Giant Monsters

by Dmitry Orlov

ClubOrlov (November 23 2009)


A few years ago I bought a sailboat from a fellow who I am sure wishes to remain unnamed, but who at the time made much of his boat restoration skills. He had made a number of alterations to the boat, some ambitious, some less so, while I was, at the time, quite inexperienced. In spite of my relative inexperience, I was already able to discern certain imperfections in the results of the seller's efforts. But I was very impressed with the boat itself (and the boat did turn out to be quite excellent) and so I chose to gloss over these slight imperfections in the seller's workmanship.

For such a large man, the seller had a very soft and gentle tone of voice. He did disclose some things along the way that should have alarmed me. I believe that the reason they didn't was because his tone of voice had a calming, soothing effect on me. For instance, he could have said something like "I ran out of caulk while installing this thing, so I mounted it on a slice of cheese from my lunchbox" and I probably would have thought "Mmm ... cheese ... lunch?" Also, the boat had recently returned from an extended ocean cruise, and the seller looked quite alive to me, leading me to think that none of these imperfections was life-threatening. And so I bought the boat.

As I already mentioned, it turned out to be an excellent boat, but I turned out to be overly nonchalant about the non-life-threatening nature of the seller's workmanship. During our shakeout cruise most things that could break did break, causing me to question many of the seller's practices and techniques. Is it proper to cut pieces out of random structural elements with a reciprocating saw in order to make room for one's head? (Apparently the seller was one or two inches taller than the boat's designer had considered it to be humanly possible.) Is a piece of Masonite an acceptable substitute when the manufacturer specifies that a block of hardwood should be used to mount the autopilot? Is it sufficiently safety-conscious to seal a disconnected through-hull by plugging it with a rubber stopper from the inside? The good part in all this was that I, in the process of tackling these questions, along with a multitude of similar ones, one by one or in combination, sometimes in circumstances when I had my hands full just sailing the boat, gained immeasurably in knowledge and in confidence.

Although confronting these questions one by one, sometimes in challenging circumstances, was an excellent (though sometimes unnerving) way to learn, eventually I realized that there was an important first question that I ought to ask of each thing on the boat: "Did the seller do it?" If he did it, then the next question would be, "What does it take it to rip out and replace it?" If it is neither very hard nor very expensive, then that is automatically the next step. If it is, then the third question becomes, "What's wrong with it?" If answering this question turns out to involve ripping it out and replacing it, then so be it, but leaving a stone unturned would not be conducive to either peace of mind or safety, because, although there are now very few of them left, I am yet to find A Thing He Did that does not have major issues.

To be fair, the seller did do one very good thing: he kept afloat and sold to me a very good boat. Also, I can't fault him for trying to maintain a boat on a shoestring (I actually have immense respect for people who are able to do that well). Whatever he does, and however he does it, it clearly works for him. I see him leaping about the spindrift-covered deck in the midst of a howling tempest clutching a hammer and a screwdriver. Maybe he is happy, maybe he is sad, who knows ...

As Ralph Waldo Emerson put it, consistency is "the hobgoblin of little minds". I agree, but I would go a step further and ardently wish that each and every little mind had such a hobgoblin to call its own. If someone's work is consistently excellent, that is better than sporadically excellent work. Although much excellent work can be undone by a single reputation-destroying, career-ending blunder, short of that, sporadic excellence is better than none at all. But if someone's work is more often than not of an abysmally ghastly quality and in general a monstrous travesty, then consistency can still be its one redeeming quality. If it is consistent, then one knows what to do with it, all of it, at once, and not waste any time trying to cherry-pick salvageable exceptions where none might exist.

Allow me to present an example. Suppose you are wondering whether a particular public institution has any particular merit that would serve to justify its continued existence. It might be the health care system, or national defense, or the tax code, or any number of other similar boondoggles. We might consider each institution in and of itself, apart from all the others, to see whether it is consistently bad, or whether it has some redeeming qualities. Or we might save ourselves a lot of time by asking ourselves just one simple question: "Is it Bolshevik?" Because if it is Bolshevik, then that tells us right away that it is just one element of a perfectly monstrous entity called the USSR. This particular monstrous entity is already defunct, and so there is no need for us to go out and slay it, but were it not, we would know immediately that none of its institutions are in need of reform, because what would be the point? Making a perfect monster into an imperfect monster does not seem like a worthy goal.

Allow me to present another example. Currently in the USA we now live surrounded by institutions that many of us readily concede are quite broken, but it still takes most of us considerable effort to declare any of them irredeemable. It is natural for us to look for redeeming qualities, to think that a certain negative outcome is the result of a mistake rather than the fullest possible expression of its true nature. It takes time and effort to collect enough evidence to be able to declare, based on a preponderance of evidence, that what we have here is something perfectly monstrous, and then to be ready to debate people who hold opposing viewpoints. Few of us are equipped to handle the task of outright condemnation. There are some experts whose job it is to condemn buildings, to decommission vessels, and to sentence people to death, and they sometimes have to exercise judgment, but mostly they just follow rules. And when there are no rules to follow, we are all helpless.

This is where monsters come in handy: we all know what we must do to them. Like so many things that bedevil our lives, they have a notional rather than a physical reality, but in spite of that the effect they have on our lives can be quite real. Take corporations: the term "corporation" is actually a clever misnomer, because a corporation is, in fact, incorporeal - lacking a body. It has many of the same rights as a person, but in place of a body it has a "corporate veil" which, once pierced, usually reveals some cringing nincompoop who screwed up the paperwork and is now personally liable for his corporation's debts and transgressions. Since a corporation has personhood but lacks a body, it is, in a technically precise way, a phantom. Like other kinds of monsters, it is immortal, and very specific steps must be followed in order to kill it. Now, not all phantoms are monsters, but I hope you will agree that the potential is there.

Just like us, monsters must follow certain rules. Vampires must drink human blood and stay out of the sun. Werewolves must turn into wolves and start mauling people at the sight of the full moon. Zombies must eat brains. Corporations must produce high share prices and dividends for their shareholders. This last one seems comparatively innocuous, but it is sufficiently abstract to make the transition between mere immortal phantomhood and complete monstrousness quite automatic, because usually there are both monstrous and non-monstrous ways to create value for shareholders, and the monstrous ways are often more profitable in the short run. Some corporations may not seem particularly monstrous at the moment, but given their monstrous propensities we can never let down our guard.

Monsters require different treatment from most other things out there. We don't generally try to reform them. There is hardly a point in teaching a vampire good hygiene (rinse between meals, please!) or in muzzling a werewolf and clipping its claws, or in making zombies eat a balanced diet and observe Lent. Rather, we generally prefer to slay them. There are specific ways to kill various monsters. A vampire is dispatched by driving an aspen stake through its heart. Werewolves are shot with silver bullets. Zombies require a shotgun blast to the head. Corporations dissolve upon being doused with red ink, a bit like the Wicked Witch of the West.

Now, a question arises with regard to the USA: is it more of a country (like, say, France) or is it more of a corporation (like, say AIG or GM or GS)? Looking at its politics, it is apparent that it is more of a country club than a country. Corporations are clearly the ones in charge, through electoral campaign donations, lobbyists, and the revolving door between corporate and government positions. The periodic electoral monkey-business and fake media frenzy are just there as an ad campaign to keep the brand fresh. It does seem more and more like a corporate entity, with a small and shrinking number of shareholders, whose latest scheme (now that the whole thing is spiraling the drain) is to have the government print lots of money just so that they can pocket huge sums of it.

Just as a vampire must drink blood, the USA is compelled by its corporate nature to produce value for its shareholders, and the only way it can do so in a collapsing economy is by printing money. Monstrous, isn't it? So, how many more buckets of red ink will it take before we all get to hear "I'm dissolving! I'm dissolving!"? If you are not quite ready to hear that, then I recommend that you run home immediately, bar the door and get busy with the garlic and the crucifixes. Slaying monsters is not for everyone, you know.

http://cluborlov.blogspot.com/2009/11/giant-monsters.html


Bill Totten http://www.ashisuto.co.jp/english/index.html

The Medieval Machine

The Industrial Revolution of the Middle Ages

A book review by Danny Yee

dannyreviews.com (July 1993)


Economic history has a reputation for extreme dryness, and probably conjures up visions of statistical compilations in most people's minds. On the other hand works on the history of technology are few and far between. Jean Gimpel's The Medieval Machine (Pimlico 1992) is an unusual mixture of the two, being an extremely readable work aimed at a popular audience. It presents a potpourri of information about the technological successes and achievements of the Middle Ages, and should do much to correct the still stereotypical view of the Middle Ages as backward, superstition- ridden and technologically primitive. The basic thesis is that in the two centuries from around 1050 Western Europe went through a kind of industrial revolution that was as significant as that of the nineteenth century. (The evidence Gimpel presents is drawn largely from France and England, but Italy and Germany and to a lesser extent other countries also get a mention.) This is fitted into a thesis of wider scope, which I discuss at the end of this review.

The first three chapters deal with medieval "primary industry", with energy sources, agriculture and mining. The first chapter describes the crucial importance to the economy of different sources of energy: river, wind and tidal. Their most important use was in mills for grinding corn, but they were also used to drive machinery for many other purposes, including fulling cloth and pressing olives. The role of the Cistercian monasteries and the social factors leading to a more general acceptance of machines than in classical times are discussed. An interesting snippet is a brief history of the worlds first joint stock company - a French mill owners organisation formed in the late 14th Century that survived until nationalised after World War Two!

The next chapter looks at the agricultural revolution. The introduction of the modern harness (making horses more effective than oxen in plowing and pulling loads), the three year fallow system, the heavy wheeled plough and other innovations contributed to a large increase in food production. The effects of this on the diet and living standards of people were considerable, with records showing that students at a Paris school had diets that are almost impeccable when subjected to modern nutritional analysis. Another effect was a large population increase throughout the period. Gimpel is also concerned to demonstrate that medieval agriculture was to a large extent "scientific", with treatises on the subject being extremely popular.

Stone quarrying and iron were the most important mining industries in medieval Europe, but tin, lead and of course silver and gold were also very important. Again the Cistercian monasteries played a critical role. German miners attained a particular reputation for excellence and moved throughout Europe (this is reflected in the large proportion of words of German origin in mining vocabulary). The importance of mining was reflected in the prevalence of Crown rights over mineral wealth throughout much of Europe.

The next two chapters deal with the broader social aspects of medieval technology: one on environmental issues and one on working conditions in medieval industries. I was intrigued to discover that pollution and resulting concern about the quality of the environment are not modern phenomena - England had national anti-pollution laws as early as 1388! Working conditions differed drastically between industries: miners and mining communities were granted exceptional privileges while workers in the textile industry were under the tight control of financial and commercial interests, with working conditions foreshadowing those of the later industrial revolution. Working conditions in the building industry were better in the medieval period than in the seventeenth and eighteenth centuries, and strikes were not uncommon. Then there are chapters on two more specific aspects of medieval technology: one on the role of the great architect-engineers (focusing on Villard de Honnecourt) and their construction of the cathedrals that were the pinnacle of medieval achievement, and one on the development of the clock. The final chapter looks at medieval science and its relationship with medieval technology. Here Gimpel is concerned to point out that Leonardo and the other Renaissance humanists drew many of their ideas from earlier writers, who have got a bad press from history.

The general effect of all this is pretty convincing, but due to the selective and anecdotal nature of the account it is hard to tell what bias there may have been in the selection of facts. So I am a little wary about basing any generalisations on the content. However a more "objective" and statistically rigorous approach would certainly have detracted from the book's readability, so I can't really complain about this.

The last chapter is particularly controversial, as it is here Gimpel goes further and argues that the medieval "industrial revolution" was followed by a setback in the progress of technology. It is worrying that much of the evidence he presents in the other chapters for the forward-looking and progressive nature of medieval technology in fact dates to within the period he wants to describe as an "era of decay" (this can be seen by internal analysis - Gimpel isn't falsifying the evidence). It is also unclear how much bias there may have been in the selective use of statistical materials. The book contains many graphs showing wages, prices, and such-like varying in a fashion consistent with Gimpel's thesis, but perhaps there are others that could have been included that would have supported an alternative view.

If the final chapter is controversial, the meta-narrative (contained in the preface and the chapter-length epilogue) is even more adventurous (one might even say wildly speculative). Gimpel's central idea is that the modern United States is going through a similar cycle to medieval France and is now in process of decay. In so far as this is based on a theory of history as driven by two fundamental underlying properties of society (namely "technological evolution" and "psychological drive") and in so far as specific dates are given as the changeover points between phases, this seems massively oversimplistic to me. Some parts of the comparison, however, are quite interesting, and the bulk of the book can be read and appreciated even if one disagrees completely with the more general theory.

At any rate, while The Medieval Machine did manage to make me rethink my conception of medieval Europe, the most impressive thing about it was how much fun it was to read. I can heartily recommend it to anyone interested either in medieval history or in the history of technology, but it is the sort of book that will also be enjoyed by people who have no interest in either. As well as being clearly written, it is nicely illustrated with black and white photographs and makes good use of line drawings and graphs.

http://dannyreviews.com/h/The_Medieval_Machine.html

Bill Totten http://www.ashisuto.co.jp/english/index.html

How Relocalization Worked

The Archdruid Report (November 18 2009)

Druid perspectives on nature, culture, and the future of industrial society


One of the points that I've tried to make repeatedly in these essays is the place of history as a guide to what works. It's a point that deserves repetition. A good many worldsaving plans now in circulation, however new the rhetoric that surrounds them, simply rehash proposals that were tried in the past and failed repeatedly; trying them yet again may thus not be the best use of our limited resources and time.

Of course there's another side to history that's more hopeful: something that worked well in the past can be a useful guide to what might work well in the future. I'd like to spend a little time discussing one example of this, partly because it ties into the theme of the current series of posts - the abject failure of current economic notions, and the options for replacing them with ideas that actually make sense - and partly because it addresses one of the more popular topics in the ongoing peak oil discussion, the need for economic relocalization as the age of cheap abundant energy comes to an end.

That relocalization needs to happen, and will happen, is clear. Among other things, it's clear from history; when complex societies overshoot their resource bases and decline, one of the things that consistently happens is that centralized economic arrangements fall apart, long distance trade declines sharply, and the vast majority of what we now call consumer goods get made at home, or very close to home. Now of course that violates some of the conventional wisdom that governs economic decisions these days; centralized economic arrangements are thought to yield economies of scale that make them more profitable by definition than decentralized local arrangements.

When history conflicts with theory, though, it's not history that's wrong, so a second look at the conventional wisdom is in order. The economies of scale and resulting profits of centralized economic arrangements don't happen by themselves. They depend, among other things, on transportation infrastructure. This doesn't happen by itself, either; it happens because governments pay for it, for purposes of their own. The Roman roads that made the tightly integrated Roman economy possible, for example, and the interstate highway system that does the same thing for America, were not produced by entrepreneurs; they were created by central governments for military purposes. (The legislation that launched the interstate system in the US, for example, was pushed by the Department of Defense, which wrestled with transportation bottlenecks all through the Second World War.)

Government programs of this kind subsidize economic centralization. The same thing is true of other requirements for centralization - for example, the maintenance of public order, so that shipments of consumer goods can get from one side of the country to the other without being looted. Governments don't establish police forces and defend their borders for the purpose of allowing businesses to ship goods safely over long distances, but businesses profit mightily from these indirect subsidies nonetheless.

