willing to dupe investors as long as it helps his d Wall Street buddies.

Paulson also put together an "industry friendly" rate freeze that is supposed to help struggling homeowners avoid foreclosure. But the plan falls well short of providing any meaningful aid to the estimated 3.5 million homeowners who are facing the prospect of defaulting on their loans if they don't get government assistance. Recent estimates by industry experts say that Paulson's plan will only help 140,000 mortgage holders, leaving millions of others to fend for themselves. Paulson has proved over and over that he is just not up to the task of confronting an economic challenge of this magnitude head-on.

Fed chief Bernanke hasn't done much better than Paulson. His three-quarter point cut to the Fed's Funds rate hasn't lowered interest rates on mortgages, stimulated greater home sales, stabilized the stock market or helped banks deal with their massive debt-load. It's been a flop from start to finish. All it's done is weaken the dollar and trigger a wave of inflation. In fact, government figures now show energy prices are rising at 18.1 per cent annually. Bernanke is apparently following Lenin's supposed injunction ­ though there's no conclusive evidence he actually said it -- that "the best way to destroy the Capitalist System is to debauch the currency."

On Wednesday, the Federal Reserve initiated a "coordinated effort" with the Bank of Canada, the Bank of England, the European Central Bank, the and the Swiss National Bank to address the "elevated pressures in short-term funding of the markets." The Fed issued a statement that "it will make up to $24 billion available to the European Central Bank (ECB) and Swiss National Bank to increase the supply of dollars in Europe." (Bloomberg) The Fed will also add as much as $40 billion, via auctions, to increase cash in the U.S. Bernanke is trying to loosen the knot that has tightened Libor (London Interbank Offered Rate) rates in England and reduced lending between banks. The slowdown is hobbling growth and could send the world into a recessionary spiral. Bernanke's "master plan" is little more than a cash giveaway to sinking banks. It has scant chance of succeeding. The Fed is offering $.85 on the dollar for mortgage-backed securities (MBSs) and collateralized debt obligations (CDOs) that sold last week in the E*Trade liquidation for $.27 on the dollar. At the same time, the Fed has promised to keep the identities of the banks that are borrowing these emergency funds secret from the public. The Fed is conducting its business like a bookie.
Unfortunately, the Fed bailout has achieved nothing. Libor rates---which are presently at seven-year highs---have not come down at all. This is causing growing concern among the leaders of the Central Banks around the world, but there's really nothing they can do about it. The banks are hoarding cash to meet their capital requirements. They are trying to compensate for the loss of value to their (mortgage-backed) assets by increasing their reserves. At the same time, the system is clogged with trillions of dollars of bad paper which has brought lending to a halt. The huge injections of liquidity from the Fed have done nothing to improve lending or lower interbank rates. It's been a flop. The market is driving interest rates now. If the situation persists, the stock market will crash.

Staring Into the Abyss

One of Britain's leading economists, Peter Spencer, issued a warning on Saturday:

The Government must suspend a set of key banking regulations at the heart of the current financial crisis or risk seeing the economy spiral towards a future that could make 1929 look like a walk in the park.

Spencer is right. The banks don't have the money to loan to businesses or consumers because they're trying to raise more cash to meet their capital requirements on assets that continue to be downgraded. (The Fed may pay $.85 on the dollar, but investors are unwilling to pay anything at all.)Spencer correctly assumes that the reason the banks have stopped lending is not because they "distrust" other banks, but because they are capital-strapped from all their "off balance" sheets shenanigans. If the Basel regulations aren't modified, money markets will remain frozen, GDP will shrink, and there'll be a wave of bank closings.

Spencer said:

The Bank is staring into the abyss. The Financial Services Authority must go round and check that all banks are solvent, and then it should cut the Basel capital requirement level from 8pc to about 6pc. ("Call to Relax Basel Banking Rules, UK Telegraph)

Spencer confirms what we already knew; the banks are seriously under-capitalized and will come under growing pressure as hundreds of billions of dollars of mortgage-backed securities (MBSs) and collateralized debt obligations (CDOs) continue to lose value and have to be propped up with additional capital. The banks simply don't have the resources and there's going to be a day of reckoning.

