Thursday, March 13, 2008

Despite the Federal Reserve's efforts Wall Street fears a big US bank is in trouble

From

Global stock markets may have cheered the US Federal Reserve yesterday, but on Wall Street the Fed's unprecedented move to pump $280 billion (£140 billion) into global markets was seen as a sure sign that at least one financial institution was struggling to survive.

The name on most people's lips was Bear Stearns. Although the Fed billed the co-ordinated rescue as a way of improving liquidity across financial markets, economists and analysts said that the decision appeared to be driven by an urgent need to stave off the collapse of an American bank.

“The only reason the Fed would do this is if they knew one or more of their primary dealers actually wasn't flush with cash and needed funds in a hurry,” Simon Maughan, an analyst with MF Global in London, said.

Mr Maughan said that the most likely victim was Bear Stearns, the first bank to run into trouble in the sub-prime crisis and the one that, among all wholesale and investment banks, is most reliant upon the use of mortgage securities for raising funds in the money markets.

“The average financial institution was up 7.5 per cent yesterday after the Fed's actions, but Bear Stearns rose just 1 per cent on massive trading volume,” Mr Maughan said. “The market is telling you it's Bear Stearns.”

The Fed's intervention sparked fears of deeper underlying trouble because it came only days after it had made $200 billion (£99 billion) available in emergency funds. The nature of the financing was also unusual, bankers say, because it was the first time that the Fed had offered to lend Treasury securities in exchange for ordinary AAA-rated mortgage-backed securities as collateral.

Chris Whalen, of the financial consultancy Institutional Risk Analytics in New York, said: “The Fed move is confirmation that at least one of the banks is in trouble. A huge part of the banks' inventories are illiquid. If a broker-dealer is illiquid, it dies.”

Speculation has swirled for months about the collapse of an American bank as the credit crisis has escalated and spread from sub-prime to other mortgage-backed securities, treasuries and bonds. As well as Bear Stearns, attention has focused on UBS, the Swiss bank, which has been forced to make more than $18 billion in sub-prime writedowns, and Citigroup, the world's largest financial institution, which has turned to sovereign wealth funds to help to shore up its credit-stricken balance sheet.

Bankers say that mortgage lenders, such as Paragon, Alliance & Leicester and Bradford & Bingley, could also be teetering on the brink soon if they cannot raise enough money in the markets to continue to lend to customers. All the banks have denied that they are facing a cash crunch and each has said that its liquidity position is strong. Nonetheless, the speculation continues to mount. Alan Schwartz, the Bear Stearns chief executive, reiterated that stance yesterday after Punk Ziegel analysts gave warning that the bank could be forced to seek a merger partner.

“We don't see any pressure on our liquidity, let alone a liquidity crisis,” Mr Schwartz told CNBC yesterday. He said that Bear had finished fiscal 2007 with $17 billion of cash sitting as a“liquidity cushion”. He added: “That cushion has been virtually unchanged. We're in constant dialogue with all the major dealers, and I have not been made aware of anybody not taking our credit.”

Yet banking sources said yesterday that a collapse seemed inevitable. One senior banker in London said: “Someone will go under in this crisis, that's for sure. The question is whether they stay under or get rescued. Let's see whether this latest round of stabilisation helps, but if it doesn't, it's difficult to see what Plan B is. The Fed can't just keep on printing money.”

One problem with the credit crunch is that banks' solvency positions can change overnight. As banks force firesales of assets to recover their loans from hedge funds, the prices of those assets fall. But as the prices fall, the amount of capital that the banks need rises. Lena Komileva, a Tullett Prebon economist, said: “This is what is fuelling the vicious cycle. Things can deteriorate very rapidly and banks can reach insolvency almost overnight.”

Ms Komileva said it was clear that the Fed was reacting to address a “specific counterparty risk”, although she declined to comment on which bank might be in trouble. She said: “The speed and severity of their action appeared disproportionate to what had actually happened, so, consequently, it seems the Fed really reacted to prevent a Northern Rock-style problem in the US.”

She said that the Fed's moves amounted to window-dressing. “All the signs of stress that were there before are still here,” she said.

Study: Public unaware of Iraq toll

Only 28 percent know that nearly 4,000 U.S. troops have been killed
By Karen DeYoung
The Washington Post
updated 12:01 a.m. ET March 13, 2008

Twenty-eight percent of the public is aware that nearly 4,000 U.S. personnel have died in Iraq over the past five years, while nearly half thinks the death tally is 3,000 or fewer and 23 percent think it is higher, according to an opinion survey released yesterday.

The survey, by the Pew Research Center for the People and the Press, found that public awareness of developments in the Iraq war has dropped precipitously since last summer, as the news media have paid less attention to the conflict. In earlier surveys, about half of those asked about the death tally responded correctly.

Related Pew surveys have found that the number of news stories devoted to the war has sharply declined this year, along with professed public interest. "Coverage of the war has been virtually absent," said Pew survey research director Scott Keeter, totaling about 1 percent of the news hole between Feb. 17 and 23.

The Iraq-associated median for 2007, he said, was 15 percent of all news stories, with major spikes when President Bush announced a "surge" in forces in January of that year and when Gen. David H. Petraeus, the U.S. commander in Iraq, testified before Congress in September.

"We try not to make any causal statements about the relationship between the absence of news and what the public knows," Keeter said. "But there's certainly a correlation between the two. People are not seeing news about fatalities, and there isn't much in the news about the war, whether it be military action or even political discussion related to it."

Although Iraq topped the list of the public's most closely followed news stories in all but five weeks during the first half of 2007, according to Pew's research, interest fell rapidly in the fall, and Iraq has not held the top spot since October. That corresponded with a sharp drop in the rate of U.S. casualties in Iraq and increased news coverage of the U.S. presidential campaign.

More track Ledger than war
During the last week in January, 36 percent of those surveyed said they were most closely following campaign news, while 14 percent expressed the most interest in the stock market and 12 percent in the death of actor Heath Ledger. In contrast, 6 percent said they were most closely following coverage of Iraq.

Compared with those Americans surveyed who correctly identified U.S. casualties at around 4,000 (3,975 as of yesterday morning, according to the Pentagon), 84 percent identified Oprah Winfrey as the talk-show host supporting Sen. Barack Obama (Ill.) for the Democratic presidential nomination, and 50 percent knew that Hugo Chavez is president of Venezuela.

All education levels in the recent survey were similarly uninformed, Keeter said. The Pew "Political Knowledge Update" was based on nationwide telephone interviews of 1,003 adults conducted Feb. 28 through March 2. The margin of error was plus or minus 3.5 percentage points.

URL: http://www.msnbc.msn.com/id/23602987/

February retail sales worse than expected

Decline of 0.6 percent another worrisome sign for the economy
The Associated Press
updated 9:06 a.m. ET March 13, 2008

WASHINGTON - Consumers, battered by plunging home prices and a credit crunch, stayed away from the malls in February, pushing retail sales down by a larger-than-expected amount. It was another worrisome sign that the country could be falling into a recession.

The Commerce Department reported Thursday that retail sales fell by 0.6 percent last month, far worse than the small 0.2 percent increase that analysts had been expecting.

The weakness was widespread with sales of autos, furniture and appliances all down.

It marked the second time in the past three months that retail sales have taken a tumble. Sales had fallen by an even bigger 0.7 percent in December, the largest drop in six months, as the nation’s retailers suffered through a dismal holiday shopping season. Sales posted a modest 0.4 percent gain in January.

Consumer spending is closely watched because it accounts for two-thirds of total economic activity. Many economists believe that the country will suffer a mild recession in the first half of this year as the economy is unable to withstand the blows from a prolonged slump in housing, record-high energy prices and a severe credit crisis brought on by soaring mortgage defaults.

In another report, the Labor Department said that the number of laid-off workers filing applications for unemployment benefits was unchanged this past week at 353,000, the same number as last week. That was a slightly better showing than analysts had been expecting although the benefit applications remain at elevated levels indicating the labor market is under stress.

The government reported last week that employers slashed payrolls by 63,000 in February, the second straight monthly decline in employment and the most dramatic evidence to date that the country could be sliding into a recession.

A third report Thursday showed that U.S. import prices rose last month by 0.2 percent after jumping an even larger 1.6 percent in January. Compared to a year ago, import prices are up a sharp 13.6 percent, reflecting the fact that petroleum prices are up 60.9 percent over the past year.

The rising cost of imported goods reflects the bind the Federal Reserve faces at the current time as it must deal with the twin threats of a sluggish economy and higher inflation.

Analysts expect that the Fed will continue to emphasize its battle against recession and cut interest rates sharply when officials hold a regularly scheduled meeting next Tuesday.

URL: http://www.msnbc.msn.com/id/23609249/

Parents may be jailed over vaccinations

MARIA CHENG
Associated Press
Wednesday, March 12, 2008

LONDON - As doctors struggle to eradicate polio worldwide, one of their biggest problems is persuading parents to vaccinate their children. In Belgium, authorities are resorting to an extreme measure: prison sentences.

Two sets of parents in Belgium were recently handed five month prison terms for failing to vaccinate their children against polio. Each parent was also fined 4,100 euros ($8,000).

"It's a pretty extraordinary case," said Dr. Ross Upshur, director of the Joint Centre for Bioethics at the University of Toronto.

"The Belgians have a right to take some action against the parents, given the seriousness of polio, but the question is, is a prison sentence disproportionate?"

The parents can still avoid prison — their sentences were delayed to give them a chance to vaccinate their children. But if that deadline also passes without their children receiving the injections, the parents could be put behind bars.

Because of privacy laws, Belgian officials would not talk specifically about the case, such as why the parents refused the vaccine or how much longer they have to vaccinate their children.

The polio vaccine is the only one required by Belgian law. Exceptions are granted only if parents can prove their children might have a bad physical reaction to the vaccine.

"Polio is a very serious disease and has caused great suffering in the past," said Dr. Victor Lusayu, head of Belgium's international vaccine centre. "The discovery of the vaccine has eliminated polio from Europe and it is simply the law in Belgium that you have to be vaccinated. ... At the end of the day, the law must be respected."

Some ethicists back the hardline Belgian stance.

"Nobody has the right to unfettered liberty, and people do not have a right to endanger their kids," said John Harris, a professor of bioethics at the University of Manchester.

"The parents in this case do not have any rights they can appeal to. They have obligations they are not fulfilling."

Aside from Belgium, only France makes polio vaccinations mandatory by law. In the United States, children must be vaccinated against many diseases including polio, but most states allow children to opt out if their parents have religious or "philosophical" objections.

In the U.S. state of Maryland, prosecutors and school officials in one county threatened truancy charges against parents who failed to vaccinate their children. The measure sharply reduced the number of unvaccinated children although nobody has been charged.

FULL STORY: CLICK HERE

Video Shows Cop Tasering Already Restrained Disabled Man

Abuse of "last option before lethal force" continues
Steve Watson
Infowars.net
Wednes
day, March 12, 2008

Recently uncovered video of a disabled British Columbia man being shocked with a taser by a Royal Canadian Mounted Police officer has sparked controversy and once again brought the use of such weapons into the limelight.

The video, which was shot in 2004 but only recently released to legal representitives, shows John Dempsey, who suffered from a debilitating muscle disorder similar to Parkinson's disease, being forced to the ground by two RCMP officers inside a Kamloops, B.C. RCMP detachment.

The video shows Dempsey being led into the booking room after being arrested for trying to intervene in the arrest of a friend whom he believed the police were being too heavy handed with.

Already handcuffed and subsequently shoved face down to the ground, an officer then fires a taser into Dempsey's back at point blank range.

"I wasn't resisting arrest, I calmly walked, he grabbed me, and said this will teach you not to [profanity] with us, that's what he said," Dempsey later commented.

Watch the video:

Dempsey had initiated a lawsuit accusing the RCMP of excessive force, but was sadly killed in a traffic accident recently.

Had he been able to see his case through, Dempsey may have been as successful as Jared Massey, who has accepted a $40,000 settlement in a lawsuit filed against the state and a Utah Highway Patrol trooper, after he was stopped and tased for refusing to sign a speeding citation.

The news comes on the back of internal reports by Vancouver police, which have revealed that the force regularly use Tasers to subdue people who are unarmed and non-violent.

The reports, released via a freedom of information request, state that in a number of cases police used the Taser as soon as someone displayed a "fighting stance" or simply to get a non-violent suspect to do what they were told.

Other cases we have highlighted also corroborate the fact that the weapon, which is designed to be a last resort before lethal force, is now being used as a compliance tool. Every week we post stories of incidents, which often feature old women, children and disabled people as the victims. The weapons are even being used in schools.

The police are now trained that "pain compliance," a euphemism for torture, is acceptable in apprehending anyone even if that person poses no physical danger. If you electrify any person, they suffer extreme pain and stand a high chance of being killed.

Many Civil Liberties Associations and police departments across North America have called for a moratorium on the weapons after hundreds of Taser-related deaths have garnered headlines from coast to coast. However, infinitely more police continue to use the weapons without question.

Despite claims by Taser proponents the weapons are safe, scientists and doctors have raised concerns about possible links between Tasers and potential heart and respiration problems, mental health and an individual’s state of exhaustion or agitation in confrontations with authorities.

Amnesty International has also cited hundreds deaths around the world after Taser use and has called for a full taser suspension while a thorough investigation into the impact of the weapon is conducted.

Recently, a UN Committee said the stun gun "causes acute pain, constituting a form of torture".

Carlyle Capital in default, on brink of collapse

AMSTERDAM (Reuters) - An affiliate of U.S.-based buyout firm Carlyle Group has defaulted on about $16.6 billion of debt and expects its lenders to seize remaining assets as the global credit crunch tightens around leveraged investors.

Carlyle Capital Corp (CARC.AS: Quote, Profile, Research), a fund listed in Amsterdam, said in New York on Wednesday that negotiations with lenders deteriorated late in the day after a drop in the value of its mortgage investments would result in margin calls of $97.5 million on top of the $400 million it was already facing.

A "successful refinancing is not possible," Carlyle Capital said, after trying for the past week to work out a deal with lenders to stave off bankruptcy.

Bund futures in Europe rose after the news back to levels they traded at before the U.S. Federal Reserve and other central banks coordinated on Tuesday to inject liquidity into credit markets. The dollar also fell.

The credit crunch, triggered last year when subprime mortgages made to risky U.S. borrowers went sour, has put increasing pressure on lenders to shore up capital and made it difficult to value collateralized debt, mortgage portfolios and other fixed-income securities -- the investments that Carlyle Capital was set up to invest in.

"The credit angst is back," said Tim Condon, head of Asia research with investment bank ING.

The default by the fund prompted spreads to widen on the iTRAXX Asia ex-Japan investment grade index, and European credit spreads also widened, returning close to record wide levels touched earlier in the week. The news also sent the dollar lower, where it touched 12 year-lows against the yen .

Carlyle Capital, based in Britain's offshore dependency of Guernsey, said in the only assets it has left are AAA-rated residential mortgage-backed securities, and that it expected lenders to foreclose on the this collateral.

"It has become apparent to the company that the basis on which lenders are willing to provide financing against the company's collateral has changed so substantially that a successful refinancing is not possible," Carlyle Capital said.

Its shares tumbled 73 percent to $0.76 at 1002 GMT, a fraction of their $20 debut price last July.

Dutch market regulator AFM said it was monitoring developments closely.

"Sentiment is broadly negative and news of missed margin calls at large highly leveraged funds only elevates fear of a vicious cycle of more forced selling at deep loss, collateral shortfalls, and more missed margin calls," said Brett Williams, credit analyst with BNP Paribas in Hong Kong.

Among the counterparties for Carlyle's repurchasing agreements, Deutsche Bank, Merrill Lynch & Co. and Bear Stearns Cos. have sold off assets, the Wall Street Journal reported.

FEARS

June Bund futures FGBLM8 were 33 ticks higher at 117.95, and by 0839 GMT, the Markit investment-grade iTraxx Europe index was at 156.5 basis points, according to data from Markit, 10.5 basis points wider and erasing Wednesday gains.

Fears that more private equity groups, hedge funds and mortgage lenders are struggling with their financing are putting heavy pressure on global equity markets, which have tumbled in recent months on fears of a U.S. recession and the widening fallout from a global credit crunch.

On Tuesday, the U.S. Federal Reserve expanded a securities lending program to prove short-term liquidity of $200 billion.

"The Fed will remain vigilant that it does not cause systemic problems, but I don't think we can rule out more instances of stress," Condon said.

U.S.-based buyout giant Carlyle Group CYL.UL participated actively in negotiations with lenders and last year extended a $150 million credit line to its affiliate.

Managers at Carlyle Group own about 15 percent of Carlyle Capital, which listed in July 2007, as the credit crunch began to take hold of the global financial system.

The Carlyle Group, based in Washington, DC, has more than $75 billion under management and has attracted a string of high-profile advisers including U.S. President George Bush in the early 1990s and former British Prime Minister John Major.

One of the world's largest private equity firms, The Carlyle Group owns a range of companies including TV ratings firm Nielsen, doughnut seller Dunkin' Brands and former General Motors unit Allison Transmission.

According to CCC's annual report, counterparties for its repurchasing agreements as of the end of 2007 were Bank of America, Bear Stearns, BNP Paribas, Calyon, Citigroup, Credit Suisse, Deutsche Bank, ING, JP Morgan, Lehman Brothers, Merrill Lynch and UBS.

Dollar Falls to 12-Year Low of 100 Yen on Carlyle Fund Failure

March 13 (Bloomberg) -- The dollar fell below 100 yen earlier today for the first time since 1995 and to a record low against the euro after a Carlyle Group fund moved closer to collapse, triggering concern of more turmoil in financial markets.

The dollar approached parity with the Swiss franc and slumped against the British pound after Carlyle said lenders will take over the assets of its mortgage-bond fund and President George W. Bush acknowledged the U.S. currency's decline was not ``good tidings.'' The dollar's drop may prompt Middle East central banks to reduce dollar holdings, Greg Gibbs, a strategist at ABN Amro Holding NV in Sydney, said in a report.

``Sentiment for the dollar continues to deteriorate very, very rapidly and if we're not careful this will turn into a dollar crash,'' said Mitul Kotecha, head of foreign-exchange research in London at Calyon, the securities unit of Credit Agricole SA, France's second-biggest bank. ``The risk is that we see a fairly aggressive move sharply lower towards 95 yen, and that could really perk up the interest of the Bank of Japan.''

The dollar fell as low as 99.77 yen, the weakest since Nov. 9, 1995, before trading at 100.24 at 7:38 a.m. in New York, from 101.79 yesterday. The dollar dropped to $1.5624 per euro, the lowest since the common European currency's debut in 1999, and was at $1.5591 from $1.5551. It also slumped to a record 1.0045 Swiss francs. Japan's currency advanced to 156.27 per euro, from 158.30.

The U.S. currency fell against a basket of six major trading partners to the lowest since the index began in 1973. The Dollar Index traded on ICE Futures in New York declined to 71.94.

Yen Sales

Japan sold the yen on the four occasions since 1995 when the currency approached 100 to support exporters including Toyota, the world's second-biggest automaker. The Bank of Japan sold 14.8 trillion yen ($148 billion) in the first three months of 2004, after record sales of 20.4 trillion yen in 2003.

The yen's 24 percent gain against the dollar from a 4 1/2- year low on June 22 was ``unexpected'' and will damage earnings, Toyota Motor Corp. President Katsuaki Watanabe said today.

``We must continue cost cuts by all means, but the currency has reached the level where we have to think about other measures,'' Watanabe told reporters in Tokyo. A gain of 1 yen against the dollar cuts Toyota's annual operating profit by 35 billion yen, according to the automaker.

The yen may rise as high as 95 per dollar, according to forecasts this month by Citigroup Inc., the third-biggest currency trader, Lehman Brothers Holdings Inc., the fourth- biggest U.S. securities firm, and Mizuho Financial Group Inc., Japan's second-largest publicly traded bank. Deutsche Bank AG and UBS AG, the world's two biggest currency traders, had predicted the dollar would hold above 100.

Intervention Risk

``There's more than a 50 percent probability that the U.S. is in recession,'' Eisuke Sakakibara, dubbed ``Mr. Yen'' when he was Japan's top currency official from 1997 to 1999, said in an interview on March 6. ``The dollar-yen rate is dependent on the state of the U.S. economy.''

The Group of Seven, which next meets April 12-13 in Washington, may signal its intent to consider coordinated intervention, UBS strategists wrote in a March 3 report. Unilateral intervention ``seems unlikely'' after Japan's economy has grown every year since 2002, it said.

The yen is a favored funding currency for carry trades, in which investors borrow in a country with low interest rates and invest in one with higher yields, earning the spread between the two. The risk is that currency moves erase those profits.

The nation's benchmark rate of 0.5 percent, the lowest among major economies, compares with 3 percent in the U.S., 4 percent in Europe, 7.25 percent in Australia and 8.25 percent in New Zealand.

Carlyle Defaults

Carlyle Capital Corp., co-founded by David Rubenstein, said in a statement it defaulted on about $16.6 billion of debt as of yesterday. Lenders will ``promptly'' take over all of its remaining assets and any remaining debt is expected ``soon'' to go into default, it said.

The yen has rallied 13 percent against the dollar as the Fed cut rates amid the worst housing slump in a quarter of a century and $190 billion of U.S. subprime-mortgage-related losses and markdowns at the world's biggest financial institutions.

``Investors are starting to lose confidence in the dollar, given the increased uncertainty over credit-related losses,'' Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London, wrote in a note to clients today. ``Carlyle is unlikely to be the last hedge fund in difficulty. That will only further depress investor sentiment.''

Recession Concern

The biggest job losses in five years and record fuel costs are eroding U.S. consumer confidence and spending, which accounts for more than two-thirds of the economy. Lehman and JPMorgan Chase & Co. last week said the U.S. is headed into a recession.

A report today is forecast by economists to show retail sales rose 0.2 percent in February after a 0.3 percent gain in the previous month, according to a Bloomberg survey. The Commerce Department will release the data at 8:30 a.m. in Washington.

``Dollar-yen is going lower,'' said Ray Farris, head of foreign-exchange strategy at Credit Suisse in London. ``It will definitely overshoot our 98 forecast in the very near term. Our forecast was for the dollar to reach 98 in three months. The big question now is whether there will be intervention.''

Japanese officials are unlikely to intervene now in the foreign-exchange market, because the yen is ``cheap'' compared to other currencies, Sakakibara said. The U.S. and Japan may intervene to weaken the yen should it break through 90 and head toward 80 per dollar, he said.

Trading Partners

The yen's real effective exchange rate, measured against 15 currencies of major trading partners including China, Europe and Canada, is 99.5, according to Bank of Japan figures. The rate averaged 121.9 in the first quarter of 2004, when the bank last intervened on behalf of the Ministry of Finance.

Central banks intervene in the foreign-exchange market when they buy or sell currencies to influence exchange rates.

``The yen hasn't played its part in terms of dollar depreciation,'' said Tom Fitzpatrick, global head of currency strategy at Citigroup in New York. As carry trades unwind, ``we could find ourselves moving down toward 95 very, very quickly in the next couple of weeks.''

The yen may strengthen further as global growth slows and other central banks will lower interest rates, prompting Japanese investors to send money back home, said Scott Ainsbury, who helps oversee about $12 billion in currency as a portfolio manager in New York at FX Concepts Inc.

IMF Forecast

Japan's economy, the world's second-largest, may expand 1.5 percent this year, matching the growth rate in the U.S., the International Monetary Fund said on Jan. 29. It would be the first time Japan doesn't lag behind the U.S. since 1991.

Japanese mutual funds have reduced purchases of overseas assets by 9 percent to 33.5 trillion yen in January, from 36.9 trillion yen in December, according to the Investment Trust Association data.

``Money is flowing back toward Japan, rather than going out to the rest of the world,'' said Ainsbury. ``Why put the money in the U.S. where stocks are sliding and the dollar is sliding? It's just a double whammy.''

The yen will reach 95 per dollar in three months, he predicted.

Wednesday, March 12, 2008

Dollar Falls to Record Low Against Euro

NEW YORK (AP) — The dollar fell against most major currencies on Wednesday, including a new low against the euro, which fetched $1.55, as skepticism grew over the latest U.S. Federal Reserve Bank plan to restore calm to jittery global credit markets.

The Fed on Tuesday unveiled a rescue package that would direct as much as $200 billion into banks and investment houses. The action was in concert with help from the European Central Bank and central banks in Britain, Switzerland and Canada.

But the Fed action was overshadowed by U.S. economic struggles, halting the dollar's rise and pushing the euro to a record high of $1.5559, surpassing its previous record of $1.5495 set Tuesday.

Late Wednesday, the 15-nation euro fell back to $1.5526 — still above the $1.5319 it bought in New York late Tuesday.

"The positive dollar impact of yesterday's coordinated central bank operations is already proving unsustainable as the U.S. currency falls across the board," said Ashraf Laidi, the chief foreign exchange strategist for CMC Markets in New York.

Traders also weighed a report from Zawya Dow Jones that said the United Arab Emirates was deciding whether to continue pegging its currency to the plummeting U.S. dollar.

In January, Qatari Prime Minister Sheikh Hamed bin Jassem Al Thani said his country was also reconsidering its link to the dollar.

The British pound rose to $2.0243 from $2.0029 even after British Treasury Chief Alistair Darling cut forecasts for domestic growth when he delivered his first annual budget against the backdrop of the worst global economic conditions for a decade.

In other late New York trading, the dollar dropped to 102.04 Japanese yen from 104.17 yen and to 1.0182 Swiss francs from 1.0337 Swiss francs it traded Tuesday. Meanwhile, the dollar edged up to 1.0096 Canadian dollars from 1.0067 Canadian dollars.

Crude rallies to surpass $110 as dollar falls

Futures hit new highs, shrug off surprise increase in U.S. inventories

SAN FRANCISCO (MarketWatch) -- Crude-oil futures gained more than $1 Wednesday to surpass $110 a barrel for the first time, moving higher as the dollar fell to a new low against the euro in a lift for dollar-denominated oil prices and as speculation increased in the futures market.

The gains came even after government data showed a surprising upturn in U.S. crude inventories in the latest week.

Crude oil for April delivery hit a new record high of $110.20 a barrel on the New York Mercantile Exchange in late afternoon trading. It was last seen up $1.05 a barrel, or 1%, to stand at $109.80. The benchmark contract was mostly in negative territory during morning trading after the inventories report.

U.S. crude inventories rose 6.2 million barrels to 311.6 million barrels in the week ended March 7, the Energy Information Administration reported. Analysts surveyed by Platts had expected an increase of 1.6 million barrels.

"Today's report is overwhelmingly bearish," said Chris Lafakis, an analyst at Moody's Economy.com. "There isn't a positive element in today's report for the oil bulls."

But some analysts believe the bearish news could instead push oil prices higher as investment funds resort to a buy-the-dip mentality, especially with the dollar under pressure. Crude has been making consecutive new highs and has rallied more than $20 in one month.

Market bears are hoping that in the short term this week's supplies numbers "could dent the recent rally, but we would not hold our breath," said Edward Meir, an analyst at MF Global, in a research note.

The dollar on Wednesday fell to the lowest level against the euro, which hit a new high of $1.5524. See Currencies.

Crude prices, denominated in dollars, tend to rise when the greenback falls, as a weaker U.S. currency makes crude less expensive to buyers holding other currencies. It also eats into oil producers' dollar revenue and could prompt them to curtail production, thus adding more upward pressure on oil. See story on dollar and crude.

Also on Nymex, April reformulated gasoline fell slightly, to $2.7172 a gallon, and April heating oil rose to $3.0234 a gallon, up 2.77 cents.

April natural gas also rose slightly, changing hands at $10.005 per million British thermal units.

Increasing speculation

The gap between WTI crude, the underlying product of Nymex crude futures, and Brent oil, a type of crude typically refined in Northwest Europe, widened to more than $4 a barrel on Wednesday, an unusual gap reflecting growing speculative buying of the U.S. contract, an analyst said on Wednesday.

"We believe that this is evidence of increased buying by hedge funds in the U.S.," said Peter Hitchens, analyst at Seymour Pierce.

According to Hitchens, the traditional premium between WTI and Brent is in the range of $1 to $1.50 a barrel, which he said "normally reflects the transportation price of moving a barrel of Brent to the U.S."

Government data showed speculators and managers of large investment funds, those who don't need physical oil, dominated bets on rising oil prices, while refiners and other oil users were betting oil prices would move lower.

The latest data from the Commodity Futures Trading Commission showed long positions from speculators, in which investors expect oil prices to move higher, outnumbered short positions, or bets on lower prices, by nearly 100,000 contracts last week.

Net long positions more than tripled in one month. This was the fourth consecutive week marking an increase in net long positions from financial traders, and some analysts are expecting another build-up in this week's net long positions.

Inventories in detail

Crude inventories at Cushing, Okla., the delivery point for crude traded on the Nymex, rose sharply, increasing by 2.7 million barrels to a total of 18.9 million barrels, EIA said in the report.
EIA also reported U.S. gasoline supplies rose by 1.7 million barrels in the latest week, while distillate stocks fell by 1.2 million barrels. Analysts surveyed by Platts, an energy information provider, had been expecting that gasoline supplies would fall by 900,000 barrels and that distillate stocks would drop by 2 million barrels.

U.S. refineries operated at 85% of their operable capacity last week, down from the previous week's 85.9%. U.S. crude oil imports averaged 10.5 million barrels a day last week, up 1.1 million barrels a day from the previous week. End of Story

6 Signs the U.S. May Be Headed for War in Iran

Terry Atlas
Global Research
March 12, 2008

This report by the US mainstream press suggests in no uncertain terms that the US is heading for war with Iran and that opposition within the US high command has been significantly weakened with the forced resignation of Admiral William Fallon.

Is the United States moving toward military action with Iran?

The resignation of the top U.S. military commander for the Middle East is setting off alarms that the Bush administration is intent on using military force to stop Iran’s moves toward gaining nuclear weapons. In announcing his sudden resignation today following a report on his views in Esquire, Adm. William Fallon didn’t directly deny that he differs with President Bush over at least some aspects of the president’s policy on Iran. For his part, Defense Secretary Robert Gates said it is "ridiculous" to think that the departure of Fallon — whose Central Command has been working on contingency plans for strikes on Iran as well as overseeing Iraq — signals that the United States is planning to go to war with Iran.

Fallon’s resignation, ending a 41-year Navy career, has reignited the buzz of speculation over what the Bush administration intends to do given that its troubled, sluggish diplomatic effort has failed to slow Iran’s nuclear advances. Those activities include the advancing process of uranium enrichment, a key step to producing the material necessary to fuel a bomb, though the Iranians assert the work is to produce nuclear fuel for civilian power reactors, not weapons.

Here are six developments that may have Iran as a common thread. And, if it comes to war, they may be seen as clues as to what was planned. None of them is conclusive, and each has a credible non-Iran related explanation:

1. Fallon’s resignation: With the Army fully engaged in Iraq, much of the contingency planning for possible military action has fallen to the Navy, which has looked at the use of carrier-based warplanes and sea-launched missiles as the weapons to destroy Iran’s air defenses and nuclear infrastructure. Centcom commands the U.S. naval forces in and near the Persian Gulf. In the aftermath of the problems with the Iraq war, there has been much discussion within the military that senior military officers should have resigned at the time when they disagreed with the White House.

2. Vice President Cheney’s peace trip: Cheney, who is seen as a leading hawk on Iran, is going on what is described as a Mideast trip to try to give a boost to stalled Israeli-Palestinian peace talks. But he has also scheduled two other stops: One, Oman, is a key military ally and logistics hub for military operations in the Persian Gulf. It also faces Iran across the narrow, vital Strait of Hormuz, the vulnerable oil transit chokepoint into and out of the Persian Gulf that Iran has threatened to blockade in the event of war. Cheney is also going to Saudi Arabia, whose support would be sought before any military action given its ability to increase oil supplies if Iran’s oil is cut off. Back in March 2002, Cheney made a high-profile Mideast trip to Saudi Arabia and other nations that officials said at the time was about diplomacy toward Iraq and not war, which began a year later.

3. Israeli airstrike on Syria: Israel’s airstrike deep in Syria last October was reported to have targeted a nuclear-related facility, but details have remained sketchy and some experts have been skeptical that Syria had a covert nuclear program. An alternative scenario floating in Israel and Lebanon is that the real purpose of the strike was to force Syria to switch on the targeting electronics for newly received Russian anti-aircraft defenses. The location of the strike is seen as on a likely flight path to Iran (also crossing the friendly Kurdish-controlled Northern Iraq), and knowing the electronic signatures of the defensive systems is necessary to reduce the risks for warplanes heading to targets in Iran.

4. Warships off Lebanon: Two U.S. warships took up positions off Lebanon earlier this month, replacing the USS Cole. The deployment was said to signal U.S. concern over the political stalemate in Lebanon and the influence of Syria in that country. But the United States also would want its warships in the eastern Mediterranean in the event of military action against Iran to keep Iranian ally Syria in check and to help provide air cover to Israel against Iranian missile reprisals. One of the newly deployed ships, the USS Ross, is an Aegis guided missile destroyer, a top system for defense against air attacks.

5. Israeli comments: Israeli President Shimon Peres said earlier this month that Israel will not consider unilateral action to stop Iran from getting a nuclear bomb. In the past, though, Israeli officials have quite consistently said they were prepared to act alone — if that becomes necessary — to ensure that Iran does not cross a nuclear weapons threshold. Was Peres speaking for himself, or has President Bush given the Israelis an assurance that they won’t have to act alone?

6.Israel’s war with Hezbollah: While this seems a bit old, Israel’s July 2006 war in Lebanon against Iranian-backed Hezbollah forces was seen at the time as a step that Israel would want to take if it anticipated a clash with Iran. The radical Shiite group is seen not only as a threat on it own but also as a possible Iranian surrogate force in the event of war with Iran. So it was important for Israel to push Hezbollah forces back from their positions on Lebanon’s border with Israel and to do enough damage to Hezbollah’s Iranian-supplied arsenals to reduce its capabilities. Since then, Hezbollah has been able to rearm, though a United Nations force polices a border area buffer zone in southern Lebanon.

Defense Secretary Gates said that Fallon, 63, asked for permission to retire. Gates said that the decision, effective March 31, was entirely Fallon’s and that Gates believed it was "the right thing to do." In Esquire, an article on Fallon portrayed him as opposed to President Bush’s Iran policy and said he was a lone voice against taking military action to stop the Iranian nuclear program. In his statement, Fallon said he agreed with the president’s "policy objectives" but was silent on whether he opposed aspects of the president’s plans. "Recent press reports suggesting a disconnect between my views and the president’s policy objectives have become a distraction at a critical time and hamper efforts in the Centcom region," Fallon, said in the statement issued by Centcom headquarters in Tampa, Fla. "And although I don’t believe there have ever been any differences about the objectives of our policy in the Central Command area of responsibility, the simple perception that there is makes it difficult for me to effectively serve America’s interests there," he said. Gates announced that Fallon’s top deputy, Army Lt. Gen. Martin Dempsey, will take over temporarily when Fallon leaves. A permanent successor, requiring nomination by the president and confirmation by the Senate, might not be designated in the near term.

U.S. Considers Adding Venezuela to List of Terrorist States

Pablo Bachelet
McClatchy Newspapers
March 12, 2008

The Bush administration has launched a preliminary legal inquiry that could land Venezuela on the U.S. list of nations that support terrorism, following reports of close Venezuelan links with Colombian rebels, a senior government official has confirmed.

The investigation is the first step in a process that could see Venezuela join North Korea, Cuba, Sudan, Syria and Iran as countries designated by the State Department as supporters of terrorism.

U.S. laws give some leeway on what economic activity is subject to such sanctions, but experts say adding Venezuela to the list would force U.S. and even foreign firms to sever or curtail links with one of the world’s largest oil producers.

The legal review comes after Colombia captured four computers belonging to a guerrilla leader in a March 1 raid into Ecuador. The documents suggest the Venezuelan government was in the process of providing $300 million to the Revolutionary Armed Forces of Colombia, or FARC.

The U.S. and Colombian governments and the European Union have officially designated FARC as a terrorist organization, but Venezuelan President Hugo Chavez has said publicly that he considers it a legitimate insurgency.

A senior U.S. official, who spoke on condition of anonymity because of the delicate nature of the subject, said government lawyers had been asked to clarify “what goes into effect in terms of prohibitions, or prohibited activities,” with the state sponsor designation.

The official was reluctant to predict if the FARC computer discoveries will lead to sanctions, noting U.S. investigators first must corroborate their veracity. The lawyers have not yet returned their opinions, the official added.

But if the captured documents are shown to be true, the official said, “I think it will beg the question of whether or not Venezuela, given Chavez’s interactions with the FARC, has … crossed the threshold of state sponsor of terror.”

Read entire article

Plan To Spray Toxic Biological Chemicals Over San Francisco Announced

Rami Nagel
Natural News
March 12, 2008

People of the world, the US Government is planning to poison more than two million people, in California, using an untested biological "pesticide" this summer. The chemical to be sprayed is classified by the EPA as a "pesticide" and the plan is to douse cities with this chemical designed to stick on everything for 90 days or longer. This application is not a one time event, but will continue every 1-3 months for as long as five years. The pesticide to be sprayed is not designed to harm the light brown apple moth’s who it is designed for, but merely to confuse its mating habits. While harmless to moths, the pesticide has been documented to harm humans.

Side effects range from vomiting and flu like systems, to male and female reproductive cycle disruption. One child nearly died from the exposure, and some people have developed asthma from being exposed to this chemical concoction. It is cause for alarm that a chemical being labeled as harmless and "safe" even in minute doses, causes severe health effects in some people. The government is racing to cover up and hide the dangerous health effects so that they can continue their aerial spray plans this summer. Your attention and action on this subject is needed in the most important way.

On January 24th, 2008, United States Department of Agriculture (USDA) Secretary Chuck Conner announced the availability of $74.5 million in emergency funding to combat the light brown apple moth (LBAM) infestation in California (1). President Bush’s recent budget proposal sent to Congress sets aside $330 Million to eradicate plant pests, like the Light Brown Apple Moth. With crime, prison crowding, pollution, poverty, budget problems and the like, why should the government go through the effort to try to control the reproductive habits of a moth? While most people say the answer is money, a far more sinister plan seems to be at hand. It is unprecedented to design a long term plan to spray chemicals on people, which are untested for safety. This plan violates a myriad of state, federal and international laws.

On February 13th, 2008, the CDFA and USDA, in conjunction, announced their action plan for aerial spraying untested poison on people. This is from the CDFA Press Release "Aerial treatments are expected to begin June 1 in the infested areas of Monterey and Santa Cruz counties, with subsequent aerial treatments expected to begin August 1 in San Francisco, Daly City, Colma, Oakland, Piedmont, Emeryville, Albany, El Cerrito, El Sobrante, Tiburon and Belvedere. The treatments in these areas are designed to be reapplied at 30- to 90-day intervals while the moths are active." (4)

In late 2007, there were 643 documented health complaints (www.1hope.org/SPRAYCOMPLES.PDF) from the aerial spray program conducted in Santa Cruz and Monterey Counties. Keep in mind that this documentation is a mere fraction of the real health effects, as no legitimate effort was made to inform even doctors on how to recognize pesticide poisoning. Many doctors also refused to report suspected pesticide poisoning as required by law, and in order for a report to get officially filed, many times the patient had to insist upon it. These health injuries are not being honored in any way, because if they are honored, this sick chemical spray will be seen for what it is. It is a poison to many humans and likely to many other animals as well. I have a difficult time swallowing that a chemical compound designed to disrupt a moth’s mating cycle can accidentally create reproductive health problems.

There are many who believe that this spray is not directed at the moth population which the government says is the goal of the spray, but rather that it is directed at humans. There is a growing body of evidence to support this claim, considering that the moth itself does not cause any crop damage. It is similar to the government deciding that we must eradicate all the ants, because ants cause millions of dollars of damage. Like ants, the light brown apple moth is a harmless pest. Another strange observation is the name of the mating disruption chemical Checkmate. In order to pull off the deployment of this biological chemical, a hoax, or reason for aerial spraying had to be created. That reason is called the Light Brown Apple Moth infestation. The second requirement to pull off releasing a massive chemical cloud of disease, is to trick people into believing it is safe. This whole aerial spray program depends on the belief that the chemicals to be sprayed are safe.

Since the chemicals planned to be deployed have never been sprayed over cities before, and are even being developed as I write, and thus have not been proven safe for humans, this is by the facts a large scale experiment. The question people should ask is, "why?" While it may be just coincidence, a recent article displays this headline: “Top-secret Livermore anti-germ lab opens.” (2) This same lab, has routinely exploded thousands of pounds of lethal, chemically toxic, and radioactive Depleted Uranium in the greater San Francisco Bay area’s air for the past fifty years (3).

When people hear about this aerial spray, many people experience a sinking feeling in the pit of their stomach. This is truly a sickening action. The government is willfully breaking countless laws in order to combat a stupid leaf rolling moth that curls up into the leaves of some plants and that doesn’t cause any crop damage. It has not caused crop damage or embargo’s in Hawaii over the past 100 years, so why would it cause damage in California?

No ounce of sanity can explain why the government must insist on violating countless laws to spray people with never before tested chemicals, except as to realize a deadly game is being played.

Unlike the horrible malathion spraying over 20 years ago, which was a one-time ordeal with chemicals that evaporate, this spraying is a time release microscopic device, which will be continuously applied, short of the winter months, for up to five years. Even five years of spraying will at best reduce slightly the moth population, as pest control experts explain that mating disruption technology is used as a small part of an overall pest management plan. Pretty much any pest control expert, except for those on the government take, will tell you that the light brown apple moth cannot be eradicated, and that even if it could, the mating disruption technology is not the best means to do it. Since aerial spraying is to be the sole method of controlling the light brown apple moth in many locations, then even after many years of spraying, the moth will still be alive. It is not sane to spray people with chemicals. That begs attention, there is not any hard evidence that the spray even works at all. In fact on the EPA’s own website, there’s an article about pheromones released from microcapsules, it states: "The studies show that only a small proportion of the microcapsules actually release any pheromone." (5)

This is now clear and reprehensible evidence of State and Federal Governments attempting to commit a large scale crime against the American people. Let us forget about supposed terrorists for a second whose propagandized images are placed on the television, and lets pay attention to this biological attack planned on our fellow neighbors. The presence of a minuscule pest, is no excuse to douse millions with chemicals. There are NO CROPS IN CITIES! So why are they going to spray cities?

This is a Cover-Up

The LBAM infestation is a monumental hoax designed as a cover for an operation of devious goals to expose people to dangerous chemicals over several years.

Following is a link to a recently published proposal of spray boundaries, the yellow lines indicating the proposed spray zones (www.hopefortruth.com/lbam_2008.jpg) . More than two million people who live in these and other targeted cities are scheduled to be exposed this summer to chemicals that that have never been tested on humans or animals before. Let me repeat: the government of the United States is conducting a human biological experiment, on a massive scale, breaking State, Federal and International laws. Children, pregnant women, and the sick and elderly will be most as risk to this increased exposure to long lasting chemicals. Chemicals which are newly designed, chemicals which have not been proven safe. Just like the reproductive health effects reported from the spray, it is important to realize that a large team of "experts" working on this project do not mistakenly douse people with chemicals. This is done on purpose, with a purpose.

Does it make sense to douse over two million people with literally hundreds of billions of microscopic balls of volatile chemicals over an extended period of time to try to limit the mating habits of a few thousand moths? Is it legal to do this? Is it ethical? Is it moral? Yet rather than halting the spray plans to investigate the damage it has done to many people, the spray plans continue to grow exponentially.

To see this insanity clearly, let’s examine the moth population. In San Francisco County, 3,501 moths total have been trapped and killed over an eight month period. The entire city of San Francisco, whose population is 744,041, is in the proposed spray boundaries. About 744,000 people are to be exposed to ‘never tested safe for humans, microencapsulated pheromones’ for several years. This is really a needle in the haystack approach to pest control. Keep in mind, each moth found is a moth that has been trapped and exterminated (6). In Alameda County, 431 months have been found in the past 8 months out of 2,327 traps. The moth population in Alameda County is thus sparse at best. Just look out your window. Imagine how many insects are in the tree, the yard, or the local park. I have seen more than 431 ants crawl into my kitchen on a rainy day. So in a giant area of 141 square miles, and the tens or hundreds of millions of insects in that zone, to try to eradicate a few hundred moths by just spraying chemicals everywhere is both ludicrous and unsafe.

When I learned that Santa Cruz, my previous hometown was to be aerially sprayed, I was in a state of shock. This was followed by a long period of disbelief.

Apparently the CDFA or the USDA, or both, decided that the previous chemical formulas used, Checkmate LBAM-F and Checkmate OLR-F were not good enough, which really points to the fact that the past two aerial sprays in Monterey, and the one in Santa Cruz County, were a waste of time and money. Not to mention the tragedy of the many severe health reactions experienced by thousands of people from chemical exposure. It doesn’t matter to those in charge at the CDFA, EPA, or USDA, if a new chemical is needed to be used, because the goal is not to stop the moth, the moth cannot be stopped, it can only be controlled. This is known. The goal may be to coat people with a toxic mesh of disease causing microcapsules.

The chemicals that were sprayed, and that are planned on being sprayed, have not undergone thorough safety evaluations. And they won’t undergo such evaluations in a legitimate way, because if they did, they would prove only one thing - that these chemicals are potentially deadly.

The chemicals planned to be sprayed will no doubt be similar to the ones used in Santa Cruz and Monterey Counties in 2007. They are a plastic encapsulated microtechnology, a microscopic plastic dust. The reported microcapsule size of the aerial mating disrupter is as small as 10 microns and averages 25-35 microns in size for an undeployed moth spray. For comparison, a human hair is approximately 70 microns in thickness. The size of these chemical containing plastic balls comes suspiciously close to micro-sized particles that are used to evade the body’s defensive systems for biological weapons, those are reported to be 3-4 microns in size. Miniature particles between 2.5-10 microns in size, especially from pesticides, are known to cause both short term and long term health effects, including decreased overall life span.

A University of California at Davis report confirmed that some unsprayed and undegraded microcapsules are indeed 10 microns in size. The small particle size explains the severe reactions, that I, along with countless others have had when being exposed to minute dosages of the chemical. Minute dosages of chemicals designed for moth’s, advertised as harmless, do not accidentally make people sick. In other words, the people who designed these chemicals and manufactured them had to have an intimate understanding of what each chemical does, and how they react with each other. So, too, should the EPA have this understanding. It is not unreasonable to assume that a chemical designed to stop moths, that is being sprayed on humans, would have such drastic health effects, but it does. The only conclusion is that this is intentional in the design. Imagine someone designing a "safe" car. If this "safe" car had no brakes, then nobody would assume that the car accidentally had no brakes. Likewise, chemicals designed for moths, in minuscule doses, cannot accidentally harm people. It is more than just chance.

Again, nobody in the public as of yet knows how small the degraded microcapsules are, or how this will effect people in the short and long term, because no such testing exists. Once sprayed, these microscopic balls can easily enter deep into the mouth, eyes, skin and lungs. Even after 90 days and several rains, some people in Santa Cruz and Monterey Counties are still experiencing symptoms of spray poisoning. When they leave the counties, their symptoms many times abate. This aerial program is a real sword through the heart of democracy and decency. The government has really gone too far and it must be stopped now.

I must inform you that through a freedom of information request, a local newspaper has learned that the CDFA has hired media spin doctor extraordinaire Porter Novelli at the tune of almost $500,000 tax payer dollars to convince the public that it is okay for the state to dump chemicals all over them, their gardens, their pets, and their neighbors. The state of California is in a budget crisis, and this is one example that explains why. Here the state is using tax payer dollars to lie to and mislead the public, to try to convince the public that the state should be spending millions of dollars of resources on polluting the air, sea, and land with chemicals that the public in general does not want or need. Since a majority of spray funding is coming from the federal arm, know that your tax paying dollars are going to a government sponsored large scale crime.

Originally, the USDA announced that the moth might cause $100 million in crop damage if allowed to multiply. Then they keep expanding their figures to create false reasons to justify this unethical chemical assault. The most recent estimate of LBAM damage is $160 million to $640 million just in California. Mind you this moth has a hard time finding its way into crop fields and seems for some very bizarre reason to live only in cities. The estimate of this level of crop damage is absurd. The figures used to estimate the damage came from one particular year in Australia and have little meaning in California, as the climate is different. Even if this $160 million crop loss did come true, one has to consider that $90 million has now been ear marked to contain the moth, primarily the funds are for aerial spraying chemicals on cities which contain people, and not crops like apples, oranges and grapes. One expert estimates that if the CDFA stays on this track, by the time the aerial treatment is complete after five years, close to $500 million will be spent on aerial eradication. With little to no impact on the apple moth population.

The pheromone being used, (E)-11-Tetradecen-l-y Acetate is identical to pheromone’s which many native moths and perhaps other species also contain. So this spray will effect other non-target species. The pheromone only represents between 10-20% of the ingredients of the aerial spray.

Now, organizations like the Breast Cancer Fund, Center For Environmental Health, Calpirg, and the Sierra Club are issuing statements opposed to aerial spraying.

What to Expect Next

The CDFA, USDA, and EPA will do anything and everything to convince, lie, cajole and get people to agree with the plan to spray chemicals. The facts of this situation are irrelevant to those in charge because the goal is to spray people, not to operate under the laws of this constitutional government of checks and balances. They are going to go to meetings, pretend it is safe, have doctors testify it is safe, pretend to listen to the public, ignore any health complaints, and try to lull people into complacency on the matter. They have even gone as far as promising an environmental review, which will contain a giant pile of documents again to try to prove that it is okay to spray people with chemicals. The CDFA will continue to find more moth finds, and create more fake evidence of how much harm the moth will do. They will get more money from Mr. Bush’s pesticide funds and continue to enlarge their aerial spray program. Strangely the moth will continue to spread, finding its way into other cities, and in the coming years, cities like Los Angeles and San Diego will be targeted.

Knowing that the government is actively lying, hiding evidence, manipulating the public, and that they are spraying chemicals illegally on people should be enough evidence to convict these felons under Racketeer Influenced and Corrupt Organizations (RICO) laws.

Freeing Yourself From the Government’s Pro Spray Propaganda

These 643 health injury reports represent a fraction of the real injuries. The actual spray has surely caused thousands to be poisoned from this biochemical formulation. See my related article (www.naturalnews.com/022434.html) . Despite these reports which include 330 official illness claims filed with the CDFA, the CDFA states the following lies on their website, “Pheromones are extremely safe” and “Public safety is the primary concern.” The statement that pheromones are safe is a misleading distorted truth. Sure, pheromones can be safe when used responsibly, for example a benign moth sticky trap in an apple orchard (away from people) that contains pheromones to attract the moths. But when you create a microscopic biodegradable ball of volatile chemicals, and then place within it a synthetic moth pheromone, which itself is described as an explosive chemical, you have more of a drug which can interact and create changes within the human body, than a pesticide. Furthermore, no thorough investigation has been done of these 330 official illness complaints, and some of these people have not yet recovered. And a further investigation won’t be done, because a legitimate investigation would find that the spray made people sick, and thus, the aerial spray program would be halted.

One must realize that any documentation regarding the safety of pheromones reported is from non-aerial applications, such as a moth sticky trap that is scented with pheromones and stuck on a tree, or a pheromone laced twist tie applied to apple orchards or vineyards. These safety assertions also do not relate to the aerial method of application. A sticky trap laced with pheromones is a different entity than a microscopic ball that can easily enter the body and then biodegrade and release chemicals within the body. Part of the less dangerous aspect to pheromone laced traps is the fact that the pheromone is so volatile that it rapidly evaporates, so the chemical won’t travel too far. The microcapsules are the opposite, they are designed to stick around in the air for months. They are infinitely more dangerous than sticky traps, and you cannot really compare them. It’s like saying that a tank is the same as a motorcycle because they are both vehicles. Microcapsulated pheromones are a different beast than pheremone laced moth traps.

The newly designed chemicals, which are scheduled for June and August deployment will not have their ingredients disclosed to the public. We do not even know what this stuff is? How can the government say the chemicals are safe, and then hide the ingredients from scrutiny? If these chemicals are so safe why not tell us honestly what they are? Clearly the intention of the CDFA, USDA, and EPA, is to cover up the real nature of this biochemical assault. They are trying to hide what they do from the public’s eye. They do not want you to know the truth. The truth is people get sick. Not everybody gets sick from the moth spray, but many people do. Its effects can be strong and violent. The truth is, the US Government is a vehicle being used to poison us.

The CDFA reports that they want their newest moth weapon deployed this summer, to be even longer lasting, which to me means that the microcapsules will be even more dangerous, possibly indefinitely sticking in the environment, and irritating people’s sensitive ducts and glands; much like allergies from pollen. In each aerial application, spray planes are contracted through Dynamic Aviation (www.dynamicaviation.com/home.htm) , which has other specialties beyond aerial application of pesticides. They also do “Intelligence, Surveillance and Reconnaissance.” The spraying is conducted at a height of between 500-800 feet and residents in the sprayed area report feeling like they are in a war zone. Once in contact with residential neighborhoods, parks, and playgrounds, the balls slowly disintegrate over time. The hope is that during this time, they release pheromones and limit the moth’s mating patterns. Again, this is a whimsical hope because no legitimate studies exist proving this new technology is effective at either releasing pheromones, or at stopping the moth’s mating habits.

Typically a drug takes many years for the Food and Drug Administration to approve for safety for humans. Under an emergency declaration, the EPA can exclude new chemicals from rigorous testing. The catch to this exception is that these laws were designed for agricultural emergencies and are being violently misused because they are planning on spraying large urban populations and not agricultural zones. These laws cannot lawfully apply to cities. Among other things, we have legal control and authority of our bodies, and our properties. We can say "No" to the spray, and if necessary, defend ourselves from this highly toxic assault. The EPA and USDA have flagrantly crossed legal and ethical boundaries by applying laws designed for agricultural fields to densely inhabited city centers.

Further, consider that the testing of these chemicals is not done to make sure that it is safe for humans, as the safety is merely an untested assumption. As an example, it took several months after the first aerial spray of Monterey County for the CDFA to pay the University of California Davis to see if the Checkmate formula was toxic to certain very small ocean insects. It took several months for this first test of the Checkmate formula to be conducted. This test only happened after the chemical was sprayed on well over two hundred thousand people. The testing being conducted in New Zealand is not to ensure safety for humans, but to see if the mating habits of the moths are disrupted. This spraying is illegally approved by the EPA because Congress passed legislation to legally prevent the EPA from conducting human experiments. “EPA’s rules make it clear that all pregnant women, all nursing women, and all children are excluded from all studies involving intentional exposure that are intended for submission under the pesticide laws.” (www.epa.gov/oppfead1/guidance/human-test.htm) If the EPA cannot test pesticides on pregnant women, nursing women, and children, then under what jurisdiction and authority can they simply endorse and approve the exposure of pregnant women, nursing women and children with untested pesticides?

How many more children do we need to see poisoned by these indefensible government actions until we wake up and say, enough! How many more of our friends, relatives and neighbors do we need to see develop chronic health conditions due to exposure to aerially sprayed chemicals until we take effective action to stop this insanity? How much longer are we going to allow the government that is created for the people, to represent the people, to break its own laws and poison its own people and then disregard any reported health concerns?

I call for the arrest and trial of the appropriate employees in the CDFA, EPA, and USDA, for conspiring to poison people of the State of California, for lying and deceiving the public, and for polluting our environment.

Here’s How I Suggest You Take Action:

* Share this information with your friends and neighbors.

* Ask your California representative to support the following bills -

1) AB 2765, (Huffman) sets new limits on the emergency powers of the Department of Agriculture.

2) AB 2763 would enact the Invasive Pest Planning Act of 2008, by Assemblymember John Laird.

3) AB 2764 (Hancock) will prohibit the Secretary of Food and Agriculture from approving the
application of a pesticide in an urban area, unless the Governor has proclaimed a state of
emergency.

4) AB 2760 (Leno) would require the completion of an EIR before any pesticide could be applied in
an urban area.

Also, State Senator Carole Migden plans to file for a moratorium on aerial spraying.

* Don’t be fooled when the CDFA says that the “pheromone” is safe. I have been poisoned myself by these microcapsules, and so has my family, it is a terrible feeling. Ask for test results to show it is safe for humans, you’ll see they have none.

* Demand accountability. Ask your local California representative why they are continuing to allow the state to spray chemicals on people, even though the state has laws, like the state constitutional right to personal safety, and legislative laws such as the California Environmental Quality Act, meant to prevent such actions. Your state representative can amend or modify the LBAM law that went into affect that gave the CDFA the unanimous green light to eradicate the apple moth. Surely your representative does not support aerial spraying? Each county has to have their local agricultural commissioner or someone to that effect to sign a permit to allow the state to spray. Stop these people from signing the permit!

* State and Federal representatives can also design an independent committee to come up with non-biased recommendations. The CDFA created such a working group, but they strangely seem to believe that aerial spraying people to stop moths from mating is a good idea.

* Gather your local city council members’ support. Use local resources to conduct research, and file lawsuits against the state.

* Ideally the city attorneys and mayors should file legal suits against CDFA, the EPA and the USDA for polluting the air and water, for violating State and Federal laws, and for planning to create large scale poisoning.

* Contact your US Senate and House Representatives, and ask them to stop or at least investigate federal funding from the USDA for the aerial spray program. Federal officials can also declassify this tiny moth from a class A pest. Ask them to strengthen protections so that populations cannot be aerially sprayed unless there is a grave and immediate danger to public health.

* Additional Note: If the aerial spray does occur, take samples. Put a turkey baster-sized aluminum tray in your back yard. Put the tray out on the night prior to the aerial spray, and another on the night of the aerial spray. Seal each tray well. Each city should organize its own tests of the chemicals, including tests for biological agents, contaminants, radioactive substances, and a microscope analysis to see how big the microcapsules are, and to see if the microcapsules contain miniature microcapsules. Analysis ideally should also include a detailed chemical profile of the substance sprayed, since the government won’t tell us what it is.

Finally, the way I see it, it is a crime to poison children and our fellow people who live in California. Just because the people who are polluting and poisoning the air with chemicals work for the government, should not make them immune to criminal liability and prosecution. Unfortunately, no city officials, yet, have the decency and standards to attack this matter for what it is, a crime. Crimes require criminal investigations, and criminal charges.

People can be alarmed, and if cities take equitable action, we do not need to be afraid. For example, we pay taxes so we can have a fire and police department to protect ourselves from crimes. Why not use the police force to protect residents from government sponsored crimes? Many of the actions of the CDFA fall under the category of illegal activities. The police force are the people on the local level, given the right and authority to protect people from crimes.

The media creates a false fear about some hypothetical terrorist releasing chemical weapons in the United States. Meanwhile, the US government is doing something very similar, releasing potentially deadly chemicals on its population, for no good reason.

I pray for grace for everyone, so that people in the proposed spray zones remain safe from harm, and that those who are inspired to take action to stop this be inspired to act effectively, with humility, strength and compassion.

Take Action

In Santa Cruz and Monterey, local residents have started the California Alliance to Stop the Spray (CASS). This alliance is developing evidence and documentation to stop the aerial spraying for the Light Brown Apple Moth. Just because this alliance is formed, does not mean the moth spray will be stopped. Each area needs to form their own groups, and work together to defeat the real pest, State and Federal governments who are performing illegal operations.

Important websites were you can learn more and take action include:

(www.lbamspray.com) – On the right hand column of this website is a portal to CASS. You can find many ways to participate and help the cause. Also this contains the most relevant information. In the CASS section of the site, there are resources and people you can contact.

(www.hopefortruth.com) – My LBAM site.

(www.1hope.org/chkmate.htm) – Lots of documentation and recent news postings.

(www.dontspraycalifornia.org)- Related website against pesticide spraying.

For those who are taking community action, two generous people have volunteered to provide further resources:

Roy Upton, California Alliance to Stop the Spray (CASS)
831-461-6317, herbal@got.net

Bonnie Keet, California Alliance to Stop the Spray (CASS)
bonnie619@yahoo.com

When Governor Schwarzenegger says he supports the health and welfare of children, he is lying to you. Governor Schwarzenegger supports biochemical spraying which has been documented to cause life-threatening harm to some children.

Call Governor Schwarzenegger and tell him what you think of his policies.
Voice: (916) 445-2841 2841 (press #1, #5, #0)
Fax: (916) 445-4633

Alert Senator Diane Feinstein
San Fransisco Office - (415) 393-0707

Alert Senator Barbara Boxer
San Fransisco Office - (415) 403-0100

Alert Democracy Now!
They want to hear our stories, (http://www.democracynow.org/contact?to=1)

As a final addendum, many people have written to me about mosquito fogging, about chemtrails, and about large scale chemical sprayings which occur in the United States unmonitored in more rural areas. While my article does not address these concerns, those concerns are valid. The government cannot ethically, legally, or morally expose, or allow for the exposure of people needlessly to chemicals. There are volumes of evidence about how chemicals in our food, water and air can cause short and long term health effects. Your concern about chemical exposure is vital. Listen to it!

References:

1. ((www.usda.gov/wps/portal/!ut/p/_s.7_0_A/…)

2. ((http://www.sfgate.com/cgi-bin/article.c…)

3. ((http://www.mytown.ca/ev.php?URL_ID=1221…)

4. ((www.cdfa.ca.gov/egov/Press_Releases/Pre…)

5. ((http://www.epa.gov/fedrgstr/EPA-PEST/19…)

6. ((www.aphis.usda.gov/plant_health/plant_p…)

About the author

Rami Nagel is the author of "Cure Tooth Decay: Heal And Prevent Cavities With Nutrition," which teaches readers how to reclaim their dental health. Learn the real cause and cure for cavities and root canals at: www.curetoothdecay.com
Rami is a father who cares about the way we affect each other, our children, and our planet through our lifestyle choices. His health background is in hands-on energy healing, Hatha & Bhakti yoga and the Pathwork.
Rami is author of several health resources:
www.healingourchildren.net - Learn the Cause and Prevention of the Diseases of Pregnancy and Childhood
www.preconceptionhealth.org - A Program for Preconception Health based on Indigenous Wisdom
www.curetoothdecay.com - Heal and Prevent Cavities with Nutrition!
www.yourreturn.org - The cause of disease and the end of suffering of humanity.

Why the US has really gone broke

Chalmers Johnson
Le Monde Diplomatique
March 12, 2008

Global confidence in the US economy has reached zero, as was proved by last month’s stock market meltdown. But there is an enormous anomaly in the US economy above and beyond the subprime mortgage crisis, the housing bubble and the prospect of recession: 60 years of misallocation of resources, and borrowings, to the establishment and maintenance of a military-industrial complex as the basis of the nation’s economic life.

The military adventurers in the Bush administration have much in common with the corporate leaders of the defunct energy company Enron. Both groups thought that they were the “smartest guys in the room” — the title of Alex Gibney’s prize-winning film on what went wrong at Enron. The neoconservatives in the White House and the Pentagon outsmarted themselves. They failed even to address the problem of how to finance their schemes of imperialist wars and global domination.

As a result, going into 2008, the United States finds itself in the anomalous position of being unable to pay for its own elevated living standards or its wasteful, overly large military establishment. Its government no longer even attempts to reduce the ruinous expenses of maintaining huge standing armies, replacing the equipment that seven years of wars have destroyed or worn out, or preparing for a war in outer space against unknown adversaries. Instead, the Bush administration puts off these costs for future generations to pay or repudiate. This fiscal irresponsibility has been disguised through many manipulative financial schemes (causing poorer countries to lend us unprecedented sums of money), but the time of reckoning is fast approaching.

There are three broad aspects to the US debt crisis. First, in the current fiscal year (2008) we are spending insane amounts of money on “defence” projects that bear no relation to the national security of the US. We are also keeping the income tax burdens on the richest segment of the population at strikingly low levels.

Second, we continue to believe that we can compensate for the accelerating erosion of our base and our loss of jobs to foreign countries through massive military expenditures — “military Keynesianism” (which I discuss in detail in my book Nemesis: The Last Days of the American Republic). By that, I mean the mistaken belief that public policies focused on frequent wars, huge expenditures on weapons and munitions, and large standing armies can indefinitely sustain a wealthy capitalist economy. The opposite is actually true.

Third, in our devotion to militarism (despite our limited resources), we are failing to invest in our social infrastructure and other requirements for the long-term health of the US. These are what economists call opportunity costs, things not done because we spent our money on something else. Our public education system has deteriorated alarmingly. We have failed to provide health care to all our citizens and neglected our responsibilities as the world’s number one polluter. Most important, we have lost our competitiveness as a manufacturer for civilian needs, an infinitely more efficient use of scarce resources than arms manufacturing.

Fiscal disaster

It is virtually impossible to overstate the profligacy of what our government spends on the military. The Department of Defense’s planned expenditures for the fiscal year 2008 are larger than all other nations’ military budgets combined. The supplementary budget to pay for the current wars in Iraq and Afghanistan, not part of the official defence budget, is itself larger than the combined military budgets of Russia and China. Defence-related spending for fiscal 2008 will exceed $1 trillion for the first time in history. The US has become the largest single seller of arms and munitions to other nations on Earth. Leaving out President Bush’s two on-going wars, defence spending has doubled since the mid-1990s. The defence budget for fiscal 2008 is the largest since the second world war.

Before we try to break down and analyse this gargantuan sum, there is one important caveat. Figures on defence spending are notoriously unreliable. The numbers released by the Congressional Reference Service and the Congressional Budget Office do not agree with each other. Robert Higgs, senior fellow for political economy at the Independent Institute, says: “A well-founded rule of thumb is to take the Pentagon’s (always well publicised) basic budget total and double it” (1). Even a cursory reading of newspaper articles about the Department of Defense will turn up major differences in statistics about its expenses. Some 30-40% of the defence budget is “black”,” meaning that these sections contain hidden expenditures for classified projects. There is no possible way to know what they include or whether their total amounts are accurate.

There are many reasons for this budgetary sleight-of-hand — including a desire for secrecy on the part of the president, the secretary of defence, and the military-industrial complex — but the chief one is that members of Congress, who profit enormously from defence jobs and pork-barrel projects in their districts, have a political interest in supporting the Department of Defense. In 1996, in an attempt to bring accounting standards within the executive branch closer to those of the civilian economy, Congress passed the Federal Financial Management Improvement Act. It required all federal agencies to hire outside auditors to review their books and release the results to the public. Neither the Department of Defense, nor the Department of Homeland Security, has ever complied. Congress has complained, but not penalised either department for ignoring the law. All numbers released by the Pentagon should be regarded as suspect.

In discussing the fiscal 2008 defence budget, as released on 7 February 2007, I have been guided by two experienced and reliable analysts: William D Hartung of the New America Foundation’s Arms and Security Initiative (2) and Fred Kaplan, defence correspondent for Slate.org (3). They agree that the Department of Defense requested $481.4bn for salaries, operations (except in Iraq and Afghanistan), and equipment. They also agree on a figure of $141.7bn for the “supplemental” budget to fight the global war on terrorism — that is, the two on-going wars that the general public may think are actually covered by the basic Pentagon budget. The Department of Defense also asked for an extra $93.4bn to pay for hitherto unmentioned war costs in the remainder of 2007 and, most creatively, an additional “allowance” (a new term in defence budget documents) of $50bn to be charged to fiscal year 2009. This makes a total spending request by the Department of Defense of $766.5bn.

But there is much more. In an attempt to disguise the true size of the US military empire, the government has long hidden major military-related expenditures in departments other than Defense. For example, $23.4bn for the Department of Energy goes towards developing and maintaining nuclear warheads; and $25.3bn in the Department of State budget is spent on foreign military assistance (primarily for Israel, Saudi Arabia, Bahrain, Kuwait, Oman, Qatar, the United Arab Republic, Egypt and Pakistan). Another $1.03bn outside the official Department of Defense budget is now needed for recruitment and re-enlistment incentives for the overstretched US military, up from a mere $174m in 2003, when the war in Iraq began. The Department of Veterans Affairs currently gets at least $75.7bn, 50% of it for the long-term care of the most seriously injured among the 28,870 soldiers so far wounded in Iraq and 1,708 in Afghanistan. The amount is universally derided as inadequate. Another $46.4bn goes to the Department of Homeland Security.

Missing from this compilation is $1.9bn to the Department of Justice for the paramilitary activities of the FBI; $38.5bn to the Department of the Treasury for the Military Retirement Fund; $7.6bn for the military-related activities of the National Aeronautics and Space Administration; and well over $200bn in interest for past debt-financed defence outlays. This brings US spending for its military establishment during the current fiscal year, conservatively calculated, to at least $1.1 trillion.

Military Keynesianism

Such expenditures are not only morally obscene, they are fiscally unsustainable. Many neo-conservatives and poorly informed patriotic Americans believe that, even though our defence budget is huge, we can afford it because we are the richest country on Earth. That statement is no longer true. The world’s richest political entity, according to the CIA’s World Factbook, is the European Union. The EU’s 2006 GDP was estimated to be slightly larger than that of the US. Moreover, China’s 2006 GDP was only slightly smaller than that of the US, and Japan was the world’s fourth richest nation.

A more telling comparison that reveals just how much worse we’re doing can be found among the current accounts of various nations. The current account measures the net trade surplus or deficit of a country plus cross-border payments of interest, royalties, dividends, capital gains, foreign aid, and other income. In order for Japan to manufacture anything, it must import all required raw materials. Even after this incredible expense is met, it still has an $88bn per year trade surplus with the US and enjoys the world’s second highest current account balance (China is number one). The US is number 163 — last on the list, worse than countries such as Australia and the UK that also have large trade deficits. Its 2006 current account deficit was $811.5bn; second worst was Spain at $106.4bn. This is unsustainable.

It’s not just that our tastes for foreign goods, including imported oil, vastly exceed our ability to pay for them. We are financing them through massive borrowing. On 7 November 2007, the US Treasury announced that the national debt had breached _$9 trillion for the first time. This was just five weeks after Congress raised the “debt ceiling” to $9.815 trillion. If you begin in 1789, at the moment the constitution became the supreme law of the land, the debt accumulated by the federal government did not top $1 trillion until 1981. When George Bush became president in January 2001, it stood at approximately $5.7 trillion. Since then, it has increased by 45%. This huge debt can be largely explained by our defence expenditures.

The top spenders



Chart


The world’s top 10 military spenders and the approximate amounts each currently budgets for its military establishment are:

Our excessive military expenditures did not occur over just a few short years or simply because of the Bush administration’s policies. They have been going on for a very long time in accordance with a superficially plausible ideology, and have now become so entrenched in our democratic political system that they are starting to wreak havoc. This is military Keynesianism — the determination to maintain a permanent war economy and to treat military output as an ordinary economic product, even though it makes no contribution to either production or consumption.

This ideology goes back to the first years of the cold war. During the late 1940s, the US was haunted by economic anxieties. The great depression of the 1930s had been overcome only by the war production boom of the second world war. With peace and demobilisation, there was a pervasive fear that the depression would return. During 1949, alarmed by the Soviet Union’s detonation of an atomic bomb, the looming Communist victory in the Chinese civil war, a domestic recession, and the lowering of the Iron Curtain around the USSR’s European satellites, the US sought to draft basic strategy for the emerging cold war. The result was the militaristic National Security Council Report 68 (NSC-68) drafted under the supervision of Paul Nitze, then head of the Policy Planning Staff in the State Department. Dated 14 April 1950 and signed by President Harry S Truman on 30 September 1950, it laid out the basic public economic policies that the US pursues to the present day.

In its conclusions, NSC-68 asserted: “One of the most significant lessons of our World War II experience was that the American economy, when it operates at a level approaching full efficiency, can provide enormous resources for purposes other than civilian consumption while simultaneously providing a high standard of living” (4).

With this understanding, US strategists began to build up a massive munitions industry, both to counter the military might of the Soviet Union (which they consistently overstated) and also to maintain full employment, as well as ward off a possible return of the depression. The result was that, under Pentagon leadership, entire new industries were created to manufacture large aircraft, nuclear-powered submarines, nuclear warheads, intercontinental ballistic missiles, and surveillance and communications satellites. This led to what President Eisenhower warned against in his farewell address of 6 February 1961: “The conjunction of an immense military establishment and a large arms industry is new in the American experience” — the military-industrial complex.

By 1990 the value of the weapons, equipment and factories devoted to the Department of Defense was 83% of the value of all plants and equipment in US manufacturing. From 1947 to 1990, the combined US military budgets amounted to $8.7 trillion. Even though the Soviet Union no longer exists, US reliance on military Keynesianism has, if anything, ratcheted up, thanks to the massive vested interests that have become entrenched around the military establishment. Over time, a commitment to both guns and butter has proven an unstable configuration. Military industries crowd out the civilian economy and lead to severe economic weaknesses. Devotion to military Keynesianism is a form of slow economic suicide.

Higher spending, fewer jobs

On 1 May 2007, the Center for Economic and Policy Research of Washington, DC, released a study prepared by the economic and political forecasting company Global Insight on the long-term economic impact of increased military spending. Guided by economist Dean Baker, this research showed that, after an initial demand stimulus, by about the sixth year the effect of increased military spending turns negative. The US economy has had to cope with growing defence spending for more than 60 years. Baker found that, after 10 years of higher defence spending, there would be 464,000 fewer jobs than in a scenario that involved lower defence spending.

Baker concluded: “It is often believed that wars and military spending increases are good for the economy. In fact, most economic models show that military spending diverts resources from productive uses, such as consumption and investment, and ultimately slows economic growth and reduces employment” (5).

These are only some of the many deleterious effects of military Keynesianism.

It was believed that the US could afford both a massive military establishment and a high standard of living, and that it needed both to maintain full employment. But it did not work out that way. By the 1960s it was becoming apparent that turning over the nation’s largest manufacturing enterprises to the Department of Defense and producing goods without any investment or consumption value was starting to crowd out civilian economic activities. The historian Thomas E Woods Jr observes that, during the 1950s and 1960s, between one-third and two-thirds of all US research talent was siphoned off into the military sector (6). It is, of course, impossible to know what innovations never appeared as a result of this diversion of resources and brainpower into the service of the military, but it was during the 1960s that we first began to notice Japan was outpacing us in the design and quality of a range of consumer goods, including household electronics and automobiles.

Can we reverse the trend?

Nuclear weapons furnish a striking illustration of these anomalies. Between the 1940s and 1996, the US spent at least $5.8 trillion on the development, testing and construction of nuclear bombs. By 1967, the peak year of its nuclear stockpile, the US possessed some 32,500 deliverable atomic and hydrogen bombs, none of which, thankfully, was ever used. They perfectly illustrate the Keynesian principle that the government can provide make-work jobs to keep people employed. Nuclear weapons were not just America’s secret weapon, but also its secret economic weapon. As of 2006, we still had 9,960 of them. There is today no sane use for them, while the trillions spent on them could have been used to solve the problems of social security and health care, quality education and access to higher education for all, not to speak of the retention of highly-skilled jobs within the economy.

The pioneer in analysing what has been lost as a result of military Keynesianism was the late Seymour Melman (1917-2004), a professor of industrial engineering and operations research at Columbia University. His 1970 book, Pentagon Capitalism: The Political Economy of War, was a prescient analysis of the unintended consequences of the US preoccupation with its armed forces and their weaponry since the onset of the cold war. Melman wrote: “From 1946 to 1969, the United States government spent over $1,000bn on the military, more than half of this under the Kennedy and Johnson administrations — the period during which the [Pentagon-dominated] state management was established as a formal institution. This sum of staggering size (try to visualize a billion of something) does not express the cost of the military establishment to the nation as a whole. The true cost is measured by what has been foregone, by the accumulated deterioration in many facets of life, by the inability to alleviate human wretchedness of long duration.”

In an important exegesis on Melman’s relevance to the current American economic situation, Thomas Woods writes: “According to the US Department of Defense, during the four decades from 1947 through 1987 it used (in 1982 dollars) $7.62 trillion in capital resources. In 1985, the Department of Commerce estimated the value of the nation’s plant and equipment, and infrastructure, at just over _$7.29 trillion… The amount spent over that period could have doubled the American capital stock or modernized and replaced its existing stock” (7).

The fact that we did not modernise or replace our capital assets is one of the main reasons why, by the turn of the 21st century, our manufacturing base had all but evaporated. Machine tools, an industry on which Melman was an authority, are a particularly important symptom. In November 1968, a five-year inventory disclosed “that 64% of the metalworking machine tools used in US industry were 10 years old or older. The age of this industrial equipment (drills, lathes, etc.) marks the United States’ machine tool stock as the oldest among all major industrial nations, and it marks the continuation of a deterioration process that began with the end of the second world war. This deterioration at the base of the industrial system certifies to the continuous debilitating and depleting effect that the military use of capital and research and development talent has had on American industry.”

Nothing has been done since 1968 to reverse these trends and it shows today in our massive imports of equipment — from medical machines like _proton accelerators for radiological therapy (made primarily in Belgium, Germany, and Japan) to cars and trucks.

Our short tenure as the world’s lone superpower has come to an end. As Harvard economics professor Benjamin Friedman has written: “Again and again it has always been the world’s leading lending country that has been the premier country in terms of political influence, diplomatic influence and cultural influence. It’s no accident that we took over the role from the British at the same time that we took over the job of being the world’s leading lending country. Today we are no longer the world’s leading lending country. In fact we are now the world’s biggest debtor country, and we are continuing to wield influence on the basis of military prowess alone” (8).

Some of the damage can never be rectified. There are, however, some steps that the US urgently needs to take. These include reversing Bush’s 2001 and 2003 tax cuts for the wealthy, beginning to liquidate our global empire of over 800 military bases, cutting from the defence budget all projects that bear no relationship to national security and ceasing to use the defence budget as a Keynesian jobs programme.

If we do these things we have a chance of squeaking by. If we don’t, we face probable national insolvency and a long depression.