When civilizations come unglued, in turn, all these indirect subsidies for economic centralization go away. Roads are no longer maintained, harbors silt up, bandits infest the countryside, migrant nations invade and carve out chunks of territory for their own, and so on. Centralization stops being profitable, because the indirect subsidies that make it profitable aren't there any more.

Ugo Bardi has written a very readable summary of how this process unfolded in one of the best documented cases, the fall of the Roman Empire {*}. The end of Rome was a process of radical relocalization, and the result was the Middle Ages. The Roman Empire handled defense by putting huge linear fortifications along its frontiers; the Middle Ages replaced this with fortifications around every city and baronial hall. The Roman Empire was a political unity where decisions affecting every person within its borders were made by bureaucrats in Rome. Medieval Europe was the antithesis of this, a patchwork of independent feudal kingdoms the size of a Roman province, which were internally divided into self-governing fiefs, those into still smaller fiefs, and so on, to the point that a single village with a fortified manor house could be an autonomous political unit with its own laws and the recognized right to wage war on its neighbors.

{*} http://europe.theoildrum.com/node/5528

The same process of radical decentralization affected the economy as well. The Roman economy was just as centralized as the Roman polity; in major industries such as pottery, mass production at huge regional factories was the order of the day, and the products were shipped out via sea and land for anything up to a thousand miles to the end user. That came to a screeching halt when the roads weren't repaired any more, the Mediterranean became pirate heaven, and too many of the end users were getting dispossessed, and often dismembered as well, by invading Visigoths. The economic system that evolved to fill the void left by Rome's implosion was thus every bit as relocalized as a feudal barony, and for exactly the same reasons.

Here's how it worked. Each city - and "city" in this context means anything down to a town of a few thousand people - was an independent economic center; it might have a few industries of more than local fame, but most of its business consisted of manufacturing and selling things to its own citizens and the surrounding countryside. The manufacturing and selling was managed by guilds, which were cooperatives of master craftsmen. To get into a guild-run profession, you had to serve an apprenticeship, usually seven years, during which you got room and board in exchange for learning the craft and working for your master; you then became a journeyman, and worked for a master for wages, until you could produce your masterpiece - yes, that's where the word came from - which was an example of craftwork fine enough to convince the other masters to accept you as an equal. Then you became a master, with voting rights in the guild.

The guild had the legal responsibility under feudal municipal laws to establish minimum standards for the quality of goods, to regulate working hours and conditions, and to control prices. The economic theory of the time held that there was a "just price" for any good or service, usually the price that had been customary in the region since time out of mind, and the municipal authorities could be counted on to crack down on attempts to push prices above the just price unless there was some very pressing reason for it. Most forms of competition between masters were off limits; if you made your apprentices and journeymen work evenings and weekends to outproduce your competitors, for example, or sold goods below the just price, you'd get in trouble with the guild, and could be barred from doing business in the town. The only form of competition that was encouraged was to make and sell a superior product.

This was the secret weapon of the guild economy, and it helped drive an age of technical innovation. As Jean Gimpel showed conclusively in The Medieval Machine (1977), the stereotype of the Middle Ages as a period of technological stagnation is completely off the mark. Medieval craftsmen invented the clock, the cannon, and the movable-type printing press, perfected the magnetic compass and the water wheel, and made massive improvements in everything from shipbuilding and steelmaking to architecture and windmills, just for starters. The competition between masters and guilds for market share in a legal setting that made quality and innovation the only fields of combat wasn't the only force behind these transformations, to be sure - the medieval monastic system, which put a good fraction of intellectuals of both genders in settings where they could use their leisure for just about any purpose that could be chalked up to the greater glory of God, was also a potent factor - but it certainly played a massive role.

The guild system has nonetheless been a whipping boy for mainstream economists for a long time now. The person who started that fashion was none other than Adam Smith, whose The Wealth of Nations (1776) castigates the guilds of his time for what we'd now call antitrust violations. From within his own perspective, Smith had a point. The guilds were structured in a way that limited the total number of people who could work in any given business in any given town, and of course the just price principle kept prices from fluctuating along with supply and demand. Thus the prices paid for the goods or services produced by that business were higher, all things considered, than they would have been under the free market regime Smith advocated.

The problem with Smith's analysis is that there are crucial issues involved that he didn't address. He lived at a time when transportation was rapidly expanding, public order was more or less guaranteed, and the conditions for economic centralization were coming back into play. Thus the very different realities of limited, localized markets did not enter into his calculations. In the context of localized economics, a laissez-faire free market approach doesn't produce improved access to better and cheaper goods and services, as Smith argued it should; instead, it makes it impossible to produce many kinds of goods and services at all.

Let's take a specific example for the sake of clarity. A master blacksmith in a medieval town of 5000 people, say, was in no position to specialize in only one kind of ironwork. He might be better at fancy ironmongery than anyone else in town, for example, but most of the business that kept his shop open, his apprentices fed and clothed, and his journeymen paid was humbler stuff: nails, hinges, buckles, and the like. Most of this could be done by people with much less skill than our blacksmith; that's why he had his apprentices make nails while he sat upstairs at the table with the local abbot and discussed the ironwork for a dizzyingly complex new cutting-edge technology, just introduced from overseas, called a clock.

The fact that most of his business could be done by relatively unskilled labor, though, left our blacksmith vulnerable to competition. His shop, with its specialized tools and its staff of apprentices and journeymen, was expensive to maintain. If somebody else who could only make nails, hinges, and buckles could open a smithy next door, and offer goods at a lower price, our blacksmith could be driven out of business, since the specialized work that only he could do wouldn't be enough to pay his bills. The cut-rate blacksmith then becomes the only game in town - at least, until someone who limited his work to even cheaper products made at even lower costs cut into his profits. The resulting race to the bottom, in a small enough market, might end with nobody able to make a living as a blacksmith at all.

Thus in a restricted market where specialization is limited, a free market in which prices are set by supply and demand, and there are no barriers to entry, can make it impossible for many useful specialties to be economically viable at all. This is the problem that the guild system evolved to counter. By restricting the number of people who could enter any given trade, the guilds made sure that the income earned by master craftsmen was high enough to allow them to produce specialty products that were not needed in large enough quantities to provide a full time income. Since most of the money earned by a master craftsman was spent in the town and surrounding region - our blacksmith and his family would have needed bread from the baker, groceries from the grocer, meat from the butcher, and so on - the higher prices evened out; since nearly everyone in town was charging guild prices and earning guild incomes, no one was unfairly penalized.

Now of course the guild system did finally break down; by Adam Smith's time, the economic conditions that made it the best option were a matter of distant memory, and other arrangements were arguably better suited to the new reality of easy transport and renewed economies of scale. Still, it's interesting that in recent years, the same race to the bottom in which quality goods become unavailable and local communities suffer has taken place in nearly the same way in most of small-town America.

A torrent of cheap shoddy goods funneled through Wal-Mart and its ilk, in a close parallel to the cheap blacksmiths of the example, have driven local businesses out of existence and made the superior products and services once provided by those businesses effectively unavailable to a great many Americans. In theory, this produces a business environment that is more efficient and innovative; in practice, the efficiencies are by no means clear and the innovation seems mostly to involve the creation of ever more exotic and unstable financial instruments: not necessarily the sort of thing that our society is better off encouraging.

Advocates of relocalization in the age of peak oil may thus find it useful to keep the medieval example and its modern equivalent in mind while planning for the economics of the future. Relocalized communities must be economically viable or they will soon cease to exist, and while viable local communities will be possible in the future - just as they were in the Middle Ages - the steps that will be necessary to make them viable may require some serious rethinking of the habits that now shape our economic lives.

_____

John Michael Greer, The Grand Archdruid of the Ancient Order of Druids in America (AODA), has been active in the alternative spirituality movement for more than 25 years, and is the author of more than twenty books, including The Druidry Handbook (Weiser, 2006) and The Long Descent: A User's Guide to the End of the Industrial Age (New Society, 2008). He lives in Cumberland, Maryland.

http://thearchdruidreport.blogspot.com/2009/11/how-relocalization-worked.html


Bill Totten http://www.ashisuto.co.jp/english/index.html

Paid Lying

What Passes for Major Media Journalism

by Stephen Lendman

sjlendman.blogspot.com (November 09 2009)


Today's major media journalism is biased, irresponsible, sensationalist reporting that distorts, exaggerates or misstates the truth. It's misinformation or agitprop disinformation masquerading as fact to boost circulation, readership, viewers, or listeners, and on vital issues lie about or suppress uncomfortable truths to provide unqualified support for state and/or corporate interests - to the detriment of the greater good that's always sacrificed for profits and imperial aims.

As a result, major media sources produce a daily propaganda diet and what Project Censored calls "junk food news", and get most people to believe it. In their landmark book, Manufacturing Consent (1988), Edward Herman and Noam Chomsky explained the "propaganda model" that controls the public message by "filter(ing)" disturbing truths, "leaving (behind) only the cleansed residue fit to print" or air.

Today the media is in crisis and a free and open society at risk at a time fiction substitutes for fact, news is carefully controlled, dissent marginalized, and on-air and print journalists support powerful interests as paid liars, or what famed journalist George Seldes (1890 - 1995) called "prostitutes of the press".

As a result, imperial wars are called liberating ones. Civil liberties are suppressed for our own good. Major topics go unaddressed or are misrepresented. Government and business interests are endorsed wholeheartedly. America is always called "beautiful". Beneficial social change is considered heresy. The market works best, we're told, so let it, and patriotism means supporting lawlessness and corporate outlaws by shopping till we drop.

The New York Times - Its Lead Role in Distorting and Suppressing Truth

For many decades, The Times has been the closest thing in America to an official ministry of information and propaganda masquerading as real news, commentary and analysis.

Its unmatched clout once got media critic Norman Solomon to call its front page "the most valuable square inches of media real estate in the USA"; most everywhere, in fact, because its reports are widely circulated and followed globally.

The Paper of Record has a long history of:

-- supporting the powerful;

-- backing corporate interests;

-- endorsing imperial wars;

-- supporting CIA efforts to topple elected governments, assassinate independent leaders, prop up friendly dictators, secretly fund and train paramilitary death squads, practice sophisticated forms of torture, and menace democratic freedoms at home and abroad. For decades, in fact, some Times' foreign correspondents were covert Agency assets. Others today likely are as well as other prominent fourth estate members.

The Times management is also comfortable with:

-- Washington and corporate lawlessness;

-- an unprecedented and growing wealth gap;

-- Wall Street banksters looting the federal treasury;

-- a private banking cartel controlling the nation's money;

-- unmet human needs and increasing poverty, hunger, homelessness, and despair for growing millions in a nation run by rogue politicians who don't give a damn as long as they're re-elected;

-- a de facto one-party state;

-- deep corruption at the highest government and corporate levels;

-- democracy for the select few alone;

-- sham elections; and

-- a deepening social decay symptomatic of a declining state, yet The Times management won't use its clout to expose and help reverse it.

Of course, the same applies throughout the corporate media, the only variance being audience size, the ability to influence it, and the special impact of TV news and talk radio to arouse their faithful. Plus their power of round-the-clock persuasive repetition.

Examples of Journalism, New York Times Style

After a Washington staged February 29 2004 middle-of-the-night coup ousted democratically elected Haitian president Jean-Bertrand Aristide, The Times March 1 editorial lied by:

-- stating he resigned;

-- saying sending in Marines to abduct him "was the right thing to do";

-- claiming they only came after "Mr Aristide yielded power";

-- blaming him for "contribut(ing) significantly to his own downfall (because of his) increasingly autocratic and lawless rule ..."; and

-- accusing him of manipulating the 2000 legislative elections and not "deliver(ing) the democracy he promised".

In fact, he's a beloved democrat first elected in 1990 with 67% of the vote, ousted by a US-supported coup months later, returned to Haiti in 1994, then, because he couldn't succeed himself in 1996, ran in 2000 and was overwhelmingly re-elected with 92% of the vote. Today in exile, the great majority of Haitians want him back but paramilitary occupiers, under orders from Washington, won't let him.


Following Hugo Chavez's December 1998 election, The Times Latin American reporter, Larry Roher, wrote:

Regional "presidents and party leaders are looking over their shoulders (concerned about the) specter (they) thought they had safely interred: that of the populist demagogue, the authoritarian man on horseback known as the caudillo (strongman)" taking power.

Ever since, Times writers consistently:

-- turned a blind eye to Venezuelan democracy;

-- bashed Chavez as "divisive, a ruinous demagogue, provocative (and) the next Fidel Castro";

-- said he "militarized the government, emasculated the country's courts, intimidated the media, eroded confidence in the economy, and hollowed out Venezuela's once-democratic institutions": common conditions during decades of pre-Chavez rule that columnist Roger Lowenstein falsely said exist now in:

-- calling him anti-capitalist for sharing his nation's oil wealth with the people by providing essential social services, and for lifting the most needy out of poverty; and

-- denouncing his making foreign investors pay their fair share.

Lowenstein backed the aborted April 2002 coup by calling Chavez's ouster a "resignation", then saying Venezuela "no longer (would be) threatened by a would-be dictator".


After 9/11, the Times played the lead role in taking the nation to war by highlighting the "day of terror" and saying the "President Vows to Exact Punishment for 'Evil' ".

In the run-up to the Iraq war, Judith Miller was a weapon of mass deception with her daily front page Pentagon press release columns masquerading as real news, later exposed as manipulative lies, but they worked.


Following the September 15 2009 Goldstone Commission report, a same day Neil MacFarquhar column suggested that Israel's "disproportionate attack" followed Hamas provocations, so perhaps it was justified. While The Times gave Judge Goldstone op-ed space, it:

-- published scathing letters denouncing his "one-sidedness" and a September 18 piece saying "the Obama administration said (today) that a United Nations report accusing Israel of war crimes in Gaza was unfair to Israel and did not take adequate account of 'deplorable' actions by the militant group Hamas in the conflict last winter".

The paper then imposed a near-blackout on its news and editorial pages to bury the story and kill it through silence - never mind its importance in documenting clear evidence of Israeli war crimes against a civilian population.

National Public Radio (NPR) and Public Broadcasting (PBS)

Founded in 1970 as an independent, private, non-profit member organization of US public radio stations, NPR promised to be an alternative to commercial broadcasters by "promot(ing) personal growth rather than corporate gain (and) speak with many voices, many dialects".

Having long ago abandoned its promise, and given its substantial corporate and government funding, NPR is indistinguishable from the rest of the corporate media, just as corrupted, and consider its former head, Kevin Klose.

He was president from December 1998 to September 2008 and CEO from 1998 to January 2009. Earlier he was US propaganda director as head of the Voice of America (VOA), Radio Liberty, Radio Free Europe, Radio Free Asia, Worldnet Television, and the anti-Castro Radio/TV Marti, so he fit easily into his new role.

On January 5 2009 Vivian Schiller succeeded him as president and CEO. Her official biography says she was previously with "The New York Times Company where she served as Senior Vice President and General Manager of NYTimes.com".

She'll oversee "all NPR operations and initiatives, including the organization's critical partnerships with our 800+ member stations, and their service to the more than 26 million people who listen to NPR programming every week". Most don't know they're getting the same corporate propaganda and "junk food news" or that NPR calls itself "public" to conceal its real agenda, and why critics call it "National Pentagon or Petroleum Radio" with good reason.

Created by the Public Broadcasting Act of 1967, the Corporation for Public Broadcasting (CPB) calls itself "a private, nonprofit corporation created by Congress ... and is the steward of the federal government's investment in public broadcasting. It helps support the operations of more than 1,100 locally owned and operated public television and radio stations nationwide, and is the largest single source of funding for research, technology, and program development for public radio, television and related online services."

Like NPR, it's heavily corporate and government funded and provides similar services for them. Under George Bush, former Voice of America director Kenneth Tomlinson was chairman of CPB's Board of Governors until an internal 2005 investigation forced him out for repeatedly breaking the law.

On September 16 2009, a CPB press release announced that "The board of directors (of the CPB) today elected Dr Ernest Wilson III (as) chairman and re-elected ... CEO Beth Courtney (as) vice-chair".

Wilson previously held senior policy positions as Director of International Programs and Resources on the National Security Council. He was also Policy and Planning Unit Director for the US Information Agency and a member of the Council on Foreign Relations (CFR).

Beth Courtney is a George Bush appointee, a past chairman of the board of America's Public Television Stations and present CPB vice chairman. Currently she also serves on the boards of Satellite Educational Resources Consortium, the Organization of State Broadcasting Executives, the National Forum for Public Television Executives, and the National Educational Telecommunications Association along with other appropriate credentials for her re-appointment.

In its May/June 2004 "Extra" report, FAIR (Fairness & Accuracy in Reporting) asked "How Public Is Public Radio? Writers Steve Rendall and Daniel Butterworth quoted past head Kevin Klose saying:

"All of us believe our goal is to serve the entire democracy, the entire country".

Not according to FAIR on "every on-air source quoted in June 2003 on four of (NPR's) news shows: All Things Considered, Morning Edition, Weekend Edition Saturday and Weekend Edition Sunday". Each guest was classified "by occupation, gender, nationality, and partisan affiliation". Combined, 2,334 sources from 804 stories were quoted.

FAIR found that NPR relies on the same dominant sources as the major media that include government officials, professional experts, and corporate representatives nearly two-thirds of the time.

Spokespeople for public interest groups accounted for seven percent of total sources, and ordinary people appeared mostly in "one-sentence soundbites".

Male guests outnumbered women about four to one, and those women quoted most often came from the same elite categories as men.

Overall, NPR represents the same dominant interests as the major commercial media - conservative, pro-business, pro-war, pro-Israel, and very much against the public interest while pretending to support it.

FAIR analyzed PBS's flagship NewsHour guest list and drew similar conclusions. Like NPR, it's ideologically right and usually censors progressive content and public interest programming. In a 1990 NewsHour evaluation, FAIR compared its content to ABC's Nightline and found that it presented "an even narrower segment of the political spectrum". It then conducted an October 2005 to March 2006 analysis of all of its programs, got similar results, and determined that NewsHour is even more ideologically right than NPR that tilts far in that direction itself.

FAIR concluded that NPR and NewsHour content "overwhelmingly represent those in power rather than the public" they're obliged to serve. While masquerading as public programming, they betray their listeners and viewers by offering the same propaganda and "junk food news" as the dominant corporate media. Considering their funding sources, what else would they do.

An October 6 NPR story is typical of most others. It charged Hugo Chavez with "Targeting Opponents For Arrest". Reporter Juan Forero claimed "dozens of university students" went on hunger strike outside OAS headquarters in Caracas on September 28 along with others "across the country ... in support of Julio Cesar Rivas, a student who was arrested during an anti-government demonstration in August ..."

Rivas is the coordinator and founder of Juventud Activa de Venezuela Unida (United Active Youth of Venezuela - JAVU). Earlier, he was part of a staged, violent street protest against Venezuela's new Education Law. The government says JAVU acts as "shock troops" in opposition protests and is liberally funded by the National Endowment of Democracy (NED), International Republican Institute (IRI), and US Agency or International Development (USAID) to disrupt internal Venezuelan affairs. It's a familiar scheme, repeated numerous times in the past, to discredit and disrupt the Chavez government in hopes of eventually ousting it.

JAVU has about 80,000 members in most Venezuelan states, and its blog site calls for bringing down the government and supporting the Honduran military coup.

Rivas was released on September 29, but must appear for trial. He's a Washington-funded provocateur, charged with resisting arrest, instigating crime, conspiracy, inciting rebellion, damaging public property, and using "generic" weapons.

While in custody, Venezuela Public Defender Gabriela Ramirez assured him in person that his full constitutional rights will be protected. Street protests still continue and have been countered by pro-Chavez ones calling for "peace and tolerance". According to the Federation of Bolivarian students' Carlos Sierra:

Opposition "students are being used and manipulated by the top leadership of the irrational opposition, which, via the (dominant) media, send them to generate violence and terrorism in the country" much like on previous occasions.

But according to NPR's Forero, Rivas was "sent to one of Venezuela's most infamous prisons" where other government opponents are held as political prisoners. Chavez "has been jailing dozens of key opponents - some of them students, some of them veteran politicians" in citing unnamed "human rights groups and constitutional experts (claiming) Venezuela is increasingly singling out and imprisoning its foes in politically motivated witch hunts".

Forero didn't mention that Rivas fomented violence. Others arrested also broke the law. No one is a political prisoner, and all Venezuelans get fair and equitable trials, unlike in America where real political arrests, prosecutions and convictions happen regularly against innocent targeted victims - a topic NPR and PBS won't touch except to vilify them publicly on-air.

Nor do they report truthfully on Occupied Palestine. On October 12 2009, on NPR's Morning Edition, reporter Renee Montagne practically extolled Israeli racism in stating:

"There is a new enemy for some Israelis: romance between Jewish women and Arab men, (so) vigilantes have banded together to fight it". She means from "Jewish settlements" that "have sprung up (in) traditionally Arab" East Jerusalem, but won't admit they're on stolen Palestinian land.

NPR's Sheera Frankel joined a patrol, implied Arabs are inferior to Jews, and suggested they pose a danger to Jewish women and girls. She described vigilantes on the lookout for "Arab-Jewish couples (to) break up their dates", suggesting it's the right thing to do, but never questioning the legitimacy of settlements, vigilante violence in East Jerusalem, its lawless disregard for the law, or great harm to innocent people. Instead she called "mixed couples a growing epidemic" of miscegenation - typical of NPR's racism and one-sided support for Israel.

The Wall Street Journal (WSJ)

The WSJ is Dow Jones & Company's flagship publication, now a News Corporation one since Rupert Murdoch bought it in August 2007. Stating its ideology up front, it says it supports "free markets and free people" as well as "free trade and sound money; against confiscatory taxation and the ukases (edicts) of kings and other collectivists; and for individual autonomy against dictators, bullies and even the tempers of momentary majorities".

In October 2007, FAIR bemoaned the Murdock takeover because of his "penchant for using his holdings as vehicles for his personal (views) and business interests". Earlier FAIR and the Columbia Journalism Review criticized its editorial page for inaccuracy, extreme bias, and dishonesty.

The Journal is unapologetic in saying its philosophy "make(s) no pretense of walking down the middle of the road. Our comments and interpretations are made from a definite point of view ... We oppose all infringements on individual rights, whether (from) private monopoly, labor union monopoly or from an overgrowing government. (We're) not much interested in labels but if we were to choose one, we would say we are radical."

Radical can be revolutionary and beneficial when it backs fundamental progressive change and reform. Webster defines it as:

"marked by a considerable departure from the usual and traditional: extreme; tending or disposed to make extreme changes in existing views, habits, conditions, or institutions; of, relating to, or constituting a political (or perhaps business) group associated with views, practices, and policies of extreme change; (or) advocating extreme measures to retain or restore a political state of affairs" such the radical right represented by the WSJ's management and editorial writers.

Critics agree that they're on the far right extremist fringe, a supporter of voodoo economics, tax cuts for the rich, a staunch defender of executive privilege, and disdainful of anything to the left of their views as witnessed daily by some of the most outlandish, one-sided, pro-business commentaries countenancing no alternatives, with the rarest of rare exceptions showing up to make the paper look fair, which it's not.

Consider editorial board member Mary O'Grady in her weekly Americas column on "politics, economics and business in Latin America and Canada". Her extremism is unmatched. Her style is agitprop; her space a truth-free zone; her language hateful and vindictive; her tone malicious and slanderous; her style bare-knuckled thuggishness; and her material calculating, mendacious, and shameless. Yet she's a WSJ regular and an award-winning op-ed writer, but surely no journalist according to Webster's definition:

"writing characterized by a direct presentation of facts or description of events without an attempt at interpretation".

O'Grady fails on both counts. She's a kind of print version of Fox News' Glenn Beck, who promotes himself on glennbeck.com looking arrogant in a uniform reminiscent of the Nazi SS.

Consider O'Grady's support for the Washington-backed June 28 Honduran coup ousting a democratically elected president. It was followed by months of mass arrests, disappearances, killings, targeting the independent media, suspending the Constitution, declaring martial law, and threatening the Brazilian embassy's sovereignty where President Manuel Zelaya took refuge after returning.

In one of her many pro-coup articles, O'Grady (on July 13) headlined "Why Honduras Sent Zelaya Away". In a "perfect world", according to her, he "would be in jail in his own country right now, awaiting trial. The Honduran attorney general (part of the coup regime) has charged him with deliberately violating Honduran law and the Supreme Court (stacked with pro-coup justices) ordered his arrest in Tegucigalpa on June 28", the day of the coup.

"But the Honduran military whisked him out of the country, to Costa Rica", to save itself the embarrassment of jailing a democratically elected leader whose lawful actions were endorsed by the majority of Hondurans wanting progressive constitutional change and a president willing to give it to them.

Yet according to O'Grady, "Mr Zelaya's detention was legal, as was his official removal from office by Congress ... Besides eagerly trampling the constitution, Mr Zelaya had demonstrated that he was ready to employ the violent tactics of 'chavismo' to hang onto power. The decision to pack him off immediately was taken in the interest of protecting both constitutional order and human life."

In fact, Zelaya neither espoused or practiced violence, and his call for a public June 28 vote on whether to hold a referendum for a new Constitutional Convention at the same time as the November elections lawfully asked for a "yes" or "no" on one question:

"Do you think that the November 2009 general elections should include a fourth ballot box (the other three were for candidates) in order to make a decision about the creation of a National Constitutional Assembly that would approve a new Constitution?"

According to Article 5 of the 2006 Honduran "Civil Participation Act", government officials may hold non-binding inquiries (referenda) to determine popular support for proposed measures. Gauging sentiment for a National Constituent Assembly for a new Constitution is legal.

Yet in her June 28 article titled, "Honduras Defends Its Democracy", O'Grady falsely claimed Zelaya planned "a constitutional rewrite (following) a national referendum" only the Congress can approve. In fact, Zelaya called for a vote to assess public sentiment, pro or con, on whether Hondurans want a Constitutional Convention, an act no different from a public opinion poll that's perfectly legal or should be anywhere. But according to O'Grady, Zelaya "decided he would run the referendum himself". It's typical O'Grady truth reversal that earns her weekly space on the WSJ's op-ed page.

The BBC's Long Tradition As An Imperial Tool

State-owned and funded, it's tradition is long, unbroken, and disturbing as the world's largest and most influential broadcaster reaching global audiences in 32 languages. From inception in 1925, it's been reliably pro-government and pro-business, or as its founder Lord Reith wrote the establishment: "They know they can trust us not to be really impartial". Neither he or his successors disappointed on topics mattering most, including war and peace, corporate crimes, US-UK duplicity, labor rights, democratic freedoms, human and civil rights, social justice, and Western imperialism.

They're consistently distorted, suppressed, marginalized or ignored throughout decades of misreporting despite claiming "honesty (and) integrity (is) what the BBC stands for (because it's) free from political influence and commercial pressure".

As a propaganda service, its record is uncompromisingly anti-union, pro-business, and dependably safe for Whitehall and its allies. It moralizes Western aggression, bashes independent democratic leaders, and cheerleads for the powerful at the expense of providing real news and information for millions believing BBC is credible. For over eight decades, it's record is solid and predictable - betraying the public trust to reliably serve the powerful. The tradition continues.

Prominent TV Demagogues

Among the many, consider a select few. For example, CNN's Lou Dobbs, "Mr Independent" he calls himself. Critics use more descriptive terms, yet according to his loudobbs.tv.cnn.com bio:

He's "anchor and managing editor of CNN's Lou Dobbs Tonight (and also anchor of) a nationally syndicated financial news radio report, The Lou Dobbs Financial Report ..." In addition, he writes a weekly CNN.com commentary, is an author and award-winning "journalist", most recently in 2005 when "the National Academy of Television Arts and Sciences awarded (him) the Emmy for Lifetime Achievement" for serving the usual special interests nightly on prime time TV.

In June 2004, he also won "the Eugene Katz Award for Excellence in the Coverage of Immigration from the Center for Immigration Studies for his ongoing series 'Broken Borders', which examines US policy towards illegal immigration". Little wonder in an August 2006 article, this writer called him CNN's Vice President of Racism. He's also a paid liar and in America wins awards.

In May 2008, a Media Matters Action Network report titled, "Fear & Loathing in Prime Time: Immigration Myths and Cable News" highlighted undocumented Latino hatemongering by Dobbs, Bill O'Reilly, and Glenn Beck, each claiming:

-- an alleged connection between undocumented Latinos and crime; in fact, clear evidence shows they're no more likely to break laws than American citizens;

-- how they exploit social services and don't pay taxes; in fact, undocumented immigrants are ineligible, without proof of legal status, for Medicaid, food stamps, State Children's Health Insurance (SCHIP) and welfare; they do pay income, payroll, property, sales and other taxes and are entitled to public education; according to the National Academy of Sciences, immigrants provide a net annual gain of up to $10 billion to US GDP; according to Rand Corporation economist James P Smith, the "net present value of the gains from those immigrants who arrived since 1980 would be $333 billion".

-- the "reconquista" myth about a supposed Mexican plot to take over the US Southwest; and

-- an epidemic of Latino voter fraud that, according to Dobbs' incessant drumbeat, puts America's "democracy absolutely in jeopardy".

He also propagates the myth that undocumented Latinos caused an increase in US leprosy (or Hansen's disease). In an on-air April 2005 report (among others), correspondent Christine Romans quoted "medical lawyer" Dr Madeleine Cosman saying:

"We have some enormous problems with horrendous diseases that are being brought into America by illegal aliens (including) leprosy ..." Romans added that, according to Cosman, "there were about 900 (US) cases of leprosy for forty years. There have been 7,000 in the past three years."

According to a May 2007 60 Minutes report, the National Hansen's Disease Program (NHDP) of the Department of Health and Human Services (HHS) reported that "7,000 is the number of leprosy cases over the last thirty years, not the past three, and nobody knows how many of those cases involve illegal immigrants". NHDP added that from 2002 to 2005 (the timeline of Cosman's claim), only 398 cases occurred. To that, Dobbs responded: "If we reported it, it's a fact".

Founded in 1971, the Southern Poverty Law Center (SPLC) is internationally known for its activism against hate groups and scoring legal victories against white supremacists. It says Dobbs regularly features inaccurate racist reports and features anti-immigrant hatemongers like:

-- Glenn Spencer, head of the anti-immigration American Patrol, whose web site highlights anti-Mexican vitriol and the idea that Mexico plans a secret takeover of the Southwest;

-- Joe McCutchen, head of the anti-immigration Protect Arkansas Now group, that Dobbs calls "a terrific group of concerned, caring Americans";

-- Paul Streitz, co-founder of Connecticut Citizens for Immigration Control, who once denounced Mayor John DeStefano, Junior for "turning New Haven into a banana republic";

-- Barbara Coe, leader of the California Coalition for Immigration Reform who routinely calls Mexicans "savages"; and

-- Chris Simcox, co-founder of the Minuteman Project and a leading anti-immigration figure.

SPLC explains that Dobbs "doggedly explores and supports the anti- immigration movement (and) won't report salient negative facts about anti- immigration leaders he approves of ..."

Instead, he falsely claims that:

-- "just about a third of the prison population in this country is estimated to be illegal aliens";

-- states have been "overwhelmed by criminal illegal aliens"; and

-- US borders are "unprotected" allowing "criminal illegal aliens (to) murder police officers".

In 2007 alone, the connection between illegal immigration and crime was discussed on 94 episodes of Lou Dobbs Tonight, and dozens more focused on an "army of invaders", immigrants not paying taxes, draining social services, and threatening our white Anglo-Saxon culture.

CNN reporters Casey Wian, Bill Tucker, Kitty Pilgrim and others present a steady diet of subtle and overt racism to incite viewers to believe it. Through constant repetition, it propagates the myth, and according to the Media Matters Action Network report:

Dobbs "is hailed by the entire spectrum of immigration opponents, from the reasonable to the unreasonable. And the degree to which extremist elements see (him) as an ally indicates at the very least that they believe he is helping their cause" because they feel he's a populist crusader.

Yet according to a July 30 New York Observer report, recent Nielsen data showed that after Dobbs began reporting (on July 15) that Barack Obama's birth certificate was fraudulent (an apparent stunt to increase ratings), his viewership dropped significantly - fifteen percent overall and 27% in the valued 25 - 54 age category.

Fox News Channel (FNC)

When it debuted in 1996, one of its on-air hosts said:

The "Channel was launched (because) something was wrong with news media ... somewhere bias found its way into reporting ... Fox ... is committed to being fair and balanced (covering) stories everybody is reporting - and ... stories ... you will see only on Fox".

Later the Columbia Journalism Review said several former Fox employees "complained of 'management sticking their fingers' in the writing and editing stories to cook the facts to make a story more palatable to right-of-center tastes". But it hasn't hurt ratings.

As of the First Quarter of 2009, Fox News Channel was the second highest rated cable channel in prime time total viewers. CNN ranked 17th and MSNBC 24th. The O'Reilly Factor has been Number One rated on cable news for 100 consecutive months and gained 27% more viewers year-over-year. Glenn Beck increased ninety percent over the previous year. Overall, Fox News Channel topped CNN and MSNBC combined in prime time total audience.

Fairness & Accuracy in Reporting (FAIR) said "Fox's signature political news show, Special Report with Brit Hume (now with Bret Baier) was originally created as a daily one-hour update devoted to the 1998 Clinton sex scandal". In the past year, it gained 39% more viewers.

As for accuracy and being "fair and balanced", FAIR (in summer 2001) called Fox News Channel "The Most Biased Name in News", yet according to Murdoch in March 2001:

"I challenge anybody to show me an example of bias in Fox News Channel".

In FAIR's Seth Ackerman article and later ones, Fox News Channel's blatant manipulation of the news is exposed. For example, Bret Baier's "Political Grapevine" is a right-wing "hot sheet" featuring a "series of gossipy items culled from other right-wing" sources. It and other reports are blatantly partisan propaganda against "liberal media bias", progressives, environmentalists, anti-war activists, civil rights groups, and others to the left of their views.

According to FAIR, the commentary on political punditry programs like The O'Reilly Factor, the Sean Hannity Show, and The Beltway Boys is so slanted that it's like watching "a Harlem Globetrotters game (knowing) which side is supposed to win".

Fox News Channel's Bill O'Reilly

His official bio calls The O'Reilly Factor "a unique blend of news analysis and hard hitting investigative reporting dropped each weeknight into 'The No Spin Zone". He also hosts a syndicated radio show, writes a weekly column carried in over 300 newspapers, and authored several books that according to New York Times writer Janet Maslin were "either (done) with a collaborator or (O'Reilly) was born with a ghostwriter's gift for filling space with platitudes ..." With good reason, Maslin called him "one of the most controversial human beings in the world ..."

In an October 2008 report titled "Smearcasting", FAIR called him an "Islamophobe" for spreading "fear, bigotry and misinformation" along with eleven other popular figures, including Glenn Beck, Sean Hannity, Michelle Malkin (another Fox News Channel regular), David Horowitz, and Pat Robertson.

After 9/11, FAIR said O'Reilly proposed attacking a list of Muslim countries "if they did not submit to the US - starting with Afghanistan".

On air he said:

"The US should bomb the Afghan infrastructure to rubble - the airport, the power plants, their water facilities and the roads ... If they don't rise up against this primitive country, they starve, period".

Iraq must also be destroyed he said, and "the population made to endure yet another round of intense pain". As for Libya, "Nothing goes in, nothing goes out ... Let them eat sand".

FAIR called his penchant for attacking Muslim countries "an O'Reilly trademark", and "his disregard for Muslim civilians is matched by the anti-Muslim sentiments he frequently expresses on both his nationally syndicated radio show, the Radio Factor", reaching 3.5 million listeners, and his top-rated Fox News Channel show.

Some of his hateful comments include saying:

-- areas of London are "just packed with just dense Muslim neighborhoods, which breed this kind of contempt for Western society. Why do they let them in";

-- "We're at war with Muslim fanatics. So all young Muslims should be subject to (special) scrutiny, (saying it's not racial, just) "criminal profiling";

-- "the most unattractive women in the world are probably in Muslim countries"; and

-- in Iraq, he blamed killing on Islam: "They're all Muslims, and they're doing what they do. They're killing each other. And they're killing Americans."

O'Reilly is equally racist about Latino immigrants with frequent comments like:

"The extreme elements in this country want open borders, blanket amnesty, and entitlement for foreign nationals who have come here illegally, and generally want to change the demographics in the USA so political power can be assumed by the left. That is the end game". He also argues that "Low-skilled immigrant labor costs the taxpayers today $19,000 to (subsidize) people who are using the hospitals (and) the education system ... These are rock-solid stats", but O'Reilly won't say from where.

They're blatantly false and may be from a May 2007 Robert Rector / Christine Kim (right-wing think tank) Heritage Foundation paper titled, "The Fiscal Cost of Low-Skill Immigrants to State and Local Taxpayers".

O'Reilly spreads daily misinformation, innuendo, and hateful demagoguery to millions of his daily faithful. Like the others above, they're paid liars delivering what passes for today's major media journalism. It's why so much of the public is misinformed and the reason more hate groups than ever proliferate.

According to the Southern Poverty Law Center (SPLC), they numbered 926 in 2008, up from 602 in 2000 and are "animated by the national immigration debate". Since Obama took office, they're also driven by their hatred of a black president, exacerbated by a growing economic crisis that's easy to blame on the undocumented and a non-white head of state.

These groups are ideologically vicious and extremely dangerous when motivated by racist right-wing media commentators reaching far larger audiences than more saner voices drowned out. It's more evidence of social decay and the urgent need for change.

The Right-Wing Media Attack ACORN

Founded in 1970, ACORN (Association of Community Organizations for Reform Now) "is the nation's largest grassroots community organization of low and moderate income people with over 400,000 member families organized into more than 1,200 neighborhood chapters in about 75 cities across the country".

As the nation's preeminent community organizing group, it backs a living wage, opposes predatory lending and foreclosures, supports affordable housing, better public schools, welfare reform, voting rights, rebuilding New Orleans, and other social and economic justice issues.

For many months as a result, right-wing extremists have tried to discredit its successes online and through the media. Led by Fox News, Lou Dobbs, and others, it's accused of financial corruption, massive voter fraud, and other indiscretions, mostly fabricated to destroy the group's credibility, cut off its funding, and harm other community organizing efforts. However, compared to corporate fraud and abuse scandals, ACORN's occasional missteps are minor, insignificant, and undeserving of inflammatory media headlines.

Nonetheless recent news stories featured false accusations that ACORN engages in prostitution nationwide. The supposed evidence came from two right-wing filmmakers (Hannah Giles and James O'Keefe) posing as prostitute and pimp, conveniently videotaped for airing. In prime time especially, Fox News, Lou Dobbs and others featured it nightly.

On September 14, Dobbs reported "another pimp and prostitute scandal at the left-wing activist organization ACORN. For the third time, ACORN workers for the left-wing advocacy group (got) caught on hidden camera breaking the law. Now calls from Congress to investigate and cut off public funding are growing."

According to Fox News Bill O'Reilly, "With more than thirty criminal 'convictions' on its resume, the organization cannot be trusted". Based on no credible evidence, other Fox News Channel reports accuse ACORN of "operat(ing) as a criminal enterprise", including prostitution, running a prostitution ring, filing false documents with taxing and other government authorities, bank fraud, violating immigration laws, transporting women and children to America for immoral purposes, and impairing the welfare of minors.

More evidence of reprehensible innuendo, distortion, deceit, and misinformation from major media paid liars. It's why web sites like this one gain followers.

_____

Stephen Lendman is a Research Associate of the Centre for Research on Globalization. He lives in Chicago and can be reached at lendmanstephen.blogspot.com.

Also visit his blog site at sjlendman.blogspot.com and listen to The Global Research News Hour on RepublicBroadcasting.org Monday - Friday at 10 am US Central time for cutting-edge discussions with distinguished guests on world and national issues. All programs are archived for easy listening.

http://republicbroadcasting.org/Global%20Research/index.php?cmd=archives.year&ProgramID=33&year=9


http://sjlendman.blogspot.com/2009/11/paid-lying-what-passes-for-major-media.html


Bill Totten http://www.ashisuto.co.jp/english/index.html

The Crashing US Economy Held Hostage

Our Economy is on an Artificial Life-support System

by Richard C Cook

Global Research (July 07 2007)


Remember when the US was the world's greatest industrial democracy? Barely thirty years ago the output of our producing economy and the skills of our workforce led the world.

What happened? It's hard to believe that in the space of a generation our character and capabilities just collapsed as, for example, did our steel and automobile industries and our family farming. What then are the causes of the decline?

Here's how I would put it today: our economy is on an artificial life-support system, a barely-breathing hostage in a lunatic asylum. That asylum is the US and world financial systems which are on the verge of collapse.

The inmates are the world's central bankers, along with most of the financial magnates big and small. The fact is that the economy of much of the world is in a decisive downward slide which the financiers cannot stop because the systems they operate are the primary cause. As often happens, the inmates rule the asylum.

The problems aren't confined to the US. Unemployment worldwide is increasing, debt is rampant, infrastructures are crumbling, and commodity prices are rising.

In such an environment, crime, warfare, terrorism, and other forms of violence are endemic. Only the most naive, self-centered, and deluded jingoist could describe such a scenario in terms of the freedom-loving Western democracies being besieged by the "bad guys".

Rather what is happening highlights the growing failures of Western globalist finance whose impact on political stability has been so corrosive. As many responsible commentators are warning, we are likely to see major financial shocks within the next few months. The warnings are even coming from high-flying institutional players like the Bank of International Settlements and the International Monetary Fund.

We may even be seeing the end of an era when the financiers ruled the world. At a certain point, governments or their military and bureaucratic establishments are likely to stop being passive spectators to the onrushing disorder. It is already happening in Russia and elsewhere.

The countries that will be least able to master their own destiny are those like the US where governments have been most passive to economic decomposition from actions of their financial sectors. The financiers are the ones who for the last generation have benefited most from economies marked by privatization, deregulation, and speculation, but that may be about to change. Whether the change will be constructive or catastrophic is yet to be seen.

The Housing Bubble Sets the State for US Collapse

Within the US, foreign investors, above all Communist China, have been propping up our massive trade and fiscal deficits with their capital. To keep them happy, interest rates - after six years of "cheap credit" - must now be kept relatively high. Otherwise the Chinese, et al , might bail out, leaving us to fend for ourselves with our hollowed-out shell of an economy.

Even so, these investors are increasingly uneasy with their dollar holdings and are bailing out anyway. Foreign purchase of US securities has plummeted. And our debt-laden economy, where our manufacturing base has been largely outsourced, is no longer capable of providing our own population with a living by utilizing our own productive resources.

For a while we were floating on the housing bubble, but those days are now history when, according to a Merrill-Lynch study, the artificially pumped-up housing industry, as late as 2005, accounted for fifty percent of US economic growth.

As everyone knows, the Federal Reserve under Chairman Alan Greenspan used the housing bubble, like a steroid drug, to pump liquidity into the economy. This worked, at least for a while, because consumers could borrow huge amounts of money at relatively low interest rates for the purchase of homes or for taking out home equity loans to pay off their credit cards, finance college education for their children, buy new cars, et cetera.

When the final history of the housing bubble is written, its beginnings will be dated as early as 1989 to 1990, when credit restrictions on the purchase of real estate first began to be eased. According to mortgage industry insiders interviewed for this article, they began to be taught the methods for getting around consumers' weak credit reports and selling them homes anyway in the mid to late 1990s.

The Fed started inflating the housing bubble in earnest around 2001, after the collapse of the dot.com bubble, which failed with the stock market decline of 2000 and 2002. Then, over a trillion dollars of wealth, including working peoples' retirement savings, simply vanished.

Also according to mortgage specialists, it was in March 2001, two months after George W Bush became president, that a "wave of intoxicated fraud" started. Mortgage companies began to be instructed, by the creditors / lenders, on how to package loan applications as "master strokes of forgery", so that completely unqualified buyers could purchase homes.

There could not have been a sudden onset of industry-wide illegal activity without direction from higher-up in the money chain. It could not have continued without reports being filed by whistleblowers with regulatory agencies. Today the government is prosecuting mortgage fraud, but they certainly had to know about it while it was actually going on.

The bubble was coordinated from Wall Street, where brokerages "bundled" the "creatively-financed" mortgages and sold them as bonds to retirement and mutual funds and to overseas investors. Portfolio managers were directed to buy subprime bonds as other bonds matured. It's the subprime segment of the industry that has now collapsed, triggering, for instance, the recent highly-publicized demise of two Bear Stearns hedge funds.

And it's not just lower-income home purchasers who are affected. The Washington Post has reported that for the first time in living memory foreclosures are happening in Washington's affluent suburban neighborhoods in places like Fairfax, Loudon, and Montgomery Counties.

The subprime bonds were known to be suspect. One reason was that they were based on adjustable rate mortgages that were actually time bombs, scheduled to detonate a couple of years later with monthly payments hundreds of dollars a month higher than when they were written. Many of these mortgages will reset to higher payments this October.

Purchasers were lied to when they were told they could re-sell their homes in time to escape the payment hikes. Now the collapse of the market has made further resale at prices high enough to escape without losses impossible.

One way the system worked was for mortgage lenders to maximize the "points" buyers were required to finance, making the mortgages more attractive to Wall Street. Of course bundling and selling the mortgages relieved the banks which originated the loans from exposure, pushing a considerable amount of the risk onto millions of small investors. This was in addition to the normal sale of mortgages to quasi-public agencies like Freddie Mac and Fannie Mae.

Was it a scam? Of course. Did the Federal Reserve know about it? They had to. Did Congress exercise any oversight? No.

What did the White House know?

Amy Gluckman, an editor of Dollars and Sense, reported in the November / December 2006 issue: "During the Clinton administration, Greenspan was relatively 'unembedded' - averaging only one meeting per month at the White House ...

"But when George W Bush moved into 1600 Pennsylvania Avenue, Greenspan's behavior changed. During 2001, he averaged 3.3 White House visits a month, more than triple his rate under Clinton and much more often with high-level officials like Vice President Cheney. His visits rose to 4.6 a month in 2002 and 5.7 in 2003.

"Whatever White House officials were whispering in Greenspan's ear, it worked: Greenspan abruptly changed his tune on tax cuts, lending critical support to Bush's massive 2001 and 2003 tax giveaways, and he loosened the reins by cutting Fed-controlled interest rates repeatedly beginning in January 2001, a gift to the Republicans in power."

Along the way, the bubble caused housing prices to inflate drastically, which officialdom touted as economic "growth". Even today, periodicals like Barron's naively boast that this inflation boosted American's "wealth".

But this source of liquidity for everyday people has been maxed out, like our credit cards, and there is nothing to replace it. There is no cash cushion anymore, because years ago people stopped earning enough money for personal or household savings.

As purchasers lose their homes to foreclosure, the real estate is being grabbed at bankruptcy prices by the banks and by any other investors with ready money. Whole neighborhoods of cities like Cleveland or Atlanta are turning into boarded-up ghost towns.

What we are seeing are the results of an economic crime on a fantastic scale that implicates the highest levels of our financial and governmental establishments. It spanned three presidential administrations - Bush One, Clinton, and Bush Two - though the worst of it came with the surge of outright lending fraud after 2001.

As usual when hypocrisy is rampant only the small fry are being called to account. Commentators, including a sleepwalking Congress, have self-righteously railed at consumers who got in over their heads. The Mortgage Bankers Association is even lobbying Congress to allocate $7 million more to the FBI to go after the supposedly rogue brokers within their own industry who are being scapegoated.

The Bubbles are only Symptoms

But there's much more to it than that. These bubbles are symptoms. They are created because our wage and salary earners lack purchasing power due to stagnant incomes and various structural causes. These causes include the outsourcing of our manufacturing industries to China and other cheap labor markets and the super-efficiency of the remaining US industry which is able to manufacture products with ever-fewer workers.

Also, our farming, mining, and other resource-based industries are in a long-term slide. This and the decline of hard manufacturing have been going on since our oil production peaked in the 1970s, followed by the Federal Reserve-induced recession of 1979 to 1983. Next came the deregulation of the financial industry. It was all part of the economic disintegration that led to today's "service economy".

Now, for the first time in modern US history, there are no new economic engines at all. The last real engine was the internet which has now reached maturity with marginal players being weeded out.

Our biggest sources of new private-sector jobs today are food service, processing of financial paperwork, health care for the growing numbers of retirees, and menial low-paying jobs, like landscaping and building maintenance. These are increasingly being performed by immigrants who are also underpricing US citizens in many service jobs like childcare and auto repair.

Today the rank-and-file of our population must increasingly turn to borrowing in order to survive. Only the banks and the credit card companies are the beneficiaries. The total societal debt for individuals, businesses, and government is over $45 trillion and climbing. This is happening even while the real value of wages and salaries is decreasing.

What I have just been saying is bad enough, but here's where the real lunacy enters in.

A major factor connected to the decline in the value of employee earnings is dollar devaluation in the overarching financial economy due to the proliferation of huge quantities of bank credit being used to keep the stock market afloat and to fuel the speculative games of equity, hedge, and derivative funds.

In other words, while our factories continue to shut down, the Wall Street gambling casino - like its Las Vegas counterpart - is running full-bore, 24/7. This, along with financing of the massive federal deficit, is what critics are talking about when they speak of the Federal Reserve "printing money".

The main growth factors for federal spending are Middle East war expenditures and interest on the national debt. But within the private sector it's leveraged loans to businesses which The Economist recently said "mirror ... interest-only and negative-amortization mortgages" in the subprime market. But here's the big difference: in the leveraged business economy, the amount of assets at stake are even greater than with the housing bubble.

The financial world, which Dr Michael Hudson calls the FIRE economy - Finance, Insurance, and Real Estate - has been producing millionaires and billionaires among those who know how to play the game.

The Wall Street hedge funds stand out as the most irresponsible financial scams in history. Unregulated and secretive, they account for a third of all stock trades, own $2 trillion in assets, and pay their individual managers over $1 billion a year. Think about this the next time someone you know has their job outsourced to China or when his adjustable rate mortgage resets and drives up his monthly house payment past the level of affordability.

The hedge funds borrow huge sums from the banks which generate loans under their Federal Reserve-sanctioned fractional reserve privileges. Often this money is used by the hedge funds to "short the market", thereby earning profits when stock prices decline.

In other words, the hedge funds and their banking enablers use banking leverage to bet against the producing economy. In doing so, they may actually drive stock prices down, causing ordinary investors to lose a portion of their own wealth. Can this be called anything other than a crime?

The livelihood of much of the US workforce and perhaps half of the rest of the world's population - maybe three billion people - is being threatened by such financial lawlessness. The justification that was first used for financial deregulation and tax cuts for the rich was that the trickle-down effect of wealthy peoples' earnings would spill over to the rank-and-file.

The Reagan administration ushered in these policies in the 1980s under the heading of "supply-side economics". But the opposite has happened. The system has institutionalized an increasingly stratified worldwide culture of haves and have-nots.

The Root Cause of the Catastrophe

How did today's looming tragedy come to pass?

Looking for causes is like peeling an onion. What we are really seeing are the terminal throes of a failed financial system almost a century old. It's happening because, since the creation of the Federal Reserve System in 1913 - even during the period of the New Deal with its Keynesian economics aimed at full employment - our economy has been based almost entirely on fractional reserve banking.

This means that under the regime of the world's all-powerful central banking systems, money is brought into existence only as debt-bearing loans. Interest on this lending tends to grow exponentially unless overtaken by real economic growth.

Remember that every instance of bank lending, from purchase of Treasury Bonds, to credit cards, to home mortgages, to billion-dollar loans to hedge funds for leveraged buyouts or sheer speculation, must eventually be paid back somewhere, somehow, sometime, by somebody, with interest. In the end, it all comes back to people who work for a living, whether in the US or elsewhere, because that is the only way the world community ever creates real wealth.

In an anemic economy like that of the US, growth cannot catch up with interest in a deregulated financial marketplace where interest rates are high. Rates may not seem high compared with, say, the twenty percent-plus rates of the early 1980s, but they are high in an economy with, at best, a two percent GDP growth rate.

And they have been high on average since the 1960s, as the banking industry became increasingly deregulated. Interestingly, since 1965, the US dollar has lost eighty percent of its value, which tends to validate the contention by some observers that higher interest rates not only do not reduce inflation, as the Federal Reserve contends, but actually cause it.

The situation today is worse in many respects than 1929, because the debt "overhang" versus real economic value is much higher now than it was then. The US economy was in far better shape in the 1920s, because so much of our population was gainfully employed in factories or on farms.

The question is not when will the system start to come down, because this has already begun. It's shown most clearly by the fact that according to Federal Reserve data, M1, the part of the money supply most readily available for consumer purchases, is not only lagging behind inflation but has actually decreased in eleven of the last twelve months. This means that the producing economy is already in a recession.

The federal government is trying to figure out what to do. Their biggest concern is that foreign investors have started to pull out of dollar-denominated markets.

The government's "plunge protection team" - known officially as the President's Working Group on Financial Markets - is trying to engineer what they call a "soft landing". It's been likened to the process by which you cook a frog in a pot where you raise the temperature one degree a day. The frog doesn't hop out because the heat goes up gradually, but before long it's too late. The frog has been cooked.

Even if the plunge protection team succeeds, and the frog cooks slowly, there will be a massive de facto default on dollar-denominated debt and a long-term degradation of the US standard of living. The inside word is that we are likely to see major monetary shocks and a possible stock market crash as early as December 2007.

The worst off will be people locked into retirement funds which have a heavy load of mortgage-related securities. Entire investment portfolios are likely to disappear overnight.

The banks, along with the bank-leveraged equity and hedge funds, are preparing for the biggest fire sale in at least a generation. Insiders are going liquid to get ready. If you think Enron was "the bomb", you won't want to miss this one.

What Can Be Done?

There are so many flaws in the system that it's time for real change.

As I have been pointing out in articles over the last several months, the key to a rational solution would be immediate monetary reform leading to a fundamental shift in how the world conducts its financial business. It would mean taking control of the world's economy out of the hands of the private bankers and giving it back to democratically elected governments.

I spent twenty-one years working for the US Treasury Department and studying US monetary history. For much of our history we were a laboratory for diverse monetary systems.

During and after the Civil War (1861-5) we had five different sources of money that fueled our economy. One was the Greenbacks, an extremely successful currency which the government spent directly into circulation. Contrary to financiers' propaganda, the Greenbacks were not inflationary.

Another was gold and silver coinage and specie-backed Treasury paper currency. The third was notes lent into circulation by the national banks. The fourth was retained earnings - individual savings and business reinvestment of profits - which was the primary source of capital for industry. The fifth was the stock and bond markets.

After the Federal Reserve Act was passed by Congress in 1913, the banks and the government inflated the currency through war debt and destroyed most of the value of the Greenbacks and coinage. The banks never entirely displaced the capital markets but eventually took them over during the present-day era of leveraged mergers, acquisitions, and buyouts, while the Federal Reserve created and deflated asset bubbles.

The banking system which rules the economy through the Federal Reserve System has produced the crushing debt pyramid of today. The system is a travesty. Banks, which can be useful in facilitating commerce, should never have this much power. Many intelligent people have called for the Federal Reserve to be abolished, including former chairmen of the House banking committee Wright Patman and Henry Gonzales and current Republican presidential candidate Ron Paul.

Some might call such a program a revolution. I prefer to call it a restoration - of national sovereignty. Central to the program would be the elimination of the Federal Reserve as a bank of issue and restoration of money-creation to the people's representatives in Congress. This is what our Constitution says too. It's the system we had before 1913.

The Monetary Prescription

The fundamental objectives of monetary policy should be to secure a healthy producing economy and provide for sufficient individual income. The objectives should not be to produce massive profits for the banks, fodder for Wall Street swindles, and a blank check for out-of-control government expenditures.

Note I referred to income. I did not say "create jobs". That is the Keynesian answer, because Keynes was a collectivist, and the main thing collectivists like to come up with is to give everyone more work to do, even if it's just grabbing a shovel and digging ditches like they did with the WPA during the Depression.

It's what President Clinton did with his welfare-to-work program that threw hundreds of thousands of mothers off the welfare rolls and into a job market where sufficient work at a living wage did not exist. It's another reason the government is constantly borrowing more money to fuel the military-industrial complex by creating more military, bureaucratic, and contractor jobs.

Back to income. The idea of "income", as opposed to "jobs", is a civilized and humane idea. When are we going to realize that everyone doesn't need a paying job in order for an industrial economy to provide all with a decent living? When are we going to realize that the productivity of the modern economy is part of the heritage of all of us, part of the social commons?

Why can't mothers have the choice of staying home with the kids like they could a generation ago? Why can't some people choose to do eldercare? Why can't others comfortably go into lower-paying occupations like teaching or the arts? Why can't some just opt to study or travel for a while or learn new skills or start a business without facing financial ruin as they often must today? Why can't retirees enjoy their retirement instead of having to stay in the job market or worrying about Social Security going broke?

The US and world economies are on the brink of collapse due to the lunacy of the financial system, not because we can't produce enough.

Contrary to so many doomsayers, the mature world economy is capable of providing a decent living for everyone on the planet. It cannot because the monetary equivalent of its bounty is skimmed by interest-bearing debt.

These are things that monetary reformers have known about for decades. The first steps within the US would be (1) a large-scale cancellation of debt; (2) a guaranteed income for all at about $10,000 a year, not connected to whether a person has a job; (3) an additional National Dividend, fluctuating with national productivity, that would provide every citizen with their rightful share in the benefits of our incredible producing economy; (4) direct spending of money by the government for infrastructure and other necessary costs without resort to taxation or borrowing; (5) creation of a new system of private lending to businesses and consumers at non-usurious rates of interest; (6) re-regulation of the financial industry, including the banning of bank-created credit for speculation, such as purchase of securities on margin and for leveraging buyouts, acquisitions, mergers, hedge funds, and derivatives; and (7) abolishment of the Federal Reserve as a bank of issue with retention of its functions as a national financial transaction clearinghouse.

While these proposals are basically simple, the overall program is so different from what we have today with our financier-controlled system that it takes careful reading and a great deal of thought to understand exactly how it would work. One way to approach it is to look at the likely effects.

These measures would immediately shift the basis of our economy from borrowing from the banks to a mixed system that would include the direct creation of credit at the public and grassroots level. The size of government would shrink, our producing economy would be reborn, debt would come down, economic democracy would become a reality, and the financial industry could be right-sized. Finally, the international situation could be stabilized because we would no longer be driven to a constant state of warfare to seize other nations' resources as with Iraq and to prop up the dollar as a reserve currency abroad.

Such a system would work by creating indigenous sources of credit needed to mobilize the natural wealth and productivity of the nation. There are people who could implement this program. Systems to do so could be installed within the US Treasury and the Federal Reserve within a matter of months.

Fundamental monetary reform implemented to restore economic democracy is what America's real task should be for the twenty-first century. One thing is for certain. The out-of-control financial system that has wrecked the US and world economies over the last generation cannot be allowed to continue.

How the outcome will play out may well depend on whether there is a Jefferson, Lincoln, or Roosevelt waiting in the wings. The success of each of these great leaders was due to one critical factor: their ability to implement monetary reform at a time of national emergency.

_____

Richard C Cook is the author of We Hold These Truths: The Hope of Monetary Reform (2007). A retired federal analyst, his career included service with the US Civil Service Commission, the Food and Drug Administration, the Carter White House, and NASA, followed by twenty-one years with the US Treasury Department. His articles on monetary reform, economics, and space policy have appeared on Global Research, Economy in Crisis, Dissident Voice, Arizona Free Press, Atlantic Free Press, and elsewhere. He also is author of Challenger Revealed: An Insider's Account of How the Reagan Administration Caused the Greatest Tragedy of the Space Age. His website is at www.richardccook.com. He appears frequently on internet radio at www.themicroeffect.com on Saturday mornings at 11 am Eastern.

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http://www.globalresearch.ca/index.php?context=va&aid=6239


Bill Totten http://www.ashisuto.co.jp/english/index.html

The Debt Economy

by James Surowiecki

The New Yorker (November 23 2009)


John Kenneth Galbraith wrote that all financial crises are the result of "debt that, in one fashion or another, has become dangerously out of scale". The recent financial crisis was no exception, with everyone - homeowners, private-equity investors, our biggest banks - taking on enormous amounts of debt. If it's frustrating that the government is footing the bill to clean up the mess, it's even worse that the government helped pay for the debt binge that created the mess in the first place, thanks to a tax system that actually subsidizes borrowing. Debt didn't get dangerously out of scale because the system was broken. It got out of scale, in part, because the system worked.

The government doesn't make people go into debt, of course. It just nudges them in that direction. Individuals are able to write off all their mortgage interest, up to a million dollars, and companies can write off all the interest on their debt, but not things like dividend payments. This gives the system what economists call a "debt bias". It encourages people to make smaller down payments and to borrow more money than they otherwise would, and to tie up more of their wealth in housing than in other investments. Likewise, the system skews the decisions that companies make about how to fund themselves. Companies can raise money by reinvesting profits, raising equity (selling shares), or borrowing. But only when they borrow do they get the benefit of a "tax shield". Jason Furman, of the National Economic Council, has estimated that tax breaks make corporate debt as much as forty-two per cent cheaper than corporate equity. So it's not surprising that many companies prefer to pile on the leverage.

There are a couple of peculiar things about these tax breaks - which have been around as long as the federal income tax. The first is that they're unnecessary. Few people, after all, can save enough to buy a home with cash, so home buyers naturally gravitate toward mortgages. And businesses like debt because it offers them tremendous leverage, making it possible to put down a little money and potentially reap a huge gain. Even in the absence of the deductions, then, there would be plenty of borrowing. The second thing about these breaks is that their social benefits are pretty much nonexistent. Advocates of the mortgage-interest deduction, for instance, claim that it increases homeownership rates. But it doesn't: in countries where mortgage deductions have been eliminated, homeownership rates haven't dropped. Instead, the deduction simply inflates house prices. The business-interest deduction, meanwhile, may lower an individual company's taxes, but it also means that the over-all corporate tax rate is higher, so its real impact is to give companies with lots of debt an unjustified advantage.

If the benefits are illusory, the costs are all too real. Economies work best, generally speaking, when people are making decisions based on economic fundamentals, not on tax considerations. So, as much as possible, the tax system should be neutral between debt and equity, and between housing and other investments. It's not, and, worse still, as we've seen in the past couple of years, debt magnifies risk: if companies or individuals rely on large amounts of leverage, it's much easier for bad decisions to lead to insolvency, with significant ripple effects in the wider economy. A debt-ridden economy is inherently more fragile and more volatile. This doesn't mean that the tax system caused the financial crisis; after all, the tax breaks have been around for a long time, and the crisis is new. But, as a recent IMF study found, tax distortions likely made the total amount of debt that people and companies took on much bigger. And that made the bursting of the housing bubble especially damaging. So encouraging people to take on debt qualifies as a genuinely bad idea.

But it's not an easy situation to change. In 2005, a special Presidential panel on tax reform actually proposed eliminating the business-interest deduction and severely restricting mortgage-interest tax breaks. Those proposals, predictably, went nowhere. But we're in a different historical moment now: the perils of too much borrowing have never been clearer. And there are precedents, on a smaller scale, for these kinds of changes. In the US, people used to be able to write off the interest they paid on credit cards. That tax break was abolished in 1986, and, the same year, the mortgage-interest deduction, which used to be unlimited, was capped. Great Britain, meanwhile, abolished its mortgage tax break in 2000. Similarly, there are a number of countries, including Brazil and Belgium, that don't give corporate debt a tax advantage over equity, while, just last year, both Germany and Denmark cut back sharply on their business-interest tax breaks, limiting how much interest companies can write off. Given the weak state of the economy and of housing prices, a wholesale rewriting of the tax code may be a bridge too far right now, but there are plenty of reforms - capping deductions, phasing them out over time, restricting their use by heavily leveraged companies - that would move in the right direction.

The clearest hurdle to these changes may be political, but the bigger hurdle is, in a way, psychological: because tax breaks on debt have been around so long, we can hardly imagine what it would be like if we changed them, and we tend to underestimate their influence in shaping our behavior. Subsidizing debt seems harmless simply because we've always done it. But the fact that you've had a bad habit for a long time doesn't make it less dangerous.

http://www.newyorker.com/talk/financial/2009/11/23/091123ta_talk_surowiecki

Bill Totten http://www.ashisuto.co.jp/english/index.html

Tax the Rich

How to Reduce Unemployment, Rebuild the Middle Class and Free Ourselves From Wall Street

by Moshe Adler

CounterPunch (October 28 2009)


Ten percent of Americans are unemployed, and many doubt that President Obama's stimulus will create enough jobs to reduce this rate significantly. But given the structure of our labor force, more jobs is not necessarily what we need anyway. Our workforce includes 13.5 million people who don't belong in it at all. Permitting them not to work would free up jobs and raise the wages of millions of workers who belong in the middle class. It would also free all of us of our dependence on Wall Street.

Currently, four million children under the age of eighteen work, filling the equivalent of two million full time jobs. (The actual number is higher. Even though the law permits the employment of children over the age of fourteen, the Census Bureau only collects data about workers who are older than sixteen.) Ten million college-age youth (between the ages of eighteen and twenty one) also work, and they fill the equivalent of eight million full time jobs. Five million of these college-age youth do not attend college at all. Finally, there are also four and a half million workers who are sixty six years or older, and they fill the equivalent of three and a half million full time jobs. The questions before us are then: Should these workers be removed from the workforce? How much would this cost? Can we afford it? And finally, what will our lives look like after all these workers stop working?

That high school students don't belong in the workforce does not require an explanation. Of course, the families of these children need the money they earn, but their earnings are very small, just $19 billion in 2007, and they could be replaced by child subsidies to low income families.

That high school grads belong in college is also pretty obvious. Today, workers must have a college education in order to do well. In 1950 the difference between the wage of a college graduate and a high school graduate was 27%. But by 2000 this gap grew to 75%. Nevertheless, just as the importance of having a college education has been increasing, it has become dramatically less affordable. Between 1981 and 2005 tuition in state universities increased four times faster than personal incomes did. Making college education free would both increase the number of youth who go to college and decrease the need of those who are already in college to work.

Of course, providing all interested high school graduates with a free college education plus stipends cost will not be cheap. The average yearly tuition in public colleges is currently $6,585 and this figure covers forty percent of the total cost of education. If all young adults chose to go to college, and assuming that tuition was entirely free, the additional cost to taxpayers would be $164 billion a year. The salaries and wages that all college age workers earned, both students and non-students, in 2007, was $135 billion. If the lost earnings are fully replaced by student-stipends, the total cost of providing college education to all would be some $300 billion.

That old people ought to be able to retire shouldn't be controversial. But the social security payment of the median retiree amounts to just forty-two percent of the income she earned while working, and it is not surprising that many workers are forced to continue working even when they are old. Doubling retiree benefits would cost an additional $505 billion a year, and it is the most expensive item in our proposal.

No doubt, not all young adults who are offered the opportunity to go to college will take advantage of it, and not all older Americans will retire even with higher social security payments. But for argument's sake if we assume that all these individuals will in fact leave, the cost of removing thirteen and a half million workers from the workforce, and giving all young adults free college education would come to $825 billion a year. This may sound like a large sum, but it is actually just eleven percent of the total income that households earn, excluding the wages and salaries of the workers who will no longer work.

Can we afford an average increase of eleven percent in taxes (a higher increase for the rich, smaller increase for the poor)? Let's recall that between 1913, the year in which the income tax became constitutional, and 1981, the first year of the Reagan presidency, the highest marginal tax rate was on average 68%. Today it is 35%.

What will our lives be like if millions of low-wage workers stop working? The most visible effect will probably be a drastic reduction in the number of stores that are open 24 hours a day, because it is the abundance of workers that keeps these stores open in the wee hours of the night, when there is nary a customer.

But the most significant change will come from the shift to government financed higher education and retirement. Our lives will be remarkably more secure when we will no longer have to entrust our fate and the fate of our children to retirement and college savings invested in stocks. And when this happens, the incomes and the political power of stock brokers will decline precipitously; Main Street will no longer be in the clutches of Wall Street.

Inequality would decline dramatically as well. With five million fewer retail and restaurant workers, a million fewer construction and a million fewer manufacturing workers, and a six million reduction in the numbers of workers available for work in all other industries, wages will rise significantly. Furthermore, the number of positions seeking workers will increase too, because in order to accommodate five million additional students, the number of jobs on colleges will have to increase by three and a half million. And if millions of old workers will be able to retire, the services that cater to them will also have to increase.

The current crisis inflicts great harm on middle class and low-wage workers. But what we don't want is to return to the world as it was before the crisis. That world deprived millions of children of childhood and the chance for a good education; it prevented millions of youth from being able to attend college; and it deprived millions of old people from being able to retire. It also made all of us dependent on Wall Street. Instead, let's make sure that families have enough money to support their children, that high school grads can afford to go to college, and that older workers who want to retire can.

_____

Moshe Adler teaches economics in the Department of Urban Planning at Columbia University and his book, Economics for the Rest of Us: Debunking the Science that Makes Life Dismal, will be published in January 2010 by the New Press. He can be reached at: ma820@columbia.edu

http://www.counterpunch.org/adler10282009.html


Bill Totten http://www.ashisuto.co.jp/english/index.html

The Tobin Tax Lives Again

by Dani Rodrik

project-syndicate.org (2009)


Something happened in late August that I never thought I would see in my lifetime. A leading policymaker in the Anglo-American empire of finance actually came out in support of a Tobin tax - a global tax on financial transactions.

The official in question was Adair Turner, the head of the United Kingdom Financial Services Authority, the country's chief financial regulator. Turner, voicing his concerns about the size of the financial sector and its frequently obscene levels of compensation, said he thought a global tax on financial transactions might help curb both.

Such a statement would have been unthinkable in the years before the sub-prime mortgage meltdown. Now, however, it is an indication of how much things have changed.

The idea of such a tax was first floated in the 1970s by James Tobin, the Nobel laureate economist, who famously called for "throwing some sand in the wheels of international finance". Tobin was concerned about excessive fluctuations in exchange rates. He argued that taxing short-term movements of money in and out of different currencies would curb speculation and create some maneuvering room for domestic macroeconomic management.

The idea has since become a cause-celebre for a wide range of non-governmental organizations and advocacy groups that see in it the double virtue of cutting finance down to size and raising a big chunk of revenue for favored causes -foreign aid, vaccines, green technologies, you name it. It has also been endorsed by some French (predictably!) and other continental European leaders. But, until Turner mentioned the idea, you would not have been able to identify a single major policymaker from the United States or the UK, the world's two leading centers of global finance, with anything nice to say about it.

The beauty of a Tobin tax is that it would discourage short-term speculation without having much adverse effect on long-term international investment decisions. Consider, for example, a tax of 0.25% applied to all cross-border financial transactions. Such a tax would instantaneously kill the intra-day trading that takes place in pursuit of profit margins much smaller than this, as well as the longer-term trades designed to exploit minute differentials across markets.

Economic activity of this kind is of doubtful social value, yet it eats up real resources in terms of human talent, computing power, and debt. So we should not mourn the demise of such trading practices.

Meanwhile, investors with longer time horizons going after significant returns would not be much deterred by the tax. So capital would still move in the right direction over the longer term. Nor would a Tobin tax stand in the way of financial markets punishing governments that grossly mismanage their economies.

Moreover, it is undeniable that such a tax would raise a great deal of money. Revenue estimates for a small tax on international currency transactions run into hundreds of billions of dollars per year. The receipts would be even greater if the base is extended, as was implied by Turner, to all global financial transactions. Whatever the precise amount, it is safe to say that the numbers in question are huge - larger than, say, foreign-aid flows or any reasonable assessment of the gains from completing the Doha Round of trade negotiations.

Predictably, Turner came in for severe criticism from City of London bankers and the British Treasury. Much of that criticism misses the mark. A Tobin tax would raise the cost of short-term finance, some argued, somehow missing the point that this is in fact the very purpose of a Tobin tax.

Others argued that such a tax fails to target the underlying incentive problems in financial markets, as if we had an effective, well-proven alternative to achieve that end. It would threaten the role of London as a financial center, some complained, as if the proposal was meant to apply just in London and not globally. It can easily be evaded by relying on offshore banking centers, some pointed out, as if not all financial regulations face that very same challenge.

In any case, as Dean Baker of the Center for Economic and Policy Research in Washington observed, there are many imaginative ways in which a Tobin tax could be made harder to dodge. Suppose, he argues, that we give finance workers who turn in their cheating bosses ten percent of the receipts that the government collects. That would be quite an incentive for self- monitoring.

What the Tobin tax does not do is help with longer-term misalignments in financial markets. Such a tax would not have prevented the US-China trade imbalance. Neither would it have stopped the global saving glut from turning into a ticking time bomb for the world economy. It would not have protected European and other nations from becoming awash in toxic mortgage assets exported from the US. And it would not dissuade governments intent on pursuing unsustainable monetary and fiscal policies financed by external borrowing.

For all of these problems we will need other macroeconomic and financial remedies. But a Tobin tax is a good place to start if we want to send a strong message about the social value of the casino known as global finance.

_____

Dani Rodrik, Professor of Political Economy at Harvard University's John F Kennedy School of Government, is the first recipient of the Social Science Research Council's Albert O Hirschman Prize. His latest book is One Economics, Many Recipes: Globalization, Institutions, and Economic Growth (2008).

Copyright: Project Syndicate, 2009. www.project-syndicate.org

http://www.project-syndicate.org/commentary/rodrik35/English

Bill Totten http://www.ashisuto.co.jp/english/index.html

Tax the Traders!

A Little Populist Retribution: Making Wall Street Pay Its Fair Share

by Ellen Brown

webofdebt.com (November 11 2009)


"Regular people know that they got done in by excesses on Wall Street, and they see a Democratic administration shoveling trillions of dollars to the same Wall Street banks that caused the mess ... What is overdue is a little bit of populist retribution against the people who brought down the system - and will bring it down again if the hegemony of the traders is not constrained".
- Economist Robert Kuttner arguing for a "Tobin tax"

In the midst of the worst recession since the Great Depression, Goldman Sachs is having a banner year. According to an October 16 article by Colin Barr on CNNMoney.com:

"While Goldman churned out $3 billion in profits in the third quarter, the economy shed 768,000 jobs, and home foreclosures set a new record. More than a million Americans have filed for bankruptcy this year, according to the American Bankruptcy Institute. A September survey of state finances by the Center on Budget and Policy Priorities think tank found that state governments faced a collective $168 billion budget shortfall for fiscal 2010. Goldman, by contrast, is sitting on $167 billion in cash ..."

Barr writes that Goldman's "eye-popping profit" resulted "as revenue from trading rose fourfold from a year ago". Really. Revenue from trading? Didn't we bail out Goldman and the other Wall Street banks so they could make loans, take deposits, and keep our money safe?

That is what banks used to do, but today the big Wall Street money comes from short-term speculation in currency transactions, commodities, stocks, and derivatives for the banks' own accounts. And here's the beauty of it: the Wall Street speculators have managed to trade in practically the only products left on the planet that are not subject to a sales tax. While parents in California are now paying nine percent sales tax on their children's school bags and shoes, Goldman is paying zero tax to sustain its gambling habit.

That helps explain Goldman's equally eye-popping tax bracket. What would you guess - fifty percent? Thirty percent? Not even close. In 2008, Goldman Sachs paid a paltry one percent in taxes - less than clerks at WalMart.

Speeding Tickets to Slow Day Traders?

The fact that Wall Street's speculative trades remain untaxed suggests a tidy way taxpayers could recover some of their billions in bailout money. The idea of taxing speculative trades was first proposed by Nobel Prize winning economist James Tobin in the 1970s. But he acknowledged that the tax was unlikely to be implemented, because of the massive accounting problems involved. Today, however, modern technology has caught up to the challenge, and proposals for a "Tobin tax" are gaining traction. The proposals are very modest, ranging from .005% to one percent per trade, far less than you would pay in sales tax on a pair of shoes. For ordinary investors, who buy and sell stock only occasionally, the tax would hardly be felt. But high-speed speculative trades could be slowed up considerably. Wall Street traders compete to design trading programs that can move many shares in microseconds, allowing them to beat ordinary investors to the "buy" button and to manipulate markets for private gain.

Goldman Sachs admitted to this sort of market manipulation in a notorious incident last summer, in which the bank sued an ex-Goldman computer programmer for stealing its proprietary trading software. Assistant US Attorney Joseph Facciponti was quoted by Bloomberg as saying of the case:

"The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways".

The obvious implication was that Goldman has a program that allows it to manipulate markets in unfair ways. Bloomberg went on:

"The proprietary code lets the firm do 'sophisticated, high-speed and high-volume trades on various stock and commodities markets', prosecutors said in court papers. The trades generate 'many millions of dollars' each year."

Those many millions of dollars are coming out of the pockets of ordinary investors, who are being beaten to the punch by sophisticated computer programs. As one blogger mused:

"Why do we have a financial system? I mean, much of its activity looks an awful lot like gambling, and gambling is not exactly a constructive endeavor. In fact, many people would call gambling destructive, which is why it is generally illegal ...

"What makes Goldman Sachs et al so evil is that they offer vast wealth to our society's best and brightest in exchange for spending their lives being non-productive. I want our geniuses to be proving theorems and curing cancer and developing fusion reactors, not designing algorithms to flip billions of shares in microseconds."

Gambling is an addiction, and the addicted need help. A tax on these microsecond trades could sober up Wall Street addicts and return them to productive labor, and transform Wall Street from an out-of-control casino back into a place where investors pledge their capital for the development of useful products.

The Tobin Tax Gains Momentum

Various proposals for a Tobin tax have received renewed media attention in recent months. President Obama gave indirect support for the tax in a Press briefing on July 22, when he recommended that the government consider new fees on financial companies pursuing "far out transactions". UK Prime Minister Gordon Brown, who has resisted pushes for a Tobin tax in the past, said at the G20 meeting in Scotland on November 7 that a tax on financial trading could prevent excessive risk-taking and fund future bank rescues. It "cannot be acceptable", he said, that banks enjoy the rewards of their successful trades yet leave taxpayers to pick up the cost of their failures. Governments spent more than $500 billion in the past year bailing out banks. US Treasury Secretary Tim Geithner opposed the tax, but the fact that it was being seriously considered was a major development. The French finance minister said, "It's not so exotic and it even seems reasonable".

In the US, a bill called "Let Wall Street Pay for Wall Street's Bailout Act of 2009", proposing to tax short-term speculation in certain securities, was introduced by Representative Peter DeFazio (Democrat, Oregon) last February; and a different bill to regulate derivative trades was approved by the Financial Services Committee in October. Derivatives are essentially bets on whether the value of currencies, commodities, stocks, government bonds or virtually any other product will go up or down. Derivative bets can cause shifts in overall market size reaching $40 trillion in a single day. Just how destabilizing short-term speculation can be - and just how lucrative a tax on it could be - is evident from the mind-boggling size of the market. The Bank for International Settlements estimates that in 2008, annual trading in over-the-counter derivatives amounted to $743 trillion globally - more than ten times the gross domestic product of all the nations of the world combined. Another arresting fact is that just five super-rich commercial banks control 97% of the US derivatives market: JPMorgan Chase & Co, Goldman Sachs Group Inc, Bank of America Corp, Citigroup Inc and Wells Fargo & Co.

Promoters of international development have suggested that a mere .005% tax could raise between $30 billion and $60 billion per year, enough for the G7 countries to double international aid. Other proponents favor the larger one percent tax originally proposed by James Tobin. The much-needed income from a US tax could be split between federal and state governments.

Pros and Cons

Opponents of the tax, led by the financial sector, argue that it would kill bank jobs, reduce liquidity, and drive business offshore. Supporters respond that Tobin tax profits could be used to create new jobs, and that while the speculative market would shrink, the small size of the tax would hardly affect overall cash flows. More than raising money, the tax could be an effective tool for discouraging short-term traders, who often make money on very small margins. Dani Rodrik, Professor of Political Science at Harvard, writes:

"The beauty of a Tobin tax is that it would discourage short-term speculation without having much adverse effect on long-term international investment decisions. Consider, for example, a tax of 0.25% applied to all cross-border financial transactions. Such a tax would instantaneously kill the intra-day trading that takes place in pursuit of profit margins much smaller than this, as well as the longer-term trades designed to exploit minute differentials across markets ... Meanwhile, investors with longer time horizons going after significant returns would not be much deterred by the tax".

Besides technical questions about how to implement the tax internationally, the offshore argument probably presents the most serious challenge. Should a Tobin tax pass in the US, investors would be likely to move to other markets beyond the reach of taxation. The US could penalize traders for doing business abroad, but governments in major markets like Germany and London would no doubt need to endorse the tax for any meaningful shift to be seen. Some experts have argued that the Tobin tax would be best implemented by an international institution such as the United Nations. But other observers see any international tax as a move toward further strengthening the power of the global financial oligarchs. Just the fact that the United Nations, the G20, and the Bank for International Settlements are discussing this option, however, suggests that we the people need to jump in and stake out our claim, before we lose the tax money to international bodies controlled by global bankers. The tax needs to be collected by the US Treasury and go into US coffers. It needs to reach Main Street, where it can be used to stimulate local business and investment.

Officials from the International Monetary Fund insist that implementing a Tobin tax would be logistically impossible. But Joseph Stiglitz, a Nobel Prize winning economist and former World Bank leader, disagrees. In Istanbul in early October, he said that a Tobin tax was not only necessary but, thanks to modern technology, would be easier to implement than ever before. "The financial sector polluted the global economy with toxic assets", he said, "and now they ought to clean it out".

Economist Hazel Henderson proposes a computerized system for imposing a graduated tax that is designed to kill "bear raids" (organized attacks by short sellers). Bear raids directed at vulnerable currencies have been known to collapse whole economies. She writes:

"Such a currency exchange tax would be simple to collect using a computerized system, which can be installed on trading screens, such as the Foreign Exchange Transaction Reporting System (FXTRS). This system operates like an electronic version of Wall Street's venerable 'uptick rule' ... to curb naked short-selling. The FXTRS computerized uptick rule would gradually raise the tax up to a maximum of one percent whenever a bear raid starts attacking a weak currency. Such bear raids are rarely to 'discipline' a country's policies, as traders claim, but rather to make quick profits."

Henderson notes that world economies have become so interlinked that such win-lose strategies are no longer sustainable:

"In systems terms, the global economy, by virtue of its real-time technological inter-linkages, has become a de facto global commons, a common resource of all its users. Such commons require win-win agreements, rules and standards applicable to all users. If normal competitive behavior (win-lose) continues, the result is lose-lose as competition between players leads to sub-optimization and the system itself absorbs risks and eventually can break down, as witnessed in the current crisis."

The financial rescue operations to date have been win-lose, with Main Street being sacrificed at the altar of Wall Street. Some 48 states have faced budget crises in the past year, forcing them to cut libraries, schools, and police forces, and to raise taxes on income and sales. A sales tax on the exotic financial products responsible for precipitating the economic crisis could help level the playing field and put some points on the populist side of the scoreboard.

_____

Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt (2007), her latest book, she turns those skills to an analysis of the Federal Reserve and "the money trust". She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Her earlier books focused on the pharmaceutical cartel that gets its power from "the money trust". Her eleven books include Forbidden Medicine (1998), Nature's Pharmacy (1998), co-authored with Dr Lynne Walker, and The Key to Ultimate Health (2000), co-authored with Dr Richard Hansen. Her websites are www.webofdebt.com and www.ellenbrown.com.

(c) Copyright 2007 Ellen Brown. All Rights Reserved.

http://www.webofdebt.com/articles/populist_retribution.php

Bill Totten http://www.ashisuto.co.jp/english/index.html

If Nothing Else, Save Farming

It's probably too late to prepare for peak oil, but we can at least try to salvage food production.

by George Monbiot

The Guardian (November 16 2009)


I don't know when global oil supplies will start to decline. I do know that another resource has already peaked and gone into freefall: the credibility of the body that's meant to assess them. Last week two whistleblowers from the International Energy Agency alleged that it has deliberately upgraded its estimate of the world's oil supplies in order not to frighten the markets {1}. Three days later, a paper published by researchers at Uppsala University in Sweden showed that the IEA's forecasts must be wrong, because it assumes a rate of extraction that appears to be impossible {2}. The agency's assessment of the state of global oil supplies is beginning to look as reliable as Mr Greenspan's blandishments about the health of the financial markets.

If the whistleblowers are right, we should be stockpiling ammunition. If we are taken by surprise; if we have failed to replace oil before the supply peaks then crashes, the global economy is stuffed. But nothing the whistleblowers said has scared me as much as the conversation I had last week with a Pembrokeshire farmer.

Wyn Evans, who runs a mixed farm of 170 acres, has been trying to reduce his dependency on fossil fuels since 1977. He has installed an anaerobic digester, a wind turbine, solar panels and a ground-sourced heat pump. He has sought wherever possible to replace diesel with his own electricity. Instead of using his tractor to spread slurry, he pumps it from the digester onto nearby fields. He's replaced his tractor-driven irrigation system with an electric one, and set up a new system for drying hay indoors, which means he has to turn it in the field only once. Whatever else he does is likely to produce smaller savings. But these innovations have reduced his use of diesel by only around 25%.

According to farm scientists at Cornell University, cultivating one hectare of maize in the United States requires forty litres of petrol and 75 litres of diesel {3}. The amazing productivity of modern farm labour has been purchased at the cost of a dependency on oil. Unless farmers can change the way it's grown, a permanent oil shock would price food out of the mouths of many of the world's people. Any responsible government would be asking urgent questions about how long we have got.

Instead, most of them delegate this job to the International Energy Agency. I've been bellyaching about the British government's refusal to make contingency plans for the possibility that oil might peak by 2020 for the past two years {4, 5}, and I'm beginning to feel like a madman with a sandwich board. Perhaps I am, but how lucky do you feel? The new World Energy Outlook published by the IEA last week expects the global demand for oil to rise from 85 million barrels a day in 2008 to 105 million in 2030 {6}. Oil production will rise to 103 million barrels, it says, and biofuels will make up the shortfall {7}. If we want the oil, it will materialise.

The agency does caution that conventional oil is likely to "approach a plateau" towards the end of this period {8}, but there's no hint of the graver warning that the IEA's chief economist issued when I interviewed him last year: "we still expect that it will come around 2020 to a plateau ... I think time is not on our side here". {9} Almost every year the agency has been forced to downgrade its forecast for the daily supply of oil in 2030: from 123 million barrels in 2004, to 120 million in 2005, 116 million in 2007, 106 million in 2008 and 103 million this year. But according to one of the whistleblowers, "even today's number is much higher than can be justified and the IEA knows this". {10}

The Uppsala report, published in the journal Energy Policy, anticipates that maximum global production of all kinds of oil in 2030 will be 76 million barrels per day. Analysing the IEA's figures, it finds that to meet its forecasts for supply, the world's new and undiscovered oil fields would have to be developed at a rate "never before seen in history". {11} As many of them are in politically or physically difficult places, and as capital is short, this looks impossible. Assessing existing fields, the likely rate of discovery and the use of new techniques for extraction, the researchers find that "the peak of world oil production is probably occurring now".

Are they right? Who knows? Last month the UK Energy Research Centre published a massive review of all the available evidence on global oil supplies {12}. It found that the date of peak oil will be determined not by the total size of the global resource but by the rate at which it can be exploited. New discoveries would have to be implausibly large to make a significant difference: even if a field the size of all the oil reserves ever struck in the USA were miraculously discovered, it would delay the date of peaking by only four years {13}. As global discoveries peaked in the 1960s {14}, a find like this doesn't seem very likely.

Regional oil supplies have peaked when about one third of the total resource has been extracted {15}: this is because the rate of production falls as the remaining oil becomes harder to shift. So the assumption in the IEA's new report, that oil production will hold steady when the global resource has fallen "to around one-half by 2030" {16} looks unsafe. The UKERC review finds that just to keep oil supply at present levels, "more than two thirds of current crude oil production capacity may need to be replaced by 2030 ... At best, this is likely to prove extremely challenging". {17} There is, it says "a significant risk of a peak in conventional oil production before 2020". {18} Unconventional oil won't save us: even a crash programme to develop the Canadian tar sands could deliver only five million barrels a day by 2030. {19}

As a report commissioned by the US Department of Energy shows, an emergency programme to replace current energy supplies or equipment to anticipate peak oil would need about twenty years to take effect {20}. It seems unlikely that we have it. The world economy is probably knackered, whatever we might do now. But at least we could save farming. There are two possible options: either the mass replacement of farm machinery or the development of new farming systems, which don't need much labour or energy. There are no obvious barriers to the mass production of electric tractors and combine harvesters: the weight of the batteries and an electric vehicle's low-end torque are both advantages for tractors. A switch to forest gardening and other forms of permaculture is trickier, especially for producing grain; but such is the scale of the creeping emergency that we can't afford to rule anything out.

The challenge of feeding seven or eight billion people while oil supplies are falling is stupefying. It'll be even greater if governments keep pretending that it isn't going to happen.

www.monbiot.com

References:

1. http://www.guardian.co.uk/environment/2009/nov/09/peak-oil-international-energy-agency

2. Kjell Aleklett et al, 2009. The Peak of the Oil Age - analyzing the world oil production Reference Scenario in World Energy Outlook 2008. Energy Policy. http://www.tsl.uu.se/uhdsg/Publications/PeakOilAge.pdf

3. David Pimentel, Marcia Pimentel and Marianne Karpenstein-Machan, 1999. Energy Use In Agriculture: An Overview. Agricultural Engineering International: The CIGR EJournal, Volume I. http://www.cigrjournal.org/index.php/Ejounral/article/viewFile/1044/1037

4. I first began pestering the government about this in May 2007, as you can see here: http://www.monbiot.com/archives/2007/05/29/what-if-the-oil-runs-out/

After that, I lodged an FoI request, and returned to the theme in these articles:

5. http://www.monbiot.com/archives/2008/02/12/the-last-straw/

http://www.monbiot.com/archives/2008/05/27/majesty-we-have-gone-mad/

http://www.monbiot.com/archives/2008/12/15/at-last-a-date/

http://www.monbiot.com/archives/2009/04/14/cross-your-fingers-and-carry-on/

6. International Energy Agency, 2009. World Energy Outlook 2009. Page 73.

7. Figure 1.5, page 82.

8. page 87

9. http://www.guardian.co.uk/environment/video/2008/dec/15/fatih-birol-george-monbiot

10. http://www.guardian.co.uk/environment/2009/nov/09/peak-oil-international-energy-agency

11. Kjell Aleklett et al, 2009. The Peak of the Oil Age - analyzing the world oil production Reference Scenario in World Energy Outlook 2008. Energy Policy. http://www.tsl.uu.se/uhdsg/Publications/PeakOilAge.pdf

12. Steve Sorrell et al, 2009. Global Oil Depletion: An assessment of the evidence for a near-term peak in global oil production. UK Energy Research Centre. http://www.ukerc.ac.uk/support/Global%20Oil%20Depletion

13. page 134

14. See Figure 2.8. page 24

15. page 7

16. International Energy Agency, 2009, ibid, page 80.

17. Steve Sorrell et al, 2009, page 169.

18. page 164.

19. page 18.

20. Robert L Hirsch, Roger Bezdek and Robert Wendling, February 2005. Peaking Of World Oil Production: Impacts, Mitigation & Risk Management. US Department of Energy. Available at http://www.hubbertpeak.com/us/NETL/OilPeaking.pdf


Copyright (c) 2006 Monbiot.com

http://www.monbiot.com/archives/2009/11/16/if-nothing-else-save-farming/


Bill Totten http://www.ashisuto.co.jp/english/index.html

We simply do not know!

by John Gray

London Review of Books (November 19 2009)

Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism by George Akerlof and Robert Shiller (Princeton, 2009), ISBN 978 0 691 14233 3


The last two years, in which capitalism has suffered one of its periodic shocks, have given John Maynard Keynes a new lease of life. Events have demonstrated the limits of the theory that economies can be relied on to be stable if they are lightly regulated and otherwise left to themselves. There is now much talk of the paradox of thrift, whereby the rational choices of individuals can prove collectively ruinous, and of the need for government to counteract the inherently anarchic tendencies of markets. Keynes has been revived because he understood that markets are very often irrational. Unfortunately, few of those who urge that we go back to him seem to have understood why he believed this.

Apart from a brief postscript to one of the chapters and a few remarks in the preface, George Akerlof and Robert Shiller's Animal Spirits was written before the current crisis. Yet, based on research undertaken over many years, it can be read as prefiguring the current disillusionment with economics. The trouble with prevailing theories, in Akerlof and Shiller's view, is that they assume human beings are more rational than they actually are. 'This book, which draws on an emerging field called behavioural economics, describes how the economy really works', they claim. 'It accounts for how it works when people really are human, that is, possessed of all-too-human animal spirits'.

They point to five different ways in which these 'animal spirits' can affect economic behaviour. First, the state of the economy depends on the level of confidence we feel about the future, but confidence 'is not just a rational prediction. It is the first and most crucial of our animal spirits.' Second, a concern for fairness 'can trump economic motivations': elementary economics teaches that a rise in demand for shovels after a snowstorm should result in higher prices for shovels; but most people - 82 per cent of correspondents in a survey conducted by two behavioural economists - believe that raising the price would be unfair. Third, the actions of predatory corporations can have an impact on the entire economy: the belief that Enron had acted in bad faith led to people being 'fed up with financial markets in general' a shift of a kind that is 'clearly within the realm of pure animal spirits'. Fourth, people make many of their economic decisions without taking account of inflation: instead of acting to maximise their real (inflation-adjusted) income, they succumb to 'money illusion'. Finally, human behaviour is heavily influenced by stories, narratives with a dramatic logic that drives people to action. The internet boom at the start of the millennium was not just a response to the development of a new technology; it expressed a view of the world, including the belief that a new era had arrived in which the economic cycles of the past had ceased to operate.

As Akerlof and Shiller represent them, each of these manifestations of animal spirits shows behaviour being driven by forces other than reason. None of them offers rational grounds for action in any sense that most economists would recognise. Even so, the authors insist, these responses must enter into any account of how economies actually work. If economists have failed to explain repeated crises, it is because they have interpreted economic activity through an unreal model of rational decision-making. Thinking of human behaviour in this way allows them to claim a high degree of precision for their discipline, which is presented as a kind of applied mathematics. But they have left psychology out of their equations.

A cogent critique of the theoretical excesses of mainstream economics, Animal Spirits is well argued and also - no small virtue among economists - pleasingly written. At the same time, it is hardly the revolution in thinking that its authors claim. The observation that markets are prone to violent swings of emotion, recurrent illusions and powerful stories is a piece of perennial wisdom that was summarised in Charles Mackay's Memories of Extraordinary Popular Delusions and the Madness of Crowds, published in 1841. More recently, George Soros has insisted that market behaviour is a reflexive process intrinsically liable to lead to cycles of boom and bust, as the beliefs and decisions of participants are reinforced by a desire to go with the trend until the market becomes unsustainable.

The fact that markets are flawed seems novel only in the context of the economic orthodoxy that prevailed between the wars, and in the run-up to the recent crisis. It is wrong to imply, as Akerlof and Shiller do, that the classical economists believed otherwise. 'Just as Adam Smith's invisible hand is the keynote of classical economics', they write, 'Keynes's animal spirits are the keynote to a different view of the economy - a view that explains the underlying instabilities of capitalism'. Here they are endorsing the caricature of Smith propagated by neoliberal ideologues anxious to confer a distinguished patrimony on an illegitimate intellectual offspring. Certainly, the 'invisible hand' is one of Smith's central ideas, but he never saw it as working in a mechanical fashion. A network of hidden adjustments whereby conflicting interests could be reconciled, in a complex process that always involved human emotions, the invisible hand was neither all-powerful nor uniformly benign. It could be thwarted by collusion among businessmen, and when given free rein its social effects could be seriously harmful. Like other thinkers of the Scottish Enlightenment, Smith understood the imperfectability of human institutions. He was concerned about the ways in which free markets detached people from communities, and some of these worries fed into the theory of alienation developed by that other celebrated classical economist, Karl Marx.

If Akerlof and Shiller's grip on the history of economic thought is shaky, they also fail to grasp why Keynes rejected the idea that markets are self-stabilising. Throughout Animal Spirits they portray him as reintegrating psychology with economic theory. No doubt this was one of Keynes's goals, but it is not his most fundamental revision of economic orthodoxy. Among his other accomplishments he was the author of A Treatise on Probability (1921), in which he tried to develop a theory of 'rational degrees of belief'. By his own account he failed, and in his canonical General Theory of Employment, Interest and Money (1936) he concluded that there was no way anyone could make forecasts. Future interest rates and prices, new inventions and the likelihood of a European war cannot be predicted: there is no 'basis on which to form any calculable probability whatever. We simply do not know!' For Keynes, markets are unstable less because they are driven by emotion than because the future is unknowable. To suggest that the source of market volatility is unreason is to imply that if people were fully rational markets could be stable. But even if people were affectless calculating machines they would still be ignorant of the future, and markets would still be volatile. The root cause of market instability is the insuperable limitation of human knowledge.

Later economists have made much of a distinction between risk, which can be assessed in terms of quantifiable likelihood, and uncertainty, where probabilities cannot be attached to possible outcomes. The trouble is that when attempting to forecast the course of the economy we often cannot confidently distinguish between the two. Even our list of possible outcomes may turn out to have omitted the ones that are most important in shaping events. Such an omission was one of the factors that led Long-Term Capital Management, a highly leveraged hedge fund set up by two Nobel Prize winning economists, to fail in 1998-2000. The information used in applying the formula did not include the possibility of such events as the Asian financial crisis and Russia's default on its sovereign debt, which destabilised global financial markets and helped destroy the fund. The orthodoxy that came unstuck with the collapse of LTCM was not faulty because it neglected the vagaries of human moods; its mistake was to think that the unknown future could be turned into a set of calculable risks and, in effect, conjured out of existence, which was impossible. Several centuries earlier, Pascal - one of the founders of probability theory - had come to the same conclusion, when in the Pensées (1670) he asks ironically: 'Is it probable that probability brings certainty?'

The central flaw of the economic orthodoxy against which Keynes fought in the 1930s was to imagine that an insoluble problem - human ignorance of the future - had been solved. The error was repeated in the 1990s, when economists came to believe that complex mathematical formulae could tame uncertainty in the murky world of derivatives. Steeped in history as they were, this was a delusion that none of the classical economists entertained. It began to shape economics only towards the end of the 19th century, with the rise of Positivism, according to which the natural sciences are the only legitimate repository of human knowledge. It was the formative influence of this philosophy on the Chicago School that enabled the orthodoxy of the 1930s to re-emerge triumphant, and the result was an immense boost to the prestige of economics as a discipline. Economists could claim to be scientists, who with the aid of their mathematical magic could pierce the veil that conceals the future.

The hegemony of Positivism in economics obscured Keynes's scepticism about probabilistic knowledge, his most important contribution to the discipline. G L S Shackle set Keynes's argument out systematically in his neglected masterpiece Epistemics and Economics: A Critique of Economic Doctrines (1972). Shackle is probably the only significant economist to have been influenced both by Keynes and by his arch-rival, F A Hayek. He knew both of them well, but argued that neither had digested the full implications for economics of our ignorance of the future. Hayek said that governments could never know enough to plan the economy successfully - a claim vindicated by the miserable record of central planning in Communist countries. At the same time, he attributed near omniscience to markets, and never doubted that if left to its own devices the economy would liquidate mistaken investments and return to equilibrium. Against this, Keynes had shown that there is no market mechanism that ensures revival; economic contraction can be self-reinforcing, and only government action can then create a way out.

Shackle took Keynes's argument a step further, and showed that no economic policy can ensure economic stability indefinitely. 'Keynesian' policies are no exception to this rule. Deficit financing and monetary expansion may have worked well in the conditions that existed after the Second World War. It is not clear that they will be so effective today, when globalisation has brought a freedom of capital movements that did not exist then. The lesson of Shackle is that we must be resourceful in devising new remedies, while not losing sight of the fact that none of them works for long.

Akerlof and Shiller claim that their account of the role of psychology helps to explain the financial crisis. 'Our theory of animal spirits', they say, 'provides an answer to a conundrum: why did most of us utterly fail to foresee the current economic crisis? How can we understand this crisis when it seems to have come out of the blue with no cause?' They are right that part of the answer lies in an intellectual default within economics, but they seem oblivious of the role of ideology in producing this default. The deformation of economics was not the result only of factors internal to the discipline, it was also part of the short-lived Western triumphalism that followed the end of the Cold War.

Those were the years when slackers throughout the world were enjoined to submit themselves to the rigours of 'the Washington consensus' - a mix of dogmatic policy prescriptions and hypocritical rhetoric that enjoyed the support of the great majority of economists. According to that consensus, the market regime that was installed in Britain, the US and a few other countries from the 1980s onwards could not only ensure stability and promote steady growth there but was a model - the only possible model - for countries everywhere. The one truly rational economic regime, free market capitalism, was also the most productive. As such it was bound to drive every other system out of existence, and would eventually be adopted worldwide. This faith in the universal spread of free markets animated much of the thinking of the American-led institutions overseeing the world economy, such as the IMF. Along with economists in university departments in much of the world, these institutions succumbed to a quasi-religious belief that the free market was the germ of a single, universal economic system.

Not everyone swallowed this creed. It was not accepted in China, which then as now displayed a well-founded contempt for Western advice - an attitude that has much to do with its astonishing economic success. Whether in the face of global recession China can continue to grow at the same rate is unclear - as Keynes would have put it, we simply don't know. Nonetheless, its emergence as an economic superpower poses questions for economics that are harder to answer than is generally recognised. Economists do not always take the neoliberal party line, according to which growth can be sustained only in a regime of deregulated capitalism; the evidence of history precludes any such simple-minded view. Liberal capitalism has achieved striking results (though in the US, often against the background of trade protection), but so have many varieties of dirigisme, from rapid growth in late tsarist Russia to Asian market economies in the decades after 1945. Economic historians whose minds are not befogged by ideology accept that there are many routes to growth. At the same time, nearly all Western-trained economists insist that sustained growth is impossible in the absence of a legal system that allows the independent rule of law and secure rights to private property. Without this framework, they believe, there will not be the incentives required for long-term saving and investment.

But China has achieved the largest and fastest industrialisation in history without having such a legal system. Until recently, Western economists, along with other Western observers, were adamant that China would continue to be successful only to the extent that it mimicked Western practice. Now that Western economies are in trouble this confidence has been shaken, and China is once again being perceived as alien and dangerous. There is no real attempt to try to understand the sources of its success. Like other branches of the study of society, economics remains culturally parochial, and its underlying concepts based on a few centuries of Western experience.

To their credit, Akerlof and Shiller do discuss how motives not normally regarded as economic have contributed to China's growth. An appeal to patriotism helped persuade villagers to contribute to the regime's plans for economic growth in the 1970s, so that 'a national story began to grip the imagination of the people of China, a story of individual effort and sacrifice'. One may doubt whether this is the whole story, but it is suggestive, because it illustrates the unreality of the notion that the behaviour of markets is governed by strictly 'economic' motivations. Much of Akerlof and Shiller's analysis is an implicit criticism of this notion, and yet - in conformity with the narrow explanatory model of market behaviour they aim to criticise - they invoke it whenever they suggest that deviations from economic rationality account for instability in markets. They don't appear to realise that the assumption of a categorical distinction between 'economic' and 'non-economic' motives is one of the chief reasons recent economic theory has been so consistently remote from reality.

Keynes and the classical economists before him knew that there is no realm of market exchange that obeys laws of the kind that can be formulated in the natural sciences. Economics and politics are not separate branches of human activity, and economic life cannot be studied independently of social divisions and political conflicts among populations, along with their cultures and religions. Familiar to Keynes and most of the economists of his generation, these truisms have been forgotten, or rejected, by many economists today. The result is an economic imperialism that tries to explain every human activity in terms of a conception of rational action that does not work even when applied to the behaviour of markets.

Of course, there is a standard response to these observations, which is that unrealism in economic theories doesn't matter. As developed by Milton Friedman, among others, this is in effect a version of instrumentalism, a tenable position in the philosophy of science. For instrumentalists, the goal of science is not a true representation of the world; it is to organise our observations into a theoretical framework that serves practical goals, such as prediction and control. But what practical goals have been served by the type of economics dominant over the past two decades? It has been useful neither in making predictions nor in responding to unforeseen developments.

Akerlof and Shiller intend their analysis to contribute to an intellectual reformation in economics, as a consequence of which the discipline will become more useful to policy-makers. It must be doubted, though, that the authors will succeed in persuading economists of the inadequacy of the conception of rational action. The profession is one of the few areas of human activity in which that conception is applicable. In its intra-academic varieties, at any rate, economics is insulated from the world not only by its narrow explanatory methodology but also because it rewards the mathematical modelling that resulted in nearly all of its members failing to anticipate the financial crisis. As institutionalised in universities, the notion of rational decision-making is self-perpetuating. Economics as currently practised may have only a slight grip on market behaviour, but it seems to be powerfully predictive of the behaviour of economists.

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John Gray’s False Dawn: The Delusions of Global Capitalism, first published in 1998, was reissued in October with a new section on the global financial crisis.

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