Pimco's Bill Gross put it like this: "What we are witnessing is essentially the breakdown of our modern day banking system." Gross is right, but he only covers a small portion of the problem.

The economist Ludwig von Mises is more succinct in his analysis:

There is no means of avoiding the final collapse of a boom brought on by credit expansion. The question is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.

The basic problem originated with the Federal Reserve when former Fed chief Alan Greenspan lowered interest rates below the rate of inflation for 31 months straight which pumped trillions of dollars of low interest credit into the financial system and ignited a speculative frenzy in real estate. Greenspan has spent a great deal of time lately trying to avoid any blame for the catastrophe he created. He is a first-rate "buck passer". In Wednesday's Wall Street Journal, Greenspan scribbled out a 1,500-word defense of his actions as head of the Federal Reserve, pointing the finger at everything from China's "low cost workforce" to "the fall of the Berlin Wall". The essay was typical Greenspan gibberish. In his trademark opaque language; Greenspan tiptoes through the well-documented facts of his tenure as Fed chief to absolve himself of any personal responsibility for the ensuing disaster.

Greenspan's apologia is a masterpiece of circuitous logic, deliberate evasion and utter denial of reality. He says:

I do not doubt that a low U.S. federal-funds rate in response to the dot-com crash, and especially the 1 per cent rate set in mid-2003 to counter potential deflation, lowered interest rates on adjustable-rate mortgages (ARMs) and may have contributed to the rise in U.S. home prices. In my judgment, however, the impact on demand for homes financed with ARMs was not major.

"Not major"? 3.5 million potential foreclosures, 11-month inventory backlog, plummeting home prices, an entire industry in terminal distress pulling down the global economy is not major?

But Greenspan is partially correct. The troubles in housing cannot be entirely attributed to the Fed's "cheap credit" monetary policies. They were also nursed along by a Doctrine of Deregulation which has permeated US capital markets since the Reagan era. Greenspan's views on how markets should function were -- to great extent -- shaped by this non-interventionist/non-supervisory ideology which has created enormous equity bubbles and imbalances. The former-Fed chief's support for adjustable-rate mortgages (ARMs) and subprime lending shows that Greenspan thought of himself as more as a cheerleader for the big market-players than an impartial referee whose job was to monitor reckless or unethical behavior.

Greenspan also adds this revealing bit of information in his article:

The value of equities traded on the world's major stock exchanges has risen to more than $50 trillion, double what it was in 2002. Sharply rising home prices erupted into major housing bubbles world-wide, Japan and Germany (for differing reasons) being the only principal exceptions." ("The Roots of the Mortgage Crisis", Alan Greenspan, Wall Street Journal)

This admission proves Greenspan's culpability. If he knew that stock prices had doubled their value in just 3 years, then he also knew that equities had not risen due to increases in productivity or demand.(market forces) The only reasonable explanation for the asset inflation, therefore, was monetary policy. As his own mentor, Milton Friedman famously stated, "Inflation is always and everywhere a monetary phenomenon". Any capable economist would have known that the explosion in housing and equities prices was a sign of uneven inflation. Now that the bubble has popped, inflation is spreading like mad through the entire economy.

Greenspan is a very sharp man. It is crazy to think he didn't know what was going on. This is basic economic theory. Of course he knew why stocks and housing prices were skyrocketing. He was the one who put the dominoes in motion with the help of his printing press.

But Greenspan's low interest credit is only part of the equation. The other part has to do with way that the markets have been transformed by "structured finance".

