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Sunday, August 31st, 2008

Volume 7, No. 15

5 Articles, 19 Pages



1. A Master-Slave Society

2. Bush Has No Right To Lecture About Human Rights

3. The Outrage in Your Credit Card's Fine Print

4. Musharraf Out, Like Nixon; Bush Still in, Like Flynn

5. The Real State of The Economy



1. A MASTER-SLAVE SOCIETY

(Democrats in Denver Should Skip One of Their Parties and Read the American Monetary Act)

BY

RICHARD C. COOK

How are things going at the Democratic Party National Convention in Denver this week?

Are they talking about the fact that the Western world is run by an international financial elite headquartered in London, the financial capitals of mainland Europe (such as Frankfurt, Hamburg, Amsterdam, Paris, and Milan), and, of course, New York City?

Are they mentioning at their cocktail parties that the financial elite exert control over the world’s population through the cartels that make up the world’s producing economies and through the civilian and military bureaucracies who work for the governments that kow-tow to them?

Of course they know that the most important cartels are those which control energy resources. And that of these, the commodity of central importance is oil. But is any of this helping them draw conclusions regarding the doubling of oil prices during the last year or about the largest oil company profits in history?

Also, they should be drawing the right conclusions from the fact that every private and pubic enterprise operates on the basis of a money economy, though it would be more accurate to call it a credit economy. This means that whoever controls the issuance of money and credit controls the world. And the world’s monetary systems function on the basis of money and credit being introduced into circulation through loans from the banking system, loans for which interest is charged. So what should that tell them?

In fact, they should be pointing out to each other and their TV viewers that the charging of interest for the use of money is a chain around the neck of everyone on earth. Further, that these cumulative interest charges are built into the price of every product that is manufactured or consumed. And that growth of debt means price increases too.

They should be honest in making it clear that the world is a master-slave society, that the slaves are those who borrow and pay interest, that the masters are those who collect the interest, and that this unjust system has existed in one form or another for thousands of years.

The candidates and delegates are talking about the aspirations of the American people and how everyone should have an opportunity to achieve their dreams. But if the United States were a free nation, they would also be talking about a financial system that destroys people’s dreams.

Unfortunately, the highest rung the candidates and delegates have been able to reach on the ladder of modern-day slavery is the need for more jobs—but they fail to note that jobs are not only the means by which people live, but also the instruments for them to pay the heavy burden of interest the masters of finance require.

What they won’t say is that the world economy is based on usury, something religions used to consider a crime (and which Islam still does). Usury is the charging of interest for the use of money. As the religions backed off from their prohibitions of interest, usury became just excess interest. But that’s not what the word really means.

So what have over two centuries of usury done to the United States?

The best answer ever given to that question was contained in a paper entitled “Revisiting U.S. Public and Private Debt” published in January 2005 by Dr. Bob Blain, Emeritus Professor of Sociology at Southern Illinois University. The paper updated an earlier study by Dr. Blain published for the United Nations Educational, Scientific, and Cultural Organization (UNESCO) in the International Social Science Journal, November, 1987, Paris, pages 577-591.

In his paper, Dr. Blain examined the growth of total public and private debt in the U.S. Total debt includes “the debts of governments (federal, state, and local), corporations, farmers, home mortgages, and consumer, commercial, and financial debts.”

In his analysis, Dr. Blain began with data from the Bureau of Economic Analyses of the United States Department of Commerce which covered the years 1916-1976. After that year the Bureau stopped publishing the data.

The figures showed that from 1916-1976, total U.S. debt grew from $82 billion to $3,800 billion ($3.8 trillion). But most of that growth was during the last 21 years, from 1955-1976, when it began to grow exponentially. Dr. Blain wrote, “The consistency of the pattern suggests that some imperative is at work, something that requires debt to increase.”

Dr. Blain found the answer by researching American history. He wrote: “Then I read G.R. Taylor’s 1950 book, Hamilton and the National Debt, which described the debate over Alexander Hamilton’s plan to fund the new economy with borrowed money.” He continued:

“The most revealing account was a speech by the first congressman from Georgia, James Jackson, on February 9, 1790, in which he predicted that adoption of Hamilton’s funding plan would lead to the explosive growth of debt. Jackson said, ‘Though our present debt be but a few millions, in the course of a single century it may be multiplied to an extent we dare not think of.’” (Annals of Congress, Vol. I, February 1790, pp. 1141-2)

From the very beginning, the U.S. had a monetary system based on borrowing and debt. First came the thousands of state chartered banks that began operating late in the Revolutionary War period and continued in one form or another until today. Then there were the two early central banks: the First Bank of the United States (1791-1811) and the Second Bank of the United States (1816-1836). Today’s national banking system began during the Civil War with the National Banking Acts of 1863-64. Then there is the system we are living under today, the Federal Reserve, chartered by Congress in 1913. Even during the times when the government has sold its debt directly to the public, as with war bonds, savings bonds, and Treasury notes and bills, that too has been money borrowed at interest.

Although there have been times in history when money entered into circulation other than through debt, such as with coinage and the Civil War greenbacks, those were exceptions and today are of little importance.

Dr. Blain estimated that from the time Alexander Hamilton placed the U.S. under a debt-based monetary system until today, the debt has compounded at 5.8 percent annually. The big problem with this system, he said, was “that no money was created to pay interest.” He continued:

“Loans created only the principal. Interest had to be paid out of principal. So payment of interest reduced the money supply and slowed economic activity. Recovery could come only when new loans were taken out at least equal to interest paid.”

Dr. Blain concluded, “As long as the money supply of a nation is created as debt costing interest, debt must grow by compound interest.” From a longer-range view, it’s a system that is constantly collapsing and that must constantly be bailed out.

Dr. Blain next sought to update his figures past the 1976 data from the Bureau of Economic Analyses. Turning to the Federal Reserve’s series on “Total Credit Market Debt Outstanding,” he found remarkably similar indicators.

He found that adding data from the Federal Reserve from 1945 to 2003 showed the “debt explosion” continuing. In 1945 total debt was $463.4 billion. In 2003 it was $44,967.7 billion ($45.0 trillion). When he projected the debt level for 2010, he arrived at a figure of $74.9 trillion. By this time the debt curve was climbing so steeply there would be almost a doubling of the amount of total debt in only nine years.

It might be argued that these figures do not take into account inflation. This is because lending at interest is the cause of inflation. The dollars still have to be repaid with interest. The problem occurs when economic growth, measured by GDP, does not keep up.

Looking at the growth of GDP from 1945 to 2003, the increase was from $223.1 billion to $10,987.9 billion, a factor of 49. But the debt ($463.4 billion vs. $44,967.7 billion) grew by a factor of 97, almost twice the rate of GDP growth. Thus the total debt burden on the economy has doubled from a ratio of 2:1 to more than 4:1 (though it was much less than that during the early days of the nation).

But with continued compound growth of debt and a slow- or no-growth state of the economy as we head into a recession, we are starting to see what Dr. Blain called an “acceleration to meltdown.” He wrote:

“We are buying more and more in the same amount of time. Witness the efforts of people to get rid of their excess through yard sales, storage units, and big trash pickup days, and the massive size of what are euphemistically called landfills. While two billion people in the world lack basics such as clean water, food, and shelter, Americans throw away their microwave ovens, televisions, computers, refrigerators, furniture, and cars. Meanwhile, acceleration is applauded as increasing productivity. It’s like arguing that cancer is good because it grows.”

These are the things the Democrats in Denver should be talking about, instead of going to so many parties. They should be making note that the U.S., to quote economists close to the Federal Reserve, is “functionally bankrupt.”

In fact, the debt this nation owes to the banks, to foreign creditors, and to each other can never be paid off. Further, one big reason for all of our fruitless military endeavors overseas may simply be to escape unpleasant economic realities at home. But this is pointless. Nothing creates more debt than war, as the bankers have always known.

The only solution is to adopt a monetary system that is not based on debt. Dr. Blain makes a couple of specific recommendations: 1) “Stop using percentage rates to calculate charges for the use of money”; and 2) “Congress must supply the economy with a money base that is debt-free and interest-free.”

The second point is a call for a new monetary system, not one based solely on lending by the banks or on government borrowing. One organization that has developed a blueprint for such a system is the American Monetary Institute (AMI), headquartered in Chicago. The director of the AMI is Stephen Zarlenga, author of a massive, groundbreaking work: The Lost Science of Money (AMI, 2002). Zarlenga’s assistant is Jamie Walton, a monetary reformer from New Zealand.

AMI will be holding its fourth annual conference in Chicago on September 25-28. Expected as keynote speaker is Congressman Dennis Kucinich, whose wife Elizabeth once worked as an intern at AMI. Dr. Bob Blain will be a featured speaker.

On the AMI website at www.monetary.org is a remarkable document, the American Monetary Act. The product of several years of work by Zarlenga and his network, which now includes a number of local chapters around the country, the American Monetary Act would replace today’s debt-based monetary system with one where the government spends or loans money directly into circulation.

Under the Act, the Federal Reserve would be retained as a national financial clearinghouse but would no longer be a bank of issue. The system would be overseen by a Monetary Control Board within the U.S. Treasury Department. The Act also includes a provision for a citizens’ dividend, similar in some respects to the Alaska Permanent Fund, which would inject desperately needed purchasing power into the economy without additional government debt or taxation.

Also promoting a citizens’ dividend, by the way, is Stephen Shafarman in his important new book, Peaceful, Positive Revolution. (Tendril Press, 2008)

It’s the American Monetary Act the candidates and delegates in Denver should skip one of their parties to read, because it’s the only way any of their hopes for America can ever be realized. Says AMI’s Jamie Walton:

“This is a crucial time. Things are happening. We have got some key media people talking and writing about our kind of reforms. The inertia is starting to yield. Things are starting to roll. The worsening conditions in 2009 will give us a once-in-a-lifetime chance to be heard above the propaganda.”

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2. BUSH HAS NO RIGHT TO LECTURE ABOUT HUMAN RIGHTS

BY

RAMSEY CLARK



A price the American people are paying for the failure of the House of Representatives to impeach Bush, Cheney and their cabal for crimes against peace, war crimes and crimes against humanity -- the greatest assaults on peace and human rights of this century -- is the Bush Administration’s bellicose drum beat for war against a widening circle of chosen enemies.



Imagine George Bush with the blood of a million Afghans and Iraqis on his hands, the shame of Abu Ghraib and Guantanamo hanging around his neck, having trashed the Bill of Rights, the Geneva Conventions and the Universal Declaration of Human Rights, lecturing China for violating human rights at the World Olympics in Beijing, a hopeful symbol of international cooperation through the peaceful competition of athletes in friendship.

Imagine George Bush lecturing Russia on human rights after insisting on putting U.S. (not NATO) Star War missile sites on the Russian border in Poland and the Czech Republic despite the tragic lessons of the Cold War, all told the greatest crime in history. Among its costs are expenditures that could have provided food for all, vastly reduced poverty on the planet, progressed toward quality universal health care, education and housing for everyone. Instead it took more lives by military violence on five continents and greater military expenditures than World War II and released the genie of nuclear weapons to a status beyond control. Can the planet survive another arms race? And what was George Bush planning when he urged immediate admission of Georgia to NATO just months before Georgia invaded South Ossetia?

Imagine George Bush who committed wars of aggression, the “Supreme International Crime,” against Afghanistan and Iraq, invading and occupying both, judging Russia’s conduct as” unacceptable," and demanding withdrawal of Russian forces because it sent troops into Georgia to protect the population of South Ossetia and Abkhazia from an invasion by Georgia that killed citizens and peace keepers alike, destroyed property and had driven tens of thousands from their homes.

Nor was Georgia a stranger to Russia. It had been a part of Russia since 1801 for nearly all the last two centuries. It had great power within the USSR. Joseph Stalin was from Georgia, as were L. P. Beria, longtime head of the NKVD and many others, Edward Shevardnadze, the Soviet Union’s last Foreign Minister and the first President of the Government of the independent Georgia that separated from the Soviet Union in 1990.

George Bush took a keen interest in Georgia, which is on Russia’s southern border, but on the opposite side of the planet from the U.S., early in his Presidency and in Mikhail Saakashvili. Under Bush’s direction the U.S. provided major military arms and training for Georgia. It persuaded, or paid Georgia which had no interest in Iraq to send 2000 troops to there, a number exceeded only by the U.S. and U.K. It trained and supported the Georgian troops for duty in Iraq. Saakashvili, a U.S. law school graduate, to quote the New York Times “...positioned himself to become one of the world’s most strident critics of the Kremlin” and with the strong support from the U.S. he was elected President of Georgia.

The U.S. helped them militarize what had been a weak Georgian state. The Pentagon helped overhaul Georgia’s military forces, train its commanders and staff officers. U.S. marines trained Georgian soldiers in the fundamentals of battle. The forces were equipped with Israeli and U.S. firearms, reconnaissance drones and other sophisticated equipment, including anti aircraft weaponry. That the U.S. trained and equipped Georgian forces fled in the face of Russian forces should have told us something about the U.S. training and equipping of foreign militaries.

All this U.S. support and manipulation was with the public goal, urged by George Bush, of making remote Georgia, though a thousand miles from Europe across the Black Sea and Russia, member of NATO and placing Abkhazia and South Ossetia under Georgian control by force.

As in most matters in which George Bush takes aggressive action, oil is a factor in some form. Georgia has made itself available for a pipeline from the Caspian Sea through Azerbaijan then across Georgia to the Black Sea, a major Bush goal, carrying oil from Azerbaijan and former Soviet Republics in Central Asia, produced in large part by U.S. oil companies, to Western markets by-passing Russia. Western Europe shared this U.S. interest.

President Bush visited Georgia in 2005, the first U.S. President to do so. Condoleezza Rice visited while National Security Advisor to Bush and since. Saakashvili has been a frequent guest at the White House and in the Washington corridors of power.

It is George Bush’s enticement and incitement of Georgia that created the present crisis. We have not been told what has been paid Georgia for it.

Suppose NATO had agreed to Georgia membership before Georgia invaded South Ossetia, as the U.S. urged. NATO would have been bound by mutual defense pact to defend Georgia as a Member. NATO, a Cold War creation, which includes all the former colonial powers, should be abolished. The U.S. persuaded NATO to share blame for its assaults that balkanized Yugoslavia which was created to end centuries of violence in the Balkans through unity. It tried to persuade NATO to join in its wars of aggression in Afghanistan and Iraq. It nearly succeeded in Georgia.

The U.S. has a major military airbase in Kyrgyzstan, a former Soviet Republic to Russia’s south and more than 1500 miles east of Georgia which is used to bomb Afghanistan. The U.S. has surrounded Russia with military bases from the Baltic states south across its western border with Europe then east for more than 2500 miles to its borders with Xinjiang Province in western China and Mongolia.

Now we can see the hypocrisy of the U.S. calling NATO into emergency session to address the Georgia crisis with false claims made repeatedly about the ceasefire and withdrawal terms negotiated by President Sarkozy of France, only to back down from all its threats and demands for action after fomenting international friction on false pretenses. The world cannot be made safe for hypocrisy, or mendacity.

It is noteworthy that Georgia is within one hundred miles of the border of Iran across Armenia. While George Bush vigorously protests Russian confrontation with Georgian troops which invaded South Ossetia, he has continued his threatening of Iran with a war of aggression for its alleged but unproven efforts to achieve nuclear weapons capability while he engages in a huge U.S. expenditure for new nuclear weapons. The U.S. now has its largest Naval presence in the Gulf region since the Gulf war, pointed toward Iran. The probability that President Bush will cause Israel and the U.S. to attack Iranian nuclear facilities plants during his remaining months in office remains high. Such an attack would violate the Nuremberg Charter and Article 56 of Protocol 1 Additional to the Geneva Convention 1979, which protects “Works and Installations Containing Dangerous Forces,” including nuclear facilities, from attack, because of the “consequent severe losses among the civilian population” from the blast and radiation.

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3. THE OUTRAGE IN YOUR CREDIT CARD'S FINE PRINT

(Penalty fees make up nearly half of industry revenues.)

BY

MARK LANGE

Monitor Opinion editor Josh Burek talks with former presidential speechwriter Mark Lange about credit-card industry practices.

Blue Ridge Summit, PA. - Would you sign a contract that says, "Any term can be changed at any time for any reason, including no reason"? Anyone who uses a credit card already has.

Such are the absurd terms of the consumer credit-card industry, which is poised to be the next big crisis (after housing) that banks have aided and abetted in US households.

Americans have now racked up nearly $1 trillion in credit-card debt. As housing equity shrinks and costs rise, agencies such as Moody's report swelling numbers of accounts with balances three or more payments past due. Reinforced by abusive industry practices, the plastic safety net is becoming a permanent cage.

But here's the good news: If you've ever been steamed by surprise fees on your credit-card statement or had your interest rate cranked up without warning, the Federal Reserve Board wants to help you. The Fed? That oracular secret society whose chairmen say Yoda-like things about interest rates? Well, actually, yes.



Ever since its remarkable "oversight" of junk lending led to the mortgage melt-down, the Fed seems determined not to let credit-card defaults drive the American banking system any closer to Third World standards.

There's plenty to reform. During the housing bubble, credit-card vendors inflated interest rates – even as the Fed slashed them – and found increasingly sneaky ways to usher their customers into perpetually indebted servitude. Such as:

•Raising rates as high as 32 percent on existing balances, with no notice, even when they've always been paid on time.

•Compressing the time between statement mailings and due dates.

•Charging interest on debt already repaid.

•Posting on-time payments after their due date – and then charging late fees.

•Neglecting to disclose how much interest and time it will take to pay off a balance with minimum payments (if ever).

Banks in the card game are raising rates and fees to limit their losses on mortgage loans they made. This is doubly ironic, since their delusional lending and exotic mortgage cocktails gave the housing bubble its irrational effervescence to begin with. So now millions of American households are being dragged under even further.

This year, card companies will break all records for late fees, over-limit charges, and other penalties, pulling in more than $19 billion. Not to mention extra charges for paying by mail or by phone (try $14.99). Credit card is the only industry where customers pay extra to be allowed to pay. Where agreements can be changed without notice. Where nearly half of industry revenues come from penalty fees.

You can't just dismiss these predatory practices as a tax on stupidity. Borrower beware? A quaint notion, when bankers play misleading and retroactively abusive games with other people's lives.

Competition? Five card vendors control nearly 80 percent of the market. State regulation? Enforcement has been rendered toothless. Recourse to the courts? This industry, given mandatory binding arbitration, is shielded from any class action. Meanwhile, the average mailbox is stuffed with 24 credit card offers each year. I'm looking at one from First Premier Bank, at an attractive 9.9 percent rate, whose fine print cost in first year fees and interest is $256. For a $250 credit line. Provided I pay on time.

Enter the Fed. Randall Kroszner, a Chicago economist hotly averse to regulation, is pushing to regulate the most misleading and predatory practices. The card vendors will tie this up in court, in an endless argument about jurisdiction. That's why legislation is needed, to make new rules stick – and why every e-mail or phone call to Congress will be another good reason to fix this.

Rep. Carolyn Maloney (D) of New York recently got the House lined up for a floor vote. Similar bills have floated and died before. The Senate "may" hold hearings in September. Got debt? Before you get your next statement – or right now, if you're online – contact your senator at www.senate.gov/general/contact_information/senators_cfm.cfm and share your own credit-card horror story. If you want the card companies to play fair, your senator needs to hear from you.

Banks should manage risk by reflecting it in their rates and credit limits up front – not through the back door, with sneaky fees and phantom interest rates. It's time for card vendors to let consumers work down debt, on terms that make it possible to do so.

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4. MUSHARRAF OUT, LIKE NIXON; BUSH STILL IN, LIKE FLYNN

BY

RAY MACGOVERN



Most of the fawning corporate media (FCM) coverage of Pakistani President Pervez Musharraf's resignation Monday was even more bereft of context than usual.

It was as if Musharraf looked out the window and said, "It's a beautiful day. I think I'll resign and go fishing." Thus, the lead in Tuesday's editorial in the New York Times, once known as the newspaper of record: "In the end, President Pervez Musharraf went, if not quietly, with remarkably little strife."

Certain words seem to be automatically deleted from the computers of those writing for the Times. Atop the forbidden wordlist sits "impeachment." And other FCM – the Washington Post, for example – generally follow that lead, still.

Very few newspapers carried the Associated Press item that put the real story up front; i.e., that Musharraf resigned "just days ahead of almost certain impeachment." In other words, he pulled a Nixon.

How short our memories! Three articles of impeachment were approved by the House Judiciary Committee on July 27, 1974; Nixon resigned less than two weeks later. But what were those charges, and how do they relate to George W. Bush today? Among the charges were these:

-- Without lawful cause or excuse [Richard M. Nixon] "failed to produce papers and things as directed by duly authorized subpoenas by the Committee on the Judiciary of the House…and willfully disobeyed such subpoenas…thereby assuming to himself functions and judgments necessary to the exercise of the sole power of impeachment vested in the Constitution in the House of Representatives."

-- "Endeavoring to cause prospective defendants…to expect favored treatment and consideration in return for their silence or false testimony."

-- "Endeavoring to misuse the Central Intelligence Agency."

The New John Conyers

Fortunately, John Conyers, who now chairs the House Judiciary Committee, was among those approving those three articles of impeachment.

Unfortunately, he seems to have long- as well as short-term memory loss.

On subpoenas, he has let the Bush administration diddle him and the committee.

What about favored treatment in return for silence or false testimony? What did Conyers do when President George W. Bush commuted Libby's sentence, in a transparent effort to prevent Libby from squealing on his bosses?

Conyers moved manfully to do what he always does: he expressed "frustration," wrote a letter to the president, held a hearing, and then – nothing. This, despite special counsel Patrick Fitzgerald's parting admonition, "There is a cloud over the vice president…And that cloud remains because the defendant [Libby] obstructed justice."

Misuse of the CIA

What about this serious charge? Here too Conyers' behavior has been nothing short of bizarre, even though he has been repeatedly briefed on how the Bush administration played games with intelligence to "justify" an unnecessary war.

If further proof of the misuse of intelligence were needed, Senate Intelligence Committee Chairman Jay Rockefeller provided it in early June, when he released the findings of his committee's investigation of administration misrepresentations of pre-Iraq-war intelligence. Rockefeller summed it up succinctly:

"In making the case for war, the administration repeatedly presented intelligence as fact when in reality it was unsubstantiated, contradicted, or even non-existent. As a result, the American people were led to believe that the threat from Iraq was much greater than actually existed."

Despite all this, Conyers has not ventured beyond flaccid rhetoric. White House minions no doubt poke fun at the talking-shirt-cum-fancy-tie to which Conyers has reduced himself. He has given them – and the rest of us – little reason to take him, or his committee, seriously.

But now…now with the wide attention drawn by the serious revelations in Ron Suskind's latest book regarding White House misuse of the CIA, John Conyers wants us to believe he is really serious this time. It brings to mind the image of Lucy setting up the football for another try by Charlie Brown.

On Amy Goodman's "Democracy Now" on Aug. 14, he said he was "the third day into the most critical investigation of the entire Bush administration." And in order to demonstrate his seriousness of purpose Conyers said, "We're starting our work, and then we're doing it in a period where Congress is in recess. I'm calling everybody back."

Many of those listening to Conyers assumed he meant Committee members. Not so. Others thought he must have meant key staff. Not so, either. There must be something in the water here in Washington that prevents people – even formerly honest people – from distinguishing between exaggeration and a lie.

As if to prepare us beforehand for still more timidity and ineptitude, Conyers rang changes on an all too familiar theme. He complained that he is "maybe the most frustrated person attempting to exercise the oversight responsibilities that I have on Judiciary" – a clear reference to how he has let himself be diddled by the White House…and an equally clear sign that he is likely to remain diddle-able.

If the Constitution Is Good Enough For Pakistan…

Tell us, John: if Pakistan can move forward to impeach a sitting president and force his resignation, why can't you? You must recall voting for those three articles of impeachment on that momentous day, July 27, 1974, and how on August 9 Nixon waved goodbye from his helicopter to the few remaining friends lined up on the White House lawn. You were proud to be part of the triumph of our Constitution in 1974. Is being chairman of Judiciary simply too demanding at your age – many years beyond what lawyers used to call the age of "statutory senility."

Without any apparent tongue in cheek, Tuesday's New York Times editorial pointed a sanctimonious finger at Musharraf's abuse of power, noting that "the presidency must also be stripped of the special dictatorial powers that Mr. Musharraf seized for himself, including the power to suspend civil liberties." The Times noted, "President Bush underwrote Mr. Musharraf's dictatorship, but it said nothing of the example Bush himself has set in such matters – including rigging elections, as Musharraf did.

It seems the height of irony that the relatively young and fragile democracy of Pakistan has been able to successfully exercise the power of impeachment inherited from the framers of the U.S. Constitution, while a constipated Conyers-captained congressional committee cannot.

Under Pakistan's constitution, the country has a bicameral legislature with 100 senators and over 300 representatives in the National Assembly. The president is head of state and commander in chief of the armed forces. Sound familiar?

The difference is that, even though impeachment of a Pakistani president requires a two-thirds majority in the legislature, Pakistani lawmakers summoned the courage to check Musharraf's unconstitutional accretion of power by exercising their constitutional power to impeach. And, facing almost certain impeachment, Musharraf resigned.

In sorry contrast to your Pakistani counterparts, John, you have chickened out. At long last, have you left no sense of decency?

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5. THE REAL STATE OF THE US ECONOMY

(Henry Paulson Has Lost Control Over US Finance)

BY

WILLIAM F. ENGDAHL

When Henry Paulson agreed to leave his job as chairman of the powerful Wall Street investment bank, Goldman Sachs to go to Washington as Treasury Secretary in 2006 he demanded extraordinary powers as de facto economic czar. He got it. Paulson is also head of the President’s Working Group on Financial Markets -- the secretary of the treasury and the chairmen of the Federal Reserve Board, the Securities and Exchange Commission and the Commodity Futures Trading Commission. The Working Group is the financial world's equivalent of the Pentagon war room. Paulson, not Fed chairman Bernanke, is the person running the Administration’s crisis management. And his recent actions indicate he has lost control as the snowballing problems from the semi-government mortgage companies Freddie Mac and Fannie Mae to the collapse of the multi-trillion dollar market in Asset Backed Securities (ABS) to the real economy are compounding into the worst crisis since the 1930’s Great Depression.

‘The US banking system is sound…’

In an eerie echo of President Herbert Hoover in 1930, during a Presidential campaign against Roosevelt, following the stock market crash and collapse of numerous smaller banks, Paulson recently appeared on national TV to declare "our banking system is a safe and sound one." He added that the list of "troubled" banks "is a very manageable situation." In fact what he did not say was that the US bank deposit insurance fund, the Federal Deposit Insurance Corporation (FDIC) has a list of problem banks that numbers 90. Not included on that list are banks such as Citigroup, until recently the largest bank in the world.

The statement is hardly reassuring. The California savings bank, IndyMac Bank which was declared insolvent a month ago was not on the FDIC list a week before it collapsed. The reality is the crisis created by "securitizing" millions of home mortgages into new financial instruments and selling the packages to pension funds and investors is unfolding like a snowball rolling down the Swiss Alps.

Indication of the lack of control is the statement just weeks ago by Paulson that "financial institutions must be allowed to fail." That was two weeks before Paulson went to Congress to ask for "Congressional authority to buy unlimited stakes in and lend to Fannie Mae and Freddie Mac." As I noted in my recent piece, Financial Tsunami: The Next Big Wave is Breaking: Fannie Mae Freddie Mac and US Mortgage Debt , those two private companies insured some $6 trillion worth of home mortgages, half the entire US mortgage debt. Paulson defended the request by calling Freddie Mac and Fannie Mae "the only functioning part of the home loan market."

That comes back to the statement about a "sound banking system". Can we have a sound banking system where the only functioning part is literally insolvent—its debts greater than its assets?

It is well known on Wall Street that some of the largest financial institutions have huge undeclared problems with Asset Backed Securities they have valued far above their worth to make their books look better than they are. The names Citigroup, Lehman Bros., Morgan Stanley, even Paulson’s old firm, Goldman Sachs and of course the inventor of sub-prime mortgage securitization, Merrill Lynch, all hold a huge percentage of what are called Level Three assets, these being assets where no one is willing to buy but the bank declares their worth based on "fantasy." In short the value of those core financial institutions of the US financial system is massively overvalued compared with their value were they forced to sell into the open market today. In a sobering aside, readers should not expect any serious economic remedies for the crisis from a President Barack Obama. Obama’s National Campaign Finance Chairman is Chicago real estate billionaire, Penny Pritzker, who is heir to among other things the Hyatt Hotels. It was Pritzker together with Merrill Lynch ten years ago who first developed the model for securitizing "sub-prime" real estate, the trigger for the current Financial Tsunami crisis.

Already Citigroup has been forced to go to Dubai hat in hand and ask for billions in cash. After it announced it would not need more capital. Now Citigroup just announced plans to sell some $500 billion more assets to raise funds. Is Citigroup really solvent is the question sober investors are asking. Similarly Merrill Lynch raised $6.6 billion from Kuwait Mizuho, stated it was fine and weeks later had to raise still more capital. Morgan Stanley sold a 10% share of the company to China International Corp.

The real economy is contracting rapidly

Behind the reassuring statements from Paulson and others that the "worst is over" the reality of the credit collapse since August 2007 is a deepening economic contraction which I have said several times in this space will surpass the Great Depression of the 1929-1938 period. A goof friend who is an unemployed homebuilder in a prosperous part of Arizona just sent me the following list of US department retail store closures. It is worth noting that over 70% of the US GDP is consumer spending and that the entire Federal Reserve strategy of Alan Greenspan after the March 2000 collapse of the stock market bubble, was to bring US interest rates to their lowest levels since the 1930’s in order to stimulate consumer spending on credit, i.e. debt, to avoid "recession." Note the scale of the following store closings across America in recent weeks:

Ann Taylor closing 117 stores nationwide.

Eddie Bauer to close more stores after closing 27 stores in the first quarter.

Cache, a women’s retailer is closing 20 to 23 stores this year.

Lane Bryant, Fashion Bug, Catherines closing 150 stores nationwide

Talbots, J. Jill closing stores. Talbots will close all 78 of its kids and men's stores plus another 22 underperforming stores. The 22 stores will be a mix of Talbots women's and J. Jill.

Gap Inc. closing 85 stores

Foot Locker to close 140 stores

Wickes Furniture is going out of business and closing all of its stores. The 37-year-old retailer that targets middle-income customers, filed for bankruptcy protection last month.

Levitz - the furniture retailer, announced it was going out of business and closing all 76 of its stores in December. The retailer dates back to 1910.

Zales, Piercing Pagoda plans to close 82 stores by July 31 followed by closing another 23 underperforming stores.

Disney Store owner has the right to close 98 stores.

Home Depot store closings 15 of them amid a slumping US economy and housing market. The move will affect 1,300 employees. It is the first time the world's largest home improvement store chain has ever closed a flagship store.

CompUSA (CLOSED).

Macy's - 9 stores closed

Movie Gallery – video rental company plans to close 400 of 3,500 Movie Gallery

and Hollywood Video stores in addition to the 520 locations the video rental

chain closed last fall as part of bankruptcy.

Pacific Sunwear - 153 Demo stores closing

Pep Boys - 33 stores of auto parts supplier closing

Sprint Nextel - 125 retail locations to close with 4,000 employees following 5,000 layoffs last year.

J. C. Penney, Lowe's and Office Depot are all scaling back

Ethan Allen Interiors: plans to close 12 of 300 stores to cut costs.

Wilsons the Leather Experts – closing 158 stores

Bombay Company: to close all 384 U.S.-based Bombay Company stores.

KB Toys closing 356 stores around the United States as part of its bankruptcy reorganization.

Dillard's Inc. will close another six stores this year.

For anyone familiar with American shopping malls and retailing, this represents a staggering part of the daily economic life of the nation, from furniture stores to clothing to video rentals to leather. The process has only begun and neither major party Presidential candidate has dared to mention this on the ground economic reality, because they evidently have no solutions to offer that would not jeopardize their campaign finances. Obama is tied to not only Pritzker but also to Omaha billionaire, Warren Buffett and George Soros. McCain depends on the traditional money contributions of the Republican Party which demand permanent tax reform for highest income earners and a pro-bank laissez faire treatment of millions of homeowners facing home foreclosure and asset seizure by banks.

Banks across the country have severely cut back on loans, fearful of bad debts. That has aggravated the consumer collapse documented above. Hundreds of thousands of real estate brokers, small and large bankers, furniture workers and salespeople, and construction workers are unable to find work. Jobs are being cut wholesale and those working are often on reduced hours. Car sales in June plunged by 28% for Ford, 18% for General Motors and even 21% for Toyota which will mean more layoffs in coming weeks. This will be the next wave of unemployment.

The economic reality is not reflected in official US Commerce Department or Labor Department statistics. There the data is constantly being "revised" to hide the grim reality in an election year.

My good friend, economist John Williams of California, has meticulously tracked such "data revisions" for more than 25 years and found the manipulation of reality so alarming that he founded an independent subscriber service titled "Shadow Government Statistics" (http://www.shadowstats.com/ ), where he makes best estimate calculations of the reality not the official mythology.

By Williams’ calculations the US economy first entered recession, defined as two consecutive quarters of negative GDP growth, at the end of 2006. Ever since, the recession has deepened, dramatically so in the past 12 months. Little known is the fact that the Labor Department also publishes six different unemployment statistics from U1, U2 through to U6 being the most comprehensive. The reported "official unemployment" is the very narrowly defined U3 which stands at 5.5%. However, as Williams notes, U6 is the real measure and that officially shows 9.7% unemployed. His calculations put the figure at 13.7% actually unemployed and seeking work.

A personal account

The unemployed homebuilder from Arizona I mentioned above recently sent me the following personal note on the situation:

"Here is how it looks to people like me: Real estate dealings fuelled the economy in most areas of the country for the past decade or more. We’ve been in a market downturn for three years. We have seen the cost of doing business increase for builders, along with a big drop in buyers as everyone tightens their belts, or can’t sell existing homes. Many employers have gone under ending thousands of jobs. If they have a job people are worried about losing it. Driving long distances to work is not possible with gasoline costs double that of 2006. There has been a 40% drop in most peoples’ home equity worth. Many people are "underwater" on their homes, meaning they owe more than the market price is worth today. So many under-employed don’t show up in government unemployed statistics. Self employed like me never get counted."

The Arizona homebuilder continued, "Today nobody is building. Unsold home inventories are triple that of 2003. Banks no longer give easy credit for home buyers. Many realtors I know have gone two years without selling a home. Empty storefronts are becoming common. In many areas unemployment among construction trades people is 50% or more. Tens of thousands of illegal Mexicans who did most of the manual labor have returned to Mexico to find work. What now? Well, I do handyman projects of all sorts, big or small and make about 70-90% of what it takes to survive with a family of a wife and three young children. My savings make up the rest. That can’t go on for too much longer. We went from affluent and comfortable to nervous and broke with diminished opportunities in just three years. We used to be the middle class."

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