What's so destructive about structured finance is that it allows the banks to create credit "out of thin air", stripping the Fed of its role as controller of the money supply. David Roache explains how this works in an excerpt from his book "New Monetarism" which appeared in the Wall Street Journal:

The reason for the exponential growth in credit, but not in broad money, was simply that banks didn't keep their loans on their books any more-and only loans on bank balance sheets get counted as money. Now, as soon as banks made a loan, they "securitized" it and moved it off their balance sheet.

There were two ways of doing this. One was to sell the securitized loan as a bond. The other was "synthetic" securitization: for example, using derivatives to get rid of the default risk (with credit default swaps) and lock in the interest rate due on the loan (with interest-rate swaps). Both forms of securitization meant that the lending bank was free to make new loans without using up any of its lending capacity once its existing loans had been "securitized."

So, to redefine liquidity under what I call New Monetarism, one must add, to the traditional definition of broad money, all the credit being created and moved off banks' balance sheets and onto the balance sheets of nonbank financial intermediaries. This new form of liquidity changed the very nature of the credit beast. What now determined credit growth was risk appetite: the readiness of companies and individuals to run their businesses with higher levels of debt. (Wall Street Journal)

The banks have been creating trillions of dollars of credit (by originating mortgage-backed securities, collateralized debt obligations and asset-backed commercial paper) without maintaining the proportional capital reserves to back them up. That explains why the banks were so eager to provide mortgages to millions of loan applicants who had no documentation, no income, no collateral and a bad credit history. They believed there was no risk, because they were making enormous profits without tying up any of their capital. It was, quite literally, money for nothing.

Now, unfortunately, the mechanism for generating new loans (and fees) has broken down. The main sources of bank revenue have either been seriously curtailed or dried up entirely. (Mortgage-backed) Commercial paper (ABCP) one such source of revenue, has decreased by a full-third (or $400 billion) in just 17 weeks. Also, the securitization of mortgage-backed securities is DOA. The market for MBSs and CDOs and other complex bonds has followed the Pterodactyl into the history books. The same is true of structured investment vehicles (SIVs) and other "off balance-sheet" swindles which have either gone under entirely or are presently withering with every savage downgrade in mortgage-backed bonds. The mighty juggernaut that was grinding out the hefty profits ("structured investments") has suddenly reversed and is crushing everything in its path.

The banks don't have the reserves to cover their downgraded assets and the Federal Reserve cannot simply "monetize" their bad bets. There's no way out. There are bound to be bankruptcies and bank runs. "Structured finance" has usurped the Fed's authority to create new credit and handed it over to the banks.

Now everyone will pay the price.

Investors have lost their appetite for risk and are steering clear of anything connected to real estate or mortgage-backed bonds. That means that an estimated $3 trillion of securitized debt (CDOs, MBSs and ASCP) will come crashing to earth delivering a violent blow to the economy.
It's not just the banks that will take a beating. As Professor Nouriel Roubini points out, the broker dealers, the investment banks, money market funds, hedge funds and mortgage lenders are in the crosshairs as well.

Non-bank institutions do not have direct access to the Fed and other central banks liquidity support and they are now at risk of a liquidity run as their liabilities are short term while many of their assets are longer term and illiquid; so the risk of something equivalent to a bank run for non-bank financial institutions is now rising. And there is no chance that depository institutions will re-lend to these to these non-banks the funds borrowed by central banks as these banks have severe liquidity problems themselves and they do not trust their non-bank counterparties. So now monetary policy is totally impotent in dealing with the liquidity problems and the risks of runs on liquid liabilities of a large fraction of the financial system. (Nouriel Roubini's Global EconoMonitor)

As the downgrades on CDOs and MBSs continue to accelerate, there'll likely be a frantic "flight to cash" by investors, just like the recent surge into US Treasuries. This could well be followed by a series of spectacular bank and non-bank defaults. The trillions of dollars of "virtual capital" that were miraculously created through securitzation when the market was buoyed-along by optimism will vanish in a flash when the market is driven by fear. In fact, the equity bubble has already been punctured and the process is well underway.

Mike Whitney lives in Washington state. He can be reached at: